Reference no: EM132750350

Question: Revising the Compensation Scheme One of the first things Rick Rencher wanted to do in his new position at SIL Manufacturing was to improve productivity through teamwork at every level of the company. As the new HR manager, Rick started to change the culture to a team-based approach.

Rick started by installing the concept of team management at the highest level, to oversee the operations of the entire company. The new management team consisted of manufacturing, distribution, planning, technical and human resource managers. Together they developed a new vision for the 500-employee company, which they expressed in the simple phrase "Excellence Together." They drafted a new mission statement for the company that focused on becoming customer driven and team-based, and that called upon employees to raise their level of commitment and began acting as "owners" of the company.

The next step was to convey the team message to employees throughout the company. The communication process went surprisingly well. Rick was happy to see his idea of "workforce of owners" begin to take shape. Teams trained together, developed production plans together, and adopted the technique of 360-degree feedback, in which an employee's performance evaluation is obtained from supervisors, subordinates, peers, and external and internal customers. performance and morale improved, and productivity began to move upwards. The company even sponsored occasional celebrations to reward team achievements and the team structure seemed firmly in place.

Rick decided to change one more thing. The company's long-standing policy had been to give all employees the same annual pay increase. But Rick felt that in the new team environment, outstanding performance should be the criterion for pay raise. After consulting with CEO Trish Safford, Rick sent a memo to all employees announcing the change to team-based pay for performance. The reaction was immediate and 100 percent negative. Employees were not happy with the change.

1. Does the pay-for-performance plan seem like a good idea? Why or why not?

2. What advice will you give Trish and Rick as they consider their decision?

3. What mistakes did they make in adopting and communicating the new salary plan? How might Rick have approached this major compensation change a little differently?

4. Assuming the new pay plan was eventually accepted, how will you address the fact that in the new performance evaluation system, employees' input affected their peers' pay levels?