read this Case and then answer question (Management theories and concepts)

Case: 7-Eleven in Australia is a business built on a franchise model that sells convenience goods such as milk, bread, drinks, petrol and so on in an operation that operates 24 hours a day, seven days a week. In 2016, there were more than 630 7-Eleven stores in Australia some of them company owned but the majority owned and operated by independent franchisees. Employing thousands of people, they served an average six customers per second and generated more than $3.6 billion in sales.

In August 2015, the 7-Eleven business chain came under intense media scrutiny, for the wrong reasons, when it was revealed that many of the employees working for the companys franchise outlets were being underpaid. The wage fraud scandal was uncovered and exposed in a joint investigation by Fairfax Media and ABCs Four Corners. But it was not the first time the company had come under scrutiny for underpayment. As far back as 2009/10, the Australian Fair Work Ombudsman (FWO) had investigated claims of underpayment at 7-Eleven stores after receiving complaints from employees. An audit back then by FWO of 56 stores in the Melbourne/Geelong area found 30 per cent being non-complaint and the company had been warned that it needed to look into the issue.

7-Elevens first attempt to control the crisis was to declare that it could not be held legally responsible for the underpayment of staff, because it was not the direct employer of those workers who had been underpaid in the individual stores run by franchisees. It also claimed that the viability of the 7-Eleven business model was not based on the underpayment of staff. However, as the pressure on the company increased, it decided in September 2015 to set up an outside Independent Franchisee Review and Staff Claims Panel to address the underpaying of staff by franchisees. The panel would be chaired by Allan Fels, the former chair of the Australian Competition and Consumer Commission (ACCC), using a team of forensic accountants from Deloitte to examine the claims. The owner of 7-Eleven Australia, Russ Withers, also stepped down from his role as chairman and CEO Warren Wilmot offered his resignation.

As the independent compensation panel started its work, it discovered that some employees had been paid between $5 and $10 an hour, considerably less than the minimum adult wage of

$17.29 an hour, and soon 2500 claims had been filed with them. By March 2016, the panel had made around 300 payouts totalling $10 million an average of $38 000 per person.

In April 2016, the FWO released a report that was highly critical of 7-Eleven. It asserted that, since the ombudsmans first auditing in 2009, 7-Eleven had received information that some stores within the network had engaged in deliberate attempts to underpay workers, including replying on inaccurate records and/or inputting false information about working hours into the head-office payroll system ... 7-Eleven had a reasonable basis on which to inquire and to act, but it had not done anything until it was exposed by the extensive media coverage. The FWO therefore recommended that 7-Eleven should enter into a compliance partnership with FWO, accepting that it has a moral and an ethical responsibility to root out and deal with the non- compliance by its franchisees. Only through such an action could changes occur that would stamp out the widespread practices of exploitation by franchisees within the 7-Eleven chain of workers, especially overseas students on visas with limited English skills and a poor understanding of their workplace rights.

Stung by the criticism, 7-Eleven tried to get a better control of the situation by announcing in a press release on 11 May 2016 that the company and Felss wage panel had agreed to transition the claims process to an independent unit within 7-Eleven. It claimed that it now had the capability to process claims internally. However, the panel members saw it differently and suggested that they were being sacked after months of increasing tension between the 7- Eleven head-office and the panel. They suspected that the company had been spooked by the prospect of payouts reaching as high as $100 million if the average payout remained at $38 000, as more than 3000 claims remained to be assessed and processed.

7-Elevens own Wage Repayment Program launched on 27 May, and as of 21 November 2016, according to figures published by Deloitte, the company had repaid nearly $57 million in back pay to 1335 workers. Thousands of underpayment claims are still being processed in what is the biggest back-pay claim in Australias history.

Question 1:

What types of controls did 7-Eleven use in dealing with the employees underpayment issue? Are there others that might be important to use?

Question 2:

What various stakeholders did 7-Eleven have to respond to following the media scrutiny of the underpayment issue? What social responsibility strategy did 7-Eleven try to implement when the crisis happened?

Question 3:

Use one of the motivation theories to explain the relationship between pay and motivation. What could the impact of the underpayment to the employees on 7-Elevens overall performance in this case?