Begin by analyzing qualitative and quantitative data for the current system (as identified in the case study) that will inform your future recommendations and revisions. Once your analysis has been completed, compare and contrast the provided quantitative data regarding the current benefits and compensation system with external benchmarking data from organizations within the same industry using the Medtronic Case Supplement. Then draft Parts A–D of your benefits and compensation analysis. Thoroughly cover each of the critical elements, and include your answers to the guiding questions. Specifically the following critical elements must be addressed: I. Benefits and Compensation Analysis: For this part of the assessment, you will analyze given aspects of a benefits and compensation package from the provided case study. You will analyze qualitative and quantitative data regarding the current system and determine gaps in that system that will inform your future recommendations and revisions. A. Analyze the issues or concerns of employees through a review of the qualitative data presented in the case study, for their validity and importance. Be sure to consider the needs of different demographics of employees within the organization. B. Determine which issues within the qualitative input data from employees were the most consistent and the most prominent. You may consider also representing your response visually. C. Determine the key issues or concerns of employees that should be targeted and addressed, based on the provided qualitative data. Justify your response. What issues or concerns should be targeted and why? Why should other concerns be made less of a priority? You could consider the underlying reasons behind the issues voiced by employees. D. Compare and contrast the provided quantitative data regarding the current benefits and compensation system with external benchmarking data from organizations within the same industry. Be sure to use the provided Medtronic Case Supplement to complete your response. What does the current system have that other organizations do not? What do other organizations offer that the current system does not? Be sure to justify your response.
Here is the case study for this case. ing environment facing the $1.2 billion medical device manufacturer. Since its founding, Medtronic had striven to meet its corporate mission: To contribute “Toward Man’s Full Life” by designing, manufacturing, and selling instruments that alleviate pain, restore health, and prolong life. However, worldwide concerns about the cost of health care needed to be addressed in the strategies Medtronic employed to achieve this mission. According to George: The health care system in the United States is in a tremendous state of flux, and we need to decide whether to prepare for the advent of a national health care system. In Europe, we need to address the European Commission’s efforts to harmonize product approval regulations and increase competition. And in Japan, the Ministry of Health and Welfare has been considering a new pricing system. The new environment called into question the appropriateness of Medtronic’s current strategy and organization. In the last five years, Medtronic had consistently spent 8% to 10% of sales on research and development and more than 36% of sales on selling, general, and administration (Exhibit 1). These heavy expenditures had allowed it to rapidly introduce new products, provide better customer service than its competitors, and set the industry standard for product quality and reliability. They had also enabled it to broaden its operations beyond its core cardiac pacemaker business, in which it had been the worldwide leader since 1960. Organizationally, Medtronic was also moving toward increasing geographic autonomy for its six business units. Some managers outside the United States believed that the company needed to establish more of its manufacturing operations in Europe and Asia. Given the possibility of a lower-margin environment, George wondered whether he needed to make changes in Medtronic’s strategy and organization in order to achieve its corporate objective of growing revenues and earnings at a rate of 15% per year.
In 1949, Earl Bakken abandoned his studies as a graduate student in electrical engineering at the University of Minnesota and formed a partnership called Medtronic with his brother-in-law, Palmer Hermundslie. The two hoped to turn Bakken’s part-time work repairing equipment at Minneapolis hospitals into a full-time business servicing the new, sophisticated medical equipment that emerged after World War II. After struggling in the repair business for a year, Medtronic broadened its activities and began selling medical equipment for several manufacturers. The company’s expertise in modifying equipment, designing new devices, and manufacturing custom products helped build strong relationships with the research teams at local hospitals. It was through such a relationship that Medtronic entered the pacemaker business. In 1958, Dr. C. Walton Lillehei, a Minneapolis open-heart surgeon, asked the company to design a batterypowered pacemaker that he could use to help pace the hearts of “blue babies” recovering from heart surgery to correct congenital heart defects. In roughly 10% of these patients, open-heart surgery temporarily damaged the nerves that transmitted the electrical signal that prompted the heart muscle to contract. As a result, their hearts beat too slowly to supply enough fresh blood to the body, causing fainting, dizziness, shortness of breath, palpitations, and seizures. At the time, existing pacemakers relied on 110 volt, AC power and would shut down during the power blackouts that occurred during the harsh Minneapolis winters. In four weeks, Earl Bakken designed the world’s first battery-powered external pacemaker. The original unit was taped to the patient’s chest and transmitted a 10-volt pulse to the heart by means of a wire that passed from the pacemaker through the chest and into the heart muscle. The more rapid electrical signals from the pacemaker replaced the slow natural beating signal in the patient’s heart. Like all subsequent pacemaker systems, it consisted of four basic components: a battery to provide power, an electronic circuit to transform the power into regular electrical pulses, a case to contain the battery and circuitry, and a lead (pronounced lÄ“d) to carry the electric pulse to the heart. Bakken’s original device, about the size of a small radio, used a 9-volt battery and a simple circuit originally designed for a transistorized metronome. Medtronic’s external pacemakers offered significant benefits to those patients who needed heart pacing for only a limited time. However, an external unit (which relied on a lead passing through the chest into the body) carried the constant risk of infection and was therefore less useful to the larger group of patients who needed the lifelong use of a pacemaker to correct chronic bradycardia, an abnormally slow heart beat.
Responding to this problem, researchers around the world began working on pacemakers that could be implanted in the body, thereby eliminating the need for a lead to enter the heart from outside. In October 1960, Bakken and Hermundslie acquired the rights to manufacture and market a two-and-one-half-inch hockey-puck-shaped pacemaker that could be implanted in the abdomen. By the end of the year, Medtronic had orders for 50 of the $375 units. Despite the popularity of its new implantable pacemaker, rapid expansion and heavy spending on R&D left Medtronic nearly bankrupt, forcing Bakken and Hermundslie to seek additional financing from a local venture capital group. In an extensive restructuring, Medtronic stopped selling and servicing other manufacturers’ equipment and laid off half of its employees. The restructuring set the stage for Medtronic’s renewal. In 1964, the company revolutionized the pacemaker business with the introduction of a transvenous lead system.
Using the new system, a cardiologist could connect the pacemaker to the heart by snaking a lead through the jugular vein into the interior of the heart. The new system eliminated the need for opening the patient’s chest cavity and attaching a lead directly to the heart muscle. This simplified procedure could be performed under local anesthesia, greatly reducing the chance of complications and dramatically decreasing the cost of pacemaker treatment. In 1973, Medtronic again revolutionized the industry when it introduced the Xytron® (pronounced Zi-tron) pacemaker. In addition to being smaller and lighter than earlier devices, the Xytron had new circuitry and an improved mercury-zinc battery that extended the unit’s life expectancy from the two years provided by earlier devices to six years. The Challenge of Product Quality The introduction of improved products such as the Xytron steadily shifted the medical community’s and patients’ perceptions of pacemaker treatment. Whereas early pacemaker implants were considered pioneering experiments, by the early 1970s, pacemaker implants were becoming routine procedures. Doctors were more familiar with the benefits of pacemaker treatment and the number of patients receiving pacemakers increased. Still, pacemakers remained technically demanding medical devices. According to one Medtronic manager: “You had to take a delicate electronic circuit, put it in a sealed environment with its own power source, and then place the whole system in the human body, one of the most corrosive environments you can imagine.”
As the number of patients with pacemakers increased, Medtronic and its competitors began to confront a new set of challenges related to product quality. Although pacemaker failures were rarely fatal, even small problems demanded extensive management in order to ensure that doctors and patients were properly informed about the issue. Beginning in the mid-1970s, all pacemaker manufacturers had difficulty managing problems with product failure. General Electric, Edwards, and American Optical all exited the business after product quality problems.