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Gap Analysis: Riordan Manufacturing
Organizations of all sizes face the difficult task of motivating and providing a challenging and rewarding atmosphere for their workforce. An organization’s business strategy and technology is the driving force for developing the organization’s design and work processes. These work processes will determine the behaviors and roles the organization desires from the workforce. The firm’s compensation and reward system can become a powerful mechanism to encourage the desired behaviors to achieve the organization’s strategic goals. (Dreher & Dougherty, 2001)
Developing a total compensation strategy can be further complicated by the organization’s business environment, changing workforce demographics, employee needs, cultural values, competitive dynamics, and the guiding values for an organization’s behaviors and underlying treatment of employee’s. The company’s image and reputation is reflected in the organization’s compensation and reward systems. (Milkovich & Newman, 2004)
A human resource management (HRM) system and compensation strategy will need to be developed that will fit the business strategy and business environment of the organization while satisfying all the stakeholders needs.
Issue and Opportunity Identification
Riordan Manufacturing is a global multi-million dollar manufacturing firm headquartered in San Jose, California that is wholly owned by Riordan Industries, a Fortune 1000 enterprise with revenues that exceed $1 billion. Riordan Manufacturing manufactures plastic products used by appliance, aircraft, automotive parts manufacturers, beverage makers and bottlers, and the Department of Defense with manufacturing plants in Georgia, Michigan, and China. Riordan recently made strategic changes in their manufacturing and marketing processes, changed their sales processes, and adapted a customer-relationship management (CRM) system due to declining sales over the past two years. In an effort to improve sales, Riordan’s customers are now serviced by a sales team consisting of a salesperson, a product engineering specialist, and a customer service representative instead of a single salesperson. These changes have resulted in an increase in employee dissatisfaction is several critical areas. Additionally, the composition of Riordan’s employees are comprised from three major demographic groups consisting of baby boomers making up the bulk of the managerial staff and half the manufacturing staff, GenXers comprising a majority of the professional staff and some of the manufacturing staff, and GenY consisting of the new hires in manufacturing, engineering, and IT. All these groups have different perspectives about rewards and motivation. These different issues facing Riordan Manufacturing have resulted in low morale and productivity, dissatisfaction in the compensation packages, and high employee turnover.
A compensation system should be a harmonious match to an organizations business strategy. A company’s business strategy, and or technology, will determine the organization’s design and work process which results in the behavioral and role requirements of the employees. The compensation should motivate the behavioral and role requirements the organization desires. The firm’s compensation system can be a powerful force to for motivating employees to achieving the firm’s business strategies, developing and supporting teamwork and cooperation, and improving quality and productivity. (Dreher & Dougherty, 2001) The HR system and compensation policies will need to be redesigned to address the employee issues facing Riordan Manufacturing in order to achieve the firm’s new business strategy.
Stakeholder Perspectives/Ethical Dilemmas
Shareholders have a vested interest in the company. They have invested money in the company with the expectation of receiving a reasonable return on that investment by sharing in the company’s profits through the receipt of dividends. This interest can conflict with the customer’s interest in receiving high quality products for the lowest price and the employee’s expectation of receiving equitable compensation and benefits for their contributions. Shareholders expect senior management to protect their investment in the company by making strategic decisions in the best interest of the shareholders by improving the organizations profitability.
The customers expect to receive a quality product for the lowest price. Customers depend on manufacturing companies to meet their supply demands and to receive fair and equitable treatment from the management of the manufacturing firms they deal with. The customer’s interest in receiving a quality product for the lowest price will conflict with the shareholder’s interest in the organization making a profit so the investor’s receive a return on their investment and employee’s rights to receive a competitive wage and compensation package.
The employee’s have the right to be treated fairly with honesty and integrity. Employee’s have the expectation of receiving a competitive wage for the work they perform for the organization and having opportunities for career advancement and development. Paying excessively high wages or having excessive compensation packages will cause conflicts with the customer’s desire for a low cost product and the shareholder’s expectation of receiving a return on their investment in the form of higher priced products with a lower profit margin. The ethical dilemma that can result is sacrificing the interests of one stakeholder at the expense of another.
Senior management is caught in the middle of these conflicts. Management needs to balance the interests and values of all the stakeholders. Senior management has an obligation to their shareholders to protect the shareholder’s interest in the organization receiving a reasonable profit. The senior management team needs to protect the interests of the customers in receiving a quality product for a reasonable price. Senior management also has an obligation to the organization’s employees by providing the workforce with a competitive compensation and benefit package that can conflict with the obligations to their shareholders and customers interests. Management has a difficult task of balancing all the conflicting interests of the various stakeholders and needs to accomplish this task while upholding the highest ethical standards possible.
Riordan Manufacturing’s End-State Vision is to become the industry leader for identifying and setting new trends by providing affordable high quality and innovative solutions to meet the customer’s challenges and in providing employees a challenging, rewarding, and innovative team orientated work environment while focusing on achieving our profitability to assure the financial stability and sustained growth of the organization.
Riordan Manufacturing will need to overhaul their compensation and reward system completely in order to accomplish the organizations vision. The company is comprised of a diverse workforce in demographics, performance levels, skills, and expertise. These groups all have different perspectives concerning rewards and what motivates them to becoming high achievers. The values range from wanting larger paychecks to being provided a challenging and interesting work environment. Two motivational theories on what motivates individuals, Maslow’s hierarchy of needs and Herzberg’s two-factor theory, will assist Riordan in developing an understanding of the motivational needs of their workforce. (Milkovich & Newman, 2004) Management needs to gain an understanding on what will motivate employees to achieve the performance levels desired to accomplish the organization’s strategic goals.
Riordan faces a challenge in motivating the sales force to support the teamwork philosophy concerning the new sales team concept of servicing their customers instead of single salespeople. Salespeople are afraid that the bonuses are at risk by depending on the performance of the team’s output and not on individual performance. Personnel working in the engineering and IT departments believe that the salaries in these two departments are below the salary levels being paid in other organizations and the open market. The workforce in Research and Development lacks in motivation to focus on long-term projects in favor for supporting sales team’s projects that provide immediate results. The Human Resources Department lacks support from the leadership team in the HR systems used within the organization. The Human Resources Department is not valued as an asset to the organization and is being construed as a personnel department. HR does not have an active and strategic role on the organization in supporting the business strategy. A difference in opinions exists between key management’s perspectives as to what the real issues are. Some of the key management believes the issue lies with a lack in the rewards and compensation system while other key managers believe the key issues that need to be considered involve issues such as lack of opportunities for advancement or further development of individual skills. For Riordan Manufacturing to succeed in achieving their vision and end-state goals they will need to have an understanding on the motivational theories to develop a motivated and dedicated workforce. Management will also need to develop a consensus on what the real issues facing Riordan Manufacturing are.
Riordan Manufacturing has made strategic changes in the processes used to manufacture and market products. Declining sales forced Riordan Manufacturing to change the sales process from single salespeople to use sales teams to service customers. These changes in manufacturing, marketing, and sales have resulted in decreased efficiency, higher turnover, and morale issues with the diverse workforce at Riordan.
To achieve the new business strategy, Riordan will need to address the primary issues that are the driving force for these various issues. Riordan will need to develop an understanding and knowledge in motivational theories. Senior management will need to come to an agreement related to the primary issues that are facing Riordan Manufacturing. Only after determining the primary issues and developing management’s skills in motivational theories will Riordan Manufacturing be able to develop a compensation strategy that will enable Riordan to achieve the organizations goals and business strategy.
Dreher, G., & Dougherty, T. W. (2001). Human Resource Strategy, 1e. The McGraw-Hill Companies. Retrieved June 10, 2008 from: https://ecampus.phoenix.edu/content/eBookLibrary
Milkovich, G., & Newman, J. (2004). Compensation, 8e. The McGraw-Hill Companies. Retrieved July 16, 2008 from: https://ecampus.phoenix.edu/content/eBookLibrary
Noe, R. A., Hollenbeck, J. R., Gerhert, B., & Wright, P. M. (2003). Fundamentals of Human Resource Management, 1e. The McGraw-Hill Companies. Retrieved June 30, 2008 from: https://ecampus.phoenix.edu/content/eBookLibrary
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"Gap Analysis: Riordan Manufacturing." 123HelpMe.com. 02 Sep 2014