Reference no: EM133078250
Question: The Millerhall Barber Shop offers hair cutting and styling services for men and women. The shop has seven stations, and the owner-manager, Carson Miller, has employed as many as six other licensed barbers or cosmetologists at the same time.
As the shop's manager, Carson has experimented with compensation plans that offered a variety of incentives. None of these experiments produced the behavior changes that Carson had hoped to accomplish. A high staff turnover rate has been a vexing problem, and Carson has also experimented with incentives to reduce turnover, again with little evidence of success. High staff turnover has made it difficult for Carson to establish customer loyalty and build repeat business.
Though the terms "organizational architecture," "goal congruence," and "aligned incentives" are not terms Carson has ever used, the ideas behind those terms are familiar to Carson. The COVID-19 pandemic has impacted the shop's business in all the predictable ways. Compounding the challenges is Carson's desire to reduce time spent in the shop and pursue other business ventures.
But this now seems out of the question because it is proving very difficult to find and retain staff who meet Carson's standards. Carson is weighing options, including selling or closing the shop. Carson discussed all these concerns with a friend who is completing an online MBA Program, and the friend suggested that this may be the time to consider a different organizational architecture.
Conduct an Internet search to learn about an arrangement common in barbershops and beauty salons (and some real estate firms) whereby licensed individuals rent/lease space from the business owner. That is, instead of being employed by the owner of a business, a licensed individual rents space and works as an independent contractor. If Carson implements the rent/lease approach rather than continuing with the current method of employing licensed staff, this would be a significant change in the business model.
From Carson's perspective, what are the potential advantages and disadvantages associated with a change to the rent/lease approach? Explain.
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