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
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
1.
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
–

– All variables are individual
Wages, bonuses, training
decisions made
collaboratively
Rewards
–
Competitive Model
 Decision making
IF all groups score above
cumulative average

FINAL grade increased
by one grade level
(except A+ and F)
groups’ decisions

Rewards
– The group with the highest
cumulative contribution

FINAL grade increased
by 5%