16. Model short report

ACME WIDGET CORPORATION

MEMORANDUM

TO: Lynn Harris

Vice President for Human Resources

FROM: Harry Edwards

Director of Personnel

DATE: February 1, 2020

RE: Absenteeism

INTRODUCTION

At the recent managers meeting there was lengthy discussion about our absenteeism policies. The current practice is to permit each manager to establish and implement his or her own policy. Discussion last week, though, indicated that the disparities among policies, and in their enforcement, was very great. Some managers were concerned about the appearance of fairness and about employee morale. There was also disagreement over whether absenteeism was so serious that we need to respond at all. You agreed to look into the problem.

When you and I met, you requested that I investigate employee absenteeism at Acme to determine if there is a serious problem, and if so to submit a report recommending a solution. Based on my investigation and research, I recommend that you approve the creation of an absentee policy at Acme, specifically the one known as the bonus policy. That policy will most effectively address the growing absenteeism problem we have at Acme at the least cost and the most benefit. This report will discuss why I believe the problem is serious enough to justify the policy, and then it will compare the three available policies to show why the bonus policy is the best one to address the problem.

ABSENTEEISM PROBLEM AT ACME

There is no simple definition of what makes absenteeism serious or not. I have determined that Acme’s employee absenteeism problem is serious enough to require that we take action, for two reasons. First, absenteeism at Acme is growing sharply, and second, absenteeism at Acme is high compared to other companies in our industry.

Rate of Growth. According to the Personnel Office’s daily absenteeism reports, from 1995 to 2010 absenteeism in all our divisions averaged a steady 2.2% of work hours, substantially lower than the industry norm. Beginning in 2011, however, absenteeism began a steady rise, as the following table shows.

2010 2.2%

2011 2.3%

2012 2.6%

2013 2.9%

2014 3.5%

2015 3.7%

2016 3.9%

2017 4.1%

2018 4.2%

2019 4.4%

Note the especially sharp rise since 2013. The Personnel Office has not found a specific cause for this, though it corresponds to an expansion of Acme’s workforce after the 2012 mergers.

Absenteeism at other companies. Other companies on average have lower absenteeism than Acme. At companies in our industry, absenteeism has averaged a steady 3.3% since 1990. But there’s an interesting difference among the ten companies I investigated. Five of those companies have formal absenteeism policies, and their absentee rates are 2.1%, 2.2%, 2.4%, 2.4%, and 2.6%. The five companies without absentee policies have rates of 3.2%, 3.3% 3.3%, 3.5% and 3.5%. (Jones, 2018) The complete results of the research and analysis of the data are in the appendix to this report.

AVAILABLE POLICIES

It appears, then, that adopting an absentee policy would effectively solve Acme’s absenteeism problem. Of the three policies widely used in the industry (Smith, 2012), the bonus policy seems the most effective for the cost, compared to the other two.

1. Bonus policy. The bonus policy provides a bonus to workers who do not exceed five absences a year. Companies using this have an absentee rate averaging 2.4%, and their productivity is 2% above industry norm, apparently because of financial incentive (Smith, 2017). The policy would be the least expensive to administer, costing an estimated $200,000 a year (factoring in savings from the rise in productivity) (Acme CFO estimate, 2019).

2. Discipline policy. The discipline policy penalizes workers for absences. The penalties range from one point for an absence with documented excuse to six points for a no-excuse absence. Forty points in 12 months means being fired. Companies with this policy have an absentee rate averaging 2%, but because of its severity morale is low and productivity is 1.5% below industry norm (Smith, 2017). This policy would cost about $470,000 a year to administer (factoring in the lower productivity) (Acme CFO estimate, 2019).

3. Job enrichment policy. The job enrichment policy makes workers feel part of the company. They meet with managers to discuss problems and make suggestions. They are given bonuses for improved productivity and useful suggestions. Companies with this policy have a 3.1% absentee rate, but because morale is so high productivity is 4% above industry norm (Smith, 2017). It costs about $410,000 a year, factoring in rise in productivity. (Acme CFO estimate, 2019).

CONCLUSION

For the reasons given in this report, I believe you should approve the bonus policy for Acme. It would effectively address the growing absentee problem at the least expense, and with minimal impact on morale and productivity. It would also put our absenteeism in line with other companies in the industry that also have such a policy. I would be happy to meet with you to discuss this further. I’m available most mornings before 10:00. If you would let me know of your decision within the next two weeks, I can bring it up with the department managers at our regular “third Wednesday” meeting.