(a) You may use any course (textbook, lectures, notes, etc.) or internet research materials to analyse the case.
(b) Read the case below. You are a compensation consultant and have been retained by the CEO and Vice President of Total Rewards to evaluate the situation and render your recommendations. You will use the Rational Decision Making Approach to analyse the case and include the following:
Section #1: List 3 to 5 problems or opportunities you feel are highlighted in the case.
Section #2: Cite 3 to 5 alternatives for each problem. Doing nothing can be considered as an alternative.
Section #3: Choose the “best alternative” for each of your problems and restate them accordingly.
Section #4: Provide a timeline for implementing each of your action steps.
CASE SUMMARY: Jiffy Auto Parts, Inc. was founded in 1961 by Otto Sloan, Jr. Otto started his business by opening his first “do-it- yourself” warehouse in Sanford, North Carolina. Over the next 20 years, Otto grew the company using private equity investments and bank loans in order to keep the company privately-held, He achieved sales revenue of $1 billion by 1980. At that time, Jiffy Auto Parts had acquired the majority of its new stores and operated 550 retail stores across the United States. Jiffy employed 4,000 teammates. In 1985, Otto and his family expanded into Canada by purchasing a 200-store chain called World Auto Parts, LTD. In 1991, Jiffy purchased a 350-store retail chain in Mexico called Car Parts De Mexico. By the year 2000, Jiffy Auto Parts became the 5 th -largest retail auto parts chain in North America and changed its corporate and capital structure to accommodate renewed growth and business unit development. Otto introduced a new holding company called General Auto Parts, Inc., company now employed 20,000 teammates across 3,000 retail stores and 100 distribution centres. Otto’s family moved the company from Sanford to Charlotte, North Carolina where the main headquarters consisted of 500 teammates in Store Sales, Store and Supply Chain Operations, Store Support Center, Finance, Accounting, Information Technology, Human Resources, Communications, Public Relations, Legal and Executive Departments.
In 2005, Otto suffered a massive heart attack and was forced to hand over company operations to his son, Carson Sloan. Otto had been grooming Carson since he graduated college in 1980 to eventually take over the reigns. Carson became the company’s president and CEO while Otto stayed on as Chairman of the Board.
In 2007, the entire U.S. auto parts industry began to pull back as the Great Recession approached. Prices declined due to increased competition from online retailers such as Amazon.com and others. As a result, profit margins became depressed and company earnings began to suffer. Sales revenue fell in 2007 to just under $4 billion. Earnings declined from $300 million to $250 million. Customers began retreating to competitors because of price increases Jiffy introduced across many product lines. Due to the grim industry forecast, teammates began to exit the company in droves. As a result, Otto instituted mandatory “non-compete” agreements for all exempt-level employees, prohibiting them from leaving the company and going to work in the automotive aftermarket industry for a period of 1 year. This slowed the turnover to near zero but teammates felt trapped and productivity began to suffer, as well as Account Executive sales results. Employee morale declined over the ensuing years as a result of these actions.
In 2008, Jiffy Auto Parts had its first company layoff whereby it reduced the corporate headquarters by 20%. Jiffy also froze salaries and wages for a 2-year period and reduced incentive compensation targets for exempt-level employees. Previously, all exempt employees from supervisor and above were eligible to receive annual incentive bonuses based on sales and earnings targets. With sales declining, Otto and his HR team removed supervisors and managers from the plan. Only director-level and above executives would be eligible in the future. Lastly, Otto made changes to the company’s defined contribution retirement by eliminating annual contributions and replacing the plan with a 401K plan. This news did not sit well with teammates as many of them accumulated a vast amount of wealth in the retirement plan because it consisted of 100% company stock, which had grown anywhere from 8% to 12% per year, excluding dividend payout.
Carson knew he had to grow sales but didn’t know how. He had cut expenses to the bone whereby there was no additional positions to eliminate. Carson knew he had to increase employee engagement and improve overall sales results at the store level and in the field with account executives.
How could Carson and his executive team reinvigorate sales and put the company back on the growth track? Carson’s Chief HR Officer, Ernest, knew there was only solution. For years, GAP’s performance was attributed to its large, motivated and experienced sales and store teammates. It was obvious that the U.S. and World economies were on a very slow recovery track so Ernest took the initiative to approach Carson and the Executive Committee and recommend a number of new HR and compensation programs that he felt confident would re-ignite sales and earnings growth.