Canadian Snow Vehicles is a manufacturer of snowmobiles. During the past four years, profits have dropped 43 percent. This decline is attributed to rising production costs, which triggered the old president's resignation. The new president, Winston McBeade, started his job by declaring a war on costs. The first thing he did was review the merit pay guide for the previous year, which follows. Performance Well Well Below Below Above Above Average Average Average Average Average Above Grade Maximum (red circle) 10 10 Position in Salary Range Notes: 1. Cost of living rose 3 percent ' 2. The number at the lower right corner of each cell represents the number of employees falling into that cell during the previous year. Exibit 1: Previous year merit guide The second thing Mr. McBeade did was implement the new merit pay guide shown below. However, the new merit pay guide was unsatisfactory. He decided that HR department was not able to perform the task properly and fired the head of the HR department. As an outside consultant, you have been hired to correct this problem and briefed on the situation. Performance Well Well Below Below Above Above verage Average Average Average Average Above grade maximum red circle Q4 2 Position in Salary 5 Range O 71 Note: Cost of living is expected to rise 3 percent this year. Exibit 2: Current year merit guide