Please read the case and answer the questions at the end. All answers must be written in clear American English.
1. Joe’s Hamburger Grill has been doing business in the same location for the past 20 years. The Grill is located in Phoenix, Arizona, and caters to college students by providing some of the world’s biggest hamburgers in a fun and casual dining atmosphere. Joe looks back with fondness on the 20 years that have passed since he first opened the grill. His primary motivation for starting the business was the opportunity to work for himself. When he graduated from college, Joe took a job as an accountant and worked for a number of different companies. When he turned 40, Joe decided he was tired of working for a boss, so he began looking for an alternative opportunity. Knowing his love for cooking and his flair for providing great customer service, Joe’s wife and friends encouraged him to open the hamburger stand. After taking some time to decide what he wanted to do, Joe followed their advice and founded the business. By all accounts, his efforts can be seen as a success. He has made a good living doing something that he truly enjoys.
When Joe turned 60 several years ago, he decided it was time to slow down and let someone else deal with the day-to-day hassles of running the business. He hired a manager to oversee operations at the Grill. After three months, the manager quit and started classes at the local university. Joe was then able to hire a manager who stayed for 18 months but left to work at a bigger store in Dallas, Texas. For the last three months, Joe has been trying to hire a new manager. He hasn’t been able to find someone he thinks will be a successful manager. Joe wonders if part of the problem is his compensation package.
When Joe hired the first manager, he decided to pay a monthly salary that included full health benefits. He didn’t know how much to pay for a salary, so he asked the first manager how much she was making. He then offered her a $500 per month increase to work for him. The second manager seemed fine with the amount, but a few recent candidates have told him that he needs to pay more.
One day a customer of Joe told him that she was taking a human resource management class where they were discussing compensation issues. Joe described his dilemma about trying to decide how much to pay a store manager. The customer offered to do some research and learn more about pay levels for managers. A few days later she brought Joe a graph that had information about pay practices. She told Joe that she had been unable to locate specific information about pay for restaurant managers. However, she had found some information about food service supervisors. Just looking at the information she felt that the amount for the supervisor position was probably too low for someone who actually managed the entire restaurant. She thus found some additional information about the wages for general managers. She also looked at compensation figures for people who owned sales-related businesses. Knowing that Joe had lost one manager to a job in Dallas, she included information about compensation in Dallas and another large city—Los Angeles.
***** Chart image attached (joes.jpg) *****
Joe looks at the information in the graph and wonders what to do with it. He wonders how important it is to take into account pay in other cities. Will he need to pay wages similar to what is being paid to managers at larger companies? Joe’s goal is to find a manager who will treat the Grill like an owner. He wants the manager to commit to several years of building and maintaining profitability. If things work out, he might even be willing to sell the Grill to a high-performing manager who shows loyalty.
What are some suggestions that might help Joe as he thinks about changing the way he pays someone to manage the Grill?
Do you think Joe’s approach to determining how much to pay a manager was successful? Would you recommend that he do something different?
How might agency theory guide Joe as he thinks about finding a manager who might someday become the owner of the Grill?
How can the concepts of equity theory guide Joe’s decisions concerning comparisons with pay in other cities and for other jobs?
How might FLSA standards apply to Joe’s compensation decisions?
2. Collegiate Promotions distributes products that are marketed to students and alumni of major universities. High-selling products include coffee mugs and T-shirts that bear collegiate logos. In order to distribute its products, Collegiate Promotions has adopted an independent sales representative model. The sales representatives work for themselves and are not actual employees of Collegiate. They have independent contractor status.
Becoming an independent sales representative is easy. An interested person pays a $300 fee to obtain catalogs and other literature needed to advertise and sell the line of products. The sales representative then begins to write orders for products. A sales representative can sell to anyone through any channel. This means that there are no protected territories, so several sales representatives are often working in the same geographic location. Many representatives also sell through Internet websites.
Collegiate Promotions does not set an absolute price for its products. Instead, it uses a wholesale plus pricing strategy that allows sales representatives to sell within a relatively broad range. The range is normally 30 to 50 percent higher than wholesale. For instance, if the wholesale price of a coffee mug is $10, then the representative can choose to sell the mug at a price anywhere between $13 and $15. The sales representative receives a commission of half the amount charged over the wholesale price. If the mug sells for $13, the representative receives $1.50. If the mug sells for $15, the representative receives $2.50. Because they are independent contractors, the sales representatives receive no other compensation.
Do you think the compensation system at Collegiate Promotions is effective?
Why would a sales representative try to sell at the top of the price range? Why at the bottom of the price range? Do you predict that most sales are made at the top or bottom of the range of possible prices?
How does the lack of geographically protected sales areas affect salespersons’ behavior?
How committed do you think the independent contractors are to Collegiate Promotions? What are some positive features of the independent contractor status for the organization? What might be some positive features for the independent representatives? Would you expect sales representatives to have long-term associations with the company?
3. State University employs a large number of graduate students to work as teaching assistants. The teaching assistants often complain about their work. They feel that faculty and administrators demand too much. A common complaint is their low wages. The graduate students frequently point out that they do much the same work as faculty members, yet they receive only a very small percentage of the pay that faculty members receive. They also claim that faculty members frequently treat them unfairly. Teaching assistants are often asked to do large amounts of grading in very short time periods. Many also feel that faculty members are not very good at communicating expectations.
In response to the dissatisfaction of the teaching assistants, a local union representing public workers has begun efforts to organize a labor union. Union representatives have obtained campaign card signatures from 40 percent of the teaching assistants. An election is scheduled for next month. Union representatives have been busy making a case that the union can help ensure that teaching assistants are treated more fairly. They have publicized statistics showing that unionized workers make significantly more than nonunionized workers. University administrators have decided not to actively oppose union organization. They have simply stated that it is important for teaching assistants to have the opportunity to decide whether they should be represented by a labor union.
Some faculty members are sympathetic to the concerns voiced by graduate students. They publicly state their concern that wages are too low. They also express frustration when they see some of their colleagues take advantage of students by assigning them large amounts of work to complete in short time periods. Other faculty members are less sympathetic. These professors talk about how they were treated even worse when they were graduate assistants. They seem to find joy in looking back and telling war stories about “the old days.” They seem to think that working hard for little pay is a right of passage that helps prepare students for future careers. Overall, the faculty at State University thus seems to be about evenly split in their support for student efforts to unionize.
A majority of the undergraduate students at State University don’t seem to know anything about the unionization efforts. A few politically active students have joined public rallies supporting the unionization efforts. Others seem to have used the unionization issue to complain about the quality of teaching provided by graduate students. These students recently met with administrators to complain about having too many graduate students as instructors. Just last week the local newspaper printed an article detailing some of the problems experienced when courses are taught by graduate students.
As a community, State University thus seems to be quite divided over the unionization issue. No matter who prevails in the election, it seems likely that a large number of people will be unhappy with the result.
Do you think a union would help resolve the complaints of the teaching assistants?
What makes the position of teaching assistant different from many jobs frequently represented by unions?
Do you think the administration’s response is appropriate?
If you were a graduate student at State University, would you vote for the union? Why?
4. Technology Consultants is a company started by a computer science professor. Five years ago, the professor hired three graduate students and began offering computer and technology services to local companies. The company grew rapidly and currently employs 30 consulting specialists. The typical specialist recently graduated from college with a degree in information management or computer science. Each specialist is assigned to work as part of a team that focuses on servicing the needs of specific customers. To date, Technology Consultants have not felt a need to formalize personnel practices. The professor spends most of his time hiring and training new consulting specialists. He also has a part-time administrative assistant who helps with personnel activities such as payroll.
Some customers complain about the high turnover of consulting specialists. It seems that most consultants leave within a year after being hired. From the customers’ perspective, specialists leave just when they are beginning to understand how to provide quality service. The professor knows this is a problem, and she worries that such turnover may eventually lead customers to cancel their contracts for service. In the past, she and a few key employees were able to form long-term relationships with most clients, but this is becoming increasingly difficult as the company grows.
Technology Consultants recruits at two local universities. This practice seems to be effective, as most graduates from the programs have the technical skills needed to serve clients. The hiring process consists of a series of interviews. The professor and two other employees conduct informal interviews and then offer jobs to individuals they feel will be successful. They don’t worry much about personality traits or past achievements; they simply focus on assessing technical skills. The performance of each consulting specialist is measured against the performance of peers, and only a few employees receive the highest ratings. Since most employees are expected to possess the technical skills they need when they are hired, Technology Consultants does not offer opportunities for training and development. Compensation has been a difficult issue for the company’s founder. She wants to encourage teamwork, so she has chosen to structure pay so that most employees receive similar wages. She doesn’t want to have some employees earning a lot more than others. New hires are paid approximately the same as other consulting specialists. So far, the company has found it difficult to offer employee benefits. The professor feels that the cost of the benefits is too high.
Which human resource practices would you recommend that Technology Consultants change?
How well do the company’s human resources practices align with one another?
How would you approach human resource management if you were starting a company like Technology Consultants?
Please read the case and answer the questions at the end. All answers must be written in clear American English.