A Zero Wage Increase

Situation Analysis

Mark Coglin is the owner of 'house Hearth & home', a large hardware and, furniture and building centre which was going through a difficult time. The global economic downturn had adversely affected the company and overall profits had shrunk. Mark was faced with the problem of managing wage review process for his employees who had been working on the same wage for 2 years now. He was apprehensive about the appraisal as there was little money which came as a result of optimising some of the operations that could be allocated to wage increase.

The core values of his company were- employee's dedication to work, customer satisfaction and integrity of the employees. There were corporate culture issues in the company. Some of the employees lacked the motivation to work. They also lacked workplace integrity and dedication to customer service. The difficult times had revealed the true character of his employees. It also revealed his lack of control over the company culture and his failure to inculcate the same in his employees. It showed the lack of communication among the managers and the subordinate employees.

He did not want to pay the underperforming employees which comprised of at least 15% of the work force. He could fire some of his employees who were underperforming and give differential increase in wage to the others based on their performance. He wanted to reward the hard working and dedicated employees who were the life blood of the company. He could also give the same hike or resort to differential hike in wage to every employee. This would appease everyone up to some extent but he was not inclined to reward the underperforming employees. Further the disparity in hike could result in an upheaval among his employees. He also acknowledged the fact that not giving a raise for 3 consecutive years could further de-motivate his employees and affect their attitude towards the company and their work adversely. This could also affect his business. But he could invest the money in his business.

hence, a decision has to be made whether he should give hike to his employees and if yes how he should manage it.

The problem

How Mark Coglin should manage the appraisal of his employees keeping in mind the tight budget constraints and the dissatisfaction brewing among his employees

The Options

1. He could fire some of the employees on grounds of performance and integrity and give hike to others on a performance basis.

2. He could give same hike to all his employees.

3. He could give differential hike to all his employees.

4. He could introduce a new appraisal system where in the employees were not given any hike at present but will be provided with some compensation on a quarterly basis from now on. The appraisal system would be purely based on performance and would be transparent.

Criteria for Evaluation

1. to acknowledge the hard working and dedicated employees.

2. to inculcate integrity amongst employees and motivate them to work.

3. to prevent any upheavals among