Premier Scientific Premier Scientific Inc. (PSI) is a large firm that specializes in the development and manufacture of adhesives. Adhesives developed by PSI are used in areas ranging from consumer products to industrial machinery. PSI has historically been known in industry circles as an innovative company, and this ability to innovate is a vital factor in their success. They operate in a highly competitive environment, and must constantly stay ahead of the competition in product development. Over the past few years, however, several smaller firms have beaten PSI to the market in product areas in which PSI has traditionally dominated. Contributing to this problem is the fact that several scientists and engineers have left PSI to work at these smaller firms. Exit interviews have indicated that PSI is experiencing compensation problems in their technical division, which employs the scientists and engineers. PSI has two job ladders for scientists and engineers: professional and administrative. PSI has always attempted to promote from within, so most employees begin at the bottom of these job ladders and progress upward. One must progress through the professional job sequence before entering the administrative sequence. The professional sequence consists of three levels: PL I, II, and III. At the PL III level, professionals take lead roles in project development. The lower level professionals take on lesser degrees of project responsibility. Advancement through these levels is based in a combination of performance and years of service. Promotion to a higher level in one’s career is not guaranteed, as some never progress beyond levels one and two. With continued excellent performance, however, level three can be reached in 10 – 20 years. Salaries and benefits at each of these levels are attractive. However, once a professional reaches level three, raises are generally limited to cost of living increases. In part, this is done to assure that level three professionals are not paid more than section heads, who are their supervisors. To receive more compensation, professionals must enter the administrative sequence. These positions consist of section head, department head, and director, technical division. Joe Ormand, Director of HR, points to two cases in point that typify the turnover problem. Mary Womack and Vince Cullen were two of the most productive professionals at PSI. Each had corporate- wide reputations for expertise, and had filed for numerous patents. Both attained level three in 10 years. Mary was at that level when she left, which was around two years ago. A start-up firm recruited her, offering a lower salary but the promise of large bonuses depending on the success of the firm. Her children grown, Mary felt comfortable taking the risk. Meanwhile, Vince stuck it out with PSI. Despite his reservations about being a “paper pusher,” he accepted a promotion to section head. However, he soon tired of the administrative chores of the position, which included evaluating the performance of the professionals, making work assignments, managing the budgets and deadlines for projects, and training new employees. He left a month ago to a professional position at the same firm that employs Mary, “with a yearning to return to the bench”. Joe asked the section and department heads what they thought should be done about the problem. They said that they thought things were fine as they were. Most of them had MBAs in addition to their technical degrees, and felt that they should be paid more than the professionals whom they supervise. Several threatened to leave, in fact, if more levels of professional pay were added. They also pointed out that if professionals were given monetary incentive to remain professionals, it would deny PSI a natural source of supervisors and managers. And several of them wondered if PSI should even be competing for talent with these smaller firms. They argued that PSI should be able retain its market dominance with better management of the talent it has. Joe must make a recommendation to top management about this issue. He also realizes that any decision that increases overall compensation expense will face strong scrutiny from top management