Section C: Establishing Strategic Pay Plans Case Study: Carter Cleaning Company The New Pay Plan Jennifer Carter graduated from State University in June 2011 and, after considering several job offers, decided to do what she always planned to dogo into business with her father, Jack Carter. Jack Carter opened his first laundromat in 1999 and his second in 2001. The main attraction of these coin laundry businesses for him was that they were capitalrather than laborintensive. Thus, once the investment in machinery was made, the stores could be run with just one unskilled attendant and none of the labor problems people normally expects from being in the retail service business. The attractiveness of operating with virtually no skilled labor not-withstanding, Jack had decided by 2007 to expand the services in each of his stores to include the dry cleaning and pressing of clothes. He embarked, in other words, on a strategy of related diversification by adding new services that were related to and consistent with his existing coin laundry activities. He added these for several reasons. He wanted to better utilize the unused space in the rather large stores he currently had under lease. Furthermore, he was, as he put it, tired of sending out the dry cleaning and pressing work that came in from our coin laundry clients to a dry cleaner 5 miles away, who then took most of what should have been our profits. To reflect the new, expanded line of services, he renamed each of his two stores Carter Cleaning Centers and was sufficiently satisfied with their performance to open four more of the same type of stores over the next 5 years. Each store had its own on-site manager and, on average, about seven employees and annual revenues of about $550,000. It was this six-store chain that Jennifer joined after graduating. Her understanding with her father was that she would serve as a troubleshooter or consultant to the elder Carter with the aim of both learning the business and bringing to it modern management concepts and techniques for solving the businesss problems and facilitating its growth. Carter Cleaning Centers does not have a formal wage structure nor does it have rate ranges or use compensable factors. Wage rates are based mostly on those prevailing in the surrounding community and are tempered with an attempt on the part of Jack Carter to maintain some semblance of equity between what workers with different responsibilities in the stores are paid. Carter does not make any formal surveys when determining what his company should pay. He peruses the want ads almost every day Page 4 and conducts informal surveys among his friends in the local chapter of the laundry and cleaners trade association. While Jack has taken an informal approach to paying employees, his salary schedule has been guided by several basic pay policies based on his intuition and experience. Although many of his colleagues adhere to a policy of paying minimum rates, Jack has always followed a policy of paying his employees about 10% above what he feels are the prevailing rates, a policy that he believes reduces turnover while fostering employee loyalty. Of somewhat more concern to Jennifer is her fathers informal policy of paying men about 20% more than women for the same job. Her fathers explanation is, Theyre stronger and can work harder for longer hours, and besides they all have families to support. C-1. Is the company at the point where it should be setting up a formal salary structure based on a complete job evaluation? Why? Describe a job evaluation method that the company can use. (5 marks) C-2. Is Jack Carters policy of paying 10% more than the prevailing rates a sound one, and how could that be determined? What type of equity issues is Carter addressing? (5 marks) C-3. Similarly, is Carters malefemale differential wise? If not, why not? (5 marks) C-4. Specifically, what would you suggest Jennifer do now with respect to her companys pay plan? (5 marks)