Pros And Cons Of Pay Openness Policy And Issues Faced By WrapItUp

Case Study 1: When salaries aren’t secret

Question 3

Pay openness policy refers to the human resource policy wherein the salaries of the organizational employees are known to the others and is not kept confidential. A majority of the organizations across the world keep their payroll secret however a few dare to follow a pay openness policy. There are several pros and cons of following a pay openness policy. When the organizations follow pay openness policy, the employees know the salaries of their co- workers as well as their sub- ordinates and seniors. It becomes easier for the organizational employees to evaluate the level of performance required to be delivered, which shall fetch them the desired amount of compensation. Pay openness policy encourages the organizational employees to work harder and improve their performance in order to obtain the desired compensation (Chamberlain 2015). The organizational employees become well- aware regarding the criterions according to which the other organizational employees are paid. Initially, the policy encourages the organizational employees to improve their performance and later on it encourages the employees to increase their compensations. The pay openness policy also encourages the employees to improve their performance by indicating towards a fair pay policy among the co- workers, which are directly related to the amount of compensation they receive. The pay openness policy ensures that there is a fair pay policy within the organization, which indirectly encourages the organizational employees to develop loyalty towards the organization . In spite of several advantages of pay openness policy, there are several disadvantages of this policy. In case of disclosing the information related to salary in an established organization, several issues arise if the salaries are not fairly divided among the employees. A majority of the individuals consider their salary information to be their personal information and on the disclosure of such information, they often feel offended. Inequality in payment structure might demotivate the employees to work harder and improve their performance in case they learn that they have been paid lesser than their colleagues even after performing better than them. Therefore, it can be stated that pay openness policy without a proper salary policy might cause several troubles to an organization. It is essential for the organizations to ensure that there exists a fair pay policy within the organization before disclosing the salary information. Salary transparency gives a clear picture of the compensation decisions taken by the organizational managers and can be a powerful tool for either leading the organization towards success or completely devastating an organization. Therefore, an organization must adopt an pay open policy on when there are no wage disparities within the organization and the organizational employees are compensated on the basis of their performance.

Question 4 

I would not support Charlie’s idea to post and share salary information among the employees as a pay openness policy has more disadvantages and involves more risks. The major concern is the performance of the employees, which can be improved by adopting other human resource management techniques rather than following a pay openness policy. Information regarding salaries is considered to be personal and confidential information regarding an employee and the employees do not feel comfortable when the details regarding their salaries are disclosed in public. In the case study, the organization did not have a perfect and fair wage policy and disclosing the information regarding the salaries of the employees have a greater chance of creating disputes and rifts among the employees. Wage disparities might also lead to decrease in the morale of the organizational employees, which would indirectly affect the performance of the employees. The pay openness policy might encourage a few employees to improve their performances however; a majority of them might consider their salaries to be lower than their co- workers. Although, pay openness policy gives the organizational employees greater negotiating power but a majority of the employees emphasize more upon the salaries paid to their colleagues, who have the same expertise and experience rather than evaluating their performance. Instead the performance of the employees can be improved by providing them lucrative incentives and other fringe benefits rather than adopting a pay openness policy. This would encourage the organizational employees to improve their performance in order to achieve the targets that would fetch them the desired incentives and benefits. This is a safer strategy for improving the organizational performance than adopting a pay openness policy. Many a times, pay openness policy leads to dissatisfaction and grudges among the employees and creates a negative environment within an organization. This can directly affect the team spirit as the personal conflicts and grudges shall discourage the organizational employees to cooperate with others and work together for the achievement of the organizational objectives (Chamberlain 2015). The ideas of Charlie are not entirely crazy, but it would have more disadvantages than advantages. Pay openness policy can be cent percent successful only when the management is sure that there are no income disparities within the organization or when they would be capable of satisfying the queries of the organizational employees regarding the differences in the compensations. Since, payroll is the highest expenses incurred by any organization, the organizations must be careful while disclosing the confidential information especially in case of an established organization. It is difficult to implement pay openness policy in an established organization as the employees are comfortable with the payroll secrecy and sudden changes in the payroll policy makes them worried and insecure. Additionally, this shall not only affect the internal environment but shall also affect the position of the company in the market as the rival companies might get the information regarding the salaries of the employees and might offer better salaries to the employees, who have been performing well in the organization. This might result in the shift of talented employees to the rival organizations, hampering the performance of the organizations.

Question 3

Question 5

The issues currently faced by WrapItUp included difficulties in maintaining consistent brand image as a result of expansion of the business. The restaurant chain has also been witnessing issues in managing the human resources, which have resulted in the increase in employee turnover along with disorganized recruiting process. As a result of improper human resource policies, the organization witnesses a high rate of turnover among the talented managers. This resulted in the incurrence of additional recruitment costs for hiring new managers. The major issues, which the organization have been facing was related to the store manager level. The organization has been facing difficulties in retaining the store managers. This has resulted in a rigorous and continuous recruitment process for finding suitable managers to fill in the vacant positions. The turnover rate among the managers and the workers has been higher than other similar organizations in the industry. The major reason behind the high rate of turnover of employees within the organization has been lower rate of compensation (Poole 2017). A majority of the managers have resigned as a result of the lower rate of compensation being paid to them. The exit interviews conducted by the human resource managers of the organization have clearly stated that lower rates of compensation have been the major reason behind the lower morale among the employees and managers, which resulted in a higher rate of turnover.  A majority of the managers stated that they were unable to support their families with the compensation they were paid. The others felt dissatisfied as they did not receive any extra benefits on running a store successfully. Another issue faced by the organization was lack of innovation in the menu. Several customers mentioned in their feedback that the restaurant has been serving the same items over the past years and there have been no changes in the menu, which caused boredom among them. Due to high rate of turnover among the employees and the managers it became difficult for  the organization to develop their relationships with the customers in order to enhance their customer loyalty. There were also inconsistencies in the menu offered to the customers due to unavailability of raw materials. Lack of ingredients led to dissatisfaction among the customers. The store managers often remained worried due to lack or unavailability of the major ingredients in the stores, which further led to dissatisfaction among them.

Question 6

The ShareIt program was a quarterly profit sharing plan developed by Reyes, HR manager at WrapItUp in order to increase the manager retention rate within the organization. The program offered a share of profit earned by the organization to the store managers to motivate the store managers to maximize individual store profits. The major issue faced by the organization was the retention of good talent as a result of lower compensation provided to the managers as compared to the similar organizations in the industry. This led to the dissatisfaction among the managers and an increased rate of turnover. Therefore, Reyes developed ShareIt program to enhance the variable portion of the compensation provided to the managers wherein the compensation provided to the managers shall be dependent upon the amount of profit earned by the organization. The advantages of ShareIt program were that it would encourage the store managers to maximize the sales in their stores as they would receive 35% of the store’s incremental profits and the associate managers would receive 15% of the profit share of the organization. This would keep the managers motivated, which would ultimately lower the employee turnover rate within the organization. The major disadvantage of the profit sharing policy was that it was unable to reduce the turnover rate among the other employees (Blasi, Kruse and Freeman 2017). Only the managers were benefitted from the policy while the compensation paid to the hourly workers remained less. After a certain period of time, the profit sharing becomes an entitlement rather than a factor of motivation. The higher level managers are only benefitted from such policies while the other workers are refrained from deriving benefits from profit sharing programs. However, the efforts of the workers actually help the businesses to grow as they directly deal with the customers while the managers enjoy the benefits of profit sharing, which increases the grievances among the workers. In case of ShareIt program also, the managers derived benefits while the other workers were refrained from obtaining those benefits.

Question 4

Question 7           

Considering the results achieved by the two pilot stores namely the Santa Monica restaurant and the Costa Mesa restaurant it can be stated that ShareIt program was successful and it achieved the set goals. Both the restaurants had witnessed an increase in the overall profits. The performance of the managers had improved along with the compensation earned by them. The program led to an increase in the retention rate among the managers along with more satisfied managers. The managers had put in their extra efforts and innovations to increase the profitability of their stores. The store manager at Santa Monica took the help of Facebook and Twitter to attract more customers. She provided special offers and discounts to increase the sales and designed an online ordering system to add to the convenience of the customers. She visited several offices during the lunch time and promoted her restaurant. All these additional efforts led to an increase in the sales and profits of the store. On the other hand, the store manager at Costa Mesa negotiated with the suppliers of raw materials to reduce the costs incurred on the procurement of raw materials. The managers were observed to work for 70 hours per week which was previously 50 hours per week. The managers at Costa Mesa tried to save the costs incurred by lowering workers hourly labor by preparing food themselves, taking orders and washing equipments. All the extra efforts put in by the managers at these two stores were a result of the profit sharing plan namely ShareIt program. Therefore, it can be stated that the ShareIt program was successful in increasing the profitability of the stores and lowering the turnover rate among the managers. However, the program remained ineffective on the hourly workers and the turnover rate among them remained higher. The increase in the profits in both the stores indicated that the plan was successful in both the pilots however; the feedback of the customers obtained were mixed in nature (Bates 2014).

Question 8

Considering the success of ShareIt program in both the chosen stores that is Santa Monica and Costa Mesa, Reyes must roll out the ShareIt plan in other stores to achieve the desired results. The profit sharing program had the capability of attracting managers from al the other stores (Baddon et al. 2017). In the expectation of receiving a substantial part of profit, the store managers would be motivated in putting in their extra efforts for increasing the amount of sales. If all the store managers try to increase the sales of their stores in return of a portion of profits, the profits earned by all the stores would increase, which would result in the overall increase in the profits earned by the organization. This would not only increase the sales and profits, but would also reduce the rate of turnover among the store managers and associate managers. However, this plan would be ineffective in reducing the turnover among the hourly workers. The plan would provide the managers with the complete freedom of applying their innovative ideas for enhancing the sales and profits of their respective stores. The plan has been successful in increasing the profits of Santa Monica and Costa Mesa stores by encouraging the managers to come up with innovative ideas and putting in their extra efforts for increasing the profits of their stores, which would render them a substantial share in the profits of the organization on a quarterly basis. The organization has been facing difficulties in retaining the store managers. This has resulted in a rigorous and continuous recruitment process for finding suitable managers to fill in the vacant positions. The turnover rate among the managers and the workers has been higher than other similar organizations in the industry. The major reason behind the high rate of turnover of employees within the organization has been lower rate of compensation. A majority of the managers have resigned as a result of the lower rate of compensation being paid to them. This strategy is likely to have a positive impact on the other stores as it would solve the compensation issues faced by the managers. Therefore, Reyes must recommend the CEOs of WrapItUp to roll out the ShareIt program in all the other stores and keep a close watch upon the advantages and disadvantages of the program in different stores. A meeting must be held after a month of the implementation of the program to keep a track of the improvements in the stores and the difficulties faced by the managers so that the success of the plan can be ensured. The store managers must be encouraged to implement their innovative ideas to retain the hourly workers so that the organization can become stable in terms of both finance and human resources.

References:

Baddon, L., Hunter, L., Hyman, J., Leopold, J. and Ramsay, H., 2017. People’s capitalism?: a critical analysis of profit-sharing and employee share ownership (Vol. 1). Routledge.

Bates, C., 2014. Practical advice to make the most of your next salary/performance review. Brief, 41(5), p.8.

Blasi, J., Kruse, D. and Freeman, R., 2017. Having a Stake: Evidence and Implications for Broad-based Employee Stock Ownership and Profit Sharing. Third Way NEXT.

Chamberlain, A., 2015. Is Salary Transparency More Than a Trend?. Glassdoor Economic Research Report. Available at https://gldr. co/1OUQibk.

Poole, M., 2017. The origins of economic democracy: Profit sharing and employee shareholding schemes (Vol. 9). Routledge.