Problem Solution: Riordan Manufacturing

Problem Solution: Riordan Manufacturing

The manufacturing industry has been under amazing economic pressure the past few years. Riordan Manufacturing has been long established in the industry but has been slow to react to the changes in declining sales, erratic profits and employee turnover. Riordan’s restructure of the U.S. plants, into self-directed work teams, has created astounding turnover rates. Instead of taking immediate action when the declining sales and turnover began, Riordan waited and allowed the attack of the market share, profits and turnover to occur. Recently, the annual employee survey revealed a dramatic decrease in job satisfaction, compensation and benefits. Many employees are currently being under paid by 15% the markets needs and compensation is tied towards seniority rather than performance based. The current reward system is overwhelmingly perceived to be unfair by employees. Employee motivational theory reflects, “Employee perceptions are the critical elements in motivation” (Dreher & Dougherty, 2001).

Upper management is aware of the growing and immanent problems and should devise and implement an employee incentive and benefits plan which will reestablish Riordan as a leader in manufacturing and human capital retention. The Riordan solution must be specific, bold, ensure measurable success and yield positive risk through implementation: “good decision makers prefer to manage risk.” “They accept the fact that consequential decisions entail risk, they do everything they can to anticipate the risk, minimize it, and control it.” (Bateman & Snell, 2004, p.14-15) Riordan Manufacturing must implore researching best practice solutions and develop their own alternative solutions plans. The following essay reflects these alternative solutions with analysis, risk assessment, and mitigating techniques. From this research an optimal solution was generated with correlating implementation plan and full evaluation of the results. The turnaround plan will reflect the goals of matching and aligning the employee pay structure, devising a fair incentive program and implementing a retention bonus tied to business growth which will catapult them back into becoming the industry leaders.

Situation Analysis

Issue and Opportunity Identification

Riordan must assert themselves within the highly competitive manufacturing industry if they are to survive. Instead of taking immediate action Riordan waited and allowed the current company status to take hold. As a result, employee morale and work ethic is in full decline. Upper management should develop a strategic plan which will yield positive risk “good decision makers prefer to manage risk. This means that while they accept the fact that consequential decisions entail risk, they do everything they can to anticipate the risk, minimize it, and control it.” (Bateman & Snell, 2004, p.14-15) Riordan should design a solution which is specific, bold and can ensure measurable success. As a company they must be able to develop a solution which will enable them to become and remain competitive.

Currently, incentive plans are based on seniority which results in employees with less tenures expressing lack of motivation and continued drops in productivity. Matching the pay structure with the importance of the job would align a more effective and fair pay and incentive structure. “Determining what is an appropriate difference in pay, for people performing different work is one of the key challenges facing managers,” (Milkovich & Newman 2004). Many employees are currently being under paid by 15% under the markets requirements. A company should align their pay strategy based on the competition within the market. External competitive is a strategy used to ensure employees are fairly paid and ensuring the company’s ability to attract employees. "External competitiveness decisionsвЂ"both how much and what formsвЂ"have a twofold effect on objectives: (1) to ensure that the pay is sufficient to attract and retain employeesвЂ"if employees do not perceive their pay as competitive in comparison to what other organizations are offering for similar work, they may be more likely to leaveвЂ"and (2) to control labor costs so that the organization’s prices of products or services can remain competitive (Milkovich & Newman, p.18). The team based reward system in effect does not create a fair system to measure employees work individually. Incorporating a pay management system, would allow for a competitive compensation package for all employees. Pay system management will "ensure that the right people get the right pay for achieving objectives in the right way" (Milkovich & Newman, p.18). As a result of the team based reward system, employees are continuously cut out of potential salary increases. Employees continue to look elsewhere for work morale issues and the possible departure of talented employees to work for competitors. Riordan Manufacturing can immediately confront employees truthfully in regard to the results of the annual employee survey and relay Riordan will be taking the necessary steps to overcome the present day challenges.

Stakeholder Perspectives/Ethical Dilemmas

Riordan Manufacturing has been long established in the industry but has been slow to react to the changes in declining sales, erratic profits and turnover. Riordan’s restructure of the U.S. plants into self-directed work teams has created astounding turnover rates and lowered stock value. The decreases within the stock value of Riordan significantly affect all stockholders negatively. Riordan will introduce a turnaround plan which will reflect the goals of matching and aligning the employee pay structure, devising a fair incentive program and implementing a retention bonus tied to business growth which will catapult them back into becoming the industry leaders.

Recently, the annual employee survey revealed a dramatic decrease in job satisfaction, compensation and benefits. Riordan has several ethical dilemmas in respect to both new and senior employees. The current reward system is overwhelmingly perceived unfair by new employees. Many employees are currently being under paid by 15% of the markets requirements. The status within pay structure, incentives, salary potential, and lack of appreciation has led to lowered productivity, morale issues and the possible departure of talented employees to work for competitors. Changing the current incentive plans which are based on seniority may create the same results