Wilson & Associates is a medium-size marketing organization specializing in professional promotion and publicity services. The firm's top management believes that it provides quality service as evidenced by the high level of customer satisfaction.

The organization consists of three departments: print media, audio media, and visual media, each of which has a senior director in charge. The company employs 80 clerical staff who are paid on an hourly basis and 30 professional staff who are salaried. A large majority of the employees have an excellent rating in their job skills, and all employees demonstrate above average performance in their job responsibilities. The employees take pride in their achievements, and morale is very good.

Salary ranges are established for different job classifications within the clerical staff (i.e., clerk, clerk typist, secretary, and administrative assistant) and the professional staff (i.e., analyst, manager, and director). A fixed-rate structure is used for all salaries. The company offers no commissions because it does not want its professional staff applying undue sales pressure on its customers. Company management is proud that it does not have to resort to a salary plus commission structure for its professionals to generate sales.

Employees are recognized for superior performances through salary increases and promotions. Management believes that salary increases should be based on merit, and open positions are filled from within whenever possible. Top management contends that highly skilled and motivated employees will improve productivity if they are rewarded with annual merit pay raises and if promotions are based on performance.

Top management announced in November 2021 that the amount available for pay increases in 2019 would be 10 percent of the actual total salary expenditures for 2018. All salary increases would be effective January 1, 2022.

The print media department consists of 20 clerical and eight professional employees on January 1, 2021. Six clerical employees were added during the year at the rate of about one every two months. Two professionals were added, one on March 1 and one on August 1. Three employees were promoted during the year: two secretaries to administrative assistants and one manager to director. The total actual salary expense for the department without regard for employee benefits and employer tax contributions was $548,000. Therefore, the total amount allocated for wage increases for the print media department in 2019 is designated to be $54,800.

Shortly after the merit pay program was announced, the print media department employees received their year-end evaluation conducted by the employee's supervisor. The senior director met with each supervisor, received all performance reports, and then announced the merit pay increase for each employee.

Upon completion of this entire process, several employees complained individually about the inequities of the merit pay program. The senior director was concerned about the employee discontent because the people complaining were some of the highest achievers on the staff. They tended to be at the lower classification levels and were relatively new employees, having been with the company for one to two years. The individuals showed potential and were highly motivated, often working extra hours and assuming additional responsibilities.

The new employees' behavior differed slightly from the employees who had been with the department for a longer period of time. Although highly skilled and competent in their jobs, the veteran employees tended to be reluctant to accept additional responsibility or to work extra hours on a regular basis.

Required:

1) Review Wilson and Associates' wage and compensation plan.

a. Identify and discuss the general strengths of the wage and compensation plan.

b. Identify and explain the shortcomings in the administration of the merit pay increases that are to become effective in 2022, and discuss what effect these shortcomings could have on the group of discontent employees in the print media department.

2) Explain how this compensation program should be revised, if at all.

PS: SUBJECT: STRATEGIC BUSINESS ANALYSIS

TOPIC: MANAGEMENT COMPENSATION

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