14.11 Case Study: Brothers Flooring
Case Study: Brothers FlooringExercises
Ali and Abbas Hamdouni, two brothers, launched a residential flooring business specializing in tile, laminate, and hardwood installations. From the outset, they prioritized high-quality workmanship and closely supervised their team of three employees.
Recently, Ali was diagnosed with advanced arthritis and advised by his physician to significantly reduce physical labour. As a result, Abbas assumed full responsibility for managing operations and completing contracts. However, Ali agreed to assist during peak periods and would be compensated at a rate of $125 per square meter (m²) for any flooring he installs.
With Ali on reduced duty, Abbas must now ensure that all accepted contracts—each with a fixed start and completion date—are fulfilled over the next six months. The monthly installation targets are summarized below:
| Months | August | September | October | November | December | January |
| Est. Volume of work (in square meters) | 600 | 500 | 1000 | 1200 | 650 | 590 |
Workforce and Compensation Structure
Abbas met with the three employees and proposed the following plan:
- The team (including Abbas) will aim to install 640 m² per month, with each person responsible for 160 m².
- Each employee will receive a flat salary of $5,000/month.
- Any employee installing more than 160 m² will earn overtime pay of $62.50/m², capped at 240 m²/month.
- Abbas emphasized maintaining quality: “You’ll have your jobs, with salary and overtime pay, but we don’t want to rush installs and lose quality.”
- Ali reiterated his willingness to help during busy months and mentioned that business volume may increase next year, prompting Abbas to consider hiring an additional employee.
Questions
Abbas has asked for your help in answering two key questions:
- Develop a six-month workforce and cost plan based on current staffing and Ali’s availability.
- Evaluate whether hiring a new employee (at $5,000/month) would be cost-effective during this period.
Solution
1. Six-Month Plan and Cost Analysis (Current Workforce + Ali)
| Month | Demand (m2) | Employees | Regular Install (m2) | Regular Cost | Overtime (m2) | Overtime Cost | Ali’s Install (m2) | Ali’s Cost |
|---|---|---|---|---|---|---|---|---|
| Aug | 600 | 4 | 640 | $20,000 | 0 | $0 | 0 | $0 |
| Sep | 500 | 4 | 640 | $20,000 | 0 | $0 | 0 | $0 |
| Oct | 1,000 | 4 | 640 | $20,000 | 320 | $20,000 | 40 | $5,000 |
| Nov | 1,200 | 4 | 640 | $20,000 | 320 | $20,000 | 240 | $30,000 |
| Dec | 650 | 4 | 640 | $20,000 | 10 | $625 | 0 | $0 |
| Jan | 590 | 4 | 640 | $20,000 | 0 | $0 | 0 | $0 |
Total Cost:
- Regular Salaries: $120,000
- Overtime: $40,625
- Ali’s Installations: $35,000
- Grand Total: $195,625
2. Evaluation of Hiring an Additional Employee
Assuming a fifth employee is hired at $5,000/month (totalling $30,000 over six months), the revised plan would look like this:
| Month | Demand (m2) | Employees | Regular Install (m2) | Regular Cost | Overtime (m2) | Overtime Cost | Ali’s Install (m2) | Ali’s Cost |
|---|---|---|---|---|---|---|---|---|
| Aug | 600 | 5 | 800 | $25,000 | 0 | $0 | 0 | $0 |
| Sep | 500 | 4 | 800 | $25,000 | 0 | $0 | 0 | $0 |
| Oct | 1,000 | 4 | 800 | $25,000 | 200 | $12,500 | 0 | $0 |
| Nov | 1,200 | 4 | 800 | $25,000 | 400 | $25,000 | 0 | $0 |
| Dec | 650 | 4 | 800 | $25,000 | 0 | $625 | 0 | $0 |
| Jan | 590 | 4 | 800 | $25,000 | 0 | $0 | 0 | $0 |
Total Cost:
- Regular Salaries: $150,000
- Overtime: $37,500
- Ali’s Installations: $0
- Grand Total: $187,500
Recommendation
- Cost Savings: Hiring a fifth employee reduces total cost by $8,125.
- Employee Morale: Existing employees earned significant overtime in October and November. Hiring may reduce their income and affect morale.
- Ali’s Health: If Ali’s condition improves, his availability could reduce the need for a new hire.
- Future Demand: If business volume increases next year, hiring may become necessary.
Conclusion: While hiring an additional employee offers modest cost savings, Abbas should weigh this against employee satisfaction, Ali’s recovery, and future workload. A flexible approach—such as temporary help during peak months—may be more appropriate until demand stabilizes.
OpenAI. (2024, May 7). ChatGPT. [Large language model]. https://chat.openai.com/chat
Prompt: Reviewed by authors.
