Reference no: EM133097948
Pay Raise Allocations
You are the HR Manager for a small company that produces and sells pretzels using the company's secret recipe for pretzel dough. In addition to offering hand-rolled pretzels and pretzel sticks with several different dipping sauce choices, the company also offers pretzel bites and stuffed pretzels. In addition to selling its products online and in some specialty grocery stores, the company operates 8 kiosks in shopping malls in a large metropolitan area. Each kiosk has onsite baking equipment, a soft drink dispenser, ice maker, and humidity-controlled showcases. In addition to pretzels, each kiosk also offers soft drinks and bottled water.
You must make merit pay increase recommendations for 5 of the managers of each of the kiosks. These managers have just completed their first year with the company and are now to be considered for their first annual raise.
Each of the managers supervises a staff of 3 part-time employees on 2 different shifts. Each has at least an associate's degree, and 1 (Bob Berghoff) has a bachelor's degree. Their salary differences reflect varying levels of sales and management experience at the time of hire.
There are no formal company policies or guidelines regarding merit pay increases; however, you must stay within your merit increase budget of $12,000. Additionally, keep in mind that you may be setting precedents that will shape future expectations. Be prepared to justify your decisions to senior management if questioned.
Read through each of the synopses of the managers and then write a report that answers each of the answers at the end of the case study.
Adam Andorfer - Current Salary: $32,950
Sales at the kiosk Adam manages are well below that of the other kiosks, and he has had problems with staff turnover. However, you know that Adam has one of the toughest kiosks in the region to manage. The shopping mall is in a less-than-desirable part of town, and several of the stores in the shopping mall have closed, resulting in decreased foot traffic throughout the mall. If you lose Adam, it will probably be difficult to find an adequate replacement.
Bob Berghoff - Current Salary: $33,750
Bob has had some performance problems over the past year. For example, there have been a few times when his kiosk was not opened on time because he was late. He is not particularly well-regarded by the employees he manages, who've complained that he has a "dictatorial" attitude and drives them hard to serve customers while he sits back and texts friends on his phone. However, sales at his kiosk have been strong, partly due to the fact that his kiosk is in a high-traffic mall in a relatively affluent area.
Carolyn Christof - Current Salary: $34,000
Sales at Carolyn's kiosk have been lackluster. Her kiosk meets quarterly sales goals, but you're concerned because sales in the mall have been strong and more stores have been opening, whereas sales at the kiosk have remained flat. However, her subordinates speak highly of her for her outstanding people skills, and her kiosk has the lowest employee turnover of all the kiosks in the region. You know that she is supporting her aged, ailing mother, and she has confided in you that it has been difficult to pay for her mother's medical bills.
Dave Daniels - Current Salary: $32,500
Dave appears to be a solid performer. Sales at his kiosk have consistently met sales goals, despite the fact that the shopping mall is struggling and has recently lost one of its anchor stores. However, turnover at his kiosk has been relatively high. At their exit interviews, some of his subordinates have complained that his management skills are poor. For example, the kiosk has run out of supplies more than once because Dave has forgotten to place orders or keep track of inventory.
Ethan Edwards - Current Salary: $34,600
Ethan has turned out to be a pleasant surprise. Although his assignment is considered relatively easy compared to some of the other kiosks, sales at his kiosk have exceeded expectations, and employee turnover has been low. However, you know he has some financial problems, and you've heard "through the grapevine" that he has been sending out his resume to other retailers. You wonder if he will leave the company if he believes his raise isn't satisfactory.
Questions:
- What merit pay increases will you give each of these managers?
- How did you determine the amount of each of these merit pay increases? In other words, did you use a merit increase grid, such as that shown in Table 13.1, or did you use another form of determining the amount of the increase?
- Do you believe there would be a more effective way to reward performance instead of merit pay increases, such as performance bonuses that are not rolled into base pay or group bonuses for the kiosk teams? Why or why not?