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Can’t Buy Me Love….

Jessica West, Personnel Manager for Wright Products, returned to her office deep in thought. She’d just spent the last hour and a half in a heated discussion with Curt Stump regarding the latest turnover crisis among assembly employees. Shrugging her shoulders, Jessica wondered if Curt was right. Maybe the current turnover problem was her fault – well, the fault of the Personnel Department. According to Curt, if she’d done a better job in selecting employees in the first place, Wright Products would not be in the current mess. “You hired losers,” he argued, pointing to the high turnover among temporary and permanent full-time employees.

           Wright had a core work force of 150 employees. Depending on the level of business, as many as 50 temporary employees must also be hired. The temporary workers were paid higher base salaries than regular employees ($12.50 an hour). However, they were not eligible for any benefits, including vacation leave, day care, and sick leave. If they were sick, they had to take time off without pay. They also could not participate in Wright’s highly successful profit-sharing program and matching pension fund. (See Exhibit 11.1.)

           Full-time, regular assembly workers were paid $12.00 an hour ($24,900 annually). While Wright’s hourly rate was below the industry average of $14.00 an hour ($29000 annually), employees more than made up this amount in performance bonuses.  Last year, regular employees received bonuses of approximately $4,000 each. This amount was lower than usual due to the recession. Since the program was implemented in 1990, bonuses had averaged $6500 per employee per year. This year bonuses were expected to be back on target. Jessica anticipated handing out bonuses in the range of $6,000 per employee. Employees had the option of taking the money in one lump sum, in quarterly installments, or in even distributions throughout the next year. According to HR policy, employee bonuses would be announced at the semi-annual employees’ meeting.

           Jessica was proud of her benefits program as well. Employee benefits as a percentage of payroll averaged 30 percent in the industry. Wright’s percentage was 42 percent. All full-time employees with one year’s seniority were eligible to participate in the extensive benefit program, which included such innovations as an on-site day care center (Jessica’s brain child, which took her two years to get approved), and an employee assistance program, including free legal assistance. The company also matched dollar-for-dollar employee contributions to a retirement fund, and offered two college scholarships annually to employees’ children. Jessica was particularly proud of Wright’s fitness center, which could be used by any “regular” employee and their families. Swimming lessons were provided free of charge to all family members.

           Wright’s vacation days were also higher than the industry average. Employees with two years of seniority earned one-half day of paid vacation per month, three-fourths day per month with three to five years seniority, and one day per month with more than five years of service. Personal days accrued at the same rate for regular employees. To prevent abuse, employees calling in absent before or after a holiday or after a payday are charged with an absence of 1.5 days. Employees with less than one year’s service and temporary employees are not reimbursed for absences. The failure of any employee to call in to report an absence at least four hours before his or her shift starts is grounds for disciplinary procedures.

           By having the core of regular employees, Wright is assured of having enough employees to meet normal production demands. By paying temporary employees base salaries slightly above the labor market average, Wright has gotten better because they were able to attract top-notch temporary employees to pick up the slack..

           Jessica wondered where things had gone wrong. Maybe Curt was right – she just hadn’t picked the right kind of employees. Shaking her head in bewilderment, she had her assistant, Margo Woods, interview some employees to see what was going on. Additionally, she prepared a report on causes of turnover (see Exhibit 1).

           According to Margo, the following comments are representative of the feelings of full-time permanent employees:

           “Sure, it’s a great place to work, but I’m tired of those young kids walking in off the street and making more than I do.”

           “I know, I know, we’re eligible to get bonuses, but they just can’t make up for a weekly salary – at least not when you have three kids to support.”

            “I worry that things are going to be the same as last year. I hung in there and look what I got, a lousy $2,500. The bottom line is that I still made less than temporary employees and those at the other canneries. I don’t like it one bit.”

           The following comments are typical of the views of permanent untenured workers (2 years seniority):

           “I got really steamed last month when they docked my pay for being sick. I mean, I was really sick. I hadn’t gone out with the girls or anything. I was down flat in bed with the flu. Why should I work hard here if I can’t even get a lousy day off when fm sick?”

            “I’ve worked here seven months already, and am pulling my own weight around here. Know what I mean? Well, it doesn’t seem right that I should be paid less than those part-timers.”

           Among temporary workers, the view was:

           “Yeah, we make a good rate of pay, but that’s not everything. My wife had to have a C-section last month. Without insurance, it cost me a bundle.”

           “I work just as hard as everyone else, so why shouldn’t I have the same benefits? Fin getting up there in years. It’d be nice to have a little bit set aside.”

           In reading these comments, it seemed to Jessica that she couldn’t win for losing. Maybe the most current employee attitude survey (see Exhibit 2) would be of help. At least it was worth a try. All she knew was that if they didn’t come up with a strategy soon, Wright would not meet its profit quotas, and the employee bonuses would be history.

Wright Products Turnover                                                                                               .

EXHIBIT 2 RESULTS OF THE EMPLOYEE ATTITUDE SURVEY

                                             P   e   r   m   a   n   e    n   t          

Rated 1 to 5, with 1 being the lowest and 5 being the highest.