Assignment1:
Write a 525- to 700-word summary on the ways in which restructuring a health care plan can produce real financial returns.
Assignment 2
Consider and apply your knowledge of the costs and the benefits of changes and how these may boost productivity.
1. Queen City Treating is a metal treating company that hardens prefabricated metal products for automobile accessories, including seat belt buckles, wheel rims, radiator caps, and other items. The company is experiencing some serious cost problems. Foreign competition, which uses better technology and has different cost structures, is taking away some of Queen City's customers by offering lower prices. As a result, Queen City is scrutinizing all of its costs. The CFO has concluded that one area that needs revamping is the high labor cost of the senior workers. The company is considering a voluntary buyout of these workers, in which they would be offered a financial incentive to leave the company before their normal retirement age. Company statistics indicate that 30 percent of the workforce has over 25 years of service and is earning the top rate of pay. The total wage difference among the highest and lowest paid production workers is about $8 per hour, and the company utilizes about two million labor production hours per year. Management believes that replacing these more senior and higher paid workers with persons at lower rates of pay would significantly improve the costs and productivity of the business.
a. From a labor economics standpoint, are older workers more expensive? What factors would you use to assess this issue?
b. If more senior employees leave the company, could there be a reduction in productivity? How would you calculate productivity? If there is a reduction, how long would it persist? What steps might be taken to mitigate this problem?
c. Are there viable alternatives to the voluntary buyout that would achieve the desired cost reduction? What is a range of possible solutions? How would you measure their effectiveness?
d. Describe in some detail the optimal plan design to encourage voluntary separation of the senior employees.
e. How would you determine the likelihood of your plan succeeding? How would you define success and how would you measure it?
f. What assessments would you make in choosing a method to reorganize and restaff the company after the reduction plan is implemented?
2. Wal-Mart has been expanding its construction of super centers, which include major food sections encompassing general grocery items, health and beauty aids, perishable produce, meat, seafood, frozen food, and deli items. The company is nonunion with labor costs at about 7.5 percent of sales versus its organized competitors' 13 percent. This, in part, allows Wal-Mart to offer prices anywhere from 6 to 10 percent below its supermarket competitors. Price sensitivity in the business is important and an overall price difference above 2 percent will cause loss of market share. You work for one of the organized companies and your CEO has directed you to begin an initiative to reduce your wage and benefit costs to be in line with Wal-Mart's levels. You know that negotiating lower wages and benefits with your unions will be a difficult task. While you have not abandoned that idea, you have decided to take a broader approach to reducing overall costs and enabling your company to offer prices that meet Wal-Mart's.
a. Describe a range of possible solutions that does not necessarily involve reducing the level of benefits and wages, but might serve to reduce the ratio of labor costs to sales and would be consistent with the overall business strategy of building sales and profits through top service, competitive prices, and great product variety.
b. What analytical steps, metrics, and assessments would you apply to each?
c. Are there possible total reward solutions that might help to attain your objective? Briefly identify them and explain.
d. How would you measure and evaluate each?
e. Select a comprehensive plan that you believe will enable your company to be price competitive without changing the level of benefits and wages.
3. Your company designs and makes electronic counting and control devices for manufacturers. It employs 300 people in the Midwest and has been in business on a privately owned basis for nine years. The industry is competitive, and your company must preserve an edge in getting new products to market faster than others, maintaining a high-quality product, offering good and sustained service to its customers, and selling at a competitive price. The company offers a privately insured health care plan, among other benefits and rewards, for all employees and their dependents. It is a traditional indemnity plan design and the cost as a percentage of total employee compensation has increased from 16 percent to 25 percent over the last two years. There is no cost to the employees for their health care. Your competitors are sponsoring much less expensive plans. Your CEO has asked you for a complete review of the health care plan and to create a design that is in line with the business strategy, is cost-effective, provides employees with choice and quality, and helps recruit and retain employees.
a. What analytical, research, data collection, and assessment steps would you undertake to fulfill this assignment? Explain in detail.
b. Can you link your health care plan to a potential increase in productivity? How? How would you measure?
c. With respect to quality, how would you make sure this element remains an integral part of your plan? How would you measure it?
d. Identify an optimal plan design, including all of its major design features that you would recommend to the CEO. What factors would you use in measuring its value to the company?