The Dilemma of a Human Resources Manager: Balancing Employee and Shareholder Interests
Patrick's Decision on Personnel Cost Cut
Patrick, the human resources manager at Acme Company, must decide how to cut personnel costs. This decision will harm employees who are laid off or fired. Patrick must balance the interests of employees who have been loyal to the firm for a long time against the interests of:
- a. Acme's competitors.
- b. The city council.
- c. Acme's shareholders.
- d. The state courts.
Final answer:
The human resources manager, Patrick, is faced with the decision to cut costs at Acme Company. To balance the interests of employees and shareholders, he may consider layoffs and firings, rather than wage cuts. This approach is likely as the 'adverse selection of wage cuts' suggests the best employees are likely to leave if all wages are reduced.
Explanation:
Patrick, the human resources manager at Acme Company, faces a challenging decision of cutting personnel costs. Balancing the interests of loyal employees and company's shareholders is a tricky task. He must make a choice that lessens the negative impact on employees, particularly those who have been with the company for a long time, while also serving the company's financial interests.
Adverse selection of wage cuts argument is a significant factor that Patrick must consider. This argument signifies that when a company reduces wages for all workers due to poor business conditions, the best employees with the most appealing alternatives at other firms are the likeliest to leave. The workers with fewer employment alternatives tend to remain in the company. This scenario results in firms leaning towards selecting which workers should leave through layoffs and firings rather than slashing wages for everyone.