CASE STUDY
Salary inequities at Acme Manufacturing
Harshit was trying to figure out what to do about a problem salary situation he had in his plant.
Harshit recently took over as president of Acme Manufacturing. The founder and former
president, Bill George, had been president for 35 years. The company was family owned and
located in a small eastern Arkansas town. It had approximately 250 employees and was the
largest employer in the community. Harshit was the member of the family that owned Acme, but
he had never worked for the company prior to becoming the president. He had an MBA and a
law degree, plus five years of management experience with a large manufacturing organization,
where he was senior vice president for human resources before making his move to Acme.
A short time after joining Acme, Harshit started to notice that there was considerable inequity in
the pay structure for salaried employees. A discussion with the human resources director led him
to believe that salaried employees pay was very much a matter of individual bargaining with the
past president. Hourly paid factory employees were not part of this problem because they were
unionized and their wages were set by collective bargaining. An examination of the salaried
payroll showed that there were 25 employees, ranging in pay from that of the president to that of
the receptionist. A closer examination showed that 14 of the salaried employees were female.
Three of these were front-line factory supervisors and one was the human resources director. The
other 10 were non management.
This examination also showed that the human resources director appeared to be underpaid, and
that the three female supervisors were paid somewhat less than any of the male supervisors.
However, there were no similar supervisory jobs in which there were both male and female job
incumbents. When asked, the Hr director said she thought the female supervisors may have been
paid at a lower rate mainly because they were women, and perhaps George, the former president,
did not think that women needed as much money because they had working husbands. However,
she added she personally thought that they were paid less because they supervised less-skilled
employees than did the male supervisors. Harshit was not sure that this was true.
The company from which Harshit had moved had a good job evaluation system. Although he
was thoroughly familiar with and capable in this compensation tool, Harshit did not have time to
make a job evaluation study at Acme. Therefore, he decided to hire a compensation consultant
from a nearby university to help him. Together, they decided that all 25 salaried jobs should be
in the same job evaluation cluster, that a modified ranking method of job evaluation should be
used, and that the job descriptions recently completed by the HR director were current, accurate,
and usable in the study.
The job evaluation showed that the HR director and the three female supervisors were being
underpaid relative to comparable male salaried employees.
Harshit was not sure what to do. He knew that if the underpaid female supervisors took the case
to the local EEOC office, the company could be found guilty of sex discrimination and then have
to pay considerable back wages. He was afraid that if he gave these women an immediate salary
increase large enough to bring them up to where they should be, the male supervisors would be
upset and the female supervisors might comprehend the total situation and want back pay. The
HR director told Harshit that the female supervisors had never complained about pay
differences.
The HR director agreed to take a sizable salary increase with no back pay, so this part of the
problem was solved. Harshit believed he had for choices relative to the female supervisors:
1. To do nothing.
2. To gradually increase the female supervisors salaries.
3. To increase their salaries immediately.
4. To call the three supervisors into his office, discuss the situation with them, and jointly decide
what to do.
Questions
1. What would you do if you were Harshit?
2. How do you think the company got into a situation like this in the first place?
3. Why would you suggest Harshit pursue the alternative you suggested?
Guidelines for report
1) It is an individual report, to be submitted online by HRM groups 2 and 3. The front page
should contain your name and regd. number. (email ID: [email protected])
2) Date of submission for Group 3 – 20.03.20 and for Group 2 – 27.03.20
3) Start the report with an introduction of one paragraph, and then start with the answers.
4) Submit the report in pdf format only, with proper formatting.
