October 23, 2000

Mr. Mahad Shiller
Chief Executive Officer Headquarters
Shiller SA
Frankfurt, 110522
Germany

Subject: Discussions on ways to decrease absenteeism

Dear Mr. Shiller:

It was good to meet you in person the other day and I'm especially grateful for your encouragement and advice. On your request, I'm writing to you to inform you of how the discussions on reducing high absenteeism in our company in Paris have progressed.  I hope the following information will satisfy your needs.

Our talks have focused on two things: diagnosing the biggest and most fundamental causes of the high absenteeism and figuring out the adequate steps to correct them. There are actually many causes of, and many corresponding cures to high absenteeism, but I would like to remind you that our focus has been on the most urgent causes and cures.

It will help your understanding if you know the three most frequent complaints from our workers. First of all, wages of our line workers are eight percent lower than those of workers in similar local factories. This low payment has led to low morale among the factory workers, and have been the leading cause of high absenteeism. Second, even though almost a third of our employees are women and about three-fifths of the total workers are working parents, our company have neglected their needs by lacking childcare facilities, thus imposing upon them heavy financial burden of getting baby-sitters. Third, the current fixed working hours have imposed psychological burden on these working parents as well, as they cannot afford time for their children.

Against this background, we have put together a plan consisting of three points. As for  payment, we agreed to increase our line workers wages by 4% (about $2.24) to $58.24 per day. The difference in the wage cost for the company between before and after the raise is shown in table 1.

Table 1.

Despite some managers' initial concerns about the current financial problem resulting from the fall in sales, we agreed on the pay increase. Our decision is based on a recently released report predicting that the economy will recover in about two years and our company will also turn to surplus in two years, making profits of almost $10 million a year.

In addition to the wage increase, we agreed to provide childcare facilities as well. According to the small survey that we conducted among the employees, about a hundred children between two years and five years old will be committed to the company's day care center when it's established in about a half year. The budget for this facility is as follows.

Table 2.

According to the budget, the income from the nursery operation is going to be $22,000 a month, meaning that the total income will exceed the construction cost within five years, allowing the company to make a profit out of it. Meanwhile, the monthly nursery fee is far cheaper than the market nursery fee, thus relieving the workers' financial burden.

Besides the wage raise and childcare facilities, the last component of our plan is to introduce a no fault absenteeism policy from the next fiscal quarter, replacing the current traditional absenteeism policy. Under the new system, workers are not asked questions about their absence as long as they do not exceed the total 15 days of absences a year. Specifics have yet to be discussed on this new policy.

Our assessment of the plan we have drawn up is that these steps will certainly help reduce the absenteeism in the region of 15 percent by almost 10 percent. Although it may seem risky and unrealistic to expand the budget at this time of recession, we are positive that implementing these steps as soon as possible is the only fundamental cure to the high absenteeism, because the three components will, to a substantial extent, soothe the most frequent and sometimes even furious complaints of our workers; low wage, no childcare facility, and inefficient, fixed working hours. Another reason that we decided to run the risk of expanding the budget is that we have some objective and trustful evidence such as financial reports saying that the national economy as well as our company's financial situation are getting better, and will fully recover in, at least, two years.

We recommend that the headquarters provide some financial support for these steps to be successfully taken. We're absolutely convinced that the high absenteeism dies hard unless immediate and fundamental actions are taken. If you provide us with more liquidity now, we will certainly be making great profits in two years well enough to pay back what we'll owe you. Also we recommend that you continue to pursue ways to reduce absenteeism in consultation with experts, and continually give advice according to the it to all the headquarters and the subsidiaries.

In conclusion, we feel that the three ways we've discussed will remarkably raise the workers' morale and also alleviate their financial and psychological burdens, thus decreasing absenteeism. We have come to learned a lot, through other companies' cases,  about how absenteeism can be a fatal cause of low productivity, so how important it is  to keep low absenteeism. Another thing that we came to realize is absenteeism is a stubborn tendency. We need fundamental (I don't know how many times I emphasized this word throughout this letter.) steps and consistently watchful eyes on it to fight it. 

As always we are grateful for your concern and help. If you require further information, please don't hesitate to contact me. I will stay at this hotel for the next few days at least until the 21st, so you can reach me at the number I gave you the other day.

Sincerely,

Yoo, Jeong-Min
Union Representative