Case study: Keep or let go the core and top performer

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Keep or let go the core and top performer: Lee Carter………………………………………….. 4

1.     Background of this study…………………………………………………………………………… 4

2.     Literature review: Theoretical support to the reasoning flow…………………………….. 4

2.1      Aligning the strategic planning and human resources activities……………….. 4

2.2      Review of the various compensation models…………………………………………. 6

2.2.1     Pay-for-Performance Models……………………………………………………. 6

2.2.2     Market-driven approach…………………………………………………………… 7

2.2.3     A “hybrid” approach………………………………………………………………. 7

3.     Analytical part: What are the current dilemmas and problems, and objectives to be pursued  8

3.1      Current dilemmas…………………………………………………………………………….. 8

3.1.1     To increase the production capacity and efficiency (business objective) vs Unstructured departments (current HR status)………………………………………………………….. 8

3.1.2     Team building (business objective) vs Informal working environment (current HR policy)     9

3.1.3     Identify the direction of new products vs No specialized new product development talents (current HR status)………………………………………………………………………………………. 10

3.2      Objectives to be pursued…………………………………………………………………. 11

3.2.1     Business objectives………………………………………………………………… 11

3.2.2     Human resource strategic planning………………………………………….. 12

4.     Solution proposed: Provide better compensation scheme with conditions…………. 13

4.1      Final decision………………………………………………………………………………… 13

4.1.1     Better compensation scheme…………………………………………………… 13

4.1.2     Conditions to be met by Lee Carters………………………………………… 13

4.2      Defending the decision…………………………………………………………………… 15

5.     Alternatives – what could be the optional choices………………………………………… 16

5.1      Job redesign…………………………………………………………………………………… 16

5.2      Case investigation and doing nothing in response………………………………. 16

5.2.1     How this alternative could be implemented?…………………………….. 16

5.2.2     Positive side of the option – case investigation………………………….. 17

5.2.3     Negative side of the option – case investigation………………………… 17

Reference……………………………………………………………………………………………………… 19

 

Keep or let go the core and top performer: Lee Carter

 

1.        Background of this study

 

Let us review the background of this case study before the analysis could be unfolded. Founded in 1953 in Lake Placid, New York, Waterway had started out as a small, high quality canoe maker. Over the years, it had built a good reputation all through the Northeast and had acquired a base of customers in the Pacific Northwest as well. And in the 1990s, strategic changes were implemented as Maher decided to venture into kayaks which later become the ongoing business success that create revenue to the shareholders of the company. One key person strengthening the business success is Lee Carter, the current marketing manager who has pushed up the marketing effectiveness and efficiency by getting more orders to the company, but recently, the CEO of the company had overheard the private conversation of the marketing manager who seemed to be attracted by better offers provided by other companies. So, this study would be dedicated to the making the best decision that could probably maximize the company’s interest through human resource management practices and policy implementation.

 

2.        Literature review: Theoretical support to the reasoning flow

 

2.1    Aligning the strategic planning and human resources activities

 

A comprehensive Human Resource Strategy plays a vital role in the achievement of an organization’s overall strategic objectives and visibly illustrates that the human resources function fully understands and supports the direction in which the organization is moving. It will also support other specific strategic objectives. In essence, an HR strategy should aim to capture “the people element” of what an organization is hoping to achieve in the medium to long term, ensuring that: (a) it has the right people in place; (b) it has the right mix of skills; (c) employees display the right attitudes and behaviors, and (d) employees are developed in the right way (workinfo.com 2009).

 

One method to relate the human resources management practices and business strategies is proposed by Bohlander and Snell (2010) as showed below. There are in the five below stages, i.e. Mission, Vision and values, External and Internal Analysis, Strategy Formulation, Strategy Implementation and Evaluation, in which the human resource could through various kinds of efforts to facilitate the business strategy process and thus assist a company to achieve its objectives. And according to Susan E. Jackson, Randall S. Schuler and Steve Werner (2009, p. 112), when an organization’s human resource management system supports and facilitates the behaviors and competencies needed for organizational success, the human resource management system and the needs of organization are in a state of strategic alignment. Creating strategic alignment involves addressing vertical alignment and horizontal alignment. And human resource planning provides a means for achieving both types of alignment.

 

Figure 1 Combining and aligning the strategic planning and human resources activities

Source: Bohlander & Snell 2010, p.52

 

From the above figure we can see the linkage between the corporate goals and strategies and the human resource management activities, and to make sure that the HR activities support the company’s long term success the HR role should be functioning in accordance with the corporate level plan and targets. Therefore, in the next analytical part we will check the conflicts between the strategic business objectives and the HR deficiencies and the inability to support the strategic actions and resolving which could help clarify the HR policy to be adopted and therefore answer the question whether the marketing manager would be necessary to be kept at high cost.  Below is the analytical part to identify the current dilemmas and problems, and objectives to be pursued.

 

2.2    Review of the various compensation models

 

2.2.1             Pay-for-Performance Models

 

Incentive pay, also known as “pay for performance” is generally given for specific performance results rather than simply for time worked. Examples of typical incentives:

 

· piece-rate pay for pruning or picking

· allowing workers to go home early, with full pay, when they finish a job

· end-of-season bonus for employees who stay to the end

· quality or production incentive

· bonus for reducing production costs

· profit sharing (berkeley.edu 2010).

 

Organizations are seeking and looking to pay-for-performance models to increase or strengthen the link between rewards and performance outcomes in a manner that makes good economic sense and rewards those who help the organization excel. Performance compensation plans can allow an organization to base pay on the achievement of certain improvements in corporate performance as well as overall employee effectiveness (payscale.com 2011). According to Michelle Brown and John S. Heywood (2002) pay for performance is a good solution to many pay related challenges and employee retention problems, and in the absence of a pay for performance system, organizations might alternatively monitor employees closely or try to motivate them through a variety of noneconomic means which could be ineffective in particular in the higher management positions.

 

2.2.2            Market-driven approach

 

Market-driven approach is the approach that pays whatever the market demands for a given position, especially in the highly competitive areas (Shi 2007). In today’s competitive economy, companies typically look outside the organization to maintain a freshness of talent in their management structures. At the same time, no company likes to see its own talent leave. This model is highly useful in the industries where the competition is fierce and the demand for the qualified talents especially those own the professional competencies and management capabilities would be strong and competitors’ better compensation scheme could frequently be the major reason why the senior managers and executives would leave the company.

 

2.2.3            A “hybrid” approach

 

The compensation method, known as “content-based market pricing,” helps price jobs fairly from the internal perspective and competitively based on the labor market. Compensation pros at The Hay Group, came up with this hybrid approach that combines the old Hay points-based system with market pricing (typepad.com 2006). This model requires the company not only the evaluate the positions with the based on the general criteria such as the years of service, professional skills and job knowledge but also would request to give some attention and consideration to the content of job which is critical to corporate goals and the general principle required is to pay to some extent higher than the market average to make the key employees content with their compensation scheme.

 

 

3.        Analytical part: What are the current dilemmas and problems, and objectives to be pursued

 

3.1    Current dilemmas

 

3.1.1            To increase the production capacity and efficiency (business objective) vs Unstructured departments (current HR status)

 

With the rapid increase of the company’s business in the kayaking because of the company’s earlier correct to concentrate on this new business sector, and with the fast growth and maturity of the kayaking market, it is now known to the company that it has more orders compared to its still limited production capacity, this could be an disadvantage for the company in the near future with the continual rapid increase in the demand for the company’s kayaking goods. As reminded by the head of the commercial lending department at CentreTrust, though the company right now is doing well by using two strategies: (a) outsourcing some of the order to the competitors and other suppliers and manufactures (b) and expand the credit from the bank to support the credit sale, But still as mentioned by Maher, the company also increases the credit to support a production in house rather than outsourcing in the future to ensure that the company controls the production of the kayaking products which is critical to make sure the quality is maintained in a high level. With the business goal of expanding the production and increase the operating efficiency to cope with the bigger business, the setting of the departments seems to be lagged behind the relatively faster pace of the strategic changes. For example, the marketing department is not yet well built with Lee Carter’s being personally responsible for 40 percent of the company’s sale for the last two years and the sale network had grown informally and it seems that Lee Carter is too busy to do so. But from the long term view, if Lee Carter still account on her capability and personal efficiency, even she stays down and does not request for a salary increase, the current unstructured departmental setting would restrict the further development of business and the normal division of labor and sharing of responsibilities.

 

3.1.2            Team building (business objective) vs Informal working environment (current HR policy)

 

Structured functional department setting does not work alone; it is hard to imagine that as a future large company with well structured functional departments such as human resource, marketing, finance and accounting and also hierarchical management structure, the company could continue the current informal working environment and the culture of ease. As indicated in the case, for the most part, the staff had adjusted easily to the company’s faster pace. The expanded business had not caused any substantial changes to the employees’ informal working style, and such culture of ease would not fit in the business objective of building up formal company hierarchy and functional departments. For example, with bigger business size, the company would need to focus on the team building. According to Katzenbach and Smith (2003) a team is “a small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they are mutually accountable”. The qualities of a successful team include (scitopics.com 2011):

 

(1) A clear mission statement or set of objectives.

(2) Commitment of each member of the team.

(3) An efficient leader or captain.

(4) Well defined roles or job specification for each member

(5) Rules and guidelines setting out how team will operate

(6) Clear and concise set of procedures for each task

(7) Decision making process

(8) Collaboration through meetings

 

From these qualities of successful team building and with comparison made to the situation of Waterway, the informal working environment is not in line with some of the above team building requirements such as collaboration through meetings, rules and guidelines regulating the individual decisions to the common targets of the teams, and it will certainly requires changing the current informal company working style to a more formal and discipline working style and company culture. And talking about Lee Carter, according to the case study, though her hard work and responsible attitude had led to the rapid growth of the business, but she did not actively foster the team building process, for example, she has always been busying travelling and negotiating with partners and suppliers and customers, she hardly had time to get to know the staff and she even missed the annual dinner of the company. In this point, Lee Carter does not act as a qualified marketing manager because of the lacking of communication with the subordinates.

 

3.1.3            Identify the direction of new products vs No specialized new product development talents (current HR status)

 

As said in the case study, the company right now is concentrating on the kayaking products which are growing in term of sale and also the popularity among the customers, but the strategic new products to continue the success of Kayaking products after the they fade out of the market are still not yet having any clues. As a small company like Waterway with only 45 employees, right now on a faster pace, the company needs to have someone who can see into the future of the industry and product features which are required and demanded by the customers in the future. And it seems that Lee Carter, as the marketing manager, who are in charge of 40% of the company’s sale personally, would be the perfect candidate to also be in charge of the new product development provided that the company is still too slow to hire a product manager.

 

3.2    Objectives to be pursued

 

3.2.1            Business objectives

 

3.2.1.1      Mission statement

 

Here we assume that the mission statement of Waterway is to become the no.1 water entertaining equipment provider and offer the most quality and wonderful water entertaining service and equipments to the young people.

 

3.2.1.2      Increase the own production

 

Because as reminded by the head of the commercial lending department at CentreTrust, though the company right now is doing well by using two strategies: (a) outsourcing some of the order to the competitors and other suppliers and manufactures (b) and expand the credit from the bank to support the credit sale, for the sake of keeping consistent product quality and build up the company’s brand in the water entertainment industry, increasing the company’s own production capacity would be the business objective to be realized in the future and other areas’ strategies such as strategic human resource management strategies should also act according to such strategic increase of the own production capacity.

 

3.2.1.3      Culture changes

 

Culture changes are needed for the company to establish a structure base to support the expected business growth in the near future, and this change would require the inputs of all the managers, CEO and employees. And a manager needs to take the lead and influence the subordinates.

 

3.2.2            Human resource strategic planning

 

3.2.2.1      Build up formal and structured functional department

 

Functional strategy is the strategy the company adopts to effectively carry out the HR activities under the HR function. As previously discussed, the company increases the credit not only to cover the credit sale but also to support a production in house rather than outsourcing in the future to ensure that the company controls the production of the kayaking products which is critical to make sure the quality is maintained in a high level. With the business goal of expanding the production and increase the operating efficiency to cope with the bigger business, the setting of the departments seems to be lagged behind the relatively faster pace of the strategic changes. Therefore one HR objective based on this business objective is to establish the formal functional department to get adapted to the increasing business operations (This is not the solution to address the issue, but the HR objective that the company need to achieve the company business plan, the team building is an HR objective that could facilitate the business success in the future and it is also the task of the marketing manager, therefore I keep this paragraph unchanged).

 

3.2.2.2      Cultivate new product development talents

 

Capability strategy refers to the action plan to develop the knowledge and skills of employees including HR people. As said above,  the company right now is concentrating on the kayaking products which are growing in term of sale and also the popularity among the customers, but the strategic new products to continue the success of Kayaking products after the they fade out of the market are still not yet having any clues. As a small company like Waterway with only 45 employees, right now on a faster pace, the company needs to have someone who can see into the future of the industry and product features which are required and demanded by the customers in the future, the company thus need to gradually cultivate new product development talents within the company or through hiring the external talents in the industry.

4.        Solution proposed: Provide better compensation scheme with conditions

 

4.1    Final decision

 

4.1.1            Better compensation scheme

 

We will offer better compensation scheme to Lee Carter, we will increase the basic salary to her to level that is little higher than the industrial level, and the key offer here is to provide with her equity option to make her the owner of the company and motivate her to perform her job for the long term interest of the company. And the increase of the salary, bonus and also the increase of equity would adopt a market-driven approach which is the approach that pays the amount the market demands for the marketing manager in the industry with reference to the competitors’ offers.

 

4.1.2            Conditions to be met by Lee Carters

 

Doing business and managing business in most case is not about making choices between rights or wrong, but making choices to maximize the company’s benefits in the long run. In another word, it is the tradeoff between the cost of keeping Lee Carter with better compensation and the benefits by having her in the position. Based on the analytical discussion about the possible alternatives that the company could turn to, the final decision that we are recommending to the CEO of the company is to offer conditional offer to Lee Carter. The rationality of this final decision will be further explained in the following part.

 

As we have found out, there are conflicts between some business objectives and the current human resource management practices and status, and some problems are even strengthened by the star marketing manager who had been too focusing on her own job and there are some changes that the management of the company expects to see on her. And now, with the finding that Lee Carter would prefer to have salary increase or addition of other compensations, trades and deals could be done between the company and Lee Carter. The company could offer a much better pay package that includes stock option and other kind of compensations but with the following conditions:

 

4.1.2.1      Task of team building

 

The first condition is about team building, as we had analyzed, though Lee Carter’s hard work and responsible attitude had led to the rapid growth of the business, but she did not actively foster the team building process, for example, she has always been busying travelling and negotiating with partners and suppliers and customers, she hardly had time to get to know the staff and she even missed the annual dinner of the company, thus one key condition to be met by Lee Carter would be to require her to help build an effective and efficient team rather than fighter on her own.

 

4.1.2.2      Formal marketing department building

 

The second condition would be to request the marketing manager to contribute more to the formal marketing department building, this request similar to the team building. And the focus of the formal marketing department building is to build up clear sale distribution channel and include the informal business partners into strategic long term partners.

 

A third condition is to require the marketing manager to take up the leadership and foster the culture change in the company as the formalized procedures and disciplines are needed. Team communication and subordinate caring would be important for Lee Carter to play the role and functions of a leader rather than a functional manager who focus on the job. Leadership is about the management and interaction between the a leader and his or her subordinates through personal influence.

 

4.2    Defending the decision

 

Firstly, in deciding the compensation to the company in the senior management positions, money is not the most important factor but the contribution that the manager could contribute and obviously Lee Carter is the star manager and the core of the management, her contribution and performance deserves an above average pay package; secondly, it is the company’s strategic plan to have Lee Carter to assist the new product development, setting of functional marketing department and also the lead the culture changes because the result oriented traits and leadership style of Lee Carter is a good substitute to the current lazy air style corporate cultural elements and help cultivate a new changed corporate culture that would better fit in the business growth needs. Thirdly, it is industrial practices that marketing management would be offered stock options and other types of compensation as incentive to retain these talented people and what Lee Carter has done proves that she is one of the best and her achievement need to be recognized by the company.

 

5.        Alternatives – what could be the optional choices

 

5.1    Job redesign

 

To retain people with critical skills for longer periods, companies need better mechanisms than compensation. One is job design. By thinking carefully about which tasks to include in which jobs, companies can exert considerable influence over retention rates (hbs.edu 2011). Because Lee Carter has been too much involved with the sale and could not help with the leadership job as a marketing manager, therefore the company could redesign the marketing manager position and send more assistant marketing managers to share the workload of Lee Carter. And less workload should make Lee Carter more content with the current job.

 

5.2    Case investigation and doing nothing in response

 

5.2.1            How this alternative could be implemented?

 

When the senior management of the company could be pondering about what changes should be introduced into the new pay package which is redesigned for the star performer with the hope that she would stay down in time of desperate need of her, but one problem that needs to be clarified is that does what the CEO overhead is really true  or not, or may the best news is that Lee Carter does have any plan leaving the company and what she said was only saying that to courteously and indirectly decline the offering. Based on this rationality, one alternative that could be an conservative option for the management of Waterway is to investigate the truth behind the overheard dialogue.

 

By adopting this alternative, the company would engage in the case investigation and there is not actual response given to the event, the investigation results are two folds: (a) Lee Carter would like to leave the company for better offer; (b) Lee Carter does not have a plan to do so. If the investigation shows that the latter option is more closed to the fact, the company could leave alone the conversation and wait for the response of Lee Carter; but if she does has a plan to leave the company for better offers, there are more alternatives to be implemented which we will be talking about later after we analyze the good and bad of the current option which is to investigate the facts relevant to the conversation.

 

5.2.2            Positive side of the option – case investigation

 

Actually investigation should be done anyway before any strategic changes in term of marketing decisions or HR decisions or in other areas because if the management of the company based on some overhead conversations and therefore increase the salary of Lee Carter to a higher level, though it seems that it helps keep a star manager it also increases the financial burdens of the company based on some unconfirmed rumors. Therefore, there are positive results by carrying out an investigation on the overheard conversations: (a) avoid the early increase of the compensation enjoyed by the marketing managers and thus save up cost for the company for the business expansion; (b) there could be chance Lee Carter is not really interested in the offer provided to her; (c) case investigation provides more evident and facts based on which the company could make more practical and balanced decisions regarding the necessity of the redesign of the marketing manager’s compensation package.

 

5.2.3            Negative side of the option – case investigation

 

Investigations could further enhance what could originally be rumors and turn rumors into gossips among the employees. It is known that gossip is rampant in most workplaces. Sometimes, it seems as if people have nothing better to do than gossip about each other. They gossip about the company, their coworkers, and their managers. Expect a certain amount of gossip; people want to know what is going on in their workplace, and they like to discuss work issues. The key is to know when the gossip is out-of-hand. And management of the company need to act if the gossip is: (a) disrupting the work place and the business of work, (b) hurting employees’ feelings, (c) damaging interpersonal relationships, or (d) injuring employee motivation and morale (about.com 2011). All these disadvantages of having the gossips spreading over the company could be there and straightened by the company’s investigation behaviors.

 

 

Reference

 

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