2.1 Blog: Making Difficult Decisions
A report release from the U.S. Department of Commerce states the U.S. economy contracted at an annual rate of 4.8% in the first quarter of this year (Module Two Blog Guidelines and Rubric, 2020). With this news I’ve been asked as a member of the HR department to review and analyze employee performance from the previous year to evaluate the quantitative results.
From evaluating the employee performance report the story I can tell is that the company is pretty consistent with paying employees from the same position the same salary, with that said there were some outliers. Which leads to a question why? Why are these employees having been with the company only but a day longer than someone else but he/she/they gets paid exponentially more than the next employee in the same position? But the company also empowers their employees by providing bonuses and over-time. What are the bonuses for? Obviously not on performance according to this report. Lastly most of the employees are longstanding, having been here from 10-20+ years, creating a pleasant relationship, loyalty, and low turnover rate for the company.
Using on the quantitative data, the total spent on just salary is $5,014,191, $146,000 in total on solely bonuses (not provided to the top 4 highest earning employees), and $37,900 in total over-time, providing an average salary of around $65,119. Some quantitative information that stood out to me was 2 out of the 7 essential employees hit overtime, the top 4 highest paid employees salaries equaled $1,100,591 leaving $3,913,600 left for the rest of the 73 employees.
The qualitative data suggest there is no correlation between performance ratings and salary. Example one, the lowest performance rank for the top 4 highest earning employees (management) makes the most money out of all of them. Their rank being the lowest at a 2, but salary being $370,834 making $123,510 more than the second highest paid employee at $247,325 with a performance ranking of 3. This data is not telling me the reasoning for this, it can’t be seniority and I’ve found no correlation with performance and pay. Another outlier in this data is the two sales representative making $22,000 more than the other 7 sales representatives. Is there commission earned for the sales reps? If so how much? Some underlying issues is there being no correlation between performance and pay, or any form of capitalism being practiced in this company. Along with bonuses being provided to every employee with the exception of management. I can use a primary source by conducting my own interviews with the outliers to determine why they’re outliers. Another primary source is finding the rubric for the performance report numbers, or what the employees are being graded to generate their performance number. To better help evaluate my results a secondary source is doing some research and finding a journal article about correlating performance with research.
To recommend a budget reduction of 10% I would want to do it the right way. “Incremental ideas with minimal impact on other departments can allow you to trim up to 10% of costs” (Coyne 2014). For a 10% cut that would equate $519,809 in resources. My first cut would be to terminate all the employees that received a performance score of 1, this is cutting the much needed dead weight, saving $264,200. “After you have exhausted the common ploy of claiming cost savings by leaving vacant positions unfilled, you should restructure the jobs of any less-than-fully-busy people and confront the problem of under-performers” (Coyne 2014) using this information supports my decision to terminate the “under-performers”. My next suggested cut would be taking away bonuses saving $146,000 along with taking away over-time that only 2/7 essential workers hit anyways saving $37,900. Altogether putting us at $316,700, which makes me revisit more cutting decisions. An easy out would be to add another low performer to the to-be-terminated list like the one person in management with the lowest performance score but the highest paid employee in the company. Terminating this person would put us over 10% reduction saving $687,534 instead of our targeted $519,809. By cutting that one person I can see was taking the easy route, in an ideal situation I would like to do more research and attain more paperwork to avoid cutting one member of management and making that difficult decision.
Coyne. (2014, August 1). When You’ve Got to Cut Costs—Now. Harvard Business Review. https://hbr.org/2010/05/when-youve-got-to-cut-costs-now