FOC101-Summer 2015 - ABC Computers Caselet Questions

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  • 19 May 2015 10:13
    Message # 3347609
    Jun (Administrator)

    QUESTIONS FOR DISCUSSION:

    1. What happened at ABC Computers that led to such a disappointing turn of events (e.g., high employee turn over, disengaged employees, etc.)?

    2. What can you learn from this case study that you can apply to your own organization?

    3. If you are in Tanaka-san's shoes, what would you recommend to the management of ABC Computers?

    Note: Feel free to critique, comment, or ask questions on your classmates' answers.

    DUE DATE: 23 May 2015

  • 21 May 2015 23:08
    Reply # 3351101 on 3347609
    Ian

    1.  A new "uniform compensation system" was implemented by management to cover sales employees who were apparently performing with different competencies (and who were aware of each others performance).  i.e. a compensation scheme inappropriate to the business was introduced.  This seems to have occurred because of an initial failure in the communication between middle and upper management, leading to a failure to adequately foresee the potential impact on motivation of the new uniform compensation system.

    2.  I think the first lesson for me is to consider carefully the likely implications of new compensation systems (or indeed any other changes) on the motivation of employees.  The second lesson is not to underestimate the demotivating effect on staff if they feel they are a) not being listened to, and b) not being "fairly" (in this case internal fairness) rewarded. 

    3.  If I was Mr. Tanaka then I would recommend modifying the new compensation system for the sales staff to include a reasonable percentage (30%, say) of performance related compensation that varies according to the performance of the group (since this appears to be the level at which comparisons are made), rather than according to the company as a whole. 

      

  • 22 May 2015 19:01
    Reply # 3352075 on 3347609
    1. The uniform compensation system was implemented by the Management whereas the employees of the Eastern Division expressed that the system was de-motivating and requested the performance-based variable pay system be introduced. Although this request was escalated to the Top Management immediately, the Top Management failed to recognize the varied performance between the two Divisions, a potential challenge they might be facing if the compensation scheme was not reviewed, and ultimately the need to implement more fair and motivating compensation system. The Division manager also failed to convince the Top Management to recognize all of the above.


    2. It again reminded me that compensation is influential as a company's communication tool to employees. Since I am an HRBP for Sales team, and our incentive scheme is a strong driver for the motivation and delivery of sales results, I would like to continue to suggest to Sales team and Management to review if our scheme is appropriate, fair, and motivating at all time.


    3. I would recommend to the Top Management to implement the performance-based incentive system comparing the sales results of the two Division, describing how the employees feel and express, and explaining the risk of high turn-over and de-motivation as a result of failing to react to this feedback. I would also elaborate how costly it would be to have a high attrition rate and disengaged employees.
  • 22 May 2015 23:02
    Reply # 3352241 on 3347609

    1. What happened at ABC Computers that led to such a disappointing turn of events (e.g., high employee turn over, disengaged employees, etc.)?

    Watanabe-san stated that an incentive-based compensation system, rather than the current uniform compensation system, should be implemented in order to encourage employee performance and motivation, and Tanaka-san took responsibility for relaying this concern to management. The response from management did not come for over two months, and as a result, several employees began quitting ABC computers. One can assume that these employees quit due to the lack of an expedient response/solution from upper management. I would guess that these employees did not feel valued by upper management since (1) they were compensated the same no matter how much more they sold in comparison with their coworkers in other divisions and (2) a response/solution from upper management was not given for over two months.

    2. What can you learn from this case study that you can apply to your own organization?

    1) I think that it is important to have regular evaluations where employees can rate and provide feedback on how satisfied they are with their work, the compensation that they receive for their work, and the overall work environment. This kind of evaluation process should be done in a way that is meaningful for both the employee and the organization. In my organization about a year ago, I proposed and received consent from upper management to revise the evaluation process for people in my position and worked to change the evaluation process so that (1) management could better understand if their employee(s) were dissatisfied with certain aspects of the job and (2) to create a starting point where upper management could analyze and discuss with employees how to make work/the work environment more satisfying and enjoyable. For me, this case study reaffirms the importance of conducting regular and effective job satisfaction evaluations.

    2) It is important to provide a time-frame (as concrete and expedient as possible) for responding back to employee’s suggestions, concerns, etc. One of the major issues in this case study was Tanaka-san’s lack of communication with his employees and lack of providing a definite response from upper management for an extended period of time. Due to this, employees began to become more dissatisfied with upper management and their work situation, which led to some of them quitting.

    3. If you are in Tanaka-san's shoes, what would you recommend to the management of ABC Computers?

    1) I would first recommend developing criteria for a variable compensation plan. In particular, I believe it would be important to discuss (1) the fairness of the compensation plan in comparison to other similar jobs outside of the company and other jobs within the company, (2) whether or not everyone should have the same plan or not based on what is being sold and the sales targets, (3) where the market pay positioning should be located, (4) whether or not to include non-monetary awards, and (5) whether compensation decisions should be made by HR (central location) or individual managers. In order to develop these criteria, I believe it would be good to create a committee that is comprised of upper executives, managers, and employees to come to a consensus regarding the decisions. This committee should follow the compensation analysis model.

    2) Depending on how big this change in compensation plan will affect the operations and culture of the workplace, I would advise the person in charge of creating the committee mentioned in (1) to follow John Kotter’s eight-step model for creating change (establishing a sense of urgency, creating the guiding coalition, developing a vision and strategy, communicating the change vision, empowering broad-based action, generating short-term wins, consolidating gains and producing more change, and anchoring new approaches in the culture). Following this model will greatly increase the probability that the change in compensation plan will be completed in an efficient and effective manner.

    3) Regarding the deadline for making decisions, Tanaka-san should make a timeframe with input from the aforementioned committee and convey this timeline early on in written form to his employees. This will give the employees a better idea of what will be decided when, which in turn should give these employees more confidence that their company is committed to improving their job satisfaction. 


    Last modified: 22 May 2015 23:05 | Blain
  • 23 May 2015 12:38
    Reply # 3353047 on 3347609

    Hello All, it is interesting reading your replies, and here is mine! :)

    1. I think the major problem behind this series of disappointing events is essentially due to communication. Effectively, it is the role of Tanaka-san to accurately communicate on behalf of the employees about their needs as well as, the urgency of the issue. Since the period when the Eastern division achieved double the sales than that of the Western Division, the Management did not acknowledge their efforts. No doubt the Management would have seen the figures, however I think Tanaka-san does play a major role in relaying messages from them to the subordinates and vice-versa. Also since Tanaka-san works immediately with the people under him, he should have foreseen these events (eg. high turnover, unmotivated employees). 

    2. It is essential to set-up a tool where the employees voices can be heard. In my company, we do an ES survey (Employees Satisfaction Survey) every 3-4 years worldwide to get an overall view of how employees think of certain initiatives by the company, compensation system and whether the policies are aligned with the organization's goals etc. 

    Obviously communication isn't a one way direction, therefore after receiving these results, the Management needs to clearly again deliver their responses especially on those outstanding issues.  

    3. Before recommending anything to the management, I would probably engage a few key people in the organization (top managers, middle managers etc.) and come out with a preliminary proposal stating the advantages/effects/fairness of going ahead with the performance-based compensation/incentive package. 

    I would also let my people know that such project is underway, so they know that their voices have been heard, and this proposal will be submitted by a certain timeframe. 

    ----

    I have a side question though about how Japanese employees feel about their current compensation system in their own company since it is largely hierarchy based. (which I feel is kind of related to this case study even though it is not explicitly stated here) I guess the problem with ABC Computers only came in because this small group of people knew they could and had achieved really good sales records. However what if this wasn't the case, will they be satisfied with the current uniform compensation system then?   

    Last modified: 23 May 2015 12:55 | Jingjing
  • 23 May 2015 17:57
    Reply # 3353226 on 3347609

     
    1.The current compensation system led to these disappointing turn of events such as High employee turnover, increased disengaged employees ,demotivated employees etc.

    The Management believed in the standard pay system based on the numbers of days the employees worked. Even the Management got the suggestions from Tanaka-san, they did not listen carefully. This is an organizational issue. I felt the difference of priority between the management and the employees. The Management focus on visible sales numbers, employees need the reward. If employees satisfy with the reward, their motivation is increased. It’s related to the numbers in the future.

    2.Actually, I had a similar situation last year. Our company’s salary systems are depends on subsidiaries. The turnover of Japan office last year was increased drastically, so we contributed to the company EBIT. Of course, the volume of workload has increased too. However, Japan office has a fixed salary system. Employees in Japan don’t have any bonus and incentive except GM due to the employment contract. On the other hand, our HQ, other subsidiaries and GM in Japan have bonus and incentive based on company EBIT. Unfortunately, our managers don’t say complaints, opinions to GM because they would like to protect themselves as GM has strong power in Japan.I recognized the power distance.We don't have a manager like "Tanaka-san, who collects employee’s voice and delivers to the TOP management. Therefore, HR given to excessive complaints from employees, then delivered to GM. I think the difference between ABC computers and our company is managers. We don't have "Tanaka-san", but we have a lot of "Watanabe-san"... As a HR, I have to make a plan to train managers to change their behavior as a real manager. Also, the communication is key for this matter as we don't have enough meetings to understand the sitation.

    3.I would recommend to the management they need to review and analyze the current situation and compensation system, and recommend to communicate with employees directly if possible.Of course, Tanaka-san is an interface between employees and the management. But if the Management communicate with employees (make opportunities, face to face, SNS on the intranet directly) I think they will change their mind and behavior.If it's difficult to change the compensation system immidiatly, the management should give commendations or words to the Eastern Division.

    Hire the consultant to give professional advice based on market reserch is option too.

     

  • 23 May 2015 18:33
    Reply # 3353230 on 3347609
    Mio

    1. Based on the overall situation described here, the message that Eastern Division sales force seems to have received from ABC computer’s managements is; “we do not care you whether or not you do a great job and made significant achievements to the company. We do not care you too even though you feel you are treated unfairly and want us to fix it.”


    2. First, the importance of sensitivity to organization climate. We (top managements, HR professionals and managers) need to remain sensitive to employees, in particular our sales force by carefully listening to them in order to retain good talents who drive sales profit. As how they behave would have significant impact on sales profits, our managements should always take their voice seriously and remain or establish a channel where heads of sales units can escalate any issues to managements.  

    Second, the importance of good communication by the managements/organization.“Good communication” means designing a communication plan and deliver each message in a timely manner, and make a necessary adjustment by monitoring their reaction.

    Last but not the least, the importance of recognition from the managements/organization.It can be compensation, such as short-term or long-term incentive, or something else including path to promotion, an award program, training for selected associates and so forth.


    3. ABC’s current sales incentive which doesn’t function as incentive but would rather enhance continuity employment with no requirement for achieving goals, and I would definitely like to recommend it’s top managements to replace it by a new performance-based incentive system. On the other hand I would always be in a position to think about budget, I would suggest transitional steps to them.

    For the current fiscal year, my suggestion would be providing reward to the entire Eastern Division and award for selected significant achievers among entire sales including both Eastern and Western Divisions. This can be anticipated to be seen a quick message from ABC “we recognize what you do.” If there is a budget issue, the amount of reward can be small. But ABC must establish a clear message of recognition.

     In next FY, implementation of the new incentive plan. Assuming that ABC managements would like the bonus pool (incentive budget) to be the same or around with it in the current FY, next question would be how to distribute the amount to the new incentive system and particularly how to design the ratio between 2 components; “Company Performance Based one” and “Individual Performance Based one”.

    Making it 100% of “Individual Performance Based” could be an answer if ABC needs to quickly recover from their awful drop in sales in the last FY and look for an aggressive incentive plan that drives sales growth. The plan may cause another turnover with  relatively modest performers like Western Division sales force though.

    If ABC, however, also consider relatively modest performer like Western Division and/or still value their continuing service or some reasons, the plan can be milder like; the combination of 30% of Company Performance Based and 70% of Individual Performance Based. This will allow Western Division sales force to receive some portion of incentive.  

    The decision must be made on what ABC values. 

  • 23 May 2015 22:27
    Reply # 3353340 on 3347609
    Thanks everyone for your insightful answers! I enjoyed reading them as well.

    Jingjing:

    Just out of curiosity, would you happen to know why your company does ES surveys every 3-4 years? My organization does a ES survey for my position once every year; however, since I work for the public sector, I am not sure if conducting ES surveys every 3-4 years is common in the private sector. Do you feel that this time frame is satisfactory or do you believe that these types of surveys should be conducted on a more frequent basis at your company?

    Makiko:

    You mentioned that you have to train managers in order to become a real manager. To confirm, do you mean train them to adopt a more Western management style? Is it difficult to train Japanese members of a company who haven't worked/lived abroad before to adopt this management style? I'm interested in hearing about the cultural barriers towards the training that you mentioned.

    Mio:

    You bring up an interesting point regarding how the compensation percentage should be determined. I wonder if it would hurt ABC Computers in the short term to immediate switch to a 100% Individual Performance Base, but at the same time, I wonder how an organization such as ABC Computers could determine the best percentage mix of company performance vs. individual performance.


  • 24 May 2015 11:46
    Reply # 3353752 on 3347609
    Deleted user

    Hi all, this is Shin. Very thoughtful suggestions you had. Here’s mine. 

    1. What happened at ABC Computers that led to such a disappointing turn of events (e.g., high employee turn over, disengaged employees, etc.)?

    First of all, the worst thing is that the business results of the company got worse in a short term perspective. Secondarily, highly performed employees resigned and it is goin to be an obstacle in a mid-term perspective. However, if we see the ABC company in a long term, this event would be the great case to change the HR system of the company to challenge the new performance-based system.


    2. What can you learn from this case study that you can apply to your own organization?

    First study to me is the compensation system influences the employees’ engagement. And it will sooner or later influence the company’s business results as a management issue. How to motivate the company is obviously significant. However, performance based pay system include the risk of disengagement at the opposite side that the labor cost will increase for the high performer while we keep the minimum wage for whom are evaluated the low performer. Therefore, If I introduce the performance based pay system to my company, I would keep the certain composition for the uniformed payment and have performance based pay parts which is consisted of two elements; a) Division’s contribution to the company business results and b) individual contribution to the division's results.

    Second, there is no clear answer in myself but,,, it reminds me that the fully performance based payment will be very difficult to execute under Japanese company who almost need to think about “Life time-employment”. If company introduce the performance based payment, at the same time the company must evaluate the employee clearly into two directions (High and Low). In case of non-Japanese HR policy, it may happen that the company will be able to dismiss the continuous  low performer, but in Japan, we need to keep him/her. So equality or seniority is still important in Japan…in fact.

    3. If you are in Tanaka-san's shoes, what would you recommend to the management of ABC Computers?

    If I were in Tanaka-san’s position I will do as follows;

    1.) Set up the interview to CEO to ask the management needs as a company’s head. Asking what does the CEO recognize as a business issue for this case, what is the achievement and the expectation to myself (or HR system) and till when the CEO would like to change the situation?

     

    2.)After find the “company/CEO’s expectation”, I will prepare a couple of options in order to achieve it. It may include the thoughts from several aspects such as;

    -Management style and leadership team

    -Effectiveness of our HR system (so far and future possibility)

    -Employee’s engagement

     

    3.)Set up the Top management meeting again with CEO, CFO, CHRO and CAO(Legal) having abovementioned analysis, and decide the main focus what we have to do now.

    Then, with all functional heads agreements, we will implement the new activity.

     

    4.)To have new activities in mind, conduct an employee survey to know the implication how the new activity may influence the employee’s motivation in a short term and a long term. Of course we should not mention about the new activity directly but design the survey with related different description.

     

    The important thing is how we can deliver the business results and its continuous growth, and Human Resources are the key driver. In this case, above all, we need to know how the new system will influence the company’s business results and employees’ motivation with high probability in good balance.


  • 24 May 2015 12:01
    Reply # 3353755 on 3347609
    Deleted user
    >Jingjing


    This is my opinion and I don't say it answer to your side question but, Japanese company have very hierarchy system. And we do not have clear job description. A certain vagueness, fairness and seniority are quite important in Japan normally. In case we induct the performance based payment, we may have to think about the promotion system. Systematically, performance based payment scheme will not be so difficult to introduce but the difficulty is how we can keep staying the cash out after we pay better to the high performer, and how we can connect to the promotion system under the strong hierarchy. 


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