CHAPTER 2 Case study: Joe Black was trying to figure out what to do about a problem salary situation he had in his plant. Black recently took over as president of Acme Manufacturing. The founder and former president, Bill George, had been president for 35 years. The company was family owned and located in a small eastern Arkansas town. It had approximately 250 employees and was the largest employer in the community. Black was the member of the family that owned Acme, but he had never worked for the company prior to becoming the president. He had an MBA and a law degree, plus five years of management experience with a large manufacturing organization, where he was senior vice president for human resources before making his move to Acme. A short time after joining Acme, Black started to notice that there was considerable inequity in the pay structure for salaried employees. A discussion with the human resources director led him to believe that salaried employees pay was very much a matter of individual bargaining with the past president. Hourly paid factory employees were not part of this problem because they were unionized and their wages were set by collective bargaining. An examination of the salaried payroll showed that there were 25 employees, ranging in pay from that of the president to that of the receptionist. A closer examination showed that 14 of the salaried employees were female. Three of these were front-line factory supervisors and one was the human resources director. The other 10 were non-management. This examination also showed that the human resources director appeared to be underpaid, and that the three female supervisors were paid somewhat less than any of the male supervisors. However, there were no similar supervisory jobs in which there were both male and female job incumbents. When asked, the Hr director said she thought the female supervisors may have been paid at a lower rate mainly because they were women, and perhaps George, the former president, did not think that women needed as much money because they had working husbands. However, she added she personally thought that they were paid less because they supervised less-skilled employees than did the male supervisors. Black was not sure that this was true. The company from which Black had moved had a good job evaluation system. Although he was thoroughly familiar with and capable in this compensation tool, Black did not have time to make a job evaluation study at Acme. Therefore, he decided to hire a compensation consultant from a nearby university to help him. Together, they decided that all 25 salaried jobs should be in the same job evaluation cluster, that a modified ranking method of job evaluation should be used, and that the job descriptions recently completed by the HR director were current, accurate, and usable in the study. The job evaluation showed that the HR director and the three female supervisors were being underpaid relative to comparable male salaried employees. Black was not sure what to do. He knew that if the underpaid female supervisors took the case to the local EEOC office, the company could be found guilty of sex discrimination and then have to pay considerable back wages. He was afraid that if he gave these women an immediate salary increase, large enough to bring them up to where they should be, the male supervisors would be upset and the female supervisors might comprehend the total situation and want back pay. The HR director told Black that the female supervisors had never complained about pay differences. The HR director agreed to take a sizable salary increase with no back pay, so this part of the problem was solved. Black believed he had for choices relative to the female supervisors: 1. To do nothing. 2. To gradually increase the female supervisors' salaries. 3. To increase their salaries immediately. 4. To call the three supervisors into his office, discuss the situation with them, and jointly decide what to do. Questions 1. What would you do if you were Black? 2. How do you think the company got into a situation like this in the first place? 3. Why would you suggest Black pursue the alternative you suggested? CASE STUDY 2: Case-Low Salary for Nationals and High Salary for Expatriates for the Same Job - Halting the Wings of the Flights Air Nuigini-national carrier of Papua New Guinea used to pay more than double the salaries to expatriate pilots compared to that of national pilots. In fact national pilots are in no way inferior to expatriate pilots in skills and in performance in safety, regularity and punctuality. The salary discrimination was necessitated to attract foreign pilots due to shortage of national pilots. This practice was along with polices and practices of compensation management in other public and private organisations in Papua New Guinea. These practices resulted in the dissatisfaction among national pilots that prompted them to look for opportunities in other countries. The fast growth of airlines industry in various countries led to shortage of pilots resulting in higher salaries for pilots across the countries. Majority of the pilots of Papua New Guinea (PNG) who are dissatisfied with the salaries in Air Nuigini based on skill levels and performance records procured jobs in various airline companies particularly in the middle-east with triple the salary levels of their previous jobs in Air Nuigini. In fact, one of the former national pilot of Papua New Guinea got the job of the Deputy CEO of one of the middle-east airline company. The migration of PNG pilots reached the peak level in April 2008 and ultimately Air Nuigini did not have required number of pilots to operate their flights and Air Nuigini had to cancel some of its domestic flights and delay the operation of international flights, resulting in halting the wings of Air Nuigini flights. Consequently, Air Nuigini modified its compensation policy and offered equal salary levels to its national pilots along with that of expatriate pilots to combat the situation. However, it could not attract those pilots who left the company, but could halt the further migration of pilots to other companies. Questions for Discussion I. Do you think the compensation discrimination based on the nationality is desirable? 2. Why did the management of Air Nuigini failed to foresee the situation? 3. Suggest the strategies to prevent such situations in future and in other organizations in various countries that differentiate the salary CHAPTER 2 Case study: Joe Black was trying to figure out what to do about a problem salary situation he had in his plant. Black recently took over as president of Acme Manufacturing. The founder and former president, Bill George, had been president for 35 years. The company was family owned and located in a small eastern Arkansas town. It had approximately 250 employees and was the largest employer in the community. Black was the member of the family that owned Acme, but he had never worked for the company prior to becoming the president. He had an MBA and a law degree, plus five years of management experience with a large manufacturing organization, where he was senior vice president for human resources before making his move to Acme. A short time after joining Acme, Black started to notice that there was considerable inequity in the pay structure for salaried employees. A discussion with the human resources director led him to believe that salaried employees pay was very much a matter of individual bargaining with the past president. Hourly paid factory employees were not part of this problem because they were unionized and their wages were set by collective bargaining. An examination of the salaried payroll showed that there were 25 employees, ranging in pay from that of the president to that of the receptionist. A closer examination showed that 14 of the salaried employees were female. Three of these were front-line factory supervisors and one was the human resources director. The other 10 were non-management. This examination also showed that the human resources director appeared to be underpaid, and that the three female supervisors were paid somewhat less than any of the male supervisors. However, there were no similar supervisory jobs in which there were both male and female job incumbents. When asked, the Hr director said she thought the female supervisors may have been paid at a lower rate mainly because they were women, and perhaps George, the former president, did not think that women needed as much money because they had working husbands. However, she added she personally thought that they were paid less because they supervised less-skilled employees than did the male supervisors. Black was not sure that this was true. The company from which Black had moved had a good job evaluation system. Although he was thoroughly familiar with and capable in this compensation tool, Black did not have time to make a job evaluation study at Acme. Therefore, he decided to hire a compensation consultant from a nearby university to help him. Together, they decided that all 25 salaried jobs should be in the same job evaluation cluster, that a modified ranking method of job evaluation should be used, and that the job descriptions recently completed by the HR director were current, accurate, and usable in the study. The job evaluation showed that the HR director and the three female supervisors were being underpaid relative to comparable male salaried employees. Black was not sure what to do. He knew that if the underpaid female supervisors took the case to the local EEOC office, the company could be found guilty of sex discrimination and then have to pay considerable back wages. He was afraid that if he gave these women an immediate salary increase, large enough to bring them up to where they should be, the male supervisors would be upset and the female supervisors might comprehend the total situation and want back pay. The HR director told Black that the female supervisors had never complained about pay differences. The HR director agreed to take a sizable salary increase with no back pay, so this part of the problem was solved. Black believed he had for choices relative to the female supervisors: 1. To do nothing. 2. To gradually increase the female supervisors' salaries. 3. To increase their salaries immediately. 4. To call the three supervisors into his office, discuss the situation with them, and jointly decide what to do. Questions 1. What would you do if you were Black? 2. How do you think the company got into a situation like this in the first place? 3. Why would you suggest Black pursue the alternative you suggested? CASE STUDY 2: Case-Low Salary for Nationals and High Salary for Expatriates for the Same Job - Halting the Wings of the Flights Air Nuigini-national carrier of Papua New Guinea used to pay more than double the salaries to expatriate pilots compared to that of national pilots. In fact national pilots are in no way inferior to expatriate pilots in skills and in performance in safety, regularity and punctuality. The salary discrimination was necessitated to attract foreign pilots due to shortage of national pilots. This practice was along with polices and practices of compensation management in other public and private organisations in Papua New Guinea. These practices resulted in the dissatisfaction among national pilots that prompted them to look for opportunities in other countries. The fast growth of airlines industry in various countries led to shortage of pilots resulting in higher salaries for pilots across the countries. Majority of the pilots of Papua New Guinea (PNG) who are dissatisfied with the salaries in Air Nuigini based on skill levels and performance records procured jobs in various airline companies particularly in the middle-east with triple the salary levels of their previous jobs in Air Nuigini. In fact, one of the former national pilot of Papua New Guinea got the job of the Deputy CEO of one of the middle-east airline company. The migration of PNG pilots reached the peak level in April 2008 and ultimately Air Nuigini did not have required number of pilots to operate their flights and Air Nuigini had to cancel some of its domestic flights and delay the operation of international flights, resulting in halting the wings of Air Nuigini flights. Consequently, Air Nuigini modified its compensation policy and offered equal salary levels to its national pilots along with that of expatriate pilots to combat the situation. However, it could not attract those pilots who left the company, but could halt the further migration of pilots to other companies. Questions for Discussion I. Do you think the compensation discrimination based on the nationality is desirable? 2. Why did the management of Air Nuigini failed to foresee the situation? 3. Suggest the strategies to prevent such situations in future and in other organizations in various countries that differentiate the salary