When developing new products, the global research strategy of Medtronic enabled it to draw on medical experts around the world. Through the development of new therapies that used technology in a nontraditional way, leading physicians helped Medtronic expand their market. The primary market for Medtronic were the United States, Canada, European, and Japanese markets. From these markets, Medtronic employees faced numerous issues, and the employees had different needs and concerns.
In the US market, largest Medtronic’s bradycardia pacemaker market, employees enjoyed reimbursement levels set by HCFA, which were higher than those in Europe were. Additionally, Medtronic salespersons in the US were highly trained and developed strong relationships with the doctors implanting the pacemakers. They also had the privilege of attending 70% to 80% of Medtronic pacemaker implant procedures. Despite having 200 sales representatives being employed, another 100 Technical Sales Representatives assisted them. However, in the early 1980s, to control employee health care cost, employers turned to managed care-systems instead of paying employee health insurance premium thus leaving a significant number of Americans without adequate coverage.
In the Canadian market, although the salespersons receive the highest revenue compared to any other market, the sales persons only attend 15% of Medtronic pacemaker implant procedures. Medtronic Canada also trains hospital personnel to take up work handled in the US by Technical Sales Representatives. To add to their injury, the government of Ontario capped the salaries of specialists. This demoralized the specialists in that they once their fees had reached the salary ceiling they had no incentive to continue working.
In the European Market, due to the low reimbursement environments, many physicians and hospitals were uncomfortable working with only one company. These low reimbursement conditions propelled doctors, particularly those in Italy, to request promotional payments from manufacturers as the medical system provided so little compensation to them.
In its dealings in Japan, Medtronic used Japanese dealers who took orders from doctors and personally made the delivery thereby making a 20% to 25% profit. The Koseisho, Japanese Ministry of Health and Welfare, set a reimbursement payment that a Doctor would receive for a specific treatment provided. Additionally, doctors would also receive reimbursement for any device or drug they provide to patients during treatment.
Most Consistent and Prominent Issues
From the qualitative data, it is evident that some issues are more consistent than others are, while others are prominent. One of the most consistent concerns faced by employees at Medtronic is the need to have better reimbursements. This need is recurring in all the four major markets and having unsatisfied employees has many repercussions. In a bid to cut the organizations operational cost, the employees are the most affected.
Take for instance in Canada, once the Ontario governments capped the specialist's salaries, many specialists were affected and most left thus resulting in a fall in business by 30% to 40%. Similarly, the Koseisho in Japan encouraged increased remuneration to employees, and this resulted in Japan being the fastest growing market than any other with a growth rate of 7% per year.
Another major consistent issue among the employees at Medtronic is the health benefit. To most employees, this is the most valued benefit. However, it is costly to the employer. As such, in the US, in a bid to cut cost, significant employees did not hesitate to leave an estimated 37 million Americans without health coverage. Further, training of employees is another prominent issue. Employees should be equipped with sufficient knowledge and expertise to enable them to carry out their roles efficiently. Finally, employees should enjoy flexibility at the place of work concerning off days, paid leaves and vacations.
Key Concerns to be Targeted and Addressed
One of the critical issues of employees that should be addressed is in improving work-life balance. An employer should ensure that once an employee comes to work, he has nothing else worrying him other than achieving the organization’s objective. To do this, the Medtronic should provide better health benefits for both the employer and immediate family dependents. With a good health cover, an employee will have no worries in the event of an illness or injury during work. In turn, this translates to increased productivity in the organization.
Employers should also ensure flexibility in the organization. Employees are entitled to rest after work. It is thus imperative for employers to give paid leaves and even vacations to their employees. Medtronic should come up with vacation benefit packages to best-performing employees. This will not only motivate the employees but will also show them that they are appreciated. With such benefits, a lower paying job has the edge over a higher paying job.
Additionally, another fundamental issue for employers to address is in training. An employee likes the feeling of growth in a career. Equipping employees with new skills and knowledge not only improves efficiency and effectiveness in the organization, but it also provides employees a sense of growth. Medtronic should focus on career development programs, which allows their employees to continue with their leadership training and education.
There is no issue is of less importance compared to the others. However, there are some issues, which should be given a priority over others. The issue of offering employees with a proper health cover is of paramount importance and should be prioritized. This issue is crucial because it ensures the employee's well-being, and it not only acts as security to employees, but it also ensures workers are in a perfect working condition.
Additionally, another vital issue of priority is ensuring employees get remunerations matching their service. According to Alshmemri et al. (2017), good salary is one of the key motivation for employees. Moreover, well-motivated employees increase the productivity of the organization, vice versa is true. In Canada, when the Ontario government capped specialties salaries, the result was a reduction in business by 30% to 40%.
Comparison of the qualitative data to Abbott
In comparing Medtronic’s benefit and compensation system, Abbott is used as the benchmarking organization. Both companies are in the same industrial field of operation. However, in their benefit and compensation systems, these two companies differ significantly.
For one, Abbott offers its employees a better health package than the current system. From the first day of employment, Abbott employees together with their eligible family members are provided with extensive coverage and protection against significant medical expenses. Additionally, they also get services that may help them better manage illnesses, maintain and improve their health through Abbott’s wellness program. This is not found in the current system.
Secondly, Abbott offers bonuses for the employee’s contribution, which result in financial success, through contribution rewards. Additionally, on top of providing life insurance to its employees, Abbott also offers Travel accident insurance and long-term care insurance.
On ensuring flexibility of employees, Abbott offers Paternity leave, sick child leave, and they have a long-term disability plan. Furthermore, Abbott's employees enjoy both the stock retirement and annuity retirement plans. Not all of these benefits are found in the current system.
The current system also has some benefits, which are lacking in Abbott's system. For one, the current system offers training opportunities to its employees for education and advancement in their careers. This benefit is lacking in Abbott’s benefits system.
Additionally, another benefit that stands out in the current system are the Koeisho policies. An employee in the current system would receive reimbursement for a specific treatment and drug provided to a patient. This benefit lacks in Abbott's benefit and compensation system.
Misalignment and Gaps Present in the Current benefits and Compensation System
In Comparison to the external benchmarking organization, Abbott, the current system reveals some significant gaps and misalignments that need to be addressed. One notable weakness is in the provision of insurance to employers. The current system is not keen on having a good medical insurance plan for its employees. The current system should not take this substantial gap lightly. Thus, the current system should come up with a proper health cover plan for its employees.
Second, there is a gap in the current system in appreciating exceptional employees. Bonus programs should be introduced into the current system to ensure that well-performing employees are valued. Showing appreciation to exceptional employees significantly enhances a healthy competitive environment in the organization.
Another gap is in offering flexibility in balancing employee work-life. Although the current system provides assistants to senior sales representatives, this is not sufficient, and there still exists a gap. The current system should develop proper working schedules to allow employees to go on paid leaves. Moreover, the current system does not consider the lives of employees after employment, and this reveals another gap. Retirement benefit plans for employees should be developed in the current system, to provide employees with options to choose.
What’s more, there is a training misalignment in these two systems. The current system offers training to employees based on getting the knowledge to help them perform their duties more efficiently. However, in Abbott's system, through its tuition assistant program, employees have the opportunity to either further their education in undergraduate or postgraduate. For the undergraduate Abbott offers up to $5,250 per year and $7,000 per year for postgraduate.
Strengths and Weaknesses in the Current Benefits and Compensation System
So far, the Medtronic's compensation and benefits structure has been highly successful and satisfactory to employees. Although we do not have an in-depth knowledge of Medtronic's compensation structure, this success may be attributed to some strengths in the qualitative data provided.
One of the critical strengths at Medtronic that stands out is the training of their employees. According to Herzberg's two-factor theory, advancement, and opportunity for growth are major motivating factors to employees. With further training, employees get new knowledge and learn new skills that might be helpful in their current job or even after they leave.
Secondly, another notable strength is the provision of assistant Technical Sales Representatives for the senior Sales Representatives. With such an arrangement, Medtronic delegated some of the senior sales representative’s role to the assistants thus giving them an opportunity to enjoy off days or even vacations. Such a benefit not only allows for consistent coverage of responsibilities but it may also be used in attracting “difficult to recruit” employees.
Despite these strengths, the qualitative data also depicts some shortcomings in the benefits and compensation system. For one, the system did away with paying premiums for their employee's health covers. This was one of the major weakness in the system. Since health cover is the most valued benefit to employees, removing it showed that significant employers would go to great extents to cut operational costs.
Additionally, low reimbursement environments, especially in Europe, is a significant weakness. To maintain the top-notch specialties in the industry, you Medtronic has to provide proper reimbursement environments lest these specialties may leave for the competitor. To maintain higher retention levels, the employer must ensure the employees are well compensated for their duties.
Changes in the Reward Components
After recognizing the strengths and weaknesses of the current system, it is imperative to highlight the much-needed modifications and the components that should be left as they are. In doing this, major improvements may be made to the current system to make it more useful and compelling to the employees.
For one, training of employees has proved to be very useful and as such in the US market, the 70% to 80% should be maintained while those in Canada should be improved to from the current 15% to at least 50%. Further, employee training should also be introduced in the European and Japan markets.
Secondly, one of the essential change that should take place is the revision of the reimbursement environments. Specialties are entitled to a proper reward for their expertise and knowledge. In its other markets, Medtronic should adopt the Koseisho policies in Japan. This will see that an employee is rewarded according to the roles they perform. A hardworking employee gets more reward than another who is not performing.
In addition, Medtronic should emphasize on medical coverage for its employees, since this is the most valued benefit for every employee. Though expensive, Medtronic should at least ensure that all the employees are covered if not with their direct dependents. Medtronic should come up with a valid healthcare program for its employees. If it becomes too expensive for the employer, they may prioritize medical health cover and leave out dental cover or vision care.
Lastly, the current system needs to leave alone the Koseisho policies as is. If it is not improving the strategies to better suit employee’s needs, these policies should be left as they are since they enable employees to determine the amount of income they will get.
Reward Components to be Reduced
Giving employees a proper benefit and compensation plan is essential; however, this should not be a reason for the organization to go bankrupt. Thus, it is imperative to ensure that the benefits are suitable for both the employees and cost-effective to the employer. In the current benefit and compensation system, some benefits need reduction.
For one, the Koseisho policies in the Medtronic Japan needs revision. Since employees are reimbursed according to the treatment, a doctor provides and the devices they use in the treatment. In a bid to take home a handsome reimbursement; this policy may encourage the development of dubious practices among the doctors. This policy needs reduction, to cap development of these questionable practices before they come up.
Similarly, still in Medtronic Japan, the use of dealers should also be reduced. The current system encourages the use of dealers in taking orders and making deliveries. However, this may encourage these dealers to hike the prices in order to make more profit. In turn, this will tarnish the name of Medtronic and clients may end up purchasing pacemakers from competitors. The current system needs to reduce this and employ professional methods of doing business.
To have employees from the different markets at the same level, the current system should reduce the training in the US market. Bringing down the training in the US to about 50% will provide more resources to improve training in the other markets. Doing this will ensure that all Medtronic employees get the benefit of advancement in their careers. These reductions need to be gradual, to give employees sufficient time to adapt to them.
Impacts of Proposed Changes
These proposed changes come with numerous implications for the organization, employer, and employees. First, improving the employee benefits package such as introducing a bonus and reward program in the organization increases employee motivation and this will, in turn, covert to increased productivity in the organization (Shields et al., 2015).
Secondly, due to the increased costs of health cover insurance. Introducing a wellness program goes a long way in educating employee on the best health practices. This helps the organization build a healthy workforce thus reducing the probability of illnesses and eventually reducing the cost of medication (Cascio, 2018).
Having a well-reimbursed workforce reduces the chances of competitors poaching your best-performing employees. This leads to a high retention rate in the organization. Additionally, having an attractive benefits package enhances the organization’s image as the employer of choice, thus making it very easy to hire the “difficult to hire” employees. This leads to increased number of very competent employees in the organization (Terera and Ngirande, 2014).
Employee training not only increases the skills of employees but it also develops new ways of doing things. Adapting to new methods, which are more efficient, and cost-effective leads to increased productivity in the organization. What’s more, employee training involves employees in social activities thus creating strong social bonds among employees. This converts into good working relations among employees, thus significantly reducing the number of conflicts in the organization.
Ultimately, having proper employee flextime eliminate fatigue in employees. In turn, this gives employees the much-needed energy in conducting the daily activities of the organization thus improving on efficiency.
Recommendations for Accommodating Potential Financial, Procedural, and Legal constraints
Implementing the proposed changes comes with numerous challenges, and it is thus critical to develop strategies for a swift transition. Some of the proposed changes require heavy financial involvement to implement, while others need carefully laid procedures for them to work effectively.
In implementing a better healthcare coverage for its employees while remaining financially conscious, Medtronic should adopt an annuity retirement plan. This plan will enable employees to make payments in installments for their pension plan. This will significantly reduce the financial burden to the organization, while also giving an employee the opportunity to determine how much goes to their pension plan (Morrisey, 2014).
Secondly, as a procedure, employees should be sufficiently educated on the need to take up pension plans, wellness programs, and how to choose the most suitable package. This will increase the number of employees taking part in these new benefits put in place (Ko and Hur, 2014).
Once employees choose a benefit package that best suits them, they will proceed to sign a contract in the presence of a company lawyer or their lawyer. This will ensure that the agreement is in line with the existing law.
Employers should also conduct market research to find what the remuneration rates for each specialty are. This will ensure proper reimbursement environments in the organization thus assuring a high retention rate, leading to reduced operational costs that would have been used in the recruiting process.
Changes in Current System to Address Identified Concerns
The current system depicts some significant concerns and issues that the organization cannot take lightly. These issues have numerous impacts on the organization most of which are harmful. For one, the current system is not keen on employee health coverage. To change this, the system should introduce a health insurance coverage for employees. In addition, a wellness program should be developed to educate employees on the best health practices.
Additionally, the current system does not provide bonuses for its performing employees. A bonus program should be introduced. The program should not necessarily involve monetary rewards. Having an employee of the month picture put up in the office goes a long way in motivating employees. These bonuses go a long way in motivating employees, thus increasing productivity in the organization.
The current system should not only focus on training its US-based employees, but it should also give sufficient training to its employees in other markets as well. This will ensure that no employee feels left out in the organization. Further, the current system offers low reimbursements levels. This is a significant issue. To alleviate this, during employment, the organization should make it clear on the reimbursement range in which an employee falls (Dhar, 2015).
The current system also does not provide for flextime. Medtronic should get rid of the notion of a 9 to 5 work. These hours do not necessarily stand for the best working window for every employee. As such, the current system should adopt some flexibility for its employees. It should allow for paid off days, and incorporate vacations and paid leaves for its employees (Bird, 2016).
Financial Cost of Proposed Changes
The proposed changes come with a financial burden to both the employee and the employer. With direct benefits such as the provision of a proper healthcare cover for employees, according to NCSL, the financial cost is estimated at to be at $10, 200 for self only cover. This total cost is partially funded by the organization, to a certain amount. On reaching this amount during treatment and the employee still needs further treatment, the employee covers the additional cost.
However, the organization fully funds the wellness program. Ordinarily, according to Porter, and Kramer (2019), a wellness program might cost about $4,000 annually for the entire organization. The employees only take part in it but do not fund it. Additionally, the organization also fully funds the bonus and reward programs. This program cost the organization up to $1,000 every month in rewarding performing employees. This cost is, however, offset by the increased productivity it enhances in the organization.
Another cost that the organization fully funds is the cost of training employees. Holding these training activities comes at the expense of which the organization fully funds. According to the Association for Talent Development Report (2016), training may cost the organization an estimated amount of $1,252.
Smeaton et al. (2014), indicates that providing an employee with flextime comes at a low cost of about $126 per request. The organization fully funds these costs in the form of overtime hours paid to its employees. Additionally, when traveling on an organization activity, the organization wholly caters to the cost of the entire travel, back and forth.
Cost of Each Benefit and Compensation Element as a Cost per Employee
To begin with the flextime cost. Since the organization is fully funding this program, on average per request, the organization is looking at a price of $126. Considering that an employee takes one day off every week, the total cost per employee adds up to about $504 per month. Annually this cost comes to $6,048 per employee.
On the health insurance cover, although the organization partially funds it. The organization will incur a cost of $5, 200 per employee. This is the total amount payable as premiums per employee. If the organization includes families to the cover, an amount of about $14,000 is payable as premium. Once this amount is depleted in treatment, the employee is expected to cover any additional cost.
Introduction to the training program will cost the organization $1,252 annually per employee. This amount translates to about $105 monthly per employee. However, traveling cost have been eliminated from this amount.
Per employee, the reward and bonus program will cost the organization an estimated amount of $1,000 monthly. This cost is only payable to one employee each month. Thus this cost translates to $12,000 annually.
The employee solely funds their pension benefits; however, the organization also has a benefit package on retirement. The amount going into an employee’s pension account is dependent on the choice of the employee.
The wellness program is estimated to cost the organization about $1,000 per employee annually. This cost translates to about $330 per month per employee.
The total roll-up cost the organization will incur sums up to $25,500 annually per employee. This cost seems expensive; however, the organization may adopt the new system gradually to ensure convenience.
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