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Case of the Unpopular Pay Plan

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Case Study 2 – “The Case of the Unpopular Pay Plan”

“The Case of the Unpopular Pay Plan” discusses how the company Top Chemical decides that they need to change their current pay plan to more closely resemble their quality control program. Currently their pay plan is set up where employees receive raises based on seniority. The senior management would like to change the pay plan to complement the quality program. In the quality program employees are on teams. The proposed pay plan would reward employees whose teams were making beneficial contributions towards quality, profitability, and new ideas to increase speed, unit cost, and improvements. Some of the top management disagrees with the new pay plan claiming that having to rely on other groups within the company to get a pay raise is unfair and beyond their control. While others agree that each employee’s pay should be a reflection of how well the company is doing as a whole.

Some commentators had the following perspectives about this pay plan: Maggie Coil, vice president of compensation of Motorola, thinks that the employees of Top Chemical should have some input on if and how to change the pay plan since they are the majority that will be affected and by allowing them to be part of the process of designing and implementing the pay plan, it will make it more accepted. Donald Berwick, associate professor at the Harvard Medical School and Harvard School of Public Health in Boston, thought the new pay plan is moving in the right direction, but still needs improvement; there is no focus on customer satisfaction, the numerical goals may be inaccurate and discouraging, and there is no incentive for employees learning new skills. Tom Nyberg, senior business systems specialist for Monsanto, thinks the employees of Top Chemical need to be more involved in creating and designing the new pay plan including

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