Case Study:

Abstract

Business leaders consider corporate investments in terms of return on investment (ROI), but the largest single expense for most major U.S. companies-compensation-is never thought of in terms of investment in human capital. Qualex, Inc., a division of Eastman Kodak Co. and the U.S. market leader in next day photo-finishing, has made the switch from a "traditional" to a "business-driven" approach to compensation. At a time of increasing competition and quality demands from customers, Qualex had also been facing an uphill battle with high turnover, absenteeism, and quality slippage, especially during its peak seasonal volume periods. Qualex realized that, in order to attract, retain, and motivate employees during these periods, its pay programs had to be restructured, and that a traditional compensation strategy would no longer meet its needs. Qualex chose a "staged" approach that systematically identified areas where changes in rewards affected business the most and adopted a four-step design process that included increasing base wages to a level where pay would make a difference. It also used focused incentives to gain leverage in those areas with the greatest impact on operating costs and business results. Qualex's business-driven compensation investment had a significant impact on turnover, absenteeism, and overtime and resulted in equally significant productivity improvements. It also contributed to the employees' greater sense of pride and purpose in their work.