Business Scenario

 

Introduction

This section provides you with the general business scenario for AB Shoes that lies behind the demonstrations and labs for defining work structures. This information should help you to see the individual labs in the context of a complete business operation and help you to understand how the labs were designed.

Working individually or within groups assigned by your instructor you should read the following and determine answers to the questions.

Business Scenario – Company Profile

AB Shoes Corporation is a division of AB Inc. - a diversified multinational corporation with operations in manufacturing, retail, finance, consulting, and entertainment industries.

AB Shoes, formerly Panzanelli Shoes, opened its first store in New York on Feb 1, 1979. Rapid expansion through the 1980s led to a chain of stores across the US. In the early 1990s the company expanded into Europe through a series of acquisitions. Panzanelli’s was acquired by AB Inc. in 1995 and renamed AB Shoes Corporation with new global management and compensation structures in line with the rest of AB Inc. AB Shoes has its World and US Regional Headquarters in New York, with European Headquarters in London.

AB Shoes Corp. has purchased Oracle HRMS and now wants to implement the system to support all of its global and local operations. If this implementation is judged successful it may lead to further implementations in the other divisions of AB Incorporated.

AB Shoes Corp (US) US Operations

Headquarters in New York AB Shoes (US) maintains a central warehouse and distribution center in Wisconsin that supplies shoes and leather goods to all other AB locations in the US.

There are three US Sales Regions: AB Shoes West in Las Vegas; AB Shoes Midwest in Columbus; and AB Shoes East in Boston.

All employees of AB Shoes receive their paychecks from AB Shoes Corp. AB shoes has hired a third-party administrator, called Great Benefits in Cleveland, to handle its health-care benefits. AB shoes needs to run its Equal Employment Opportunity (EEO) report based on AB Inc. information in a consolidated report for all of their organizations.

Currently, one Senior Vice President oversees the North American division for US and Canada with planned expansion to several Latin and South American countries.

Finance

The accounting department requires the transfer of certain payroll and budget costs to GL in line with a global cost center structure for AB Inc. that covers all companies and organizations.

Accounting would like to track costs by company, by cost center, account code, and project or product code.

Additionally, they would like to see a breakdown of tax costs by state, city, county, and school district.

Compensation

Executives and managers are salaried employees with separate grade-pay structures to cover differences in compensation for level and geography. Warehousing stock clerks and retail sales associates are paid within hourly ranges. Stock clerks belong to the United Stock Workers Union who negotiate annually to set rates of pay for employees in their union. Stock clerks are automatically entitled to annual grade step increments within their pay scale. Every three years the union also negotiates for changes in vacation, sick pay, and overtime.

Sales associates in retail stores are entitled to earn commission in addition to their regular wages. Wage rates for sales associates vary by grade and are updated annually.

Annual bonuses for managers are calculated in January and paid at the end of February. Sales and stock clerk associates are eligible for a bonus if AB turns a profit in the preceding financial year.

All employees accrue vacation time at the rate of 40 hours for the first year, 80 hours for the next four years, and 120 hours from five years of service forward. These values are automatically pro-rated for employees who work part-time. There is no maximum amount that can be carried over.

All AB executives and store managers are entitled to receive company cars. AB Inc. offers an employee stock-purchase plan for all employees. Employees can choose to deduct any amount from 1% to 15% of their pay toward stock-purchase.

Additionally, stock options are awarded on a discretionary basis to those associates who have exceeded sales quotas. The company will record stocks that the associates sell.

AB Shoes runs a United Way campaign every November with contributions to be deducted from the February 15 paycheck of the following year. In the absence of a self-service enrollment option, local managers record individual employee contributions on a spreadsheet that is provided to the Payroll Department who submit this through a batch process. Associates can choose a one-time deduction or can spread the contributions over each paycheck until the end of the year.

There are several agencies associated with the United Way and AB Shoes will match contributions to the American Heart Society.

The company is offering a Preferred Provider Organization (PPO) medical plan for the following

categories: Employee only, Employee + 1, Employee + 2, Employee + 3, Employee + Family; it

will offer a dental and vision plan in the future. Each employee must choose one of the preferred

hospitals associated with this medical plan (Chicago Hope, Wisconsin Central, Boston Hospital,

Buckeye Memorial Hospital, or Las Vegas Healthcare).

AB Shoes Corp. UK Operations

AB Shoes (UK) has a London HQ, with a warehousing and distribution center located in

Manchester. There are three regional sales centers: AB Shoes North - Manchester; AB Shoes

South-London and AB Shoes Scotland - Edinburgh.

AB Shoes offers all employees private health care options and works with a third-party health

care group, Great Benefits (UK) to administer employee health checks.

Currently, one Vice President based in London oversees the entire UK operation. AB Shoes are

currently discussing options to establish an integrated European management structure to cover

all European operations.

Finance

The accounting department requires the transfer of certain payroll and budget costs to GL in line

with a global cost center structure for AB Inc. that covers all companies and organizations.

Accounting would like to track costs by company, by cost center, account code, and project or

product code.

Compensation

Executives and managers are salaried employees with separate grade-pay structures to cover

differences in compensation for seniority and geography.

Warehousing stock clerks and retail sales associates are paid within hourly ranges. Stock clerks

belong to the United Stock Workers Union who negotiates annually to set rates of pay for

employees in their union. Stock clerks are automatically entitled to annual grade step

increments within their pay scale. Every three years the union also negotiates changes in

vacation, sick pay, and overtime entitlements.

Sales associates in retail stores are entitled to earn commission in addition to their regular wages.

Wage rates for sales associates vary by grade and are updated annually.

Annual bonuses for managers are calculated in January and paid at the end of February. Sales

and stock clerk associates are eligible for a bonus if AB turns a profit in the preceding financial

year.

All employees accrue vacation time at the rate of 40 hours for the first year, 80 hours for the next

four years, and 120 hours from five years of service forward. These values are automatically

pro-rated for employees who work part-time. There is no maximum amount that can be carried

over.

All AB executives and store managers are entitled to a company car.

AB Inc. offers an employee stock-purchase plan for all employees. Employees can choose to

deduct any amount from 1% to 15% of their pay toward stock-purchase.

Additionally, stock options are awarded on a discretionary basis to those associates who have

exceeded sales quotas. The company will record stocks that the associates sell.

AB Shoes runs a charitable giving campaign every January to encourage employees to enroll in

GAYE - Give As You Earn, with contributions to be deducted from the first paycheck of the

following tax year. Employees can choose to contribute a fixed amount or a percentage of pay

each pay period.

To encourage employees to contribute, AB Shoes will match any employee contributions to the

United Kingdom Heart Foundation.

The company offers a choice of coverage in a private medical plan with BUPA: Employee only,

Employee + 1, Employee + 2, Employee + 3, or Employee + Family. Each employee must

choose one of the preferred hospitals associated with the medical plan (Manchester Hope,

London Central, Bristol Hospital, Norwich Memorial Hospital, Plymouth Healthcare).

The company will offer a dental and vision plan in the future.

Business Scenario Questions (US)

1. Draw an organization chart to reflect the structures of AB Inc and AB Shoes.

2. How many business groups will there be?

3. How many locations and organizations (external and internal) will there be for AB Shoes

(US)?

4. What effective date will you use when you set up your HRMS structures?

Answers would be released soon