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Harvard Business Review

Case Overview

The major reason behind pay disparities includes the recent tightness in the job market. According to the case, top marketers in the field are sought by most companies hence the need to pay top dollar for their services. Therefore, some people may earn more than others. In the IT sector, young employees who are excellent in their job performance receive hefty salaries unlike the seasoned workers in other departments like HR. This type of remuneration, which is performance based, explains the pay inequalities among the employees. Employers pay for critical skills, and the rates are dictated by the market. However, whenever employees gain access to this information, it is interpreted differently. People feel they are unfairly treated when they discover that they earn much less than their colleagues in the same or other departments. At the same time, some employees who are paid much more than their colleagues also feel frightened that everyone would find out that they are given preferential treatment.

The information about salaries in the public domain, as demonstrated by the events in the case, can elicit sharp reactions from the employees. When information that was initially kept secret finally comes out, one needs to have smart choices when dealing with the consequences. One of the ideas is to let employees gain access to much more information and make their salaries public as other companies are embracing the idea. The main reasons for this approach are that it can be pretty hard to keep salaries secret and secondly, it makes a company honest and transparent. However, the practice will be difficult to put in place because trying to explain to an employee why he earns half of what others in his capacity are earning is a bit tricky. This is because the differences in payment are a result of hundreds of judgment calls made by managers about each employee every day.

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Case Analysis

The issue of keeping salaries secret is a very contentious and controversial issue in many companies and organizations. It is associated with a fair share of costs and benefits making this issue a complex one. A long-standing policy of many businesses is to award employees with salaries and bonuses depending on the value and quality of services they offer. This makes their payments differing from one employee to another, and therefore companies strive to keep the issue of salaries in secrecy, strictly between the individual and the company. Employers restrict the information on salaries by not releasing the data for publication. If the information has been published, it is highly encrypted by computer security. The information can also be kept secret by giving vague information like pay range or averages of pay rise without being precise about specific employees (Colella, 2007). The employer may also regulate the information about salaries by introducing norms and bylaws against discussion of such information.

Most employers have well-grounded arguments as to why the information on salaries and bonuses is kept confidential. When information on salaries and bonuses is readily available, and discussions on the issue are held openly, it results in morale problems among the employees. Most of them fail to understand that there are good reasons behind pay disparities. This is similar to what is happening to the teed off employees of the Right Now Company discussed in the case study. It may even result in the lack of self-drive and motivation among the employees who may start leaving work at 5, given that they still have other tasks to do.

Possible Scenarios Hank May Take

The events at Right Now Company of leaked payrolls detailing what each employee makes elicited reactions which the CEO needs to address to prevent further aggravation of the situation. The first scenario Hank might consider doing is to follow Charlies idea of taking advantage of the window provided by the leak and continue to make salaries known by the public. The advantage of this move is that it will portray the company as honest and transparent. Keeping the information public eliminates the prospect of being caught off-guard by future leaks. This approach will also help low-income earners in the company to determine whether or not the employer is conforming to salary and hour laws. If the employer is not complying with the laws, the employees can take legal measures (Estlund, 2012). The other advantage is that wage theft, which is prevalent at the low level of the labor market, will be kept to a minimum due to wage transparency. The disadvantages, however, include the fact that some employees fail to understand the legitimate reasons behind salary inequalities. The other disadvantage is that this information will elicit bad feelings among employees who might feel they are being treated unfairly. The third disadvantage is that motivation and performance among employees may decrease (Colella, 2007). An additional disadvantage is that fairness judgments and trust perceptions are sacrificed.

Hank might also consider using the scenario of upholding the practice of salary secrecy like before. The advantages of this scenario include the fact that there is decreased mobility of labor, privacy protection, and organizational control. The approach will ensure the workplace is peaceful, civil and conflict free (Colella, 2007). The disadvantages of this scenario include the fact that employees do not know whether their employer is conforming to labor laws. The company is also portrayed as not honest and not transparent. The other disadvantage is that a hacker might get access to and leak the information about salaries, thus causing displeasure among the employees.

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Relevance of the Case to the UAE

The UAE is a federation consisting of 7 regions, boasting of a favorable tax environment as well as a rapidly growing economy. Over the years, it has transformed into an attractive market for major businesses around the globe. Salary secrecy is a contentious and controversial issue in the UAE as well. Most employers appreciate secrecy as far as the salary issue is concerned to ensure that the companys privacy is protected, the company is controlled and labor mobility is decreased. In cases where a controlled amount of information is provided, that information is limited to cover only payroll costs by the department leaving out personal listings and ranges of payments per position as well as particular names. The salaries are listed in maximum-minimum contexts only. The disparities in salaries in the UAE exist across both government and private sectors, with government workers earning more (Tong, 2010). A classic example of salaries in the UAE is shown below.

Summary statistics of annual salaries in the UAE (2008 Labor force survey)

Paid employees yearly salaries

Yearly salary

In-kind salary (Yearly)

% of In-kind against cash salary

Working hours in weeks

Overtime hours in previous week

N

22314

22614

22436

22316

23238

638

Mean

90484

82609

7870

0.135

52

8.0

Median

38000

35000

0

0

48

6.9

Std. Deviation

136672

127714

23237

0.216

15

4.4

Skewness

8.136

9.126

7.424

2.504

1.701

3.184

Minimum

1320

1320

0

0

2

.0

Maximum

7200000

7200000

600000

2.57

168

60.0

Recommendations

As a consultant of the Right Now Company, one can best advise Hank to take the approach of continually making information about salaries public. However, the information should only be limited to specific positions and costs per department. Particular names of employees should be kept secret so that workers only have an idea of the range of wages their colleagues receive. In order to ensure low-level employees earning low salaries do not feel unfairly treated, their salaries should be reviewed upwards a little every time wage increments are being expedited. The major reason for this recommendation is that such decision portrays the company as transparent and honest (Estlund, 2012). The workers can also determine whether the employer adheres to labor laws through this approach.

Code: Sample20

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