Harvard Business Review

Mar 12, 2021 in Case Study
Harvard Business Review Case Study

A friendly and fair corporate culture is crucial for organizational productivity because satisfied workers show more concern about the companys progress. Generally, people spend at work the biggest part of their life and they want to be confident that their effort is evaluated objectively. At the same time, the companys market always dictates new rules that must be followed if it strives to remain competitive. Thus, the main organizational objective consists in finding the balance between its interests and expectations of its workers. The case When Salaries Arent Secret by John Case (2001) represents a managerial dilemma associated with the cancellation of pay secrecy that results in the necessity to completely restructure its HR policies. However, only thoughtful policies can retain employees that have faced inconsistency in their work evaluation.

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Case Overview

Hank Adamson is the CEO of the fashion retail company called RightNow!. He has managed to build a successful career, which makes him proud of his achievements. Nevertheless, the CEO gets to know that the companys corporate culture has been deteriorated by one of his employees. In particular, a former IT worker Treece discovers information concerning salaries of her colleagues. After leaving, she reveals the numbers to all employees and, as a consequence, they notice that RightNow! has significant salary disparities.

Workers are dissatisfied with such policy because the company has recently launched a highly technological website that has helped to increase its sales. The whole organization waits for the general meeting where this issue is going to be discussed in detail. However, the failure is an emergency case for leaders as well because they were overly focused on other organizational questions, while ignoring the salary issue. For this reason, the senior management decides to discuss it before the general meeting takes place.

On the one hand, all people can see current market salaries on the Internet. On the other hand, they compare their salaries with those offered at similar positions in the company and see a big difference. During the private discussion, leaders insist that these disparities can be justified by the amount of work that is usually performed by particular workers. Moreover, some of them often show higher levels of motivation and initiative. The rest that has considerably higher salaries are well-trained professionals who will not agree to work for less based on the trends evident in the contemporary job market. At the same time, the senior management realizes that the majority of employees have negative feelings about the situation, which can negatively impact their loyalty to the company.

Hence, leaders must develop a new plan that will help to retain the best employees. Major concerns are that workers will not understand the situation and the latest HR policies. Hank Adamson has to find reasonable explanations regarding a new compensation system, which will show that the senior management does not ignore employees needs and opinions. Moreover, he should decide how to present results of newly adopted changes to the staff.

Case Analysis

The fact that Treece decided to reveal the salary information shows that the companys corporate structure was unfavorable for her. Besides, this situation would not have occurred if the HR policies had been satisfactory for all workers. Thus, the organization should have implemented changes in the past when the issue only emerged. Since it failed to do that, it has to decide how to solve the current problem. Thus, Hank Adamson should not hide any facts regarding the companys previous management strategies. Otherwise, peoples trust in the organization would be lost. The CEO has to be as transparent as possible in order to win employees trust and ensure that they understand him as intended (Aier, 2014). Every difference in salaries can be justified with some reason and is linked to the workers efforts and input. Therefore, Hank can provide the same explanations that he gave to other managers, yet this decision would have positive and negative consequences. One consequence is that employees would receive a deeper insight into the companys management and would learn how to evaluate their own performance. Another consequence includes a significant restructuring of the staff as those workers who would not be able to accept the organizations policy may decide to leave it. At the same time, RightNow! would get rid of unreliable employees and would show what kind of efforts it expects from people who want higher salaries.

Another scenario for Hank is to change the entire payment system of the company. He could apologize for not reviewing the workers salaries for some time, as well as explaining that it has happened because the company was busy with launching the website. Thus, he could announced the next stage of the companys development and promise that performance of all employees would be evaluated in the future according to their new achievements. The advantage is that motivated workers would apply more efforts to receive new bonuses (Belogolovsky & Bamberger, 2014). The disadvantage includes the loss of those individuals whose efforts were ignored in the past or who never intended to do extra work to make a difference for the organization.

Enterprises located in the UAE have similar problems with retaining good employees. Companies are forced to follow major rules of the labor market to calculate an approximate salary they should offer to a particular person to recruit him/her (Rehman & Abbas Ali, 2013). Also, in the UAE, employees have a tendency to seek favorable working environments, where their qualifications and potential are appreciated. The situation described above would have a negative effect on the workplace, resulting in job dissatisfaction and resignations.

Recommendations

Hank Adamson should introduce a new bonus scheme based on particular efforts of employees. These efforts should be evaluated in numbers for other employees to see their progress and acknowledge that the company implements fair and transparent policies (Aier, 2014). Such strategy helps to eliminate conflicts, as well as solving disputes that may arise between efficient and non-efficient employees (Rehman & Abbas Ali, 2013). For example, efforts can be evaluated in the amount of items sold during a month. Efforts can also be evaluated in the amount of satisfied customers. Moreover, the leader should avoid pay secrecy for some time until workers understand what the company expects from them and how it is going to appreciate unique skills. Additionally, subordinates will be convinced that the bonus scheme is objective because they will see it measured in numbers (Belogolovsky & Bamberger, 2014). Regarding the previous bonus scheme, Hank Adamson should take into account relevant criticism. Subsequently, the manager may provide employees with some specific examples of efforts and performance required to be eligible for a bonus (Aier, 2014). Hank should not ignore peoples commentaries if they are convinced that they have contributed to previous projects.

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Conclusion

In conclusion, the company should pay attention to positive changes that arise from the payment secrecy situation. The senior management should show confidence in its decisions that have always been based on reasonable outcomes. However, leaders should pay attention to workers feelings as well. In particular, they should be good listeners when people try to prove their point of view. The case is unpleasant for all parties involved and, therefore, they should solve it together using as much transparency as possible. The situation may be used as a good motivation to introduce a new bonus scheme and make necessary changes in order to enhance productivity. Nevertheless, to track progress, leaders should evaluate it in numbers for workers to comprehend the new policy.

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