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Mr Tan runs a business selling plastic toys. He hired
managers Chan and Dick to help run the company. The production line
has five workers: Ah Beng, Ah Seng, Ah Huat, Muthu and Ali. As the CEO,
Mr Tan pays himself a million dollars a year. His justification is:
"Without a good leader, the business will not be successful; and
you won't get a good leader if you're unwilling to pay for one."
Mr Tan has never worked in another company before.
Chan had won a government scholarship twenty years
ago while Dick is an expatriate from America. Mr Tan thinks very highly
of them and pays them each half-a-million dollars a year. As an expatriate,
Dick also gets housing, transport and relocation allowances amounting
to a quarter of a million dollars a year.
The production workers each gets $1,500 a month with
$300 going towards a retirement gratuity that the company would match
dollar-for-dollar. The business hasn't been going too well. In fact,
business has been downright awful for the last few years. Consumers
seem to prefer the cheaper plastic toys from companies across the street.
Mr Tan is furious. "These consumers are a bunch of idiots,"
he said, "don't they know that the companies across the street
are not managed by talents like Chan, Dick and myself?"
Mr Tan has always been deeply impressed by Chan and
Dick. Chan has the remarkable ability to use words like "synergy"
and "paradigm shift" in every sentence. And Dick? Dick is
white.
So Mr Tan got down to some serious discussions with
Chan and Dick. After many hours of brain storming, they decided that
they knew what's wrong with the company. "We don't have enough
talents," Mr Tan declared, "we need to hire more scholars
and white men." And he did. So now, there's Ang, who was Chan's
best friend when they were in RI, and Brad, Dick's brother. They are
hired on the same terms as Chan and Dick.
To reward themselves for coming up with this visionary
strategy, Mr Tan gave Chan, Dick and himself a 10% raise. With the raise
and the hiring of two new management staff, Mr Tan figured that he had
to cut cost. So he laid off Ah Huat, who's about to retire and receive
his retirement gratuity from the company. The remaining four production
workers now have to work 12 hours a day to cover for Ah Huat. They didn't
get any compensation for this extra work because Mr Tan told them that
this is a difficult time for the company and all workers have to make
some personal sacrifices. "Luckily, we now have a world class management
team and business will pick up in no time," Mr Tan proclaimed.
However, business hasn't picked up at all despite having
a world class management team. On the contrary, business seems to have
worsen quite a bit. Mr Tan is now even more furious. He has no doubt
that he and his management staff are world class. So the problem with
the company must surely lie with the blue-collar workers like Ah Beng
and his gang, who hardly have any paper qualifications and speak dialect
and Singlish. But just to be sure, he engaged the services of a management
consultancy firm to confirm his belief.
The management consultant cost Mr Tan an arm and a
leg but he identified the problem: "Your labour cost is way too
high. Do you know that the average annual wage of your employees is
more than $400,000? That's ten times the amount for the companies across
the street."
"Ah ha! Just as I thought," Mr Tan congratulated
himself on arriving at the same conclusion as a world class management
consultant, "Ah Beng and his gang are overpaid." So Mr Tan
reduced the salary of his production workers to $1,000 a month and abolished
the retirement gratuity scheme.
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