After reviewing the simulation, choose one of these three strategies as a possible proposal for the CEO. Explain and justify your choice by including responses to the Learning Questions in your proposal.
1. Employees will receive absolutely no raises, and performance management is eliminated throughout the economic crises. Therefore, employee wages will remain the same regardless of position held; no performance reviews are given; and there will be no adjustments of missions, goals, and duties during this period.
2. Performance, as well as revenue, is reviewed every 6 months. This way it allows JVA Corp. to cut or increase pay every 6 months and review its bottom line. Employees can also benefit by having the opportunity to earn pay raises potentially twice a year, rather than the typical annual reviews.
3. Review and make any necessary changes to the guidelines for performance management within JVA Corp. First review the mission and goals for JVA Corp. Then review the requirement of each employee. A review of compensation packages is also necessary, so evaluate commission packages, expenses covered, perks, and necessity of onsite amenities that are currently covered.
Based on the costs that have been calculated, a net savings should be evident to allow for major or minor cost savings for JVA Corp. In the midst of calculating ways to save expenses for JVA Corp., don’t forget that your duty as an HR director is to also ensure the well-being of employees. It’s important to also represent the workers while looking out for the interest of the company.
Your paper should address the appraisal process, performance management systems, ways to make performance management systems more effective, various classifications of rewards, the goal of the compensation administration, and compensation programs.
JVA Corporation Simulation
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JVA Corporation, established in 1995, is an international manufacturing firm based in Plano, Texas. JVA Corp. produces wireless technology devices such as cellular phones, walkie-talkies, intercoms, and GPS units. The JVA campus headquarters is an impressive 17-acre facility that includes manufacturing and office space. Employees enjoy the additional amenities of a break room lounge, fully equipped exercise room, kitchen, and cafeteria. In addition to the amenities onsite, employees are offered various discount tickets, discounts on various personal services such as cell phones, gym memberships, home and auto insurance, and JVA Corp. credit cards.
JVA Corp. is a private company owned by the founders and private equity investors. JVA boasts 185,000 worldwide employees. Of these, 3,500 are full-time salaried managers, which includes department managers, warehouse managers, logistics managers, human resource managers, security managers, facility managers, and shift supervisors. The rest of the employees are either full time or part time and paid an hourly wage with bonuses based on the number of goods produced and number of goods marketed.
As we begin this journey into benefits restructuring and employee performance management, let’s also consider the various aspects it entails. Performance management is often misunderstood to only mean performance appraisals or performance reviews. In actuality, performance management is a continuous process that consists of three steps: defining acceptable employee performance; facilitating employee performance; and encouraging employee performance. Performance management is accomplished through consistent and timely feedback about employee performance focused on achieving strategic objectives and meeting goals and mission of the organization.
It is often the case that an employee becomes eligible for compensation increases after a certain length of service time. In doing so, more often than not, employees are reviewed based on performance. Thus when an employee’s performance is rated highly, then they may be offered additional compensations or compensation in the form of other means rather than monetary. Ultimately, the balancing of these three areas—external market, internal organization, and the individual’s profile— is what determines what pay structure is equitable.
Shortly after the terrorist attacks of 2001, JVA Corp.’s revenue soared by 60% for the next 5 years and stabilized for the last couple of years until the world faced sudden recession. As many industry businesses suffered and workers lost jobs, JVA Corp. is still in business and has been trying to achieve stability through the shakeup. Since the recent economic hardships, JVA Corp. has suffered from a net loss of $53 billion (17%) in the fiscal year.
You have been in the position of HR Director since 1999, so the chief executive officer has full trust in your suggestions and final decisions. The CEO, Katelyn Van Michelson, has entertained the possibility of closing the doors to a few of their international factories, but it is not the preferred course of action. Before JVA Corp. proceeds to make such drastic cuts, you have suggested making some cuts in the compensation area of the company costs and the structure in which performance management was previously conducted. Ms. Van Michelson was intrigued by this idea and asked that you to submit a proposal of the cuts to take place and how those cuts will affect JVA Corp.’s future, as well as its employees.
Using your education, expertise, and passion for making changes and improving the well-being of JVA Corp.’s employees, you will prepare a proposal to be reviewed by Ms. Van Michelson within 1 week. She will scrutinize it and thus make a final decision on how to save and preserve the overall profitability of this company. As an HR Director, you will review the cost of all additional compensation programs that JVA Corp. offers, exceeding the current base salaries for employees. The current package includes commissions, bonuses, profit sharing, and travel rewards. Based on the calculation of 150,000 employees within the United States and not counting international locations, JVA Corp. is currently spending 8% of its revenue for additional compensations or perks. Within the 150,000 employees, approximately 35% are eligible for all of those additional perks, and the rest are offered a base salary with no option for additional compensation. In order to cut costs, an alternate solution will be proposed with a goal of spending only 5% of revenue instead of the current 8%.
In making your selection, be sure to consider the following concerns:
1. How permanent or temporary is the change?
2. How much will employees lose by the change?
3. How much will JVA Corp. save by the change?
4. How will it affect the employees?
5. How will it affect JVA Corp.?
6. How will it affect the community?
7. Should international employees be subject to the same changes?
8. Does it matter whether the employees are in its U.S. base or international locations?
Note!Don’t think of these decisions with specific monetary costs but in opportunity costs (time, morale, dedication, etc.).
Make a report between 500 and 750 words (use MS Word’s Word Count feature on the Review tab to ensure that your answer is not too brief or too verbose). Be sure to use the questions above as your guide in selecting a recommended strategy. You are not required to answer each and every question specifically as long as your report addresses how you considered and evaluated each of these eight concerns to determine the appropriate strategy, meets the word count range, and employs one of the three strategies above.
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