In his new position at Hathaway Manufacturing, one of the first things Sandy Caldwell wanted to do was improve productivity through team- work at every level of the firm. As the new human resource manager for this plant, Sandy set out to change the culture to accommodate the team-based approach he had become so enthusiastic about in his most recent position.
Sandy started by installing the concept of team management at the highest level, to oversee the operations of the entire plant. The new management team consisted of manufacturing, distribu- tion, planning, technical, and human resource plant managers. To- gether 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 surpris- ingly well, and Sandy was happy to see his idea of a “workforce of owners” begin to take shape. Teams trained together, developed pro- duction 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 cus- tomers. 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.
Sandy decided to change one more thing. Hathaway’s long- standing policy had been to give all employees the same annual pay increase. But Sandy felt that in the new team environment, outstand- ing performance should be the criterion for pay raises. After consulting with CEO Regina Cioffi, Sandy sent a memo to all employees announc- ing the change to team-based pay for performance.
The reaction was immediate and 100% negative. None of the em- ployees was happy with the change, and among their complaints, two stood out. First, because the 360-degree feedback system made every- one 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.
Sandy 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?
Questions
1. Does the pay-for-performance plan seem like a good idea? Why or why not?
2. What advice would you give Regina and Sandy as they consider their decision?
3. What mistakes did they make in adopting and communicat- ing the new salary plan? How might Sandy have approached this major compensation change a little differently?
4. 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?