MDMBA 15-0165 MDMBA 15-0171 MDMBA 15-0138 MDMBA 15-0050 CASE ANALYSIS: WATERWAY INDUSTRIES I. PROBLEM IDENTIFICATION A. FACTS OF THE CASE ●
Founded in the late 1960’s as a small manufacturer of high-quality canoes
based in Lake Placid, New York ● Not only did the company quickly gain a solid reputation throughout the Northeast, the company began building a small customer base in the Pacific Northwest as well ●
By the late 1980’s (roughly 20 years time), the company was comfortably
settled in the canoe market ● Although earnings growth was fairly steady, the CEO, Cyrus Maher, after being persuaded by a friend, began venturing into kayaks by selling its own life of compact, inexpensive kayaks in 1998 ● Because of the relatively sizable kayak orders from Waterway’s existing canoe customers as well as the number of private-level companies, Maher knew he made the right decision to venture into kayaks ● When Lee Carter was hired to establish a formal marketing department at Waterway things really took off ● Carter began bringing in so many large orders that the company had to contract with other manufacturers to keep up ● Managers began to envision the day when Waterway would be a major player in water sports equipment ● Because of that, the managers developed a long-range strategic plan that called aggressive growth, new product designs, and nationwide marketing and distribution by 2003 ● Waterway has always had relaxed, informal working atmosphere, where employees got along well, enjoy their jobs, and got their work completed on time ● Due to the recent changes in the company brought about by the venture into kayaks, there is an increase in workload for the employees ● However, Maher believed that most employees are adjusting well to the faster pace at the company and thought that workers have been given adequate raises to compensate for it ● Maher has recently been hearing complaints from the shop floor about inadequate pay
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Maher has recently also turned down a request from the plant supervisor for
additional hourly wage increase for top performers because he insisted that the wages were in line with what other local manufacturers were paying ● This subsequently allowed three of his best workers to be lured away by the slightly higher wage in a new automotive parts plant ● Several managers approached Maher about salary adjustments as well, with two of the designers suggesting that they would be interested in equity (part ownership) in the company, whereby they would receive a share of the profits if their designs did well in the market ● Maher’s solution was to give the senior designer a modest pay raise and extra vacation and to increase the bonuses for both designers ● Waterway’s CFO, recently left the company after Maher had refused his request for redesigned compensation package to include equity twice ● Maher now had just overheard Lee Carter discussing a possible job opportunity with another company and he is concerned about losing her ● The current role: Company’s sole human resource manager B. PROBLEM IDENTIFICATION How can Cyrus Maher increase employee compensation satisfaction in order to keep his hard working employees from transferring to another company in order to be in line with its long range strategic plan? II. KEY OBJECTIVES Business Objective: To be able to maintain a steady growing income and be able to implement its long-range strategic plan Organizational Objective: Reorganize the current compensation and reward system in order to Increase employee satisfaction and boost employee amidst increasing workload III. ANALYSIS OF CAUSES ● Waterway was already in the maturity stage and thus experiencing steady growth. However, his friend gave him an idea to venture on another business. This gave the company an opportunity for another take-off stage to reach a higher maturity stage. ● Maher’s management style is behavioral. He tries to talk to his employees on a one-on-one basis so he can hear their sides. ● The company has become less attractive to employees because the management almost doesn’t want to adjust their compensation scheme. ● The recent change in the company deviated from its usual work/life balance style or free atmosphere, to a more stressful style
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The employees can be considered as Generation Y individuals/
millenials because they used to enjoy the free atmosphere of the company, and even enjoy kayaking or canoeing. ● There was a decline in employee stimulation because of inadequate compensation, and people are contemplating to move to another company because of its better compensation scheme. ● The pay system might be a job-based pay, which compensates the employee for every task it performs. ● His resistance to increasing salary has discouraged people and made them contemplate to switch to another company. ● His lack of business strategy is evidenced by his lack of a compensation plan. Porter Five Force Analysis:
Threat of Potential Entry: Low • New product development • Inreased capacity of Manufacturing
Supplier Power: HIGH • Lee Carter • Second Designer • New Marketing manager
Competitiv e Rivalry: HIGH Marketing skills are transferabl e
Buyer Power: LOW • Cyrus Maher • Looking for Expansion • Competitors working on marketing department
Threat of substitution : LOW • Outsourcing of sales and marketing
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V. DEVELOPMENT AND SELECTION OF ALTERNATIVES
Alternatives
Advantage
Disadvantage
Increase current wage at a
Change in compensation
Profit loss for the company.
level like the competitor or
system can become
a bit higher than the
palatable to the employees
competitor company. Offer cafeteria plan
The benefits that the
The need to meet all the
benefits package
employees will ask may or
expectation these benefits
may not be purely
being available to them.
monetary Increased employee morale Outsource positions
They need not to adjust the
Outsourced employees
current compensation system might not share the same culture or relate to the culture with the company Create a new
May decrease the chance
Time consuming to
compensation system
of employer shift
formulate a system for
(Skill Based Pay System)
compensation. Encourage employees to develop their skills and competencies
VI. IMPLEMENTATION 1. Maher has to define his business goals and define his compensation. 2. He has to rightsize the organization in order not to compromise the company by increasing salary if the productivity plateaus even if you increase the number of employees. 3. Discuss with the employees for their reason why they want to leave the company. Maybe the reason why they want to leave the company is not only compensation but also the budding stressful environment at the company. 4. Talk to Carter and motivate her to stay in the company. 5. Offer the cafeteria plan benefits package initially. 6. Once that a system is formulated, they can now implement the new compensation system.
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VII. RECOMMENDATION
Maher should realize the importance and effect of compensation in a company. He should make sure that he can compete with the outside industry especially for skills
that are highly transferable (such as marketing) Before he could think of expanding the company, he should formulate a business
strategy in order to prevent these from happening in the future He should also note that compensation is not the only way in maintaining an effective workplace. He should recognize the employee effort by also offering them non-
monetary benefits. Compensation system should be formulated at the star of business, not when the
business is expanding. He should also pay for the performance of his employees in order to sustain their
interest in the company. He should remember that his employees are generally Generation Y employees, so he must also prepare them for the scenarios that might happen once the expansion has started. They should be fully informed and trained. He could also use other means of working such as telecommuting.
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