Manager Ethan Allen

Business Analyst

Ethan Allen Designers: Case Study on Employee Management

Problem Analysis, Solutions and Recommendations.

Business Analyst

Low Employee Motivation

Employee's Needs and Organization's Needs Not Consistent

Employees Cannot Work as a Team

Commission Only System Bad for Morale

Resistance to Change

Alternative Solutions

Pay Salary Only

Operate as a Team

Hire Two More Employees

Employ Six Designers and Introduce Overtime Payments

Hire Assistant Designers

This report has been prepared for the design firm, Ethan Allen. The company currently wishes to expand its design team to ten designers instead of the current eight. The reaction of the employees to this decision shows various problems within the organization.

These problems are related to employee morale with the commission-only pay structure central to the problem. The pay structure is a symbol that the employees goals are not effectively aligned with the organization's goals. Along with this problem comes various others including high employee turnover and low morale.

After analyzing the problems it is recommended that the company employ six designers instead of ten and that each designer be paid a salary with bonuses instead of commission only.

This solution ensures that all employees are fully utilized, communicates to employees that they are valued and encourages teamwork and the development of a cohesive working team.

This increases the organizations cost efficiency via the increased morale and increased employee satisfaction and motivation.

By better managing employees, Ethan Allen will be able to work more effectively with six employees than with ten, while saving in terms of financial costs, efficiency costs and employee management costs.

With increased employee satisfaction and committment, having six employees will allow the company to handle busy times more effectively than having ten employees, ensuring that the company's needs are also met in being able to handle peak workloads.

It is also recommended that the company employ two assistant designers to help cope with this peak workload as well as be available for backup and to allow smoother replacement of staff leaving the company.

INTRODUCTION

Ethan Allen is a design company and currently employs eight designers. These designers are paid on commission only and so must rely on there being enough traffic in the store to support all the designers. There is also high staff turnover and low morale among the designers.

Ethan Allen needs to ensure that there are sufficient designers in the store to handle high demand at any time. For this reason, the company wishes to employ two more designers.

The employees are unhappy about this decision because new designers will take more work away from them.

PROBLEM SUMMARY

The problem Ethan Allen has is how to manage its employees effectively while still meeting the organization's goals. While having ten designers solves the problem of having enough employees to meet high demand time, it does not meet the employees need. In turn, this works against the organization's own goals as the employees have lower morale, there is high staff turnover and also lower efficiency.

PROBLEM DEFINITION

Several specific problems can be defined, each of these will be discussed in turn.

Problem One - Low Employee Motivation

The problems of high turnover and low morale both have the root cause of low employee motivation. McNamara (2001) says that "the key to supporting the motivation of your employee is understanding what motivates each of them." The low morale of the employees is a clear sign that their needs have not been adequately considered. While the organization is concerned about having enough employees to cover high demand times, there appears to be little concern that the employees are uncomfortable with this and feel like they are fighting with each other for enough work to sustain an income.

Problem Two - Employee's Needs and Organization's Needs Not Consistent

McNamara (2001) says that goals of the organization need to be aligned with the goals of the employees. Employees need to share the aims of the organization and be motivated to work towards them. In this way, the company works efficiently towards its goals. Participation of employees greatly increases their motivation and productivity, and aligns individual goals with organizational goals. It is also noted that empowering employees requires a culture that reflects this (Billsbery, 2000, p292). There is a need then, to ensure that employees are aware of the organization's goals, are involved with them and are inspired to work towards them. A recent study reported in the Journal of Applied Psychology reports that employees working on projects...

If we look at Ethan Allen as a team, there is a need for employees to be working towards the organization's goals, instead of working towards their own goals.
Problem Three - Employees Cannot Work as a Team

The commission only pay for employees means that employees must compete against each other for work and to earn their commission. In this environment, the employees cannot work effectively as a team.

Three vital characteristics for a successful team include (Robbins, 1999, p521):

Members share a common purpose and are clear on how to achieve the task.

Members have some degree of empowerment.

High morale for team members.

These factors are clearly not present with the Ethan Allen employees.

Problem Four - Commission Only System Bad for Morale

Paying employees commission only communicates an important message to them. Tony McGraw has managed real estate agencies for over ten years, an industry known for paying sales people by commission. McGraw says that this communicates to the employees that they are only worth what they can earn. According to McGraw, if you pay people a base salary this tells them that they are worth employing and valuable to the company. McGraw also says that paying commission only puts stress on employees to make their targets and that this often means they push too hard. Overall, a commission only payment system puts pressure on employees and communicates to them that they are not truly valued by the organization. It is also viewed as unfair by employees, as their income depends not just on how well they work, but on how much work is available, something that they are not able to control.

Problem Five - Resistance to Change

There is evidence to suggest that many employees are resistant to the changes. This is to be expected, as many managers have noted, employees often seem to resist change for no apparent reason (Daft, 1998, p548). Major reasons for resistance include (Daft, 1998, pp. 548-550):

Self-interest, fear of losing power or prestige.

Lack of understanding in regards to the changes

Uncertainty

These reasons for resistance are the same ones that we see in the situation at Ethan Allen. This is a sign that changes have not been managed effectively.

ALTERNATIVE SOLUTIONS

Solution One - Pay Salary Only

The commission only system is one of the major problems effecting morale. One option is to pay a base salary instead. This would assist in communicating to employees that they are important to the organization. By improving morale, efficiency would be improved. The benefits of this solution is that morale would improve, costs to the organization would be fixed, employees would feel more secure and employee turnover would be reduced. The problems with this solution are that employees may not be as motivated to work as hard and that the organization will be paying employees more, even when there is not enough work for them.

Solution Two - Operate as a Team

The second solution is that employees work as part of a design team, rather than individually. This would involve employees being paid a base salary and then paid commission as a group. The benefit of this solution is that teamwork is encouraged and the organization is better able to align their own goals with the individual goals of employees. The problems with this solution are that problems may occur within the team as harder working employees are given the same rewards as less hard working problems. This could create perceived inequity and be dissatisfying to employees. There is also the problem that employees will not be encouraged to take extra work when they are not rewarded for it.

Solution Three - Hire Two More Employees

The third solution is to hire two more employees. The benefit to this is that the organization has enough employees to cover high workload times and also to take the place of employees leaving without being too disruptive. The problem with this is that the problems of employee morale are not solved. While this solution appears to meet the needs of the organization, it does not meet the needs of the employees. For this to be effective, the organization would have to manage change effectively to gain the acceptance of the changes. This would include lessening employee fears about the changes. This would be difficult to do, when the fears of the employees are rational and justified.

Solution Four - Employ Six Designers and Introduce Overtime Payments

The fourth solution is to employ less designers. This would ensure that all designers were fully occupied, would increase their job satisfaction, their morale and their job security. This would lead to increased efficiency. In high demand times, the extra work could be managed by offering employees overtime. With increased job satisfaction…