Reference no: EM132983928

Scenario

You are a new HR Manager who has been hired to work for a manufacturing company called Smith Industrial Operations Products Inc. (SIOP), which employs approximately 350, makes industrial equipment, and has one plant located in Connecticut. The company has a small profit margin of 10%. It is located in a small town near many midsize manufacturing facilities. Background - The company was started in 1970 by a small group of entrepreneurial engineers who developed a unique high quality machine assembly product that other manufacturers could not imitate (due to the high quality, the technical know-how, and the complexity of the process required to manufacture the product). As the company grew it was acquired and sold several times by larger enterprises. Recently, the company was acquired by a small group of foreign investors. During the last acquisition, some of the original managers decided to become investors in the company to take some control of the operation. As a result of all the changes in the business, they have been struggling to build their customer base, as well as recruit employees to regain the momentum they had in the past. During the past 50 years that the company has been in business, the manufacturing site remained in the same 15-mile radius of the original location, and therefore many of the employees decided to continue to work there during these acquisitions. Some of the employees were laid off and then later were rehired. To encourage them to come back with equal benefits, the company kept their original hire dates. Turnover for the long service employees has been low, but turnover for the new employees is very high. There are numerous manufacturing businesses located within a 25-mile radius of the facility and many of these businesses need employees with the same skill set, so the competition for manufacturing labor is fierce. The Plant Manager has requested to see you as soon as possible to help him address a compensation issue that he recognized with his Machine Operators. He indicates in his interview with you that he has a significant problem with a group of Machine Operators. Specifically, he tells you that he has 28 Operators who have service time between 10-15 years, and who he believes are underpaid and need an adjustment to their salary. You ask how and why he believes this has occurred. He does not know but says that you need to fix this fast or these employees will leave. You realize that this is a significant issue but need to understand the root cause and don't feel comfortable just making an adjustment without data and analysis. You ask him to give you time to assimilate and learn more about the organization and how this happened. You know that giving an "adjustment" to 28 people out of 200 machine operators would not be a wise solution. From your research in trying to understand how and why this issue has occurred, you discover the following:

• The minimum wage in Connecticut increases each year. Each year, over the past 4-5 years, the minimum wage has gone up approximately 5.0%. HRM307 - Compensation & Benefits SIOP Team Project - Information Inflation rates have remained steady over the same period with changes each year of only 0.5- 1.0%. Machine Operators are not on a pay for performance plan. They have not received performance reviews or merit increases. Over the past 4-5 years Machine Operators have received three Cost of Living Adjustments (COLA). These have ranged from 1.5% to 2% across the board. Machine Operator output is measured on an individual basis (number of quality parts), but they work in cell teams with other Operators. Each Operator is expected to be flexible and work on many different types of machines. The job description for a Machine Operator has not been reviewed or updated in 6 years. There is an internal pay structure for hourly employees. The pay structure consists of 6 pay grade levels with small differentials between these levels. The Machine Operator is the first level of the pay structure. Each level consists of several positions which are valued at the same pay range. These salary ranges have not changed for 5 years. The Company provides a competitive benefits package consisting of medical, dental, vision, tuition reimbursement, a 401k, time off, and an annual discretionary bonus plan. Machine Operator Statistics Years of Service Number of Machine Operators Percentage of Machine Operators Average comparatio (80% is minimum of salary range, 100% = midpoint/market of salary range, 120% = maximum of salary range) Annual Turnover Less than 2 years 126 63% 81% Very High 2-5 years 20 10% 83% High 5-10 years 0 0% n/a 10-15 years 28 14% 85% Low Over 15 years 26 13% 110% Low 200 100% Problem Statement - You have been requested to give an "adjustment" to 28 Machine Operators between 10-15 years of service. You have researched the root cause of the problem but have not yet presented this to the Plant Manager or the leadership team.

1. What potential solutions would you recommend to the Plant Manager regarding making any adjustments to the 28 Machine Operators between 10-15 years of service now that you have thought through many of the challenges?
2. What are the implications to the business for each solution/recommendation?