What organizational structure did the company in the case study have? Centralized or decentralized? What are some of the components of the structure which make it more centralized or decentralized?;Attachment Preview;Com350Case StudyWK4.docx;1;CASE STUDY & The Power of Rewards at Industry International;Industry International is a manufacturing firm with about twenty-five hundred employees in a;number of plants. It is often touted as a monument to the power of financial reward systems. In;an industry that has been battered by foreign competition for three decades, it has remained;highly profitable, in large part because its workers are 2 1/2 to 3 times as productive as those of;its competitors. Their compensation is also three times the average salary for U.S. manufacturing;employees. They are not unionized, have no paid vacations, and work 45-50 hours per week.;Much of their income comes from a year end cash bonus. Each year, after company taxes and;dividends have been paid, the board of directors determines the size of the bonus pool, which is;divided among the employees based on their base salary and individual merit ratings. From 1943;to 1994 the bonus percentage ranged from 55 percent to 104 percent, in 1994 it was 61 percent;meaning that an employee earning a $30,000 base salary and receiving a 100 percent merit rating;would receive a bonus of $18,300.*;*Because Hancock and Papa have never identified the real company that they called Industry;International, it is impossible to update these figures. However, the Lincoln Electric Company;which operates very much like Industry International, and which had comparable bonuses during;the years covered in this case, gave out average bonuses of $11,800 in 2002 and $10,800 in 2003.;The reduced size resulted from the recent recession.;The bonus is kept secret from October until a meeting/celebration in December. When the;meeting ends, the employees rush to their cars, bonus checks in hand, and tie up traffic for hours;going to their favorite places of celebration.;Most employees use the money to pay accumulated bills, in fact, many spend far in excess of;their base salaries and then put off paying bills and loans until the bonus checks come in. Other;employees use the money for less mundane activities. One got his bonus in $100 bills, spread;them on the living room floor and, along with his wife, rolled around on them (among other;activities) in celebration. Some made major purchases like houses, cars, and luxury items in cash.;A few (mostly younger employees) used the money to gamble, hire prostitutes, or buy illegal;drugs. When asked why they spend the money as they do, three answers were commonly given;to live the good life so valued in the United States, to assert their autonomy (one said spending;bonus money is the one thing they [management] ain't telling me what and how to do), and for;the social status that money provides. Other employees commented, As soon as they [friends;and neighbors] find out you work there, they think you have money coming out of your ears;and They think I'm the richest s o b [ellipses added] in the world. A worker recalled;Years ago we made more money than professional football players.;What they don't tell their envious neighbors is what they go through to get the bonus. Merit;points are based on output, quality dependability and personal characteristics. The first two can;be quantified, leading employees to work like dogs until they are dangerously exhausted by;long hours and difficult working conditions, the latter two cannot, creating a highly political;atmosphere in the plant. Most echoed one worker's conclusion that if you don't go along with;the system [managers], you could be the hardest worker in the world and you would still be;way short because you have not gone with the flow and you would be black-balled, and they give;you what they want to give you.;But things have changed for Industry International. The recession of the mid-1980s led to low;bonuses (55 percent). Many workers lost their homes and cars because they were relying on large;bonuses to pay mortgages and loans. Workers attributed the decline to many things, but primarily;to management greed and incompetence-a fat managerial level and more men at the top;2;embezzlement, and mismanagement of overseas accounts. Whatever the reason, the recession;made it clear to workers just how dependent they were on Industry International and how much;things had changed: The whole philosophy [established by the founder and maintained until;1983] was that you worked hard and got compensated for it. You busted your ass, but you got;compensated. Now you bust your ass and you don't get compensated for it. The employees have;very few options, however. Most are too old to start over somewhere else and are limited by their;education and training to manufacturing jobs. Furthermore, high-paying manufacturing jobs are;becoming very rare in the United States (see Chapters 1 and 11).;So workers talk about resisting management. They fear that management will eliminate the;bonus system, replacing it with a form of profit-sharing that is not as lucrative for the workers.;Many predict a massive walkout or work stoppage if that happens. Others consider unionizing;the firm. Management has persuaded them that the bonus system relies on a nonunion shop, but;if the bonus system is eliminated, they have no reason not to unionize. Others predict that;without the bonuses, employees would quit the company, still others predict plummeting;productivity and quality, others threaten physical violence against management and sabotage of;the plant. If they got rid of bonus, they wouldn't have the control over anyone. Bonus is what;they have to keep the hold on you.;Applying What You've Learned;1. A number of factors need to be present for rule-reward systems to succeed. Which of;those factors were present at Industry International? Which, if any were absent?;2. What resistance strategies are available to these employees? What could they do to keep;from being so dependent on the system? What effects would those actions have on the;system? Why?;Questions to Think About and Discuss;1. There is a substantial amount of research evidence indicating that pay is the most;powerful motivator for U.S. workers, more so than for workers in some other countries.;See John Campbell and Robert Pritchard, Motivation Theory, in Handbook of;Industrial and Organizational Psychology, Marvin Dunnette, ed. (Chicago: RandMcNally, 1976), and Charles Greene and Philip Podsakoff, Effects of Withdrawal of a;Performance-Contingent Reward on Supervisory Influence and Power, Academy of;Management Journal 24 (1981): 527-542.;Why?;2. Would this kind of motivation/control system work differently in different societal;contexts, for example, in a society that was not as consumption-oriented as the United;States or in a country with extensive social support systems for unemployed workers and;their families?;This question is examined in Richard B. Freeman, ed., Working under Different Rules;(Washington, DC: Russell Sage Foundation, 1994).;3. If you were the CEO of Industry International, what kinds of public economic policies;would you want the government to follow? (Would you want the Federal Reserve Board;to focus on keeping inflation low or keeping unemployment low? Would you want;corporate income taxes to be a primary source of government funding, or personal;income taxes?) Why?;This case is based on Melissa Hancock and Michael Papa, Employee Struggles with Autonomy;and Dependence: Examining the Dialectic of Control through a Structurational Account of;3;Power, Paper presented at the International Communication Association Convention, Chicago;1996.
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