Riordan Manufacturing: Benchmarking Research

BENCHMARKING APPROACH

ISSUE DESCRIPTION: The Riordan sales staff is having trouble retaining top performers with their current compensation and rewards system. Morale and work ethic are on the decline.

Alternative Solution: Enhance employee retention by upgrading the way employees are compensated and rewarded.

Company Benchmarked: Sonic Drive-Ins

The Chief Financial Officer Dale Edgel is concerned that in the past 12 months Riordan's turnover rates have increased. There is normal level of turnover that a company is expected to have, but Riordan's level has increased from its norm. Mr. Edgel is also concerned that some of Riordan's key personnel will leave the company and take their knowledge and training with them. According to Noe & Hollenbeck, "organizations must try to ensure that good performers want to stay with the organization and those employees whose performance is chronically low are encouraged or forced to leave" (2005, p. 309).

Sonic Drive-In is a 1950's style fast food chain headquartered in Oklahoma City which serves hamburgers and other types of famous fast food ("Working Class: Employee Retention Takes More Than Just a Free Lunch", 2003). Director of operations Diane Prem noticed prior to 1994 that the company had high levels of employee turnover. To solve this problem and ensure they retained top performers they created an employee retention program called "Showdown for Sonic Gold". The program resembled Olympic style games for employees. Some of the features of the program was "The Dr. Pepper Games" that had categories such as Carhop that enabled employees to compete for the best food delivery. The next event was Fountain where employees competed for the tastiest drink preparation. The Switchboard event was used for the best service delivery, and the Grill and Swamp event was used to see who had the best food preparation. In addition to these events, Sonic also held other contests throughout the year to rate employee knowledge and cleanliness. The winners of these contests would receive cash and special points that could later be redeemed for anything from T-Shirts to home audio equipment. As a result of this employee retention program, Sonic was able to increase the number of stores that participated in the program from only 20% to 95%. This has also been a great training opportunity for the employees. The employees learn leadership skills, how to work well with others, and customer service and food safety skills. Dian Prem says the prizes awarded drive performance and promote teamwork among the employees. The games are fun and they get everyone working together to make their jobs at Sonic more fun and enriching. The employees look at the training and fun they are getting as rewarding for their hard work.

In order to be successful at retaining employees, Riordan can use this benchmark to reduce turnover. They can foster an environment for employees that are fun to work in. Retaining employees does not always have to be about increasing their pay to get more productivity or motivation out of them. This is an example of non-financial returns in the workplace. "Non-financial returns from work have a substantial effect on employees' behavior (Milkovich & Newman, 2004, p. 11)."

ISSUE DESCRIPTION: The Riordan sales staff is having trouble retaining top performers with their current compensation and rewards system. Morale and work ethic are on the decline.

Alternative Solution: Enhance employee retention by upgrading the way employees are compensated and rewarded.

Company Benchmarked: AltaOne

The engineering and information systems managers at Riordan Manufacturing are concerned about losing key staff members due to inadequate compensation. Personnel with proprietary information that is vital to the company's success may quit. According to Milkovich & Newman, "90 percent of U.S. firms use merit pay increases.16 Merit increases are given as increments to the base pay in recognition of past work behavior. Some assessment of past performance is made, with or without a formal performance evaluation program, and the size of the increase is varied with performance" (2004, p. 8).

AltaOne is a federal credit union headquartered in Ridgecrest California with assets of $274 million ("Cruise Control: Recruitment and Retention Strategies", 2001). Prior to 2000, AltaOne had significant employee turnover. To solve this problem, in 2000 AltaOne redesigned their compensation program by instituting a merit pay system. Under this program employees are compensated based on what they are worth rather than a fixed salary. As an added bonus, management added a pay-for-performance system to complement the merit pay system. Under the pay-for-performance system, employees receive a bonus equal to a percentage of their base pay. This pay is rewarded for attaining personal goals such as furthering their education. Employees also receive a bonus for attaining corporate goals such as recruiting new members. In addition to these rewards and bonuses, Training is tied to the pay-for-performance program. Employees attend bi-monthly all-day workshops to help them hone their teller skills. This training gives employees the opportunity to excel in their current jobs so that they become more productive. This program has helped tellers to get promoted to more lucrative positions which in turn reduced the monotony of teller duties and decreased teller turnover. AltaOne also incorporated a program called "Caught Being Great". Under this program employees are rewarded if they are found doing something above and beyond their job responsibilities. They also incorporated a new career development program which enables two tiered structuring within positions. Teller positions now have different levels allowing more room for advancement within their job rating. As a result of the merit pay and pay-for-performance systems, turnover has been cut to an annualized rate of 14.6% by the end of third quarter 2000 from 1999's 29%.Teller turnover has also decreased from the California credit union average of 45% to 25%. The new pay systems have proven to be valuable in retaining employees and attracting new ones.

In order to be successful at retaining their key performers, Riordan can use this benchmark to reduce turnover. They can institute a pay system that not only compensates employees based on level or grade, but for the extra things they do for the company. The key staff members at Riordan may be