Zenith Medical Systems Incorporated

1. Zenith Medical Systems Incorporated Zenith Medical Information Systems

2. Agenda Faraaz • Identification of Current Organization – issues and opportunities • Strategic and Structural Recommendations • Reward and Compensation Strategy Paul • Job Evaluation Plan and/or Pay for Knowledge Plan • Design of Market Survey • Identification of Benchmark Jobs • Pay Structure • Performance Pay and Indirect Pay Plans Faraaz • Compensation Budget • Communications • Ongoing Plan Administration • Q / A Session Zenith Medical Information Systems

3. Identification of Current Organization • Medical Information systems • Number 1 in Canada (8th in North America) • 600 employees (most university grads) • Result of a joint venture between software company / health supplies company • Classical / Human Relations model • Prospector Zenith Medical Information Systems

4. Large competitors Takes advantage of economy of scale Produces one generic product that is sold to all types of clients Low per unit cost/ systems can be deployed immediately Medium / Small Competitors Specializing in a niche market Focusing on system modules Designing customized systems catered to a specific organization (Zenith) Corporate Players Zenith Medical Information Systems

5. Issues • High turnover • Low employee morale • Customer dissatisfaction • High customer complaint rates Zenith Medical Information Systems

6. Production issues • Systems are often over budget • Systems are often late • Systems often don’t work 100% once deployed Zenith Medical Information Systems

7. Marketing issues • Marketing people are pressured to make sales due to their compensation allocation (50% base pay / 50% commission) • Marketing people are faced with the issue of marketing products that have a reputation of crashing • Marketing people are being blamed for over promising on features of the software and time of delivery • In 2005 sales dropped, resulting in $5,000,000 in revenue Zenith Medical Information Systems

8. System implementation issues • Consistently over budget on implementation • Tech-support is stressed because they hear an earful of complaints when the systems do not work Zenith Medical Information Systems

9. Three main issues • Marketing (i.e. sales) compensation strategy needs to be reviewed; to reduce force-selling • Quality of the product needs to be raised; implement a total quality management (TQM) using the Six Sigma system • Lack of interdepartmental communication Zenith Medical Information Systems

10. Opportunities • Zenith is first to market in Canada • Zenith should take advantage • small size (Diseconomies of scale) because it allows them to act swiftly. Also the small size is highly conducive to high-involvement managerial strategy. • highly knowledgeable and skilled workforce which is also suitable for the high-involvement managerial strategy. Zenith Medical Information Systems

11. Diseconomies of scale • Bureaucratic Limits of Firm Size • Dr. Seffan Canbäck • http://canback.com/archive/thesis.pdf • Theoretical and empirical overview • http://canback.com/archive/jmanec.pdf Zenith Medical Information Systems

12. Diseconomies of scale • Cost of communication • Duplication of effort • Isolation of decision makers • Slow responses time • Inertia (unwillingness to change) • Public and government opposition (or intense surveillance) Zenith Medical Information Systems

13. Long run average cost(LRAC) curve Zenith Medical Information Systems

14. Competitive Environment • Highly competitive and volatile industry • Zenith needs to be responsive, facilitate quick decision-making, and encourages creativity. • prospective corporate strategy, Miles and Snow, is most conducive to these characteristics. • Zenith is categorized as a Question mark, Boston Consulting Group • means that Zenith is not competitive but has growth potential. Zenith Medical Information Systems

15. Boston Consultant Group Zenith Medical Information Systems

16. Comparative Analysis Criteria Zenith Goal Zenith Medical Information Systems

17. Comparative Analysis Criteria Zenith Goal Zenith Medical Information Systems

18. Organizing Corporate Enterprise • To facilitate high-involvement • flatten the organizational hierarchy • Use the matrix organizationstructure • combines the advantages of the pure functional structure and the product organizational structure • Suitable for companies that are “project-driven” Zenith Medical Information Systems

19. Matrix Structure Zenith Medical Information Systems

20. What is a Matrix? • The basis for the matrix organizationis an endeavour to create synergism through shared responsibility between project management and functional management. • Information sharing (i.e. interdepartmental) is mandatory in such an organization, and several people may be required for the same piece of work. Zenith Medical Information Systems

21. What is a Matrix? • The project manager has considerable responsibility and accountability over the success of the project. • The functional departments, on the other hand, have functional responsibility to maintain technical excellence in the organization. Zenith Medical Information Systems

22. Zenith’s Current Structure Zenith Medical Information Systems

23. Zenith’s Proposed Structure Zenith Medical Information Systems

24. Regional Layout Zenith Medical Information Systems

25. Facilitates the break down of functional silos; more communication People can be shared, thus project cost is minimized There is a better balance between time, cost and performance Authority and responsibility are shared Stress is distributed among the teams Highly complex system Expensive to administer If not properly managed can be a disaster Project can quickly get out of hand if there is inadequate synchronization of information between department Is Matrix the right fit? Zenith Medical Information Systems

26. Re-structuring Changes Zenith Medical Information Systems

27. Outsourcing Janitorial Services • Outsource to Hurley Corporation because it is not part of Zeniths core competencies. • Hurley Corporation is better at administering these services, and it will allow Zenith to concentrate on its core business. Saves on administrative costs: • Constantly monitor cleaning supplies • Payroll deductions & administrative costs – EI and CPP • WSIB premiums Zenith Medical Information Systems

28. Intermediate mangers • Assume project management (team leader) role • Become full-time members of the implementation committee • They will be given group based bonuses when the implementation committee meets quarterly targets. • They will be required to sign six-month contracts, for the duration of the implementation period, to protect to company from free loading. • As an incentive to join the committee we will offer stock options that will mature in 2 years. • Give a severance package Zenith Medical Information Systems

29. Reward and Compensation Strategy • How do we relate our compensation strategy to our corporate and managerial strategies? • How do we satisfy the employees? • Pay should be competitive with the industry (hygiene factor) • How do we motivate the employees? • challenging tasks, new skills to learn, job enrichments, or autonomy. • How do we foster citizenship behavior? • Team work • Group based bonus • Individual appraisals Zenith Medical Information Systems

30. Compensation Strategy • Managers • will need to assume larger workload than before • Marketing • NOT to force sell • Programmers • skills become obsolete fairly quickly in the IT industry we need to encourage programmers to constantly upgrade their skills • How we will encourage citizenship behaviour throughout the company? Zenith Medical Information Systems

31. Group-based Performance pay • Team based bonus • Profit sharing • Zenith is a small company, there is a short inline-of-sight. Reduces entitlement mentality • ESOP Zenith Medical Information Systems

32. Joint-implementation committee Determine the following: • Which performance pay scheme employees favours most • Which benefit plan employees refer most • How these will be implemented • The committee is restricted by the percentage allocations indicated in the next section. • Set a objective system for evaluating individual performance Zenith Medical Information Systems

33. Compensation Details • Job Evaluation Plan and/or Pay for Knowledge Plan • Design of Market Survey • Identification of Benchmark Jobs • Pay Structure • Performance Pay and Indirect Pay Plans Zenith Medical Information Systems

34. Compensation Strategy Zenith Medical Information Systems

35. Compensation Strategy Zenith Medical Information Systems

36. Job Evaluation Plan – Point Method Zenith Medical Information Systems

37. Job Evaluation Results Zenith Medical Information Systems

38. JE Comparators Zenith Medical Information Systems

39. JE Benchmark Jobs Zenith Medical Information Systems

40. JE Market Line Zenith Medical Information Systems

41. JE Pay Structure Zenith Medical Information Systems

42. JE Pay Structure Zenith Medical Information Systems

43. Pay for Knowledge System Reasons for Implementing PKS • Flexible skills and knowledge • Incentive to learn and upgrade • Leaner staffing • ↑ quality of output • ↑ long-term productivity • ↑ workforce flexibility • ↓ absenteeism and turnover rates Zenith Medical Information Systems

44. PKS Benchmark Jobs Zenith Medical Information Systems

45. PKS Pay Structure Zenith Medical Information Systems

46. PKS Knowledge Grid Zenith Medical Information Systems

47. Performance Pay Plans Incentives • Suggestion system Profit sharing • ESOP Non-monetary reward • Company paid vacation Zenith Medical Information Systems

48. Indirect Pay Plans • Mandatory benefits • Supplemental health insurance • Wellness and recreational • Tuition reimbursements Zenith Medical Information Systems

49. Key Point Compensation  Desired Behaviour Compensation system must support managerial strategy! Zenith Medical Information Systems

50. Implementation and Ongoing Administration • Compensation Budget • Communications • Ongoing Plan Administration • Q / A Session Zenith Medical Information Systems