Once again, the Eastman Kodak Company has altered the determinants of pay raises for US employees. Whereas in the past pay increases for managers, professionals, and hourly workers had been automatic, starting in 1996 the company began determining the size of an annual bonus pool and then allocated lump-sum bonuses to employees on the basis of performance. Hourly workers were to be evaluated within their annual performance appraisals; professional-level employees would work with their supervisors to establish personal goals against which they would be measured.
a) What problems do you foresee with the implementation of this arrangement? Be specific about who will be affected by the problems you’ve identified.
b) What recommendations would you offer to top management at Kodak to preempt or minimize problems with the new reward system?