Does the pay-for-performance plan seem like a good idea? Why or why not?
2. What advice would you give Regina and Carla as they consider their decision?
3. What mistakes did they make in adopting and communicating the new salary plan?
4.How might Carla have approached this major compensation change a little differently ?
5. Assuming the new pay plan is eventually accepted, how would you address the fact that in the new performance evaluation system, employees’ input affects their peers’ pay levels?
6. Develop an Individual or Team sales incentive plan you would create for the employees of Hathaway Travel Agency, that will prove more effective ?
7.Consider your roll out plan and making employees “buy-in” to the proposed idea..
8. Discuss the importance of employee engagement in this case to increase staff retention ?
Case Study: Inserting Team Concept Into Compensation -Or Not ?
In her new position at Hathaway Travel Agency, one of the first things Carla Caldwell wanted to do was improve productivity through teamwork at every level of the firm. As the new human resource manager for the Miami Office, Carla set out to change the culture to accommodate the team-based approach she had become so enthusiastic about in her most recent position.
Carla started by installing the concept of team management at the highest level, to oversee the operations of the entire agency. The new management team consisted of international sales , national sales, marketing distribution, Itinerary planning, finance and human resource agency managers. Together they developed a new vision for the 500-employee facility, which they expressed in the simple phrase “Excellence Together”.
They drafted a new mission statement for the firm that focused on becoming customer driven and team based and that called upon employees to raise their level of commitment and begin acting as owners of the firm. The next step was to convey the team message to employees throughout the company. The communication process went surprisingly well, and Carla was happy to see her idea of a “workforce of owners” begin to take shape.
Teams trained together, developed marketing & sales plans together, and embraced the technique of 360-degree feedback, in which an employee’s performance evaluation is obtained from supervisors, subordinates, peers, and internal or external customers. Performance and morale improved and productivity began to tick upward. The company even sponsored occasional celebrations to reward team achievements, and the team structure seemed firmly in place.
Carla decided to change one more thing. Hathaway’s long-standing policy had been given to all employees the same annual pay increase. But Carla felt that in the new team environment, outstanding performance should be the criterion for pay raises. After consulting with CEO Regina Cioffi, Carla sent a memo to all employees announcing the change to team-based pay for performance.
The reaction was immediate and 100% negative. None of the employees was happy with the change, and among their complaints, two stood out. First, because the 360-degree feedback system made everyone responsible in part for someone else’s performance evaluation, no one was comfortable with the idea that pay raises might also be linked to peer input. Second, there was a widespread perception that the way the change was decided upon, and the way it was announced , put the firm’s commitment to team effort in doubt. Simply put employees felt left out of the decision process. While others are considering leaving the company to work with other competitive agencies.
Carla and Regina arranged a meeting for early the next morning. Sitting in her office, they began a painful debate. Should the new policy be rescinded as quickly as it was adopted, or should it be allowed to stand?