Reference no: EM132733700

Case:

S Electro-Galvanizing (LSE) produces corrosion-resistant sheet steel for the automotive industry at its plant in Cleveland, Ohio. The firm receives large coils of sheet steel from steel mills, unrolls and cleans them, and then appliesa coating of zinc to precise specifications. Although the process is highly automated, many things can go wrong,and mistakes are very costly. Rather than hourly paygeared to the specific task that a worker does (such as packaging or process control), which is the norm in thisindustry, LSE plant workers are paid salaries, with theirsalary level based on the number of different plant jobs that they are qualified to perform (a "pay for knowledge" system). To maintain their skills, workers rotate through the various plant jobs. This means that someone working at one of the traditionally lower-paying jobs, such as pack-aging, may be earning twice the standard industry rate forthis same job. On top of this, employees receive an excel-lent benefits package, as well as gain-sharing bonusesbased on plant productivity and profit-sharing bonuses based on company performance. Overall, LSE pays its workers far more than its competitors. Are you surprised to learn that almost no one ever quits?

• By contrast, Koch Foods operates a plant in Morton, Mississippi, that converts live chickens into packages chicken parts. All work is centred around the "chain"on which the live chickens are hung, which rattles pastline workers at a rate of 90 birds per minute. Workers posted along the chain perform various operations on thechickens as they pass by, such as snipping their headsoff or reaching in and yanking out their innards. UnlikeLSE, Koch Foods hasn't implemented any pay innovationsand simply pays workers an hourly wage not much abovethe legal minimum. Employee benefits are minimal.The firm has no fixed pension plan, other than a savings plan to which the company contributes, but only when the firm is profitable.

Problem 1: Your ability to apply the relevant concepts of strategic compensation in characterizing the firms (L-S Electro Galvanizing and Koch Foods) mentioned in the case