A Zero Wage Increase Again?

A Zero Wage Increase Again?

Situation Analysis

Senior management at House, Hearth and Home (HHH) is facing a tricky situation. It is the time of the year when it has to take a decision regarding the wage increase of the employees. The employees did not express their displeasure after not getting any raise in 2009 and 2010 because they knew that the company was walking a tightrope due to the economic slump. However, there is a limit to how much they can take without complaining as they have to take care of their own financial situation. This year employees are eager to get a raise. The morale of many employees is already low, and no wage increase this year will push them over the edge.

Since, before 2009, every employee used to get almost same wage increase, it has become a part of the organization culture and everyone has taken it for granted that there will be a uniform wage increase this year irrespective of individual performances. So, any selective wage increase process might not go down too well with the employees.

The performance of the employees in the store is quite varied. There are some employees who are critical resources for the store without whom it will be difficult to tread through these tough times. There are also some underperformers who are bogging down the company with their laid-back attitude. Instead of keeping them on a short leash, the managers are cutting them a lot of slack and allowing them have their way. There is a lack of communication between managers and employees. Even when the managers are not pleased with the conduct of the employees, they do not let their displeasure known and do not give the employees any feedback. Moreover, some employees resort to unscrupulous practices such as stealing to earn some extra money. This culture is detrimental not only to the financial health of the store but to its performance and reputation as well.

Another issue is the source of funding for any wage increase that the management may contemplate. Some ways have been identified for saving money such as cutting down on advertisement expenditure, inventory reduction and process improvement, but the dilemma is whether to spend this hard earned saving on securing the company's future or spend it on employees;many undeserving among them.

The Problem Statement

The problem faced by the senior management is whether the employees should be given a wage raise in 2011. If yes, what should be the distribution?

The Options

The management has the following options:

1. Do not give wage raise to anyone

2. Give equal wage raise to everyone

3. Give performance based wage raise

Criteria for Evaluation

The criteria for evaluation of the options in decreasing order of priority are:

1. Improvementof culture and work environment at HHH which will have a long term impact

2. Financial burden

3. Future growth of company

Evaluation of Options

Option 1

If none of the employees is given any wage raise, it will not