A ZERO WAGE INCREASE AGAIN
Background
The case is about hardware, furniture, and building, where its owner Mark Coglin is concerned with how he will manage the upcoming process of reviewing the wages. The firm does not have spare cash for catering the pay increase, and the employees are no longer patient with the financial progress of the firm. There is a possibility of increasing the wages by using savings, but Mark Coglin does not want to use the savings which have been earned in a hard way in rewarding employees whose performance is below standard. Rewarding some employees and leaving others would result in conflicts within the firm. The employees are less motivated as their wages have been frozen for the last two years, others are incompetent in their duties, and they rarely report to work as expected. The firm’s sales have been decreasing and cases of lost inventory. With the current situation, the firm does not have a bright financial future.
Problem identification
The firm is facing three critical problems; inability to increase the wages for workers, demotivated workers, and declining sales.
Inability to increase wages for employees: for the last two years, the workers have not been able to get a wage increase, despite an increase in inflation, which results in increased costs of living. The firm has been doing well financially, considering a decline in sakes and lack of extra cash to cater for the wage increase. The owner is considering diverting savings to cater for the wages increase to avoid another zero-wage increase, but he does not know the most effective distribution plan to use, considering the differences in employee performance and commitment to their duties.
Demotivated workers: it is not all employees who are satisfied with their duties. Most of them have shown their dissatisfaction levels openly and are no longer interested in working within the firm.
Declining sales: financial statements have indicated that the sales of the firm have been declining. The sales have shrunk by about Cdn$4 million a year, and profit margins lost in most of the operational areas.
Immediate and long-range problems
Immediate problems are those that can be addressed within a short term period, and in our case, we have demotivated employees and declining sales. Long term problems have got along adverse effect to a firm, and are not easily solved. In this case, we cannot increase wages for workers.
Indicators and symptoms suggesting there is a problem
Starting with the issue of the inability to increase wages, there is enough evidence to support such a problem. The sales of the firm have been declining, hence resulting to low profitability. Lack of profits makes it impossible for the firm to increase wages. Savings can be diverted to increase wages, but the chances are high that angry backlash will arise. The owner does want to waste the savings on nonperforming workers and is only interested in those who add value to the firm. Some cost-saving strategies, such as laying off some workers would further decline the workers’ morale. Diverting funds from sales promotions would lead to more declined in sales, hence loss of profitability. Employees have started stealing inventory from the firm, leading to low sales and profit decline. The firm is fixed such that increasing wages is hard, and cannot be achieved any time soon.
The problem of declining sales is also evident. Profits which are subject to sales value have declined by almost Cdn$4 million just within a single year. Based on the balance sheet, the firm has written off some inventory, suggesting a further decline in sales. Employee productivity has declined, as a good number of them don’t report to work as expected, they spend time discussing personal issues instead of organizational duties, and some have shown incompetence in their assigned tasks. A decline in profitability suggests low sales.
In the third problem, employees are demotivated as there has not been a salary increase for the last years, and no hopes in the 3rd year consecutively. They don’t report to work mainly on Mondays, citing minor excuses such as coughs. Workers are not committed in their duties, and some need supervision to execute their regular duties. Concern for customers has faded away, and workers value their interests at the expense of those of the organization.
Existing Opportunities and challenges
The inability of increasing wages for the workers can be solved through the use of savings, but it will result in wastage of resources as not all employees add value to the firm. Increasing wages for some will result in an angry backlash, hence destroying employees’ relationships. Cost savings like laying off workers and reducing advertisement costs can generate additional funds to cater for the wage increase, but they will result from declining employee morale and low sales respectively.
The problem of low sales can be increased by intensifying marketing campaigns, but unfortunately, a negative correlation has been observed between the funds invested in advertisements and sales volume. There is a possibility of intense competition in the market place. Lastly, employee morale and motivation can be increased by increasing the level of wages, but the firm is not in a position of doing so, due to decline in sales, the possibility of disagreements and loss of inventory.
Reference
CASE: A Zero Wage Increase Again – MGMT 4242: Organizational Behavior – Lawrence (Summer 2019), East Carolina University.