Contribution #7 for BUAD 336

Economic Downturn in Businesses: India vs. United States

                When the average person compares India to the United States, he or she only thinks of the basic facts: that India is a third-world country, the United States is a privileged country, and that the difference in wealth and technology is enormous.  The United States is supposed to be the more developed and sophisticated country with a wealth of opportunity.  On the other hand, India is a poor, dirty, under-educated country with too many people.  When looking at these statements, one might ask the question, ‘What could the United States possibly have to learn from India?’  Concerning human resource management, the United States could learn a thing or two from India.

                In the United States, during an economic downturn, the top human resource solutions to company survival are layoffs, hiring freezes, restructurings, pay freezes, and pay reductions.  With layoffs as the number one option for staying competitive, jobs are being lost all the time for no other reason than budget cuts in certain departments. 

                In India, companies focus more on restructuring, slowing down pay increases, and hiring freezes.  It is important to have a job in India, because it relates not only to one’s well-being, but his or her social standing as well.  It is almost unheard of to lose a job in India due to an economic downturn.  If you lose your job in India, it’s because of you, not the circumstances surrounding you.

Contribution #6: Labor Relations and Unions (BUAD 336)

                Here in the United States, there’s an expectation of fairness when it comes to the workplace.  Everyone should get the same benefits and pay for the same work.  No one wants favoritism to occur, and people who slack off should be punished.  Fairness is the main reason employees join unions. 

                Unions tend to be a scary word for managers in companies, especially manufacturing companies.  The downsides of unions, such as higher wages, benefits, and limitations of work, make companies nervous.  All these things can affect the profitability of a company.  Also, some unions are too strong to be reasonable.  My dad once went to a different factory under the same company he works for.  This company’s employees were so protected by the union, my dad literally saw some workers sleeping on the job.  It was shocking to see such a thing.

                On the other hand, unions tend to make up for some of their downsides.  One way of doing this is by increasing the use of “voice” strategy instead of “exit” strategy.  This means employees are more likely to ‘voice’ their concerns or problems in the hope they can be fixed or reconciled.  Less people ‘exiting’ the workforce means decreased turnover.  Turnover has its own high costs.  Another way unions make up for union costs is by emphasizing seniority in pay and decision-making.  This makes older workers more likely to pass on knowledge they’ve acquired through the years on the job.  This in turn increases productivity all around.  Also, unions can be the kick in the butt needed by management to enforce safety regulations in the workplace.  The safer the workers are, the less likely it is that they will be injured on the job and incur the associated costs of that.

                The United Auto Workers recently had to go through another round of negotiations with the big three auto companies.  Some of the executive perks had to be thrown out, and some of the union benefits paid for by the company are being revamped in an effort to decrease the company debt.  There are painful concessions being made by both sides, but whatever the outcome, the workers are in good hands.

BUAD 336 Contribution #5

The Cost of Wellness

                In America, one of the fastest growing health problems is obesity.  While being a little overweight might not be too bad of a thing, if weight gets out of control, it leads to an entire host of other health problems.  This is part of why health care costs are so high in companies.  Employees sit at their desks for hours at a time and eat fast but unhealthy lunches and snacks and gain weight all the time.  A few companies have recognized the connection between their employees’ weights and the number of insurance claims they are getting.  Therefore, to cut the costs, some managers have employed the use of wellness programs.  While these programs can be expensive, the costs of them are covered by the savings in insurance claims and health care costs.  One company’s program, which costs $20,000 to $30,000, cut the cost of insurance claims and such by about $150,000 in the first year.  With that kind of return on investment, the wellness trend is going to spread quickly.  Most of these programs encourage exercising with co-workers to keep each other motivated and build team spirit.  They also encourage healthier eating.  One company has a point system that gives points for buying fresh fruit for a snack throughout the week.  Many companies have walking/jogging trails, showers, and workout rooms to increase the push for exercise.  At Schneider National, Inc., they have a walking trail, a workout room, a yearly marathon, a healthy food section in their cafeteria, and exercise classes offered right in the building.  Confluence has a program that is based on points with fantastic prizes for the top three performers.  This point program costs a little under $10,000, but has already reduced the company’s insurance premiums by about $28,000.  PMSLIC Insurance Co. discovered a problem with competitive wellness programs, though.  If people get out of hand trying to win, they can go past their healthy weight and become underweight.  The company did a walking contest with pedometers where the top walkers would get prizes.  When they realized what was happening as a result of the competitiveness, they modified the program to a random drawing of all the participants for prizes.  This re-motivated those who hadn’t been winning and lowered the intensity with which the top walkers had been going.  With every program, it is important to look at all the angles.  Several companies have proven that wellness programs can cut costs significantly enough that it would be silly not to have them.  It is imperative that managers motivate their employees not just to lose weight, but to find their healthy weight and stay at it.  One company rewarded overweight employees for losing weight, underweight employees for gaining weight, and fit employees for maintaining their weight.  It is good that these companies have paved the way and worked out some of the kinks in the system so that other companies can follow easily.

Contribution #4 for BUAD 336, Fall 2010

Evidence-Based HR: Health Care in the Work Place

                One of the biggest issues today is health care.  It’s expensive, and insurance tends to help very little.  However, there are companies trying to combat this high cost of living for their employees.  One way that is growing in popularity is by setting up on-site health clinics.  At these clinics, visits are zero to ten dollars.  At a typical quick care center, the cost for a visit is $65.  The theory behind having these clinics is that if it is convenient, then workers will get preventative care sooner and incur less costs later.  These costs can include the cost of taking time off from work to go see a doctor, recovery time, and for the actual employee the cost of any medications needed. 

                Another way some employers are cutting health care costs by providing assistance to employees is by providing insured employees with control medicines for conditions such as asthma and diabetes with free prescriptions.  This is their way of encouraging their workers to take their medications and prevent future more serious conditions from arising.  When an employee becomes seriously ill it can cost a company a lot to cover for the resulting lack in productivity by that ill employee. Also, even if an employee is only moderately ill with something such as strep throat, if they don’t get it treated, they will not be as productive as they would otherwise be when they are well.

BUAD 336 Contribution #3

Applebee’s restaurants used to have a turnover rate of 146 percent.  This is high, even for food service.  In order to counter this turnover problem, they employed a ranking system run by their managers.  Under this system, employees receive one of three grades: A, B, or C.  The top twenty percent are A’s, the middle sixty percent  are B’s, and the bottom twenty percent are C’s.  Once they are rated, managers are to work harder to retain the top eighty percent, or all the A’s and B’s.  Since they have executed this plan, they have effectively reduced their turnover rate to 84 percent.  Managers are thinking more about the staff they are in charge of and working to be better managers.  They can earn raises or bonuses for retaining the top employees.  This has created a whole new thought process for the managers.  They actually care and give employees the day off on their birthdays or anniversaries.  They come up with new forms of recognition, similar to employee of the month types of deals.  They also have an Applebucks point system where the points earned can yield a prize in the form of a bike or a DVD player.  It’s a pretty cool system, and I think it is a good HR move.  One problem with this system, though, is what happens when the difference between the A’s and the C’s is miniscule.  It is also important to be careful not to punish the C’s when trying to reward the A’s and B’s.  While differentiation in treatment is necessary sometimes, managers have to be very careful how they do it.

BUAD 336 Contribution #2 (Executive Compensation)

                In America, it is common knowledge that the general public’s opinion is that executive compensation is too high.  Generally, we think CEO’s and other key positions in corporations are paid too high of a compensation for what they do.  In China, this is a fairly recent discovery.  However, the opinion is still the same.  One executive in China actually makes $9.9million per year.  On the other hand, in America, in 2009, the top ten paid executives were paid from $70 million to over $100 million.

                One of the reasons for “overcompensation” of executives in America is stock.  A lot of high-power executives are paid a lot of their salaries in stock to keep their interests aligned with the company’s interests.  In this way, the executives can justify their pay. 

                In China, they are doing the same. The only difference is that the Chinese culture sees a major inequity with this, considering the low pay of the average Chinese worker.  The average Chinese worker only makes about $3,500 per year. 

                Some people think the government should intervene and limit how much these executives can earn by setting a cap on how many shares of stock a CEO can own.  The Chinese want to eliminate corporate duality in executives.  Unfortunately, since there is a shortage of qualified individuals for corporate executive positions, this could deter them from performing as well as they would otherwise.  The entire debate is still in its infancy in China.  Though, I think I like the idea of limiting corporate ownership by executives in America. It would make for an interesting change.