VIII.Your Turn: Adapting Benefits to a Changing Strategy
Summary of Case
made a number of major changes. It is reducing the size of its menu to reduce the amount of
Learning Objective
Analyze corporate strategy and wage/benefit decisions.
Teaching Guideline
Use this case to apply the concept of linking customer needs with strategy and wage/benefit
decisions in a large multinational corporation.
Discussion of Case Questions
1. Given the facts from the case, what can you glean from news reports about
McDonald’s, what do you think is going on? Specifically, how do corporate strategy
and wage/benefit decisions either support or conflict with each other?
have different needs. They have to continue to reduce turnover. All these pressures make
decisions to improve benefits and raise wages logical. Increasing Paid time off should
Answers to Review Questions
1. James A. Klingon has a mandate from his boss to cut employee benefit costs. In a
company expanding by 10 percent in employees every year, Jim decides to control
costs through his selection strategy. Is he crazy? Or crazy like a fox? Explain.
Student answers may vary.
Some organizations, for instance, do not hire smokers.
2. Explain the concept of experience rating using examples from unemployment
insurance. Would the same concept apply to workers’ compensation? Using the
Internet, find out if experience rating plays a role in insurance coverage.
Student answers may vary.
depends on its experience rating—lower percentages are charged to employers who have
Insurance companies use the technique of experience rating to determine the correct price
of a policy premium, by analyzing the past losses of others in the insured group to project
provided. This will help insurers set high premiums for companies where injuries and
Experience rating plays a similar role in insurance coverage to identify the potential
3. The CEO of Krinkle Forms Inc. says there is a serious problem with turnover, with
data for her observation provided below.
Seniority Turnover Rate
0–2 yrs 61%
The CEO wants to use employee benefits to lessen this problem. Before agreeing to
look at this as the solution, what should run through your mind as a trained
professional? What might you do, specifically, in the areas of pension vesting,
vacation and holiday allocation, and life insurance coverage in the effort to reduce
turnover?
Full vesting after three years
turnover.
The ideal situation would be to offer lower than average benefit levels for newcomers but
provide a much steeper growth curve than other companies might offer. Students should
4. Why are defined contribution pension plans gaining in popularity in the United
States and defined benefit plans losing popularity?
The employer costs are known or “defined” up front.
5. Some experts argue that consumer-directed health care is, amongst other things, a
great communications tool for employee benefits. Defend this position.
provider-sponsored networks. Some experts contend that direct contracting can save 30 to
would be an example. Indeed, there is general evidence that cost shifting to high users is
yielding good results. All this involves explaining the services available, why, and why