Question

You are the manager of a business that is losing money due to COVID and the CEO is pushing you hard to fix things.

You have many employees who are also effected by COVID.

Your financial statements show that you must cut employment costs by 50 percent. If you do not do this you will go out of business. You made the decision for the entire company: except for two employees.  Miss. Jackson and Jerome Edwards.

Tip 1: Remember from Chapter 1 the goal of the Financial Manager is to maximize the wealthy of your company.  

Tip 2: What about the human component? This is never covered in the text. This is on YOU as a manager.

Facts below.

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Miss. Jackson is one of your best employees, she has worked for you for 10 years, and recently she has lost two family members to COVID. Miss. Jackson is not doing well. If she is furloughed she risks losing her house and everything she has worked for over the years. Her performance has decreased due to these major life issues. She suffers from depression and sleep issues due to the stress. She has not communicated these circumstances to you because she is overwhelmed and she is afraid of losing her job. However you know, based upon her performance, she is going through rough times.  Miss. Jackson earns $60,000 a year.

Jerome Edwards is a new and upcoming employee that obtained his MBA from UNCFU with a 3.9 GPA and he is Miss. Jackson's subordinate. Jerome meets deadlines and shows no emotion to the difficulties of COVID. He hits every deadline and has the potential to succeed under any circumstances. When you send him a task he states "I'm on it" and he delivers.  Jerome earns $40,000 a year.

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I am the CEO of the corporation and I care about people. However I need to keep this business alive.

My request for this answer is to write a 250 word memo to me, the CEO, discussing your decision regarding Miss. Jackson and Jerome.

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I am a CEO who requires facts and an analysis based on how we can support our employees while keeping the business sustainable.

Answer 1

Case Scenario :

Many employees who are also effected by COVID.Financial statements show that you must cut employment costs by 50 percent.Decision was made for the entire company: except for two employees.  Miss. Jackson and Jerome Edwards.

Paycut is always considered as least worst option when compared with Layoffs.And as a Organisation,one has to always care for the emotional well being of the employees as they are pillars for success of the Organisation.As said earlier,Paycut has become now the only left option for the Organisation to come out of financial Crunches and save cost.Infact the Organisation taking up Overdraft facilities to incur the cost is now ending up paying high interest which is resulting in shutting down ultimately.For Success of the Organisation,It is always important to retain the employees,which infact buildup the trust and encourage employees to "work for the company" rather than to "work to Earn".

In case of Miss. Jackson :

Miss Jackson is one of our best employees and is dedicated and her contribution to the organisation is tremendous.Now,in COVID Scenario where our company is not in a position to pay the employees,though we have decided a cut of 50% of employee wages,in case of Miss Jackson who is outperforming and is going through depression on loss of the her dearest ones,It is important for the Management to assure her Job security which will make her feel strong and also It is wise to cut now treating Miss Jackson equally with all other employees and promising a promotion or higher rate of Bonus or Increment in the coming years.

In case of Jerome Edwards :

Jerome Edwards is a new and upcoming employee,who is always attentive and work oriented, should never be disappointed.Since the company has no other option rather to opt for pay cutt to make the company sustainable,It is advisable to also cut the pay of is Jerome Edwards and to give a promising future and wide scope in the coming projects.