This case study depicts the challenges faced by Mark Coglin, the owner of a House, Hearth & Home, a hardware, furniture and building center, as he struggles to decide whether or not to issue wage increases, and, if so, how to fairly allocate the increases. For two consecutive years, he has been unable to offer his employees this wage increase due to lack of budgetary funds resulting from decreased sales and practically nonexistent profit margins. There are several options available that would permit Coglin to issue a pay increase, such as utilizing savings from process improvement initiatives, reducing advertising costs, and/or reducing inventory. Improvement in all three expense reduction areas would provide the company the ability to reward
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The lowest performing employees, he felt, were undeserving of such a raise as they were frequently absent and were less motivated to perform well on the job. According to Absenteeism: The Bottom Line Killer, a publication of workforce solution company Circadian, unscheduled absenteeism costs roughly $3600 per year for each hourly worker and $2650 each year for salaried employees (CITE website). In Coglin’s case, both direct and indirect costs attribute from high-cost replacement workers as they are paid overtime to cover absent employees, administrative costs of managing absenteeism, poor quality of goods and services from overtime fatigue or understaffing, reduced productivity, excess manager time dealing with discipline and finding fillers, and safety issues from inadequately trained employees filling in for others (CITE website.) Studies have also shown that increased absenteeism leads to costly employee turnover rates. Therefore, Coglin must address the costly issues fairly and transparently with a comprehensive performance evaluation system linked to the pay wage increase and other employee rewards and recognition. With the assistance of both his floor manager, Simon, and his yard foreman,Wesley, Coglin can determine all key measurable areas in the performance evaluation system. The performance evaluation system will serve as a tool to weed out the 15% of employees who will save the company money if they left (Kreps, 1997, p. 5); and it will motivate the remaining employees, increase productivity and performance, and reduce
The lowest performing employees, he felt, were undeserving of such a raise as they were frequently absent and were less motivated to perform well on the job. According to Absenteeism: The Bottom Line Killer, a publication of workforce solution company Circadian, unscheduled absenteeism costs roughly $3600 per year for each hourly worker and $2650 each year for salaried employees (CITE website). In Coglin’s case, both direct and indirect costs attribute from high-cost replacement workers as they are paid overtime to cover absent employees, administrative costs of managing absenteeism, poor quality of goods and services from overtime fatigue or understaffing, reduced productivity, excess manager time dealing with discipline and finding fillers, and safety issues from inadequately trained employees filling in for others (CITE website.) Studies have also shown that increased absenteeism leads to costly employee turnover rates. Therefore, Coglin must address the costly issues fairly and transparently with a comprehensive performance evaluation system linked to the pay wage increase and other employee rewards and recognition. With the assistance of both his floor manager, Simon, and his yard foreman,Wesley, Coglin can determine all key measurable areas in the performance evaluation system. The performance evaluation system will serve as a tool to weed out the 15% of employees who will save the company money if they left (Kreps, 1997, p. 5); and it will motivate the remaining employees, increase productivity and performance, and reduce