FOC101-Spring2012: ABC Computers' Compensation Problems

  • 24 Jan 2012 15:33
    Message # 805962
    Jun (Administrator)

    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: 27 January 2012
  • 24 Jan 2012 16:44
    Reply # 805983 on 805962

    I will start with my humble answers !

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

    I think that come from a lack of listening and/or compensation knowledge from the Top Management, feedback was done by Manager (Tanaka-san) but not followed by the Top that led to this turn of events.

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

    Thats a tricky question for me, nothing maybe as my organisation compensation system is very different. 
    I think HR people must take care of the stakeholders so creating a fair compensation system who will send the good message inside the organisation is the 1st step to avoid the problem ABC Computers faced.

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

    To take FOC 101 course at TUJ ? 
    Seriously, I should try to find case where that kind of situation happened, to create a file, proving that not providing a fair compensation system may result in big problems. Remind them our goal.

    As a follow up question :

    - How would you link this case study to our strategic definition of compensation as a "communication tool"? 

    When Top Management (TM) decided to don't change anything in their compensation strategy the message received by the sales staff was clear. The TM didn't send a message to drive people to do their best, but in opposition what ever their performance they'll not be rewarded better than the ones who have lower performance.  

    - Where is the disconnect? What lessons can you learn from it? 

    As I said before creating a fair compensation system is critical, being very carefull about the message we send to the organisation, and to be very reactive if a problem occur, the compensation system is not a fixed strategy and have to be designed regarding the culture of each branch (in a Global Org.) and updated anytime it's needed. (but is also part of what I learned last Monday !)

    - What criteria would you use in developing a comp system for ABC Computers? 

    I surely use performance criteria to develop a compensation system, creating a survey done by manager about employee satisfaction and goals, pointing their needs and designing a system with different choice as bigger performance bonuses, training, promotion etc ... 

    Last modified: 25 Jan 2012 16:39 | Jeremy
  • 24 Jan 2012 21:49
    Reply # 806100 on 805962
    • 1.     Similarly to Jeremy’s answer, I believe that the recent departure of sales staff is due to a lack of response from top level management. Although, they were heard from Tanaka-san, they never heard from top level management (tlm) This sent probably a message that they TLM wasn’t going to listen. More so, I believe that the principal cause was perceived inequities from within the organization in terms of compensation. The sales team kept on going based on the intangibles of Tanaka-san’s management style (jovial, friendly, respected, helpful, patient etc.), however the sales team’s personal needs may have changed in the meantime (ex: need more financial reward and/or need for career advancement, etc..) or the external market changes (i.e. availability of similar jobs in other companies but for “better” compensation). If those needs changed along with that of the employment market, compounded by the sales team view of same wage for average performance (as in the case of the other division), then this would naturally lead to dissatisfaction and sales team members to look elsewhere.


    • 2.     In my current organization I am aware of differences in compensation in terms of Japanese staff vs foreign staff. However, I am unclear what the differences are nor what the perceptions are. However, in the broad scope, I think that a response from TLM is crucial to let employees know that they have received the feedback. However, TLM should not stop there, they should within a reasonable amount of time, begin to examine the situation, by involving those who have given this feedback. By doing so, TLM sends a message that the employees have been heard and though no solutions are immediately found, TLM is actually doing the ground work, the research necessary to then have facts and figures to start looking at some sort of change. Also, by involving those who gave the feedback, there usually is greater likelihood of commitment to the solution found.


    3. Hmmm, though one really. I think that if I were Tanaka-san, I would do some preliminary research to compare and contrast the compensation and performance of the two division, to examine closer the perception in my team. Then, when approaching TLM, I would be approaching them with facts and figures – and hopefully have laid some of the groundwork for more research, solution finding, etc.. I would inform my team that this step is taking place, so that they can see that they have been heard. I would also ask my team what their timeline is for the resolution of this? Do they need results in one month? Is this realistic? Do they need a result in six months? Along the way, it would be crucial to give them updates. I would also seek to understand where the dissactisfaction comes from, that is what are the personal needs of my staff which are instigating this, as sometimes it’s not always about money.

    From there, I would attempt to levy from what is within my power to enact in my own department which doesn’t involve financial compensation but remain within company policy. For example, can the team have an extra day off? Is there someone who could be promoted?



  • 25 Jan 2012 10:37
    Reply # 806610 on 805983
    Jun (Administrator)
    @Jeremy: Thanks Jeremy for starting this discussion. As a follow up question, how would you link this case study to our strategic definition of compensation as a "communication tool"? Where is the disconnect? What lessons can you learn from it? What criteria would you use in developing a comp system for ABC Computers?

    @Marie: You made excellent suggestions on what Tanaka-san and ABC Computers could have done to solve this comp problem. As a follow up question, what "intrinsic" or non-monetary rewards would you consider suggesting to ABC Computers? How would you realistically implement these suggestions?
    Last modified: 25 Jan 2012 10:41 | Jun (Administrator)
  • 27 Jan 2012 02:29
    Reply # 807870 on 805962

    1. The uniform compensation system implemented by the Management was not fair.  Indeed the incentives were awarded equally to the employees both of the Eastern and Western regions, but their performances were not appraised fairly.  The sales employees are not robots.  Their appraisals should be based on their performances of each task, not the number of working days.  The compensation is linked closely with the performance appraisal.  The Management could not understand the relationship.    

    2. I understand that there is no perfect performance appraisal system.  But in my previous company, the appraisal system was almost reasonable.  Each employee set goals and objectives.  At the appraisal, these were reviewed by employees, colleagues, and supervisors.  Anyway, we have to improve and keep accuracy of the performance appraisals, and reflect the results into the compensation, incentives, and other rewards.

    3. If I were Tanaka-san, I would suggest the Management that the compensation system should be changed to the one which is based on the performance.  I would show the figures of sales reports to them how the differences between the Eastern and the Western regions are.  Each employee has the right to get the appropriate compensation for their efforts.  And also, I would alert the Management about the risks of high turn over, disengaged employees, and poor sales performance without the fair compensation system.  Tanaka-san might be a respective manager by all the sales personnel, but he was not a good one for the Management because he could not let them understand the effectivity of the performance-based compensation and the voice of the sales personnel.

    This is my answer.  I appreciate your comments. 
  • 28 Jan 2012 11:08
    Reply # 809165 on 805962
    • A1:Top management policy of compensation does not match the nature of business ABC computers are doing. Uniform compensation system is not suitable for this organization where business is based on volume of sales. Executive management did not consider the recommendation for change from middle layer and their ignorance demotivated the employees, brought down the sales revenue and high turn over. They should have a performance based compensation system rather than a uniform compensation system.


    • A2: It’s hard to design a perfect compensation system, as business goals, individual goals, economical circumstances and labor policies change time to time. We should have an appropriate compensation system which rewards the employees fairly. It’s an ongoing process we have to keep reviewing, make positive changes and consider feedback from middle layer management.


    • A3: I would have proposed a performance based compensation system which is highly needed as Eastern and Western divisions are producing different sales revenue(target). Each employee deserves adequate compensation depending on how much employee contributed towards the department and corporation goals. If we don’t change the system we may face the loss of valuable resources, decrease in sales and lose market competency.

    Sorry for late posting.

  • 29 Jan 2012 20:12
    Reply # 809987 on 805962
    1. Top management was clearly not listening to Tanaka-san and ABC Eastern employees that the uniform compensation system based on the number of work days was regarded as unfair. Not only was TM unwilling or possibly unable to offer a more fair system, the lack of communication between TM and employees led to a "demotivating" work environment, high turnover and poor sales performance.

    Though Tanaka-san seems to be an effective manager, he was unable to successfully convey to TM the dissatisfaction among employees and persuade them to make changes before difficulties arose.

    2. I currently do freelance work at home so I am completely unaware of differences in compensation in my company. (Ignorance is bliss!) However, in previous jobs when discrepancies became apparent, the effects were similar to those at ABC Company, particularly loss of motivation and high turnover among department members. I'd like to agree with Jeremy that the creation of a fair compensation system would be the first step in avoiding the difficulties that ABC faced, but that depends on the business -- low wages/low retention/high turnover seem to be the norm for some sectors.

    3. Tanaka-san should be promoting a performance-based compensation system to TM. In addition to or perhaps as part of this system, ABC should be implementing a performance appraisal system, which would clearly define objectives and goals for employees and enable TM to become more fully aware of the successes or setbacks of the sales department (among others) to better decide appropriate compensation. Tanaka-san should consult a compensation specialist to ensure an effective performance-based system is created.

    My apologies for the late posting. It's exam week!
  • 30 Jan 2012 00:12
    Reply # 810068 on 805962
    Jun (Administrator)
    @ Etsuko: Great answers and as a C&B professional yourself, I'm sure you were able to relate to this case study. However, acting as a "devil's advocate," how will your suggestions be affected if the Management of ABC Computers want to communicate a "pay by membership" culture rather than a "performance-based comp system"? Looking forward to your answers.

    @ Shazad: You highlighted a very important aspect in designing a comp system: FLEXIBILITY. How can you make ABC Computers' comp system to be more flexible?

    @ Lisa: You also highlighted another important aspect in designing a comp system: COMMUNICATION. If you were Tanaka-san and TM, how would you communicate to the employees the company's comp system and its current predicament?

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