Io Enterprises Orientation Overlake Mining Company

The mines 6 mines – 250 miners – 25 support personnel Profitability – Correctness of management team decisions – Compensation (pay and bonuses) – Training expenditures

Decisions… decisions Ten scenarios (3 possible responses) Wage Bonus Training

Management report Scenario feedback Income statement – Revenue – Expenses – profits Productivity report – Key measures – Company averages Status report (past, present, future)

The Income Statement Revenue = contract price (200/ton) x tons produced Cost of production = fixed (1,900,000) = wages and bonuses Gross margin = difference between production costs / bonus pay and revenue Selling expenses = 200,000 Admin expenses = 500,000 Miscellaneous = $150,000 (unless overwise indic) Contribution to profit = gross margin – total exp

Productivity Help to monitor and improve productivity Efficiency of production Defined as average tons of titanium produced per quarter per miner (total tons of output/250 miners) Scenario responses, wages, bonuses, training affect productivity Also affected by number of employees available for work…

Absenteeism Absent workers are paid wages, but not bonuses Absenteeism is reduced by number of correct responses and training investment Some absenteeism cannot be avoided.

Status Report Past Present Future All mines, unless otherwise indicated, are equally affected by these variables

Scenarios Ten “people problems” Based on briefings (written and oral) Cumulative Productivity and absenteeism are impacted by decisions

Sample question 1. The foreman of one of the mining crews is adamant about eliminating conflict within her crew. The production supervisor should inform this foreman that: A. She is correct in her view B. Eliminating conflict is a worthwhile goal but probably impractical C. Some conflict within a group is often constructive

Pay Range determined by management – $50/75 per hour; $55-65 recommended How to maximize profits and pay “fair” wages? Pay equity? – “I heard it through the grapevine…”

Productivity as a function of pay

Bonuses Your decision Range determined by management – $5-10 per hour One time incentive money paid in addition to hourly wages Impact on morale and sense of equity Impact of scenario responses and efficaciousness of bonus on productivity – Each missed scenario decreases positive impact

Training Up to $99,999 per period No training in last period Effect on productivity Effect on absenteeism Decision criteria Timing

Injuries Danger! Scenario responses Training Absenteeism: 20% of injured will not return to work for rest of year… accumulated total

Absenteeism Scenario responses (compromise organizational climate) Pay equity Injury Extraneous reasons (including legitimate illness)

Insurance Effect of injuries on premiums – Greater than 13; double premium from $100,000 to $200,000 See income statement

Profit Scenario responses correct Full impact of bonuses Wages are adequate and equitable Training expenditures sufficient Absenteeism/injury controlled

Team Decision Form Team Name: ______________________________ Period #____, 2086 Team Number:__________ SOLUTIONS: (place a check mark or X next to the most correct response) 1.A.___B.___C.___ 2.A.___B.___C.___ 3.A.___B.___C.___ 4.A.___B.___C.___ 5.A.___B.___C.___ PAY?_____ (range $50-$75) BONUS?___.__ (range %5-$10) TRAINING?______ (range $0-99,999)

Decision Collaborative Decision making – Wages, bonuses, training decisions made collaboratively Rewards – IF all groups score above cumulative average FINAL grade increased by one grade level (except A+ and F) Competitive Model Decision making – All variables are individual groups’ decisions Rewards – The group with the highest cumulative contribution FINAL grade increased by 5%