Twin Oaks Hospital Case Study

Twin Oaks Hospital is a privately owned facility that serves Lexington, Colorado ( popula-tion approximately 250,000). The 100- bed hospital has a staff of 350 employees, including over 200 nurses and 40 clerical and secretarial employees ( an almost exclusively female group).


In the last month, discontent concerning pay levels has been mounting among the hospital’s nurses and secretarial- clerical employees. Discontent was spurred by recent de-velopments at the Lexington Memorial Hospital, a public facility. There, the hospital ad-ministration agreed to demands by nurses and secretarial- clerical workers for a 5 percent pay increase.


The administration further agreed to launch a job evaluation program that would evaluate the nursing and secretarial- clerical jobs on the basis of comparable worth. The administrators pledged that the study’s findings would be used as the basis for any further pay adjustments.


The administration’s moves came after demonstrations by nurses and secretarial- clerical workers and by a clear threat of unionization by the Union of American Nurses and the United Office Workers. Union organizers had held discussions with the nurses and office employees and had circulated the results of a comparable worth study ( shown in Ex-hibit 10– 1A) to illustrate the extent of pay inequities. David Hardy, director of personnel at Twin Oaks, was acutely aware of the troubles brewing at his hospital. He knew that union organizers were meeting with employees and distributing the study flier. Overall, Twin Oaks’ pay levels for its nurses and office staff were very similar to the levels at Lexington Memorial before the 5 percent increase. How-ever, the levels were not competitive with compensation available in Denver, which is located about 100 miles north of Lexington. In the last week, Hardy had met with representatives of the two employee groups at their request.


There, the spokeswomen made three requests: an immediate 5 percent pay increase, the establishment of a job evaluation program based on the concept of comparable worth, and a pledge to base wage adjustments on the findings of the study. Hardy informed James Bledsoe, the hospital director, of the employees’ requests: Bledsoe asked for a recommendation for action within three days. Before developing an action plan Hardy met with his two top aides ( Janet Sawyer and Charles Cooper) for an initial, infor-mal discussion of the situation. In Hardy’s view, the key question focused on whether to evaluate the jobs on the basis of comparable worth. “ I favor launching the job evaluation program,” said Janet Sawyer. “ Nationwide, there is a disturbingly large gap between the pay levels of predominantly male and female jobs. Consider that there’s no difference in the median education levels of men and women— about 12.6 years. Yet with the same median amount of education, women on the average earn 40.8 percent of a man’s median pay. If we take a close look at our compensation levels across jobs from the perspective of comparable worth, we’ll probably find some pretty disturbing gaps of our own. “ There’s a growing precedent for comparable worth- based pay adjustments,” she con-tinued. “ Over 30 states have comparable worth bills pending or commissions that are studying the issue. Minnesota has had comparable worth- based pay policies for its employ-ees since 1983, and several city governments have implemented the concept.” “ That’s precedent in the public sector, not private industry,” said Charles Cooper. “ I would favor a pay increase, perhaps 5 percent, to keep us competitive with Lexington Memorial. However, agreeing to a job evaluation based on comparable worth is opening the door to a very questionable and costly concept.” “ I’m troubled by the concept of comparable worth for three reasons,” he continued. “ First, if you implement comparable worth, you destroy our free market system. The mar-ket does discriminate, but on the basis of supply and demand, which accurately reflects a job’s worth. The market is blind to gender.” “ I’m not so sure about its visual shortcomings in that regard,” Janet said. “ I agree with Janet that a sizable wage gap does exist,” Charles continued. “ But accord-ing to some studies, much of that gap is not due to gender. For example, I’ve just reviewed a study by the U. S. Labor Department that found that over 50 percent of the gap between men’s and women’s pay is due to vocational training, the industries that women choose, and geographic location. The remaining gap could be due to sex discrimination, but frankly I’m not willing to destroy the free market system to find out. “ Second, there’s the issue of implementation,” Charles said. “ Here, comparable worth floats in a sea of subjectivity. If we conduct the evaluation, we must evaluate all jobs in the hospital, not just the nurses, secretaries, and clerical workers. Doing so requires one evalu-ation system with one set of job factors.

Which factors do we use? How do we weigh the factors in calculating a job’s worth? Few objective guidelines exist for us to use. “ And suppose we did implement comparable worth,” he continued. “ We might create internal pay equity across our jobs but it would not address our need to be externally com-petitive. For example, suppose we determine that two jobs are very similar in worth, almost identical.


Using comparable worth as a basis, we provide the same pay for both jobs. “ However, marketwise we’re paying far too much for one job and far too little for another. How do we attract people for the underpaid position? We end up with too many applicants for jobs already filled and not enough for jobs that go unfilled. “ Third, there’s our primary concern— costs. We won’t know how much comparable worth will cost us until we’re into the evaluation program. However, given adjustments made in clerical and secretarial pay by government offices that have implemented compa-rable worth, the cost should be hefty. Look at the estimated price tag for implementing comparable worth nationwide— over $ 150 billion. Business and society would pay the bill via inflation and lowered productivity.” “ We could conduct an effective job evaluation program— other companies have done it,” Janet countered. “ General Electric has overhauled its job evaluation methods to reflect concerns about comparable worth. Bank of America has also made some changes; it’s in-corporated job factors into predominantly female jobs that weren’t there before, such as physical demands for computer VDT operators and bank tellers. We could also talk with Lexington Memorial about how they plan to conduct their job evaluation program. “ I’d suggest that we develop a job evaluation plan that’s tailor- made for our hospital,” Janet continued. “ We could form a committee composed of 6 to 10 members with represen-tatives from all functional areas. The committee would be charged with identifying the ele-ments that should be considered in evaluating all jobs in the hospital. It would also determine the weights for all factors. For some factors, such as knowledge and experience, account-ability and judgment would be more difficult. But we could do it; others have done it.”


What about costs?” David Hardy asked. “ Charles is right,” Janet replied. “ We won’t really know until the evaluation task is complete. “ But as a very rough estimate, I’d say we would be raising the nursing and office work-ers’ pay by at least 10 percent, probably more. However, we can phase in the increase over a number of years, a bit at a time.’” “ What happens if the evaluation determines that some male- dominated jobs are over-paid?” asked Charles. “ Do we reduce our pay while boosting the women’s? Threat of unionization is a factor in regard to the nurses and clerical staff. What about the possibility of male employees unionizing because of pay cuts?” “ We’d have to address that question,” Janet replied. “ But given that most of our staff are women, overall our employees would benefit from comparable worth.” “ You know, I’ve heard a lot about women benefiting from comparable worth,” said David Hardy. “ But over the long term, I’m not sure. It seems to me that if the concept is imple-mented nationwide, companies will have a higher wage bill with no increase in productivity. So they may pay the bill by reducing the number of jobs with the highest wage increases— jobs that women hold. Many women may find themselves out of work.” “ That might be,” Janet said. “ However, that hasn’t happened in countries like Australia and Great Britain that have actively closed much of the gender- based wage gap in recent years.” “ Any other thoughts?” asked David. “ We should take a good look at a pay increase, and perhaps even more than the 5 percent requested,” Charles said. “ But stay away from comparable worth. For private business, it’s uncharted and dangerous territory.” “ This whole situation has raised questions in my mind about the fairness and validity of our pay structure,” Janet said. “ We may have problems. Let’s look at it, and let’s consider comparable worth. We may not be able to go the full 90 yards.


How about a first step?” Discussion Questions

  1. In your view, is comparable worth a legitimate strategy for determining job compensation?


  1. As the director of Twin Oaks’ HR department, what recommendations would you make to James Bledsoe?


  1. From an HRM perspective, what are the challenges of implementing comparable worth?


  1. Have you identified the critical issues/problems in the case and analyzed the key facts related to the issues/problems?


  1. Have you discussed a tentative solution that addresses the issues/problems and how you would implement your solution?

preview of the answer..

Based on my own observations, comparable worth is not legitimate strategy for determining job compensation. This is despite the fact that it reduces the wage gap between male and female employees. Employing this strategy is likely to limit the ability of employers to respond to the changes in the labor market. This is because employers will not be in a position to determine employees’ salaries..

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