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Riordan Manufacturing

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Category: Business

Autor: reviewessays 18 April 2011

Words: 3133 | Pages: 13

RUNNINGHEAD: RIORDAN MANUFACTURING

Problem Solution Paper: Riordan Manufacturing

Introduction

The purpose of this paper is to recommend a solution to Riordan Manufacturing (RM) for problems they are experiencing. The key areas to be addressed are the issues, the opportunities, the problem definition, the alternative solutions and benchmarking validation. This paper will analyze the alternative solutions, and state the risks and mitigation techniques to these risks. It will then recommend a final solution to Riordan Manufacturing. Finally, this paper will conclude with a plan to implement the recommended solution.

Situation Background

Riordan Manufacturing (RM) is a global plastics producer with projected annual earnings of $46 million. RM employees comprise three major demographic groups, baby boomers, generation X’s and generation Y’s. Riordan’s major customers are automotive parts manufactures, aircraft manufactures, the department of defense, beverage makers and bottlers and appliance manufactures. Riordan has recently made several strategic changes in the way it manufactures and markets its products. They have adopted a customer-relationship management system. After which the company conducted an employee survey which revealed a decrease in job satisfaction in the areas of compensation and benefits. For these reasons Riordan is losing sales and key personnel. They are in the middle of making important decisions on how and when to proceed with solving their issues.

Issue Identification

Many employees are complaining about compensation benefits. Riordan is also underpaying key employees below the industry average.

Opportunity Identification

Riordan can revise the current compensation plan to fit the needs of the organization. Riordan can also review the industry pay scale and base it on the performance of their employees.

Stakeholder perspectives/Ethical Dilemmas

The stakeholders are as follows: Michael Riordan, CEO for Riordan Manufactures, Kenneth Collins and the research and development team, Charles Lacy and the sales and marketing team, Maria Trinh and the information technology department and the customers.

Michael Riordan the CEO of RM and primary shareholder with 80% of the company’s stock is concerned with the value of his investment. His perspective on the employee’s complaints about the company’s compensation plan is “the new generation is ungrateful and doesn’t realize how good they have it” (UOP, 2007, p.11). His ethical dilemma is, he believes the “company is good to its employees and is concerned they are no longer as loyal as they used to be” (UOP, 2007 p.11). Kenneth Collins and the research and development team are concerned with inadequate compensation. His perspective is if he properly compensates key researchers they will continue to develop innovative products. The dilemma he faces is he has been with the company and Michael Riordan since the beginning and understands the company’s current financial situation. Charles Lacy and the sales team are concerned with the modification of the incentive system. He believes that employees should be compensated as teams. The dilemma he faces is that he has only been in management for one year so he does not want to push his limits. Maria Trinh and the information technology department are concerned with being underpaid. She values maintaining key employees and compensating them fairly. Her dilemma is knowing that other employees are competitively paid and her department is being underpaid. Finally, the customers are concerned with the cost of the products. They value adequate professionals handling their products at a reasonable rate. Their dilemma is deciding to pay more for highly skilled employees who produce innovative products or paying less for uncertainty.

Problem Statement

The problem is Riordan Manufacturing’s compensation process is deficient thereby causing a dissatisfied workplace and low morale among employees, which is resulting in declining sales and low productivity for the organization.

End State Goals

The changes expected if the problems are resolved are, reduced employee complaints about compensation and fairly compensate employees.

RM will fairly compensate employees and increase company approval ratings by 65% within the next six months. Many employees seek higher compensation for motivation to reach their fullest potential. Employees are being sought after and many have left the company during this difficult time due to the lack of challenges and low compensation.

In order for the company to reach its goals it must identify the goals of its workers. “The pay policy decision can have a major impact on the quality of a company’s workforce—and therefore on company performance” (Dreher and Dougherty, 2001, ch. 2 p. 11).

Verizon promises excellent salary and benefits, performance based incentive awards, tuition assistance outstanding career and growth opportunities and a unique environment of talented, diverse people (www22.verizon.com). They are one of the most highly sought after employer. Riordan is more than capable of this achievement.

Alternatives/ Benchmarking Validation

Company #1 Perdue University (Performance based pay determination process)

Purdue University is divided into two entities one is the university the other is named Business Services. In 1997, Business Services introduced a compensation and staff development plan for administrative and professional staff. Since 1997, there have been changes and additions that are incorporated into the new “Business Services and You guide” (www.purdue.edu). This guide is intended for administrative and professional employees within Business Services and provides information for these staff in the areas of: performance management, position bands, compensation, posting vacant positions, and career management (www.purdue.edu). This segment of the paper will focus on the employee compensation plan.

Business Services believes that aligning an individual’s performance to support team or organization goals will be very important if the primary basis of pay will be an individual’s performance. To determine an individual’s performance, managers will consider how well the employee demonstrates the following: “Business Services values and basic principles and Contribution to the team or organization’s success” (www.purdue.edu).

During the annual evaluation process (July 1) the directors of each department would have a meeting with the Vice President of the company to discuss base pay adjustments and the funding available to make these adjustments. They communicate a rationale “Pay based on performance is the foundation of a high-performance organization” (www.purdue.edu). Once the funding is finalized the directors may ask a group of managers to assist in making performance-based pay decisions. Managers would use a comparative performance ranking process.

The managers: 1.Determine which staff will be comparatively ranked. The supervisors of these staff should form the manager group. 2. Each supervisor in the group must discuss performance feedback with affected employees before the manager group meets. 3. The manager group meets and, through consensus, ranks all employees into performance categories. These categories are not pre-determined, but instead are developed through the discussions occurring during the meeting. 4. After ranking employees into performance categories, the manager group then recommends staff merit increases to the appropriate director.

Company #2 HR Group (Performance based pay determination process)

An implementation plan was produced through the HR group process website which suggests steps a company can implement when determining performance-based pay. This system entails a rating of performance based on merit. The rating scales are as follows: Meets job requirements receive up to 0% increase in salary. Demonstrates above average performance receive up to 1% increase in salary. Demonstrates excellent performance receive up to 2% increase in salary. Demonstrates extraordinary performance receive up to 3% increase in salary (www.hr.ubs.ca).

This process is as follows: 1. HR provides spreadsheet to HR administrators HR sends a spreadsheet (attached) with the list of employees who are eligible for the 2006 performance-based merit pay program, i.e., they have passed probation as at June 30, 2005 and are at or above the midpoint of their salary range(www.hr.ubs.ca). 2. Department administrators complete performance evaluations. Complete the performance evaluations for staff. To avoid any misunderstandings, please do not share information with employees of what percentage increases they may expect until the department’s overall merit increases have been reviewed (www.hr.ubs.ca). 3. Department Administrators complete spreadsheet. Fill in the spreadsheet with the employee’s performance rating, the merit pay information (both percentage and dollars) and the effective date of the changes. One could use July 1 or the anniversary date of the employee as the implementation date (www.hr.ubs.ca). 4. Forward completed spreadsheet to HR and staff appointment forms to payroll. Return the completed spreadsheet to HR Since the plan is to reward staff for meritorious performance, and not to give across-the-board increases, it is to be expected that a variety of ratings will be represented on the spreadsheet with a departmental average of approximately 2% (www.hr.ubs.ca).

This program is designed to reward meritorious performance; staff members who meet their job requirements are therefore not eligible for an increase. It is expected that a normal distribution across the various performance levels would occur, and that staff members who have demonstrated extraordinary performance would typically receive a higher percentage increase than those who demonstrate above average performance (www.hr.ubs.ca). Managers may elect to reward staff in ways other than pay increase such as additional time off or career development opportunities such as courses, coaching or conferences (www.hr.ubs.ca).

Analysis of Alternative Solutions Pros/Cons

When a company determines they are moving towards a performance based pay process they can apply a comparative performance ranking process (CPRP) or the performance based on merit program (PBMP). Both of these processes are attainable depending of the culture of the organization. Riordan can borrow a leaf from Perdue University and the HR group by changing its compensation process that is currently based on seniority, to a performance based process. This process will help Riordan solve their issues of employee complaints concerning pay and underpaying employees below the industry average by making them accountable for their own compensation (as most of the Riordan’s employees are not happy that compensation is based on seniority and not performance). Therefore, there is need for Riordan to increase its employees’ job satisfaction by adapting a pay process that is based on performance.

The CPRP has advantages when similar position responsibilities within an area make it reasonable to compare the performance of individual staff members. The further advantages of CPRP are: comparative ranking by a group of managers emphasizes the cross-functionality of the organization and helps to neutralize the effect of the varied rating styles of different managers for example some managers are tougher "graders" than others (www.purdue.edu). Additionally, immediate supervisors have direct involvement in determining the raise their staff receives (www.purdue.edu). Finally, gathering staff into larger groups provides greater flexibility for distributing raises. The larger group is more likely than smaller, individual groups to have a broader distribution of staff within the various performance categories (www.purdue.edu).

The performance based merit program (PBMP) has advantages when and organization has positions from one end of the spectrum to the other. The further advantages of the performance based merit program are: clear and concise documentation along the entire process (fewer cracks to slip through). Employees would also be motivated to exceed expectations instead of merely meeting set goals. This system particularly rewards only those who have meritorious performance and have gone beyond for company success. Finally, Human Resources are an integral part of the process. With both of theses alternatives Riordan Manufacturing can have a system intact with definite dates and deadlines.

The disadvantages of these alternatives are: if management is not thorough with their assessments and timely with the delivery of the evaluations the processes would be worthless. Additionally, the employees with the seniority status may lose their enthusiasm for the company because newer employees might perform at a higher rate. Finally, the value of being loyal to the company may decrease because employees are no longer being rewarded for longevity and loyalty.

This paper identified two processes and will recommend that Riordan adopt one of these processes. The process recommended is performance based merit based program. This process will fit better within the culture of Riordan. Many employees currently strive for excellence and incorporating this program will motivate employees and allow them to have the salary that they desire based on the work they produce.

Risks assessment and Mitigation Techniques

The risk of the performance based merit program is employee miscommunication about the process thereby causing a grapevine syndrome to be prevalent within the organization. In order to mitigate this risk RM must have clear and open communication with employees about the changes and diffuse rumors immediately. Another risk is the lost of focus about the process because “it’s different”. Management should anticipant this mindset and set a change date and stick to it. Finally, senior level employees could rebel because this system depletes seniority increases. RM can have other reward systems in place, like drug maker Genetech; they have anniversary recognition awards for 3, 5, 10, 15, 20 and 25 years of service (Genetech.com). Riordan can benefit from these changes.

Implementation

The solution suggested will be implemented within the next thirty days. Initially, the responsibilities will be delegated. Yvonne from human resources will take charge of the administrative responsibilities of this project and report directly to Michael Riordan. Next, a meeting will be called with all managers to explain the new process and the timeframe in which to implement changes. Afterwards, managers will be instructed to gather their individual departments into the auditorium for a company wide meeting. Michael Riordan will personally address the employees to advise them of the changes. He will address headquarters first and then travel to the other sites to meet with the remainder of the company. The management team will be given a one day training on the process and further particulars to answer employees’ questions. A question/suggestion box will be place strategically around the company for employees to anonymously ask questions and direct comments to the CEO about the plan. These boxes will be there for six months and the questions or suggestions will be addressed and answered in the company’s weekly memorandums. The printed memorandums are available at the entrance of the cafeteria. After management has been successfully trained, they will relay the process of the new plan to their staff in detail during a team meeting. Within thirty days the human resources department will be prepared for the transition. They will have all paperwork in order. They will initially review the industry pay scale and base employees’ current salary on it in conjunction with the demands required by our industry. Riordan Manufacturing will then roll out the performance based merit program.

Conclusion

In conclusion, it is possible for Riordan to have a successful process in place that will determine efficient compensation benefits for employees. Therefore, there is need for Riordan to change their current processes, which are based on seniority and politics to a process that is based on performance. This paper has proposed a solution to Riordan Manufacturing. The solution proposed was to adopt a performance based merit program.

Changing to a performance based process will allow RM to: 1. diffuse their issues, employee complaints about compensation and having underpaid key employees. 2. Realize their opportunities; revise the current compensation plan and review the industry pay scale and base it on the performance of their employees. 3. Lastly, achieve their end-state goals, reduce employee complaints about compensation and have fairly compensated employees. As a final point, linking pay to performance will allow employees to reach their full potential.

References

Genetech Company website. (2007). Retrieved from Google Scholar on March 10, 2007 from

http://www.gene.com/gene/careers/benefits/rewards.jsp

Purdue University website (2007). Retrieved from Google Scholar on March 10, 2007 from

http://www.purdue.edu/business/

Unknown. 2006 Retrieved from Google Scholar on March 8, 2007 from

http://www.hr.ubc.ca/files/pdf/compensation/Merit_2006_Implementation.pdf

University Of Phoenix. (2007). Week Four Riordan Manufactures, Inc. Scenario. Retrieved March 2, 2007, from UOP, Week Four, rEsource. MBA 530-Human Capital

development Course Web site

Dreher, G. and Dougherty, T. (2001). Reward and Compensation Systems. Human Resources Strategy 1e. 18 [University of Phoenix custom edition e-text].New York: The McGraw-Hill Retrieved March 5, 2007 from the University of Phoenix, Resource, MBA530- Human Capital Development Course Web site

University Of Phoenix. (2007). Week Four Riordan Manufactures, Inc. Scenario. Retrieved

March 2, 2007, from UOP, Week Four, rEsource. MBA 530-Human Capital

Development Course Web site

Why work at verizon retrieved on March 5, 2007 from https://www22.verizon.com/about/careers/why_work.html

Table #1

Issue Identification

Issue

Employees are dissatisfied with the compensation package

Riordan’s is underpaying key employees

Table # 2

Opportunities Identification

Opportunities

Riordan can revise the current compensation plan

Riordan can also review the industry pay scale and base it on the performance of their employees

Table #3

Stakeholders Perspectives and Ethical Dilemmas

Stakeholder Perspectives

Stakeholder Groups

Perspectives and Ethical Dilemmas

Michael Riordan, CEO for Riordan Manufacturing Ungrateful new generation/ thinks the company is good to its employees and are concerned they are no longer as loyal as they used to be

Kenneth Collins and the research and development team, If he properly compensates key researchers they will continue to develop innovative products /understands the company’s current financial situation.

Charles Lacy and the sales and marketing team, Believes employees should be compensated as teams/ doesn’t want to push it

Maria Trinh and the Information Technology department, Underpaid staff/ knowing other departments are being paid competitively

The customers. Concerned with the cost of the products/ is paying more for highly skilled employees who produce innovative products or paying less for uncertainty.

Table #4

End State Goal

End State Goals

RM will fairly compensate employees and increase company approval ratings by 65% within the next six months.

Table #5

Pros and Cons of Alternative Solutions

Alternatives Pros Cons

Comparative performance ranking process Emphasizes the cross-functionality of the organization

Helps neutralize the effect of the varied rating styles of managers

Immediate supervisors have direct involvement in determining the raise their staff receives

Provides greater flexibility for distributing raises.

The value of being loyal to the company may decrease

May cause dissention among managers

May allow room for favoritism

May not be cost efficient

If the system is not followed correctly may cause dishonesty and defeat the purpose.

Performance based merit program Makes for a clear system with definite dates and deadlines

Motivates employees

Sets clear expectations

Specifically involves key administrators Increases demands on employees

Increases demands on key administrators

Table #6

Alternative Solution Decision Matrix based on desired End-State Goals

Table #7Risks Assessment and Mitigation Strategies

Alternative Solution Risks and Probability Mitigation Techniques

Comparative performance ranking process Miscommunication about the process (grape-vine syndrome)

Lost focus about the process because “it’s different”

Senior level employees rebelling RM must effectively communicate with employees about the change

Set a change date and stick to it.

Establish other reward systems

Performance based merit program Some employees may never have the opportunity to advance in pay.

Cause dissention among employees

Managers can create a mentoring program for employees falling short

Re-work the program to fit departmental needs (i.e. team performance evaluations)

Table #8

Optimal Solution Implementation Plan

Deliverable Timeline Who is Responsible

Delegate responsibilities:

Yvonne from human resources will take charge of the administrative responsibilities of this project and report directly to Michael Riordan. Day 1 Michael Riordan

Managers meeting to explain the new process and the timeframe for implementation Day 1 Michael Riordan

Company-wide meeting

Headquarter Meeting

Two offsite meetings

Day 2 Michael Riordan

question/suggestion box placed for employees to anonymously ask questions and direct comments to the CEO about the plan 10 days to 180 days Human Resources Staff

Train management team on new process and tips on how to effectively answer employee questions 15 days Barbra Masterson

Human Capital Consulting

Team Meetings to relay detailed information gathered during the mangers training about the new plan 15 days Departmental managers

Final review of the process >30days Yvonne McMillan

roll out the performance based merit program 30days Everyone