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Riordan Manufacturing, When Human Resource Policy Meets the Voice of the Business
Introduction: Riordan Manufacturing is a fortune 1000 enterprise and a global plastics producer employing 550 people with projected annual earning of $46 million and revenues in excess of $1 billion. Production at Riordan Manufacturing is divided among three plants. One plant located in Albany, Georgia manufacturers beverage containers. The second plant located in Pontiac, Michigan manufacturers custom plastic parts. Riordan has recently become global and started manufacturing plastic fan parts in Hang Zhou, China. Corporate headquarters is located in San Jose, California where Research and Development is conducted. Riordan markets their goods to automotive parts manufacturers, aircraft manufacturers, the Department of Defense, beverage makers, bottlers, and appliance manufacturers.
Situation Analysis Issue and Opportunity Identification: a. There have been declining sales and uneven profits over the past two years. Employee retention numbers have declined. A decrease in overall job satisfaction, particularly in the areas of compensation and benefits is evident. The current reward system is mostly performance based,recognizing cost-of-living increases, seniority and position. Most department managers seem to perceive that the base pay of their workers is inadequate.”Monetary incentives though important need to be accompanied by non-monetary incentives like praise, recognition to be effective in motivating employees for better performance.” (Chaudhary, Sunil V., 2010) and a motivated workforce. The Riordan culture is composed of three distinct sub-groups of employees which hold radically different perspectives on rewards valuing everything from interesting work to bigger paychecks.
Stakeholder Perspectives/Ethical Dilemmas The first stakeholder is sales management. They want to implement a CRM system that responds with immediacy to the voice of the customer. Their plan is interdisciplinary work teams which consist of a salesperson, a R&D person and an IT person. This strategy is in direct conflict with the needs of the sales people who has for years been the sole contact with customers and who did not share their bonuses with other professionals on a team. R&D management feels that the new interdisciplinary teamwork system would inhibit their staff from completing greatly needed design projects on time..This group of professional’s just needs more interesting work. The IT manager believes that her staff is underpaid, and that key employees may leave the business. So far, no IT employees have resigned. The ethical conflict amounts to throwing money at employees as opposed to looking at more intrinsic factors such as job re-design to provide more interesting work.
Problem Statement: Riordan Industries aspires to create a system of employee incentives, rewards and empowerment which supports their vision of customer intimacy.
End-State Vision Since Riordan Industries has such a diverse employee population, the company implementing a total rewards system as a potentially powerful tool in assisting them to align their HR and business strategies with employee needs, to realize “higher productivity, better quality, and more competitive costs” (Collins, John P., 2012) to achieve optimal business performance. Total reward is the term that has been adopted to describe a reward strategy that brings additional components such as learning as translated to mean “collaboration between educators and the manufacturing base” (Collins, John P., 2012), into the benefits package. It goes beyond standard remuneration by embracing the company culture, and is aimed at giving all employees a voice in the operation, with the employer in return receiving an engaged employee performance. In this context, Riordan Industries would have a workforce which is motivated to execute team oriented strategies such as ISO 9000, Six Sigma and CRM.
Alternative Solutions: Riordan Industries can learn from McDonald’s and consider alternative solutions which align with their overall strategy of customer intimacy. They can develop a rewards system where people are paid for the contribution they make, as being paid less than a person is worth is a major de-motivator.” (Tracy, Brian) These rewards can be driven by individual incentives which are tied to customer satisfaction such as having the engineering team design a variety of customer driven product options and having the manufacturing team deliver a defect free product to the customer’s facility consistently on time. Opportunities for employees who show initiative and exceptional internal and external customer service may advance as far as their dreams may take them.
Analysis of Alternative Solutions: The most effective alternate solution would be to reward employees who show initiative and exceptional internal and external customer service in the form of advancement to better positions within the company. This solution would tie into reinforcing behaviors such as industriousness, good human relations and initiative which promote good customer service on all levels of the company which is good for business. Secondly, this solution would bundle other incentives with a job promotion such as better wages and benefits, and more challenging work which would be good for the employee. There would not be any impact on job content or other parameters of the benefits package. A second alternative solution would be to connect productivity and customer satisfaction with unilateral rewards for the entire team. A final alternative solution that the company may choose is to “structure a high performance environment around” (Tracy, Brian) their star performer. Others in the work group will want the same degree of praise and monetary rewards, that they will emulate this employee’s positive behaviors. The anticipated result would be better team chemistry, quality, and productivity.
Risk Assessment and Mitigation Techniques With any solution, there are risks. With solution number 1, which ties in individual performance related to customer satisfaction with incentive pay, some employees may not be motivated by money. Some would rather have additional days or weeks of vacations. Others may want recognition among their peer group. There are as many different incentive combinations as there are people. What motivates one employee may de-motivate another depending on where they stand on Maslow’s hierarchy of needs. If individuals do not feel motivated, the desired service behavior and quality workmanship may not occur. As a mitigation technique, the company may need to employ additional inspectors to be certain that acceptable product is produced. This activity may result in customer satisfaction in the short run, but will also increase the cost of the product. In the long run, customers may seek out less expensive alternatives with other manufacturers. Solution number 2, ties in team performance related to customer satisfaction with incentive pay. In an ideal world, this would be a great idea. In the real world however, some employees may not work well with other employees, and dysfunctional work teams are likely to create opportunities for poor quality products and missed deliveries. Some team members may not be money motivated either. To mitigate these issues, work teams need to be assembled not only by needed skills but by having people who enjoy working with each other. Employees may need to be re-assigned to different teams to make this a success. Employees whose style does not fit with any team may need an assignment as an individual performer such as a quality auditor. Secondly, a variety of incentives should be made available to motivate all employees to satisfy the customer and perform at a high level. Solution 3 recognizes your star performer, but does nothing to motivate the critical mass of the company. They may exhibit a backlash of disengagement towards their jobs. In addition, we must consider the rewards that we plan to give our star performer which must be substantial in relation to the additional hours that will be worked and additional responsibilities that the person will be held accountable for. To mitigate these circumstances, additional incentives must be provided to all employees that are tied in to customer satisfaction.
Optimal Solution: The optimal solution for Riordan Industries includes: 1.) Multiple (monetary, non-monetary, additional vacation time, education, etc.) performance based incentives aligned with serving the customer which have a broad appeal to all Riordan Industries employees. The benefit of these incentives would be a motivated workforce. 2.) Offering employees a competitive base pay and benefit package relative to similar jobs which exist in their industry and their geographical area. This would benefit Riordan Industries by reducing their attrition rate and correspondingly, the cost to recruit and train replacement employees. 3.) Offer stretch goals for all employees which are followed up by supervisors on a quarterly basis. The benefit for employees would be more challenging work.
Implementation Plan: To begin implementing an improved rewards and service program, human resources will solicit all Riordan Industries employees to determine their individual motivation criteria. Secondly, all supervisors and managers will define performance behaviors that ultimately impact customer satisfaction which they will reinforce and reward. Human resources will codify this data into a cohesive performance-reward plan. Senior management will approve this plan. Human Resources and all department heads will put into action. In addition, human resources will conduct an external environmental survey regarding base wages and benefits at Riordan Industries. If warranted, wages and benefits will be improved appropriately to correspond with the company’s lag strategy regarding compensation and benefits. Lastly, all supervisors will establish and review stretch goals with all their employees no later than the end of the first week of the next quarter, to be followed up the succeeding quarter.
Evaluation of Results The results of implementing the new rewards program at Riordan Industries will be based on the metric of number of surveys, (employee motivation, supervisor goals, wages and benefits, stretch goals) received on a weekly basis and the satisfactory implementation of all end state goals.
Conclusion: In Riordan Industries as in all organizations, it is important that the value of any rewards that are offered to employees appeals to their varied needs. Human resources and middle management need to have superior listening skills to ascertain what these needs are and what business goals they can be aligned to. It is also important to compare employee behavior, with actual actions. Many people may say that they will leave for a better job that pays more money and offers better benefits. Considering that human resources has adequately done their job and conducted wage and benefits surveys in the geographical area and the industry, and competitive compensation packages are offered, it is likely that a mass attrition of employees will not be realized. This will be the real truth for the Riordan Industries employees.
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