Dennis is a member of the management team of a company that, until recently, was
ID: 422156 • Letter: D
Question
Dennis is a member of the management team of a company that, until recently, was extremely profitable. As a result of a continuing recession; however, there has been a significant drop in profits, although the company is still making profits. The 196 non-permanent employees are low-skilled, but all of them have been with the company for at least 3 years. The lowest-paid worker earns at least double the minimum wage and the company provides all its employees the benefits required by law.
Dennis will soon be attending a meeting of the management team to decide how many employees to retain. Dennis feels that the firm’s value lies in its employees, regardless of rank. Indeed, it was this culture of inclusiveness that led Dennis to join the firm in the first place. Dennis believes that employee retention is more than an issue of short-term profit maximization.
How can he give voice to his values in the upcoming meeting?
Number of the 196 employees who will continue to be employed. Expected Annual Profit ($millions)
0 (all workers laid off) = -8
50 (146 workers laid off) = 1
65 (131 workers laid off) = 1.5
100 (96 workers laid off) = 2
144 (52 workers laid off) = 1.6
170 (26 workers laid off) = 1
196 (no layoffs) = 0.4
Discussion Questions:
(1) What are the main arguments Dennis is trying to counter? That is, what are the reasons and rationalizations you need to address?
(2) What’s at stake for the key parties, including those with whom Dennis disagrees?
(3) What levers/arguments can Dennis use to influence those with whom he disagrees?
(4)What is Dennis’ most powerful and persuasive response to the reasons and rationalizations he needs to address?
Explanation / Answer
1. The management is keen on maintaining the profit levels it enjoyed during the good times. For this, it wants to cut down expenses by retrenching some employees. The issues that need to be addressed are the benefits derived from retrenching a number of employees, the forecasts for future so as to determine long term implications of such a decision, cost of cultural deterioration and lack of motivation affecting commitment towards work in remaining employees and cost of negative outlook of the company in the business fraternity.
2. The Finance department wants to limit the expenditure on employees to meet the profitability targets, the production department wishes to retain the minimum number of employees to get the work done without sacrificing the performance. The HR and strategy department may not want to fire any employee if it sees the revival of the economy from the recession from the forecasts and a way to survive during bad times. The top management needs to find the most optimum solution to the problem.
3. Dennis can put his point forward that recession is a temporary phenomenon. Though the company can save money in short term, it might have to pay more to recruit, train and retain the new hands when the economy revives. Besides this, the cost of bad employee morale and loss of faith among the prospective employees is also significant. The move will also downgrade the company's performance in the business world. He may also suggest to withhold the annual increments or at the worst, restructure the pay and benefits to meet the demand without firing anyone. Kost of the employees will agree to it, given the current scenario.
4. Loss of employee morale and the long standing negative effects on the work culture of the company are the most persuasive agreements to prevent the management from retreching the employees.
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