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i. Overall Organizational:

1. Result of SWOT analysis of the organization with emphasis on the HR department.

Page 25 from case study ( Compensation and Benefits questions 3: What makes a reward system motivating?)

PAC Resources, Inc.:
A Case Study in HR Practices
By Myrna L. Gusdorf, MBA, SPHR
Myrna L. Gusdorf, MBA, SPHR
SHRM project contributor:
Bill Schaefer, SPHR, CEBS
External contributor:
Sharon H. Leonard
Copy editing:
Katya Scanlan, copy editor
Jihee Lombardi, senior design specialist
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
For more information, please contact:
SHRM Academic Initiatives
1800 Duke Street, Alexandria, VA 22314, USA
Phone: (800) 283-7476 Fax: (703) 535-6432
Case Overview
Although PAC Resources is a fictional organization, it experiences many of the
difficulties common in today’s business climate. In response to declining sales, PAC
Resources must transform itself from a strategy of expansion and high profit to one
of cost containment and staff reductions.
The case is presented in two parts. Part I lays the groundwork for the case, with
discussion of the organization and details of the human resource department. Part
II is presented in e-mails from various staff members. The e-mails identify specific
problems that need to be addressed by the HR department and give the reader an
understanding of PAC’s overall culture.
Resolving the case of PAC Resources requires you to have fundamental knowledge
of human resource practices and general business management. You should have
previously completed lower-division classes in human resource management,
introduction to business and principles of management.
In this case, you will:
1. Recognize the link between organization strategy and human resource activities.
2. Conduct a SWOT analysis of the organization with emphasis on the HR
3. Indentify problem areas in each of these five functional areas of HR Management:
Human resource development.
Safety and security.
Compensation and benefits.
Employee relations.
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 1
4. Design solutions to the strategic problems identified in the five functional HR
5. Develop solutions to the policy and people management problems identified in
the e-mails.
6. Present their solutions to the class and lead discussions of the issues involved in
their assigned functional area of HR.
This case requires you to decipher the problems at PAC Resources and then suggest
solutions for the organization. As a future HR professional, you must recognize
the interrelationship of organizational issues and HR activities. In the case of
PAC Resources, you will address the strategic challenges facing the organization
while concurrently resolving issues within the HR department and managing the
dilemmas of individual managers and staff.
2 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
PAC Resources, Inc.:
A Case Study in HR Practices
PAC Resources is a small manufacturing company located in a mid-sized city in
the upper Midwest. PAC manufactures high-quality specialty components for
the computer industry. The company was founded in 1994 by current CEO,
David Dukakis. Dukakis was a talented young engineer in Silicon Valley. When
the industry hit the skids in the early 1990s, he found himself out the door with
little more than an entrepreneurial spirit and a small severance package. Dukakis
left California, moved back to his home state and used his severance package to
finance PAC Resources, starting the company in small rented quarters in a nearly
vacant strip mall. He brought in Cliff McNamara early on as chief financial officer.
Dukakis was smart enough to know that he had no head for figures, but McNamara
did. McNamara was an old college buddy, a super accounting wiz, and somebody
Dukakis could trust to squeeze as much mileage as possible out of his severance
money. It was a good match. McNamara managed the business, and Dukakis was
the idea man and designer of the specialty components, patents of which were the
backbone of PAC’s success. Today, the low-rent strip mall is a part of company
history, and PAC employs 835 full-time workers in its own contemporary facility
built in 2002.
So far, PAC has not been significantly affected by the latest downturn in the
industry. Its market niche continues to be high-quality, specialized equipment.
The company is proud that its products continue to be made in the United States
and of its ISO quality certification granted by the International Organization for
Standardization. Dukakis believes this is what has kept his company in business
while others in the industry shipped jobs offshore or went by the wayside.
PAC sells its own products and has a small customer base scattered throughout
the United States and Asia, but this generates only a small percentage of PAC’s
revenue. Eighty-three percent of PAC’s sales come from building original specialty
components for one manufacturer. This has been a steady income source for PAC,
but heavy reliance on one customer is a significant source of worry for PAC’s
management team, especially because sales of finished products are down for this
customer and cutbacks are expected. If the rumor proves true, PAC will not escape
unscathed. Consequently, the push is on for belt-tightening in the organization.
PAC instituted a hiring freeze, and marketing and sales budgets were directed
to increasing the company customer base. Canadian and European markets are
being explored, and while there is some interest, there are no solid contracts. PAC
employees are understandably jittery.
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 3
Though PAC remains non-union, three years ago the organization went through
a difficult period of employee unrest. There were complaints of poor management,
inconsistently enforced policies and unfair practices regarding job changes and
movement of employees within the organization. Because of the company’s standing
as a respected employer in the community, it was a significant public relations
black eye when an anonymous employee wrote a scathing letter to the editor of
the local paper. This brought in union organizers who distributed leaflets and
circulated authorization cards. To address employee concerns, PAC responded with
management training and reorganization of lower-level supervisory positions. A
companywide “Talk-to-the-Boss” program was implemented, allowing employees to
bring issues to any level of management without fear of reprisal. It seemed to help.
The authorization cards failed to generate enough interest for an election, and things
settled down. Unrest, though, never goes away entirely. Employees became cynical
about “Talk-to-the-Boss,” and “the union buzzards”, as Dukakis calls them, never
completely went away.
Things have certainly changed for PAC from the old days of the store-front location
and a handful of employees. Dukakis remains the CEO, but he no longer manages
the day-to-day operations, spending his time instead at his family’s summer retreat
on the Maine coast or in the Caribbean during the winter months. Decision-making
is primarily in the hands of McNamara, who is now the organization’s senior vice
president, and a second vice president, Mark Schilling. Schilling came to PAC eight
years ago with an honors degree in human resources and a successful military career.
With a history that has known only growth and strong revenue, it will be a major
culture change for PAC to respond to the eroding economy and a possible decline
in sales. In addition to the hiring freeze, McNamara directed managers to cut waste
and improve productivity across the board. Employees were reminded that every
department would be affected and that nothing was sacred.
Patricia Harris was HR director at PAC for eight years before her departure in 2007.
The official word was that she had taken early retirement to spend more time with
her family, but what everyone really believed was that Schilling finally got fed up and
gave her the boot. Of course, there was the official retirement party where everyone
said how much they would miss her, but really, most employees in the department
raised a toast to her departure and gave a collective sigh of relief. Her management
style—when she managed at all—was divisive. She had her favorites, especially
Kathy Davis, PAC’s benefits coordinator, for whom no perks were ever too many.
Consequently, the compensation and benefits staff fared well under Harris because it
was Davis’s area. Other employees in the HR department found Harris to be unfair
and abrasive even on the best of days.
With approval from McNamara and Schilling, Harris and compensation manager,
John Culbertson, had established a merit bonus plan early in Harris’s tenure at PAC.
Though Harris continued to champion the bonus plan as a success in accomplishing
4 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
objectives and controlling costs, it has been a bone of contention across the
organization, particularly in the HR department. The bonus plan required everyone
to have annual performance goals. Harris allowed Culbertson’s compensation and
benefits staff to set their own goals, but for everyone else in the department, Harris
alone set the goals with no input from those expected to carry out the activities.
The result was hard feelings and perceived inequity that continues today. There
is grumbling that even with Harris’s departure, things never changed. Davis still
offloads most of her work on others and is never dependable for project completion,
yet she and her staff members receive top-tier bonuses year after year. Even
Culbertson seems to look the other way. Other HR department employees feel their
work is not supported by management and that there is little feedback on progress
toward goals. For them, bonuses, if paid at all, are based on unknowns controlled
arbitrarily by Culbertson. As a result, the HR department is rife with animosity
and there is little cooperation across functional areas. Certainly things couldn’t get
When Harris retired, Schilling promoted Ben Trudeau, manager of safety and
security, into the director’s position, even though he had only been with PAC for
a year before his promotion. Though Trudeau had reported directly to Harris,
his good track record at safety and security kept him below the radar of many
of the problems in the HR department. As manager of safety and security, he
focused primarily on increasing wellness activities. Establishing an active wellness
team across the organization, he became the most visible member of the HR
department, and with his positive upbeat attitude, many employees thought of him
as the organization’s “cheerleader.” Best of all, his management style was the polar
opposite of Harris’s. Where she micromanaged and criticized, Trudeau believed in
encouragement and responsibility. Schilling thought Trudeau would bring a breath
of fresh air to the HR department, and he gave Trudeau free reign to make the
changes necessary to turn the department around.
When Trudeau moved into Harris’s old office, he set a big jar of candy on the desk
and invited everyone to stop by and chat with him whenever they wanted. Of course,
Davis was first in the door.
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 5
David Dukakis
Vice Pres.
Sr. Vice Pres.
Mark Schilling
Cliff McNamara
Human Resource
Human Resources
and Benefits
Ben Trudeau
Sales and
Safety and
HR Director: Ben Trudeau
HRD Manager: Kellie Stephens
Compensation and Benefits Manager: John Culbertson
Benefits Coordinator: Kathy Davis
Staffing Manager: Kim Wong
Safety and Security Manager: Jose Vasquez
Employee Relations Manager: Steve Wilson
The HRD division is managed by training director Kellie Stephens, who supervises
two other employees: a trainer and an administrative assistant, who coordinate the
logistics of PAC’s training programs. Recognizing the continuous dynamics of the
high-tech industry, PAC has been a strong supporter of employee development.
With approval of the immediate supervisor, PAC encourages employees to attend
training seminars, and tuition reimbursement is available for college-level courses
that are related to the employee’s job. In-house training is conducted regularly to
ensure all employees are up-to-date on sexual harassment and safety procedures.
Other training is made available as the need arises. Whenever possible, training
programs are developed and facilitated by in-house staff members. When that is not
practicable, a request for proposal is generated and PAC hires outside facilitators.
Since the labor problem a few years back, Stephens aggressively trained management
employees with particular emphasis on skills for first-line supervisors. She wants
to see improvement in people skills and consistent implementation of PAC policies
across department lines. Unfortunately, her efforts are not universally well received.
Some managers grumble that HR just gets in the way and ties their hands when
dealing with difficult employees. All too often Stephens hears managers say that
there is the “classroom way” and the “shop floor way.” She sees training for PAC
managers as an ongoing process.
6 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
Last year’s strategic planning process identified knowledge management as an area
for organizationwide improvement. PAC has a history of employees working in silos,
with little communication across functions. Hoping to bridge the gap and encourage
collaborative exchange, Stephens established “communities of practice,” where
individuals could meet to problem solve and exchange ideas. Her first community-ofpractice group consisted of individuals from research and development, engineering
and production. A number of other communities have since been established. More
informally, Stephens encourages “snack and chat” meetings on Friday afternoons,
where employees can drop by for a snack and talk about their work.
To increase information exchange with employees working off-site, an idea blog
was added to the company’s intranet, where staff could share information about
their successes and failures on various projects. At first, people were reluctant to
comment, and it took some time before they were willing to share their knowledge
and ideas. Stephens had not anticipated how proprietary some individuals would be
about their work methods. Progress has been made; with increasing postings, the
blog is becoming a source of ideas and information sharing. To manage the volume
of information generated by the blog and to make it easier for more employees to
use the system, Stephens submitted in a budget request to add enhanced knowledge
software to the intranet.
To capture knowledge that might be leaving the organization, Stephens worked
with Steve Wilson to improve the exit interview process. Departing employees are
encouraged to talk informally about their career at PAC and to pass on information
other employees need to know. There has been some success here, but as expected,
not all exit interviews generate a positive exchange.
As part of the recent directives to “tighten up” for increased results, HRD was asked
to update and improve the company’s performance management system. In addition,
the organization is looking closely at all training expenses, and Stephens was asked
to identify the return on investment for all programs. She is worried about her
management training program and feels certain that tuition reimbursement will fall
under the ax.
With Trudeau’s promotion to HR director, management of safety and security fell
to his assistant, Jose Vasquez. Vasquez is a recent college graduate with a degree in
ergonomics. He came to PAC as an intern during his senior year of college. Trudeau
was impressed with Vasquez’s attitude and enthusiasm and hired him right after
graduation. Vasquez worked with Trudeau on wellness activities and conducted
safety training, but his real forté is his ongoing ergonomics audit. PAC has had high
instances of workers’ compensation claims, particularly carpal tunnel syndrome
claims, and Vasquez expects that his emphasis on ergonomics will help alleviate
the problem. His goal is to check every workstation in the organization and either
approve or recommend ergonomic changes. He has developed an elaborate database
to track the project.
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 7
Besides ergonomics, PAC has an active wellness program. In partnership with a local
hospital, PAC conducts an annual on-site health fair providing employees with free
immunizations and voluntary health-risk assessments. Since maintaining a healthy
weight and not smoking are especially important, PAC reimburses employees for
50 percent of the cost of weight loss and smoking cessation programs. PAC also
maintains an employee assistance program.
Schilling asked Vasquez to take on a greater role in risk management. Schilling is
concerned about the increasing rate of workers’ compensation claims and asked
Vasquez to conduct a job-hazards analysis and report the results to him, identifying
which jobs, departments and people are most likely to incur a workers’ compensation
claim. From that information, it is expected that Vasquez will work with the finance
department to develop a cost-saving risk allocation plan.
Unfortunately, the ergonomics audit is so involved that Vasquez is seldom available
for anything else. He is either out in production checking workstations or mired in
spreadsheet tracking. He created an extensive spreadsheet to track the results of the
hazard analysis that Schilling asked for, but so far, little else has been done and the
completed analysis was due on Shilling’s desk last Friday.
With his short tenure at PAC and his focus on ergonomics, Vasquez seems illprepared to manage the entire safety department. Trudeau knew this when
he promoted Vasquez, but with the hiring freeze, he couldn’t go outside the
organization, and there was no one else with the safety background needed for the
position. Trudeau felt sure that if he worked closely with Vasquez, he could keep
safety and security on the right track.
Kim Wong has managed staffing at PAC since the early years when the company
had less than 100 employees. Wong runs a tight ship and manages the department
with only one other recruiter and an administrative assistant, who maintains all job
postings, including a telephone employment hotline and the company’s job line
web site. Wong is well-respected across the organization for his strict adherence to
ensuring equity in hiring and job placement that goes well beyond equal opportunity
Wong recently completed an aggressive hiring drive at major universities, hiring
several new engineers and CAD specialists. These new hires barely squeaked in
before the hiring freeze, but with the downturn in sales, the atmosphere has
changed dramatically. The staffing department has known only hiring; they never
had to plan for a layoff. Wong worries that a layoff of newly hired employees will
seriously harm the company’s reputation in the community and make recruiting
difficult when the economy gets better.
Wong received a confidential memo from Schilling and Trudeau requiring a 10
percent reduction in labor costs by the end of the fiscal year. He wonders if there
is some way to cut labor expenses while saving as many jobs as possible. He also
8 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
worries about the loss of talent and retaining the knowledge of long-time employees.
He’s got some cost-saving ideas, but it certainly won’t add up to 10 percent. Wong
feels certain there will be a reduction in force. A few managers will be delighted;
they all have some bad apples they want to get rid of. Wong wonders how he is going
to ensure that the layoffs are equitable and nondiscriminatory. This is not going to
be good for morale, and he dreads the backlash when word gets out.
PAC pays at market rate and conducts a salary survey every three years to ensure the
company remains competitive. Both practices served PAC well over the years, even
with the growth in the number of full-time employees and an increasingly complex
compensation system. Two years ago, Culbertson restructured the compensation
system by broadbanding 14 salary grade levels into a far simpler system of five levels.
Culbertson expected some resistance because there are always people who hate
change, but he hadn’t anticipated the outcry from some employees who claimed
it was nothing but the loss of promotion levels and a manipulation of the system.
He has spent a lot of time since then educating staff on the system, and in the two
years that have passed, the outcry quieted a bit, but there are still claims of salary
compression. Culbertson knows there are managers who have abused the system,
using the higher salary ranges to reward their favored few regardless of performance
or longevity. He concedes the new system isn’t perfect, though it is simpler to
administer. Now, however, he spends more time worrying about results than he ever
did in the past.
The merit bonus plan had been Harris’s baby. She thought it was a good way to
link compensation to actual results, and it was a key compensation element in the
early years, when Dukakis wanted to encourage innovation and creativity. It may
have been effective early on, but Culbertson now sees it as an expensive giveaway
that creates employee anxiety. He has complained to Schilling that it’s not working
and ought to be scrapped. “Whatever they get,” he says, “it’s never enough. They’re
always dissatisfied. I don’t know why we bother.”
Employee benefits are another issue. Benefits became increasingly expensive over
time, and every piece of the package is under scrutiny for cost effectiveness. PAC
offered fully paid health coverage to all full-time employees from the outset until
2006, when double-digit premium increases necessitated a change. Laying its cards
on the table, PAC conducted information sessions with employees to ensure they
understood the costs of insurance and the financial health of the organization.
Cost-cutting was a given; the question was what to cut. An employee survey was
conducted to determine what cuts would be most acceptable to employees. The
focus was to determine if employees would accept less health coverage but continue
with insurance fully paid by PAC or if they preferred to pay a portion of their
premium and maintain the same benefit coverage as in the past. It was a contentious
discussion before the decision was made to maintain coverage with employees paying
a part of the premium. The employee-paid share has risen every year since, with
complaints that it is nothing but a pay cut.
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 9
Despite some grumbling, Culbertson thinks employees do well with PAC’s benefits
package. PAC supports retirement savings by matching employee contributions to
their 401(k) accounts at 50 percent of the employee contributions up to a maximum
contribution of 5 percent of the employee’s annual salary.
Paid time off is available as paid vacation time and sick leave. After one year of
full-time employment or the equivalent, employees receive 10 days of paid vacation,
and sick leave benefits accrue at the rate of 12 hours (1½ days) per month worked.
Both unused vacation time and sick leave time can be carried over from year to year.
Vacation time carryover is limited to a maximum of 10 days while accrued sick leave
can be carried over from year to year with no ceiling.
Those are just the major benefits. There are some other nice perks as well. Stephens
lobbied hard to get McNamara and Dukakis to agree to tuition reimbursement
for work-related college courses. Despite having few employees using the program,
Culbertson thinks the benefit sends a positive message to employees that PAC
supports educational development. Some employees work flexible schedules, and
some telecommute a few days a week if it is appropriate to the job. Vasquez manages
the wellness activities, and there is also an employee assistance program. Overall,
Culbertson thinks it is a good benefits package, but he knows change is coming.
The memo from Schilling said that all compensation practices are on the table for
discussion and that some significant changes would be forthcoming. With the bonus
system in place, annual base salary adjustments have been kept low, generally at a
2 to 2.5 percent increase. Culbertson suspects a salary freeze is in the offing, and
he braces for the repercussions of disgruntled employees and the loss of some of
PAC’s best employees as their skills are lured away by higher-paying competition.
He wonders if Dukakis and Schilling really understand how important it is to stay
competitive in this industry.
Steve Wilson has his hands full managing employee relations. There is always
the union issue, and Wilson’s belief that “once employee dissent sets in, it never
goes away” seems to be well founded. He knows there is still an undercurrent
for unionization, and he fears any cost-cutting will turn the undercurrent into a
Wilson continues to send out the message that PAC wants to remain non-union
and is willing to listen to employees and address their concerns. A comprehensive
employee survey was conducted by an outside firm shortly after the unionization
attempt. It asked employees to comment on a variety of issues, including their
perception of management, PAC’s compensation policies, career opportunities and
equity, and, of course, overall job satisfaction. Some changes were made as a result of
the survey, mostly enhanced communication efforts and not actual policy changes.
Since compensation was an issue, more information was made available to employees
regarding the compensation system. Specifically, employees received a comprehensive
chart identifying salary grades and corresponding job titles. The compensation
10 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
staff answered questions, the idea being that if people understood the compensable
factors and the logic behind the system, they would perceive less inequity. Things
quieted down a bit, but Steve knows compensation equity is always a bone of
A second issue that emerged from the employee survey was the use of skip-level
interviews where employees could raise issues to mangers two levels up. In other
words, employees can discuss things with their boss’s boss. Most managers did not
fully support the idea, and Wilson suspects some feel threatened by the thought
of their subordinates going around them to talk to the boss. He has heard some
grumbling, but he doesn’t think it is of too much concern because few employees
actually take the initiative to talk with management.
The survey also pointed out some specific criticism of the HR department for lack of
communication with employees. Employees said that when they brought problems
to HR, HR did not listen and did not respond. It really hit close to home when
HR was called on the carpet. One employee response was particularly troubling
to Wilson because the employee said she reported sexual harassment to HR twice;
the first time HR didn’t respond at all, and the second time HR’s response was
that the employee should “focus on work and stop complaining.” Wilson couldn’t
imagine anyone in HR responding with such a statement, but he could not ignore
the allegation. He felt they had dodged a bullet because there had been no other
harassment complaints. He knew he had to do something. He started a hotline to
HR that was available 24/7 either online or by phone for employees to ask questions
and report anything of concern, not just harassment. He called it “HR Answers”
and subscribed to a call center in India to answer and track the calls so the service
could be available to employees at all times.
Wilson recently developed employee involvement teams. It was a hard sell because
Schilling was against the process, claiming it gave employees too much latitude. The
teams worked well for a while. Employees had a forum to be heard, and some good
suggestions were generated for productivity improvements. Wilson monitors the
teams closely. He knows it’s a precarious situation between management and staff,
and he thinks he’ll never be comfortable enough to let them run on their own.
Wilson worked with Stevens to plan and facilitate training programs for all
managers. They concentrated on discrimination and harassment. He hopes the
training will forge a closer link between line management practices and HR. All too
often he finds himself untangling a mess created by a manager who inappropriately
disciplines an employee without regard to policy and with no input from HR. He
wants supervisory employees to understand the complex responsibility imposed
by their position between management and staff, and he wants to see consistent
implementation of policies across departments. So far, understanding and
consistency are a long way off. Sometimes he thinks managers are just not paying
Wilson knows things are about to change, and he is worried about the end outcome.
He’s been told to work closely with Wong to develop a plan for a reduction in force,
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 11
and he wants to ensure that all decisions are appropriate and nondiscriminatory. He
knows some managers are looking for any excuse to get rid of their union agitators.
He is meeting tomorrow morning with team leaders. He’s received word from
Schilling that all actions arising from the employee involvement teams must be
passed by Schilling for approval.
Three months ago, Ben Trudeau, director of HR, resigned unexpectedly because a
family emergency. Despite the hiring freeze, a quick but thorough selection process
was conducted, and you were hired as the new director of human resources. You’ve
come to PAC with an HR degree from a respected university and with several years
of experience as an HR generalist in a large organization. This is an outstanding
career opportunity for you. You will be a member of the management team, and this
is a chance for you to make a real difference in the organization. Congratulations on
your new position and welcome to PAC Resources.
It’s your first day on the job. You hang your diploma on the wall, arrange a few
personal mementos on your desk and settle into Trudeau’s old chair. You notice his
in-basket is overflowing. You reach for the top file, open the bulging folder and start
to read the stack of e-mails Trudeau printed out before he left.
12 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
E-mail 1
Mark Schilling, vice president
Ben Trudeau, director, human resources
Cliff McNamara, senior vice president
It has come to my attention that our sales numbers were misrepresented for the last
two quarters. A number of unconfirmed sales anticipated for January were prebooked into our accounting system between September and December of last year.
These sales were entered without signed purchase orders or confirmed contracts.
Most of them did not come to fruition, and this significantly inflated our sales totals
for the last fiscal year. As you know, pre-booking of sales without confirmation is a
violation of company policy.
First, I want an immediate accounting of all bonuses paid to the sales staff. Any
bonuses paid on fictitious orders must be returned to the company, and disciplinary
action will follow for those involved.
Second, because our staffing forecast is based on sales numbers, this indicates that
PAC has a surplus of labor. The hiring freeze may not be sufficient.
E-mail 2
Ben Trudeau, director, human resources
Cliff McNamara, senior vice president
Mark Schilling, vice president
Ben –
I know you have already put in place a hiring freeze, but considering the news that
has come out of sales, we believe that it will not be enough. You are directed to
design a comprehensive plan to reduce labor costs across the board. You should
plan for a 10 percent reduction in labor force by the end of this fiscal year. We
have scheduled a meeting with you for the afternoon of the 31st to go over your
plan and finalize decisions.
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 13
E-mail 3
All staff
Cliff McNamara, senior vice president
Like all of you, I have watched the downward turn in our national economy, and I
worry about reports of declining sales in our industry. The business news is greeted
with increasing concern each time we hear of yet another company that moves jobs
off-shore and shuts down its U.S. facilities. Throughout it all, PAC remains steadfast
in our policy of American-made products, and it is the quality of our workforce that
has garnered our success. Each of you is to be commended for the good work that
you do.
However, we must recognize that business cannot be sustained today with policies
of the past. We must be proactive and anticipate change. Though the company
remains healthy, our revenue has been flat for the last two quarters, and sales
projections indicate a downturn going into next year. This necessitates cost-saving
measures throughout our organization. Mark Schilling and I will be meeting with
all department managers to determine specific goals and plans for the future. All
departments will be involved.
With falling sales, there will be significant cuts in staffing expenses because
our hiring freeze did not sufficiently reduce labor costs. We cannot continue to
build and stockpile inventory without sales. Effective immediately, all areas of the
organization must plan for a 10 percent reduction in costs. I know this will be a
difficult time for all of you, but know that this is for the health of the organization and
not a reflection of the quality of your work. As in the past, we will work together,
and the good work that you do will sustain us during these difficult times.
14 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
E-mail 4
Ben Trudeau, director, human resources
John Culbertson, compensation and benefits manager
I’m sending this on to you because I don’t know what to tell her. Do we have a
policy on this?
Forwarded message:
John Culbertson, compensation and benefits manager
Kathy Davis, benefits coordinator
Hey John –
I just got back from vacation today, and I wish I could say I had a great time and
was well-rested and ready to hit the ground running, but unfortunately I was sick for
10 days of my two-week vacation. What a bummer and a lousy way to burn up
all my vacation time! Since I have unused sick time available, can I change the 10
days of vacation to 10 days of sick leave so I can take a vacation when I’m not
sick? Thanks for doing the paperwork for me!
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 15
E-mail 5
Ben Trudeau, director, human resources
Steve Wilson, employee relations manager
Hi Ben,
Hey, sorry to bring all these problems to you when I know you have your hands full
with the pending staff reduction, but we had another issue with Gary Stephens on
the production floor this week. You know he’s hot under the collar most of the time.
He gets production out of his staff, but he certainly has issues as a supervisor. I don’t
think he’s learned even one thing from all the management training Kellie’s group has
provided. He had a run-in with Lon Jeffers yesterday. I guess he and Lon really got
into it—a real shouting match. In front of the whole shop, Gary fired Lon, marched
him right over to his locker, dragged out all his personal stuff and hauled it out the
front door. Granted, Lon’s kind of a bad apple and having him gone might be for
the best, but I had a call this morning from some junior lawyer at Ness, Terry and
Smith saying he was representing Lon in his employment lawsuit. I thought you’d
want a heads up.
Hey, look at the bright side—one less person to downsize!
E-mail 6
Kellie Stephens, human resource development manager
Ben Trudeau, director, human resources
Kellie – As you know, upper management is looking for areas to cut costs. In light
of Steve’s memo regarding the termination of Lon Jeffers, it looks like the supervisors
aren’t getting much benefit from your management training program. I hate to be
the bearer of bad news, but Cliff McNamara has management training on the
chopping block. If you want to save your training programs, you need to get a
report to Cliff that demonstrates a clear ROI for training expenditures. Better get to it
ASAP before your whole department disappears.
16 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
E-mail 7
Steve Wilson, employee relations manager
Dick Remington, production foreman
Hey Steve – I don’t know what’s the matter with people these days. The rumor mill
is crazy, and I know everybody’s nervous about possible layoffs, but we’ve got
some real problem employees down here on the production floor. Steve Welch and
his gang are stirring things up with the unions again. He’s getting quite a following,
and there’s a group that meets in the cafeteria at lunch and the talk is they are
calling the union to get out here again with the authorization cards. Attitudes are
terrible, product damage is up, and production’s hitting the skids. I’m trying to put
a stop to it—I changed everybody’s lunch schedule to break up the group, and
I transferred Steve to a different shift. Frankly, I’m looking forward to some good
layoffs. You’d think they’d listen up and think about what’s good for them.
E-mail 8
Steve Wilson, employee relations manager
Dick Remington, production foreman
Hey Steve – Some guy in a suit was here today, said he’s legal counsel for the
union. Gave me a bunch of lip service about switching around employee lunches.
Said it was an unfair labor practice. I told him to get his fanny outta here. I’m the
boss; I can make lunch schedules any way I want, and besides, we aren’t even a
union shop. Can you believe the nerve of those guys?? He also said something
about your employee involvement teams, but I don’t know what he was talking
about. He said he’d be around to see you later. I just thought I’d give you a heads
up. When do we start the layoffs?
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 17
E-mail 9
John Culbertson, compensation and benefits manager
Ben Trudeau, director, human resources
Kathy Davis, benefits coordinator
Hi John and Ben,
I’m forwarding this on to you – I don’t know how this happened, but it looks
like we’ll have to do something about it. It must have happened while I was on
vacation. Thanks a bunch!
Kathy Davis
Forwarded message:
Kathy Davis, benefits coordinator
Mary Lou Flanagan, supervisor, CAD design
As you must be aware, Tracy Peters in CAD design went on approved family
medical leave on the first of last month. Somebody in your department messed
up the paperwork and put it through as a termination instead of FMLA leave. She
should have continued to get her regular salary because PAC policy allows her to
use sick leave and vacation pay under FMLA. Because it was a termination, though,
her salary was cut off. She has direct deposit and didn’t even know it was cut off
until her checks started bouncing. Now she has overdraft fees, she says her credit’s
ruined, and her mortgage company is threatening foreclosure. She is hopping
mad, and I don’t blame her. She wants the mix-up fixed right now, she wants all
the fees reimbursed, and you need to do something about her credit score and
her mortgage company. She says she’ll get an attorney if need be. It’s crazy, why
would anybody think she was terminated, she’s my best CAD designer!
18 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
E-mail 10
Jose Vasquez, manager, safety and security
Ben Trudeau, director, human resources
Maury Peterson, production supervisor, team 3
Hey Jose,
You know we’ve got Jerry Andrews out on workers’ comp for a back injury, but the
scuttlebutt is that it’s not a PAC injury. Bill Peters went fishing with Jerry last weekend,
and after a few beers, Jerry tells Bill he hurt his back moving his sister’s refrigerator.
The guys on the floor think it’s a big joke. Seems everybody but management knows
that old ankle injury that kept Jerry off work a few years back was a motorcycle
accident and not a pallet that fell in the warehouse. I suggest you cut off his workers’
comp and put him at the top of the reduction list.
E-mail 11
All employees
Cliff McNamara; senior vice president
Mark Schilling, vice president
In light of the economic difficulties we are experiencing, the following actions will
become effective immediately. In addition to the hiring freeze already in place,
compensation paid to all hourly and salaried employees will remain at the current
level until further notice. Accrual to the merit bonus system will end at the close of
this quarter, and the bonus system will be eliminated at the end of this fiscal year.
All travel expenditures will be strictly scrutinized and must be approved by Cliff
McNamara’s office. All equipment purchase orders will be delayed by 90 days
and must then be approved by the office of Cliff McNamara. Tuition reimbursement
is discontinued, effective today.
In light of the importance of health care and retirement savings to the well-being
of employees, PAC will, for the present time, continue its current level of employee
health insurance coverage and PAC’s contributions to employee retirement accounts.
We are hoping these efficiencies will get us through these difficult times and
sincerely appreciate your understanding and cooperation.
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 19
E-mail 12
Kathy Davis, benefits coordinator
Angelina Sanchez, accounting supervisor
Hi Kathy,
You know Amy Alvarez in accounting has been taking MBA classes at the university
using tuition reimbursement. She’s already enrolled in a class for this term on a
program we approved last fall. We’ve paid her tuition reimbursement in the past,
and she told me yesterday she would be turning in another reimbursement form at
the completion of this term, and she expects it to be paid because she was enrolled
before the cancellation of the policy. Her reimbursement is $1395. I’m assuming it’s
E-mail 13
Angelina Sanchez, accounting supervisor
Kathy Davis, benefits coordinator
Tuition reimbursement for Amy Alvarez
Sorry Angelina – No can do! I checked with Cliff McNamara, and he said “No
way!” The reimbursement benefit has been cancelled effective immediately.
E-mail 14
Kathy Davis, benefits coordinator
Angelina Sanchez, accounting supervisor
Tuition reimbursement for Amy Alvarez
I passed your message on to Amy, and she was pretty huffy about it! She said Cliff
had approved Tom Schneider’s reimbursement, and he’s in the same MBA class
as she. You know Tom–he’s the manager over in Design. Amy said you couldn’t
discriminate in benefits–if one gets it, it has to be available equally to all. I don’t
know where that comes from, but she acts like she knows everything since she’s
been taking these classes.
20 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
E-mail 15
Angelina Sanchez, accounting supervisor
Kathy Davis, benefits coordinator
Tuition reimbursement for Amy Alvarez
Wow! Now Cliff’s hopping mad! He said he didn’t have to reimburse anybody
after the policy had been cancelled. He said he’d pay her $500 and that’s all
she’s going to get—she can take it or leave it. Besides, he said PAC doesn’t need
an MBA at her level in the company.
E-mail 16
Kathy Davis, benefits coordinator
Angelina Sanchez, accounting supervisor
Tuition reimbursement for Amy Alvarez
Cliff’s not the only one that’s mad–you should have seen Amy! She said if her
choice was to take it or leave it, she’d leave it. But I don’t think we’ve heard the end
of this.
E-mail 17
Ben Trudeau, director, human resources
Jose Vasquez, manager, safety and security
Mark Schilling, vice president
Wellness Activities
I’ve gotten word from Cliff McNamara that the budget committee is about to ax our
wellness program. I know you both feel strongly about wellness, but it doesn’t seem
appropriate in this climate to pay people for fitness activities or to stop smoking.
You know Cliff’s attitude has always been that wellness is just a lot of expensive
“fluff” anyway. If you want to save the wellness program, you’ve got a hard sell. You
need to convince the budget committee that there is a real return on investment for
wellness activities.
Cliff is also looking at health insurance coverage for nonsmokers only. Seems the
company could save on premiums if our entire workforce was nonsmokers. He is
considering giving our smokers 90 days to quit or lose their health insurance. Can
we do that?
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 21
E-mail 18
Ben Trudeau, director, human resources
Steve Wilson, employee relations
Pending lawsuit
Hi Ben – It looks like we’ve got a bad one here. I have attached a copy of the letter
I received from the law firm representing Beth Simmons. You remember Beth; she’s
that girl who used to work in Design. I thought she left PAC to go back to school,
but I guess not. Looks like she’s got a chip on her shoulder. Her attorney claims she
reported sexual harassment twice, and nothing was done about it. In fact, he says
that somebody in HR told her to stop complaining. I can’t imagine who would say
such a thing, but looks like we’ve got to answer for it. He also claims when our
HR people ignored her, she called our HR Answers hotline, and all she got was
somebody in India she couldn’t understand and who didn’t help her at all.
I don’t expect this to amount to anything, but the attorney wants to meet with us. I
suspect they’re trying to strong-arm us for a settlement. When are you available?
We should keep this off Mark Schilling’s desk if possible. Agree?
You frown as you close the file and set it back on top of the in-basket. There is a lot
of work to be done here. There may be more to PAC Resources than you thought.
22 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
Student Activities
As assigned by your instructor, you will be working with a team of your classmates
to resolve the problems at PAC Resources. There will be six teams—one team
working on the organizational issues and five teams working on five functional areas
of HR (each team working on one area)—human resource development, safety
and security, staffing, compensation and benefits, and employee relations. Each
team is to identify the problems occurring within its assigned area and to suggest
methods and procedures for resolving the problems. Your plan must recognize the
interrelationship of activities in your area with the other areas of HR and consider its
impact on the wider organization. Discuss how you will manage possible opposition
to your intervention plans. Your results will be presented orally to the class or in
written assignments as directed by your instructor.
All teams should start by conducting a SWOT analysis of PAC Resources. Your
SWOT analysis will help you to determine the organizational issues confronting
PAC as well as the issues in your assigned area. You may find it helpful to do an
additional SWOT on your functional area. This will help you focus in on the
problems within your particular assigned area. If you are not familiar with SWOT
analysis, the two websites identified here are excellent references that will help direct
you through the process. There is a SWOT analysis template found at the end of
your workbook. Turn in the results of your SWOT analysis as directed by your
Websites with information and diagrams on SWOT analysis can be found at
PlanWare.org (www.planware.org/strategicplanner.htm).
Assignments and Discussion Points for Each Functional Area
The following section identifies the issues to be addressed and the activities for each
functional area. Unless directed otherwise by your instructor, your team will focus
on your assigned area only. Turn in assignments and present your results as directed
by your instructor.
The Organization and the HR Department
Address the following issues
1. What should be done in light of low sales numbers?
2. What should be done, if anything, about the fraudulent sales data?
3. What can be done to improve employee communication methods?
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 23
Write a code of ethics and establish an ethics policy for PAC. Include plans for
implementation. Many organizations post their code of ethics on their web sites, so
you may want to research sample code of ethics documents online.
Research topics
1. HR’s role as a partner in strategic planning.
2. Establishing a climate of ethics in organizations.
Human Resource Development
Address the following issues
1. Identify the goals of PAC’s training programs. Are they meeting these goals?
What could be improved?
2. Discuss PAC’s efforts to retain and transfer knowledge. Are these efforts
effective? What could be done to improve the process?
3. What can HRD do to improve transfer of training?
4. How can HRD demonstrate return on investment to prevent cuts in the training
budget? What is the business case for training?
Research Kirkpatrick’s four levels of training evaluation and design an evaluation
system for PAC’s management training program. Use all four levels of evaluation.
Research topics
1. Knowledge management.
2. Transfer of training.
3. Measuring return on investment for training.
Safety and Security
Address the following issues
1. Discuss the process of conducting a job hazard analysis. Would this be helpful in
light of the increasing workers’ compensation claims?
2. Are wellness activities and flexible scheduling just an expensive perk, or is there
a real return on investment for the organization? Discuss the business case for
wellness and flexible scheduling.
3. Discuss the possibility of differentiating health insurance coverage. Can PAC
provide different levels of coverage for smokers and nonsmokers or require
smokers to pay their own premiums? What about dependents who smoke? What
about discrimination issues?
Activity 1
Carpal tunnel syndrome seems to be a significant problem at PAC Resources. Design
a formal program to prevent the risk of carpal tunnel and discuss implementation of
the program.
24 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
Activity 2
A supervisor terminates an employee for suspected on-the-job drinking. How does
this affect organizational risk? Write a supervisor’s guide to reasonable suspicion.
Research topics
1. Conduct a job hazard analysis.
2. The business case for wellness.
Address the following issues
1. How can PAC reduce labor costs and still save as many jobs as possible?
2. Discuss the short-term and long-term implications of downsizing. What does the
research say?
3. What are your recommendations for implementing a 10 percent reduction in force?
Discuss possible discrimination issues that may occur in downsizing.
Research and explain the demographic characteristics of your local labor market.
When the economy recovers, PAC Resources plans to build a facility in your
community. Would the company find the skilled workers needed to build its
technology components? Note: You may want to search national databases such as
the U.S. Census Bureau. However, you must also include state and local information
sources in your report.
Research topics
1. Contingent workforce.
2. Downsizing.
3. Employee self-service (ESS).
Compensation and Benefits
Address the following issues
1. Discuss broadbanding. Is this a viable program for PAC, or should it be
2. Discuss the bonus system at PAC. How could it be improved, or should it be
3. What makes a reward system motivating?
4. Discuss what happens when a bonus system is discontinued. What does the
research say?
5. How should PAC address the issue of the FMLA employee who was mistakenly
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 25
Create a plan to merge PAC Resources’ vacation and sick leave systems into one
combined paid time off (PTO) plan. Include plans for implementation and a timeline
and discuss how you would address opposition.
Research topics
1. Broadbanding.
2. Motivation and rewards.
3. Discuss how to conducting a salary survey and ensure that the data is relevant.
Employee Relations
Address the following issues
1. What should be done regarding the employee who was terminated without a
discipline procedure?
2. Discuss unfair labor practices. Are there incidences of unfair labor practices at
PAC? If so, how should they be addressed?
3. How can PAC discourage unionization of employees without incurring issues of
unfair labor practices?
4. How should employee involvement teams be managed? Would you recommend
they be disbanded? Why or why not?
Write a supervisor’s guide to avoiding unions. Your guide should identify what
supervisors need to know and how they should respond to employees to avoid
allegations of unfair labor practices and still remain union-free.
Research topics
1. Unfair labor practices.
2. Employee involvement strategies.
3. Work/life programs.
26 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
Functional area: _________________________ Date: _____________
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 27
Functional Area:
Team Members:
Delivery and
Relating to
the Audience
because of poor
difficult to follow
because points
are not sequential
or are unclear.
is presented
logically and is
information is
sequential and
well supported.
Excellent organization.
Main points are well
stated, supported and
Team has little
of topic and is
unable to answer
Team seems
with the
information and
can answer only
Team is
with information
and can answer
questions, but
fails to elaborate.
Team has
good grasp of
subject, answers
questions and
fills in details
as needed.
Research is
Superb grasp of
subject. Excellent
answers to
questions supported
by research—
demonstrated topic
related to other areas
of HR.
No graphics
or poor use of
Graphics not
well related to
the discussion.
Students cannot
explain graphics
reinforce the
and are easy to
enhance the
presentation and
are appealing and
easily understood
by the audience.
Graphics are
creative and easily
understood. They
support and enhance
the presentation.
Some team
members not
professional in
appearance or
presentation not
shared equally
by all team
Poor eye contact.
Inaudible or
difficult to hear
from the back of
the room.
Clear voice
with generally
effective delivery
but somewhat
presentation. All
team members
present well and
respond to the
Excellent. Team
is professional in
appearance and
presentation skills.
Team members
seem unaware
there is an
audience. No eye
contact; reading
from notes or
Occasional eye
contact, but still
reading most
of presentation.
Little or no
Generally aware
of audience
eye contact
and answers
Comfortable with
Relates well to
the audience
and can answer
questions. Good
eye contact
across the board.
Excellent answers to
questions with ability
to modify material
and respond to needs
of the audience.
Excellent enthusiasm.
No introduction
or summary.
Introduced team
members, but
little introduction
or summary of
the presentation
team members
and gave some
introduction of
the material to
be presented.
Limited summary
at the end.
team members.
and summary of
material at the
Introduced team
members and topic.
Engaged audience
in the topic from the
start. Ended with clear
summary of points
and conclusion.
28 © 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR
Overall comments:
Total score:
© 2011 Society for Human Resource Management. Myrna L. Gusdorf, MBA, SPHR 29
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