Scenario)The productivity dividend decision

As head of the transmission/distribution group (TD group) in the city's water agency (a government corporation), you have been asked to reduce costs over the next year by a minimum of 3% without undermining service. Your department employs about 300 people, who are responsible for constructing and maintaining water lines throughout the city. Although you have an engineering background, the work is complex and involves several professions and trades. Even the TD group's first line supervisors (one or two levels below you in the hierarchy) are not fully knowledgeable of all aspects of the business.

You believe that most employees support or at least accept the city's recent mandate to reduce costs (called the 'productivity dividend initiative'). The city leaders have stated that this initiative will not result in any layoffs this year. However, the labour union representing most nonmanagement staff in the water agency (including most of your employees) is concerned that the productivity dividend initiative will reduce employment numbers over time and increase employee workloads. Although the TD group is a separate department within the city water agency, it affects most other work units in the agency. It is possible, for example, that ideas that reduce costs in the TD group might increase costs elsewhere. The TD group employees may be unaware of or care about these repercussions because there is limited interaction with or social bonding with employees in the departments.

 

Can anyone help me in answering these questions related to this scenario:

 

What is the issue/ what decision has to be made?

What level of employee involvement should be used and why? 

1.  Decision  to be made.

The issue or decision at hand that must be made is to reduce the cost of operation for a Transmission / Distribution Group (TD Group), a water agency / government parastatal. The task involves reducing the costs over the next year by a minimum of 3% without undermining service. The firm currently employs over 300 people responsible for constructing and maintaining water lines throughout the city.

Step-by-step explanation

 However, the decision made would have both direct and indirect implications on the performance of the firm. On one hand, there is concern that the reduction would significantly impact the performance output of the agency, having reduced its overall costs of operations. In this regard, it would be advisable for the firm to proceed with the directive to save the company's funds by reducing the costs involved through successful implementation of the cost reduction program, as long as the quality of service remains exemplary (Croce, 2014). 

On the other hand, there is concern that the reduction would threaten the job security of employees working in the firm, and subsequently transfer the costs elsewhere, thereby counteracting the initial objectives of the cost reduction plan (Prskawetz, Fent and Guest, 2008).

2. Level of employee involvement to be used and why? 

Implementation of such a strategy requires extensive consultation with concerned stakeholders, particularly employees of the firm, as these are the ones that would be directly affected by the cost cutting strategies adopted by the firm by being laid off (Croce, 2014). Extensive consultations would help identify redundancies in the existing workforce of the firm, and determine where to assign workers with repeated tasks in the firm, which would in turn ensure that there is a significant level of productivity among all the workers.

 As argued by the labour union representing the non-management staff of the water agencies, implementation of the productivity dividend initiative would reduce employment numbers over time, and increase workloads for existing employees (Prskawetz, Fent and Guest, 2008). As a result, it might only reduce costs at TD Group in the short-run, but increase these costs elsewhere, hence the need for extensive consultations.