Case study on absenteeism at ono inc
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- What figure will Cal Jenson report to Fred Donofrio for the amount that absenteeism cost ONO last year?
By using the method in the text, 3 categories of costs are associated with absenteeism. These are compensation paid to absent employees, compensation to supervisors in managing the absenteeism and other costs (http://www.enotes.com/biz-encyclopedia/absenteeism)
Calculation:
- Compensation lost to absent employees
Salary and benefits amount to $18.62 per hour for employees. Since 539 hours were lost to absenteeism last year, the total cost here is:
$18.62 X 539 = $10,036.18
- Compensation to supervisors in managing problems of absenteeism
Salary and benefits amount to $26.60 per hour for supervisors. Since 1.5 supervisory hours were lost per day of employee absenteeism (and there were 67.375 days absent), the total cost here is:
$26.60 X 1.5 X 67.375 = $2,688.63
- Other costs
From the case given, these totaled $475.00 last year.
The total costs of absenteeism last year are therefore the sum of a, b, and c above, which is $13,199.44.
- Is absenteeism a serious problem at ONO? Why or why not?
Absenteeism at ONO is seen to have increased over the last two years. The information given in the text shows that ONO lost 539 hours (equivalent to 67.375 days) to absenteeism last year.
Given that there are only eleven employees, this equates to 6.125 missed days per employee.
This figure is less than but significant close to the United States average of seven missed days per year per employee. The data given in the text suggests that though absenteeism at ONO may not yet be a serious problem, it is necessary to carry out investigations and strategize on how to minimize it. As the book states, “Unfortunately, there are no industry-specific figures on the costs of employee absenteeism.” (Cascio, Pg. 54).
These costs of absenteeism vary depending on the industry, the company, and the employees’ role in the company (E.E. Lawler III 2012). For instance, the cost of absenteeism is different for a skilled employee as compared to an unskilled one (Cascio, Pg. 54).
For ONO, Inc. we may not know how serious the problem is, without being provided with more information. For instance, if we knew how much it would cost the company to reduce absenteeism, we would be able to determine if the problem is worth fixing.
Based on the little information provided, however, we are aware that the rate of absenteeism is increasing. This implies that the problem is likely to become serious in future. Using the data provided, the cost of absenteeism can be estimated to help us assess the seriousness of the problem to some extent.
The total cost of absenteeism to the company is $13,199.44. This equates to $1,199.95 per employee. This figure represents 13.2% of ONO's net profits, implying that absenteeism could actually pose a serious threat to the company if not dealt with.
- Recommendations that Cal Jenson can make to Fred Donofrio
The first thing that they must realize is that some of the absenteeism cannot be avoided. For instance, serious illnesses cannot be avoided. There will therefore be certain costs associated with this kind of absenteeism.
Cal can recommend the following for the other kind of absenteeism that is avoidable:
A "tighter control" approach: This is where the employees whose illnesses last more than one day or fall on certain days have to show proof from a doctor (Armstrong, M. 2010). Cal can also recommend that they reduce the number of paid sick-offs, so that the employees are discouraged to use this advantage.
Reward approach: This is where the employees are rewarded for their commitment to work. Cal can recommend different forms of rewards for the employees. These will work as incentives for them especially on those days they are not motivated.
In addition, the management can revise the cases under which absenteeism is allowed in order to stop the employees from taking advantage of the provision.