MDMBA 15-0165

MDMBA 15-0171
MDMBA 15-0138
MDMBA 15-0050
CASE ANALYSIS: WATERWAY INDUSTRIES
I. PROBLEM IDENTIFICATION
A. FACTS OF THE CASE

Founded in the late 1960s as a small manufacturer of high-quality canoes

based in Lake Placid, New York

Not only did the company quickly gain a solid reputation throughout the
Northeast, the company began building a small customer base in the Pacific Northwest
as well

By the late 1980s (roughly 20 years time), the company was comfortably

settled in the canoe market

Although earnings growth was fairly steady, the CEO, Cyrus Maher, after
being persuaded by a friend, began venturing into kayaks by selling its own life of
compact, inexpensive kayaks in 1998

Because of the relatively sizable kayak orders from Waterways existing

canoe customers as well as the number of private-level companies, Maher knew he made
the right decision to venture into kayaks

When Lee Carter was hired to establish a formal marketing department at

Waterway things really took off

Carter began bringing in so many large orders that the company had to
contract with other manufacturers to keep up

Managers began to envision the day when Waterway would be a major player
in water sports equipment

Because of that, the managers developed a long-range strategic plan that

called aggressive growth, new product designs, and nationwide marketing and
distribution by 2003

Waterway has always had relaxed, informal working atmosphere, where

employees got along well, enjoy their jobs, and got their work completed on time

Due to the recent changes in the company brought about by the venture into
kayaks, there is an increase in workload for the employees

However, Maher believed that most employees are adjusting well to the faster
pace at the company and thought that workers have been given adequate raises to
compensate for it

Maher has recently been hearing complaints from the shop floor about
inadequate pay

Maher has recently also turned down a request from the plant supervisor for

additional hourly wage increase for top performers because he insisted that the wages
were in line with what other local manufacturers were paying

This subsequently allowed three of his best workers to be lured away by the
slightly higher wage in a new automotive parts plant

Several managers approached Maher about salary adjustments as well, with

two of the designers suggesting that they would be interested in equity (part ownership) in
the company, whereby they would receive a share of the profits if their designs did well in
the market

Mahers solution was to give the senior designer a modest pay raise and
extra vacation and to increase the bonuses for both designers

Waterways CFO, recently left the company after Maher had refused his
request for redesigned compensation package to include equity twice

Maher now had just overheard Lee Carter discussing a possible job
opportunity with another company and he is concerned about losing her

The current role: Companys sole human resource manager

B. PROBLEM IDENTIFICATION
How can Cyrus Maher increase employee compensation satisfaction in order to keep his
hard working employees from transferring to another company in order to be in line with its
long range strategic plan?
II. KEY OBJECTIVES
Business Objective: To be able to maintain a steady growing income and be able to
implement its long-range strategic plan
Organizational Objective: Reorganize the current compensation and reward system in
order to Increase employee satisfaction and boost employee amidst increasing workload
III. ANALYSIS OF CAUSES
Waterway was already in the maturity stage and thus experiencing steady
growth. However, his friend gave him an idea to venture on another business. This gave
the company an opportunity for another take-off stage to reach a higher maturity stage.

Mahers management style is behavioral. He tries to talk to his

employees on a one-on-one basis so he can hear their sides.

The company has become less attractive to employees because the

management almost doesnt want to adjust their compensation scheme.

The recent change in the company deviated from its usual work/life
balance style or free atmosphere, to a more stressful style

The employees can be considered as Generation Y individuals/

millenials because they used to enjoy the free atmosphere of the company, and even
enjoy kayaking or canoeing.

There was a decline in employee stimulation because of inadequate

compensation, and people are contemplating to move to another company because of its
better compensation scheme.

The pay system might be a job-based pay, which compensates the

employee for every task it performs.

His resistance to increasing salary has discouraged people and made

them contemplate to switch to another company.

His lack of business strategy is evidenced by his lack of a

compensation plan.
Porter Five Force Analysis:

Threat of
Potential Entry:
Low
New product
development
Inreased capacity of
Manufacturing

Supplier
Power: HIGH
Lee Carter
Second Designer
New Marketing
manager

Competitiv
e Rivalry:
HIGH
Marketing
skills are
transferabl
e

Buyer Power: LOW

Cyrus Maher
Looking for
Expansion
Competitors working
on marketing
department

Threat of
substitution
: LOW
Outsourcing
of sales and
marketing

V. DEVELOPMENT AND SELECTION OF ALTERNATIVES

Alternatives

Advantage

Disadvantage

Increase current wage at a

Change in compensation

Profit loss for the company.

level like the competitor or

system can become

a bit higher than the

palatable to the employees

competitor company.
Offer cafeteria plan

The benefits that the

The need to meet all the

benefits package

employees will ask may or

expectation these benefits

may not be purely

being available to them.

monetary
Increased employee
morale
Outsource positions

They need not to adjust the

Outsourced employees

current compensation system might not share the same

culture or relate to the
culture with the company
Create a new

May decrease the chance

Time consuming to

compensation system

of employer shift

formulate a system for

(Skill Based Pay System)

compensation.
Encourage employees to
develop their skills and
competencies

VI. IMPLEMENTATION
1. Maher has to define his business goals and define his compensation.
2. He has to rightsize the organization in order not to compromise the company by
increasing salary if the productivity plateaus even if you increase the number of
employees.
3. Discuss with the employees for their reason why they want to leave the company.
Maybe the reason why they want to leave the company is not only compensation but
also the budding stressful environment at the company.
4. Talk to Carter and motivate her to stay in the company.
5. Offer the cafeteria plan benefits package initially.
6. Once that a system is formulated, they can now implement the new compensation
system.

VII. RECOMMENDATION

Maher should realize the importance and effect of compensation in a company. He

should make sure that he can compete with the outside industry especially for skills

that are highly transferable (such as marketing)

Before he could think of expanding the company, he should formulate a business

strategy in order to prevent these from happening in the future

He should also note that compensation is not the only way in maintaining an effective
workplace. He should recognize the employee effort by also offering them non-

monetary benefits.
Compensation system should be formulated at the star of business, not when the

business is expanding.
He should also pay for the performance of his employees in order to sustain their

interest in the company.

He should remember that his employees are generally Generation Y employees, so
he must also prepare them for the scenarios that might happen once the expansion
has started. They should be fully informed and trained. He could also use other
means of working such as telecommuting.