Scenario I

During the past five years, productivity and worker commitment at the Kendall Toy company have been declining. Productivity is now so low that Dr. Helen Kendall, the companys founder and president, is worried about the firms future. When Kendall, a mechanical engineer, started the company in 1980, she installed an assembly line so that workers could become specialized at their jobs, and hence, very productive. The employees were quite productive during the first ten years of operation. Then, several younger, newly hired employees began complaining about the repetitive, boring nature of the work. About that time, Kendall began to notice a decline in productivity.

Kendalls assumed that pay was too low. Her thinking was that pay was not an issue for the original employees because many were women whose husbands worked. However, she now saw that newly hired employees were younger, unmarried, and that several held second jobs in order to earn more money. That seemed to explain why so many seemed to be coming to work too tired to work efficiently. Kendall decided to raise everyones salary by 20 percent. Since she had 75 employees, this represented a substantial increase in payroll expenses. Nevertheless, she was concerned about productivity as well as the economic difficulties facing her workers. Besides, she knew that increasing the base pay of the current workers would be less costly overall than hiring more workers.

About two months after the salary increase, Kendall noted that the level of productivity had not increased. In fact, it had actually declined slightly. You have been hired as a consultant to work with Dr. Kendall to help her understand and solve the problem.

QUESTIONS:

a. Why didnt the salary increase improve productivity? Discuss ( 7 marks)

b. What other approaches might Kendall try to improve productivity and worker commitment? Discuss in the context of performance management. (12 marks)

c. Which would you recommend? As HR consultant, will your recommendations differ if the company strategy is to be a low cost toy manufacturer? And will your recommendations differ if the company strategy is to produce toys of the highest possible quality? Justify (6 marks)