Performance Pay at Safelite Auto Glass - Case Study Example

Performance Pay at Safelite Auto Glass Table of Contents Problem Identification by PPP Plan 1 Pros and Cons of Switching From Wage Rates to Piece Rates 2 Likely Consequences of Switch 4 Bibliography 6 Problem Identification by PPP Plan The PPP (Performance Pay Plan) in Safelight Auto Glass was contemplated by Barlow who was bestowed with the responsibility related to operations in the organization. He initiated this plan after reviewing Safelite Auto Glass’s low productivity. It was identified by him that by introducing an incentive plan, the productivity of the company could be enhanced to a greater extent. From the case study it can be observed that, PPP has tried to address the installer’s productivity problem in a better manner and has also identified new problems that the company was facing. The installer’s problem as identified in the PPP was related to the turnover rates. It has been found that the turnover rate of the company has been quite high because the glass installation was a seasonal business. The busy periods were spring and summer and it was found that at this time, the competition for new hires was mounting. However, the demand for the windshield replacement troughed and as a result the repair shops found it necessary to lay off many of their workers and hire them back during spring and summer. In addition to this, another biggest problem was associated with technicians who were lured by other companies’ offer, which promised to pay them a fraction more than what they were currently receiving. Therefore, as a result it was evident that the installers were changing their jobs since they were paid a Dollar more an hour and were allowed to take the company’s truck home during night. In order to reduce the turnover rate, Safelite also offered truck privileges for a time being, but then stopped it later. It was a matter of concern for the recruiters in HR with regards to getting technicians from other companies to come to Safelite. These were the problems that the PPP had tried to identify which were affecting the company’s productivity. Pros and Cons of Switching From Wage Rates to Piece Rates After going through the case study, it can be revealed that Performance Pay Plan was revised for both the managers as well as the technicians. It was decided to pay the technicians according to the piece rate system rather than the wage rate system which was previously being practiced. The plan was implemented for the technicians to receive the piece rate for every windshield that they installed. According to this plan, the number of windshield that the technician would install in a week would be accumulated. As a result, the technicians’ pay for the week was decided to be based upon the number of installations. The new plan brought both advantages and disadvantages to the technicians. Previously, the technicians received $10-$12 an hour. However, it was analyzed that according to the new PPP, the technicians would receive $15.22 per hour. Therefore, it can be examined that there would be a substantial hike in the salary of the technicians. However, the disadvantages of the plan for the technicians was that for the first twelve weeks of the plan, if the technician did not reach a weekly average which was equal to his previous hourly wage, then he would receive the hourly wage as a guaranteed rate. After that first twelve-week period, his guarantee rate would lower by 30% so that he gets encouraged to work towards the PPP rate. This is quite demotivating for the technicians. This may even discourage the technicians to improve the productivity. The other disadvantage has been that the installers were paid different rates depending on the area of the country in which they lived. It was also apparent from the case study that the technicians were at times asked to remove a work shield while the auto body work was being completed on a vehicle and then replace it later. The Safelite installers can be considered as good candidates for the piece rate system. It has been evident from the case study that the turnover rates have been high in the company. Moreover, the installers were switching to other competitors just for a Dollar increment per hour. The piece rate system was an effective plan for the installers as well as the managers. PP Plan can turn out to be a good proposition for Safelight installers as they were capable enough to provide better output than they are presently providing. The piece rate system has been applicable for the managers as well. Depending upon the size of the store, the managers were expected as well as encouraged to install a certain number of glass units per day. They were also expected to maintain as well as motivate staff of technicians. It was found that the amount of time that the managers would spend both installing and managing would depend upon the number of installers that he is supervising. The advantage of this plan to the managers was that higher the number of technicians hired by them, the lower will be the amount of installations done by them. Likely Consequences of Switch It can be revealed that the piece rate system would be of great benefit to the company. The main motto of the piece rate system is to encourage and motivate the employee performance in return of the monetary rewards. Incentives tend to motivate the staffs since a worker would get motivated even further if his additional labor is rewarded through incentive. The plan provides an opportunity for the employees to increase their pay. If the pay of the employees is increased then it will lead to increased productivity and better quality of the products. This in turn results in customer’s satisfaction as well. It can be revealed that it is the employees of an organization who influence the attitude and behavior of the customers; and on the other hand it is the customers who help in driving the organizational profitability by purchasing and use of the company’s product. The switch to piece rate system would also reduce the rate of turnover in the company. It can be said that satisfied and a loyal employee may not leave the company until and unless circumstances force him to do so. Turnover tends to be less when the employees have a high level of value for their work. It is the duty of the top management to help the employees value their work by means of continuous appraisal, special incentives and recognition. These kinds of motivations and the motivated performance tend to reduce the workers turnover to a great extent. With the revision in the pay plan, company will be able to attract the right people. Not only the right candidate can be attracted but also the company will be able to retain them for a longer period of time. Attempt must be made by the organization to remove the barriers to work as much as possible so that the productivity of the organization doesn’t get hampered. If the organization can establish a link between prize and performance, then the employees tend to look at the organization more as a business partner and less as a boss. The incentive schemes not only help the employees but also the top management such as the managers of the organization. If they receive incentives on their performance then they can supervise their employees in a better way and motivate them to work for the organization with a motive of improving the performance of the organization, increasing the profitability and achieving the corporate mission. Therefore, in concluding note, it can be said that the switch from wage rate plan to the piece rate plan has a positive impact upon turnover rate, recruitment policy and customer satisfaction. Bibliography Hall, Brian. J. & Et. Al. Performance Pay at Safelite Auto Glass (A) Harvard Business School, 2001. Read More