Assignment:
Read Case"The New Director of Human Resources".
The HRM Function/Environment The New Director of Human Resources
Mount Ridge Engineering Systems designs, builds, and operates standardized, coal-fired utility plants in Kentucky. These small generating plants (35 megawatts and 55 megawatts) are built adjacent to an industrial plant that utilizes steam in its operations. Mount Ridge sells the steam to the industrial plant and electricity to the local utility. Under federal regulations, utilities are required to purchase this independently produced power if it is cost competitive. When Garrett Levinson founded the company, he firmly believed that the future of electric generation in the United States would depend upon coal as the primary fuel and stand- ardization as a method of cost control and efficiency. This new technology, known as ‘‘cogeneration,'' is rapidly coming of age as many companies turn to these systems as a way to cut energy costs. Mount Ridge's very efficient plants have allowed it to pursue a cost leadership business strategy. When the firm was formed four years ago, Joyce Newcombe was hired as director of human resources. Newcombe had recently graduated with an MBA from a large university in the Southeast. At the time of its establishment, the company had four employees in addition to Newcombe: the president and founder, a senior vice president of operations, a vice president for administration, and a vice president of cost and estimation. From the start, Mount Ridge had both the financing and plans to build seven plants over the next five- to eight-year period. Joyce Newcombe was hired to develop all of the necessary human resource programs, plans, and policies needed to staff the plants once they became operational. She explained, ‘‘When I was hired, all we had was a dream and a plan. I had an office with a desk, chair, and telephone. I literally had to develop an entire human resource system.'' During the first year, Newcombe developed benefit packages for both corporate and plant personnel, an employee handbook, job descriptions, a salary program, a supervisor's manual, and other basic personnel policies. In less than three years, the company built five plants. The size of the workforce grew from 5 to 39 people at corporate headquarters and from 0 to 183 employees in the plants.The company became remarkably successful in a short period of time. Newcombe was promoted to vice president. In addition to having two plants currently under construction in the state, Mount Ridge plans to build an additional two to three plants in the Northeast. The demand for cogeneration plants is strong in New Jersey, Connecticut, Maine, and Massachusetts, where state energy regulators are concerned about high electricity prices. Forecasts indicate that the company will grow to a total of nine plants and approximately 650 corporate and plant employees over the next two to three years. The company faced a dilemma with regard to determining benefits and salaries for its employees. These had to be competitive, but not so high as to attract workers from Mount Ridge's ‘‘customers''-its industrial hosts and the local utility. In addition, since profits were to be reinvested into the business to finance future plant expansion, a profit-sharing plan was not feasible. Another important goal of the company was to remain nonunion by offering employees a good quality of work life and attractive benefits. Balancing these two goals was often difficult. Low-cost production was critical to Mount Ridge's competitive position. The importance of these goals is reflected in the words of President Levinson: ‘‘Mount Ridge places great value on its relationship with our industrial and utility clients. Our internal employee relationship has an equally important role in order to maintain an enjoyable and productive workforce for the future. Management believes that companies that are good to their employees reap the benefits in terms of increased productivity and loyalty.'' As part of an effort to build this philosophy into its human resource programs, employee appreciation dinners are held annually at each of the five plants. The president and other corporate officers attend each of the dinners given throughout the state. These dinners have been well-received by employees.
Plant Operations
Most of Mount Ridge's plants are scattered throughout the state. Each plant employs approximately 45 workers. The typical plant structure is shown in Exhibit 1.2. Each plant is run by a plant superintendent who reports directly to the manager of plant operations and maintenance. While personnel operations are generally centralized at corporate headquarters, the plant superintendent and shift supervisor of each plant are largely responsible for the day- to-day administration of personnel policies. Newcombe admits, ‘‘One of our biggest problems has been getting management-especially plant management-to understand the legal and governmental regulations affecting human resource procedures.'' Although Newcombe devel- oped a detailed employee handbook and supervisor's manual, over the years there have been situations where supervisors have not followed company policy. Newcombe recounted one such incident that occurred in one of the older plants during her third year with the company.
The Termination
One of the first plants built was the Edison plant. It is located in a medium-sized rural community in the eastern region of Kentucky and employs 45 workers. Bud Johnson, who started at the plant as a laborer, worked his way into a position as an auxiliary operator. An auxiliary operator is responsible for assisting the control room operator and the equipment operator in the basic operations and maintenance of the plant's generating system. In the two years that Johnson was in this position, he learned quickly and knew a good deal about the equipment operator's job. On many occasions, Johnson was asked to fill in when the equipment operator was absent or when there was a problem that no one else could handle. One day Johnson approached the plant superintendent, Larry Braxton, about a promotion to equipment operator:
Johnson: Larry, you know I can handle the equipment operator position, and I'd like to be considered for a promotion.
Braxton: That's not the point. We all know you are capable, but we just don't have any openings right now. Besides, the job qualifications require that you spend sufficient time as an auxiliary operator before moving up to an equipment operator. Just sit tight.
Johnson: Well, I hope some openings will come up soon. I really would like to make more money, and I know that I am qualified. You know I can learn quickly. Look at how fast I moved up from being a laborer. After this conversation, Johnson was again called on several times to help out with the equipment operator's job and to explain the readings and gauges to Wilma Barker, one of the equipment room operators. When Johnson did not receive a pay increase or promotion after his annual evaluation, he met with Braxton and told him that he was dissatisfied with his pay and felt that because he often performed the equipment operator's job, he ought to be paid at that rate instead of his present rate as an auxiliary operator. Braxton told him he would have to remain at the pay of an auxiliary operator and that he should be satisfied with that for the time being. Johnson became quite upset and stormed out of Braxton's office. The next day, Johnson did not report to work and did not call in to report his absence.
Company policy stated that when an employee is absent and fails to notify his or her supervisor, the employee may be terminated. When Johnson returned to work the following day, he told Braxton that he had decided to quit his job because he was very dissatisfied with his pay. Johnson was asked to sign a termination notice form required by company policy and was told by Braxton that he would receive a copy of the form in the mail.
A week later, Newcombe received a phone call from Johnson. Johnson told her that the reason given on the copy of the termination form he had just received in the mail was incorrect . He had not left to take another job but had left because he was dissatisfied with his pay and lack of promotion at the plant. He explained that he had spoken with the plant superintendent about this several times. Johnson told Newcombe that he wanted his personnel records to be corrected and that he had been asked by Braxton to sign a blank form. He alleged that Braxton had added the incorrect reason after he had signed the form. Johnson also stated that he thought the Department of Labor would have something to say about this whole incident.
EXHIBIT 1.2 Typical Plant Structure
1 Plant Superintendent 1 Secretary 1 Chemist 1 Instrument and Controls 4 Shift Supervisors 8 Equipment Room Operators 16 Auxiliary Operators 2 Electrical Maintenance 2 Mechanical Maintenance 3 Coal Handlers 6 Laborers 1 Assigned to Electrical Maintenance 1 Assigned to Mechanical Maintenance 2 Assigned to Coal Handling 2 Assigned to Plant Clean Up 45 Total Plant Staff.
Questions:
Q1. Discuss the relationship between corporate human resources structure and operations at the plant level. What impact, if any, did that relationship have on the situation described by Newcombe?
Q2. Describe Mount Ridge's business strategy. What is the relationship between its business strategy and its human resource practices?
Q3. What strategic human resource issues will Newcombe likely face as the company expands to the Northeast? How might this expansion affect the structure of the organization and its human resource department?