A hospital was having financial problems. Occupancy was low, equipment costs were higher than expected and the cost of supplies had increased. At the year's end, a rumour began to circulate that there would be no salary raises and that personnel reductions were possible. The hospital's five hundred employees were shocked by the extent of the financial problems indicated by the rumours. They began to ask supervisors, "Does top-level management agree with this rumour Or not?"
The managers made no comment, refusing to confirm or deny the rumour. The official communication from management was, "The matter is under study". Most employees believed there would be no pay increases and, as a result, their morale was getting low.
When management announced that there would be no layoffs and that there would be a 2-percent pay raise, the employees were delighted. Management was pleased with the employees' reaction, since six months before there were demands for a 10-percent pay increase and reduction of workloads.
Questions
(i) Was the employee reaction to the 2 percent pay raise more favourable than it would have been if the rumour had not started?
(ii) Should management have taken action when the rumour started circulating?
(iii) What would be possible results if the employees learnt that the management
had started the rumour?
