Reference no: EM132249377

Scenario : Cutting Labor Costs

You have been in business for 5 years. In the beginning, the demand for your product was outstanding and your sales were through the roof. However, over the past 5 years, more competitors have entered the market and your sales have remained stagnant.

In analyzing areas of the business where you could improve, you have identified that your labor costs are far too expensive. Your Board of Directors has told you that you MUST reduce labor costs by 20%. You have power in deciding how you want to reduce your costs by 20%. Below you will find information on your current labor and benefits costs.

The categories listed here only involved the employees located in your corporate headquarters. The decision made in Scenario 1 does not have any impact on this section. Your labor costs are divided into 3 categories: hourly employees, salaried employees, and executives. Your labor costs are broken down as follows:

costs are broken down as follows:

Hourly employees: 30% of your employees, which include administrative and maintenance staff positions with salaries averaging $30,000/employee

Salaried employees: 50% of your employees, which include 1st line managers, account representatives, and accounting and marketing employees with salaries averaging $80,000/employee.

Executives: 20% of your employees, which include senior vice presidents, presidents, and chief officers with salaries averaging $150,000/employee.

The company also pays a large amount of benefits which includes insurance, 401K, unemployment benefits, etc. that are worth $10K. All employees get $10K worth of benefits. The difference lies in how much each employee pays for their benefits. The portion of benefits that the company pays is listed below:

Hourly employees: company pays 50%, employee pays 50%

Salaried employees: company pays 60%, employee pays 40%

Executives: company pays 75%, employee pays 25%

You have been told by the Board of Directors to cut costs by 20%. You may adjust any of the salaries, number of positions, and amount of benefits to make these changes. You also have the option of decreasing or increasing other areas as you see fit. Please be sure to correctly calculate your answer and explain why you made the decision.

Discuss the pros and cons of reducing compensation or cutting positions. How would this affect the company, the customers, and the organizational culture of the company? How will your decision affect the morale of existing employees? How will your customers feel about this decision?

For this scenario, I want you to have both a well-written summary of the decisions you made with a chart included at the end to back up what is in the written section above. The numbers in the chart should back up your written portion. This should be a Microsoft Excel chart copied and pasted into your paper. I will include a template of what I would like to see but you are welcome to use your own chart if you prefer. This portion of the project should be (3-5) pages in length (including the chart).