Performance pay at Safelite Auto Glass - Essay Example

?Case Performance Pay at Safelite Auto Glass (A) Table of Contents Solution 3 Consequences of the Proposed PPP Plan 3 Solution 2 4 Pros and Cons ofSwitching from Wage-Rate to Piece-Rate Pay and Evaluation of Safelite Workers 4 Solution 3 5 Consequences of Switching from Wage-Rate to Piece-Rate 5 Turnover 6 Recruitment 6 Customer Satisfaction 6 Bibliography 8 Solution 1 Consequences of the Proposed PPP Plan The proposed PPP (Performance Pay Plan) plan introduced at Safelite was initiated with the objective of increasing productivity in installation of glass units. Problem arrived when it was observed that productivity in the company has become significantly low. Workers were capable of installing more but their output was not up to the mark. PPP was introduced as it can motivate workers, enhance productivity and permit the employer to differentiate among the payments to his employees. PP Plan is assumed to be an effective plan for enhancing organizational climate which was not in line with the policies of Safelite. The organizational climate determines several features of a company inclusive of responsibility, rewards, standards, flexibility, team commitment and clarity. Problems encountered in the company, are related to lower productivity and the subsequent lower sales volume. The proposed PPP is estimated to boost up the company’s morale, sales and also build long lasting relationship between the company and employees, partners and customers. Thus, the plan can be measured to be addressing the productivity problems encountered in the company. As evident form the case, due to implementation of PP Plan, conflict may result in between employees and managers because employees would seek for maximizing their output while managers might pay more attention towards deterioration of quality levels. Employees might pose resistance in introducing new technologies as they might feel that the new technology would have an impact on the standards of production. There might even be reduced willingness of suggesting new methods of production on the part of the employees. There can be increased complaints from the employees that machines and equipments are not properly maintained and that might arrive as a form of excuse. Experienced workers might be reluctant in helping new employees as they will have to keep high focus on their personal level of performances. All these consequences can lead to eminent mistrust between management and workers. Assurance of maintaining equipments all the time will be required. This might lead to increased maintenance cost for the operational department and in turn would definitely have an impact on the financial performance of the company. Solution 2 Pros and Cons of Switching from Wage-Rate to Piece-Rate Pay and Evaluation of Safelite Workers There are several advantages of piece rate system of payment that will be enjoyed by Safelite through the step that it has taken for switching from wage-rate to piece-rate system. The first advantage of piece rate system is that it encourages the efficient workers. The workers who are inclined towards working efficiently are motivated to enhance their level of performance and thus results in greater output volume for the company in turn. Through the switching decision, Safelite will be able to reduce idle time which had been an immense problem in its operation. The adopted system would provide incentives to workers for adopting improved method of production that will result in their improved earning as well. Safelite would be now able to determine the appropriate cost of labor per unit for submission of quotation. This system would even reduce the production cost per unit due to increased production volume. Another cost will also be reduced through this system which is supervision cost. The advantages are achievable but the switching can also result in certain disadvantages for the company. Review of the past records suggest that piece rate system is not helpful in production of quality outputs as the workers are more concerned about quantity and not quality. Regulation over the production schedule gets reduced for the company and does not provide for a uniform production flow. It becomes difficult for a company to set a reasonable and acceptable piece rate for each job. Although Safelite has created different piece rate for different sections, at times conflict can arise from the sections resulting in production halt. Piece rate pay system is an almost appropriate form of payment for Safelite’s workers who has developed a sense of lethargy in executing their works. Installation of just two and a half glasses per day while they are capable enough of producing more than eight; depicts the form of lethargy developed among them. At this point of situation, introduction of piece rate system would provide productive results for the company. Piece rate pay enhances workers for improving their performances and brings excitement among them which are the exact necessity for them. Thus, it can be mentioned that Safelite’s installers are good candidates for piece rate pay. Solution 3 Consequences of Switching from Wage-Rate to Piece-Rate Turnover Piece rate system of payment is an effective way of reducing boredom from work and attracts employees towards higher performance. It creates incentive for enhancing employee effort of job completion. Moreover, workers who have a lower proneness towards boredom will also benefit as the system will result in job enrichment. Thus, it is evident that from Safelite’s switching of payment system from wage rate to piece rate would result in lower employee turnover. Although the system is prone to creating pressure on workers, at the same time it also creates opportunity that allows workers to earn more. Recruitment The recruitment process for the company would become easy as people would enjoy earning their own desired level of salaries. Piece rate system motivates new incumbents towards the job as they can measure their own salaries that are to be collected. They would enjoy deregulation on their salaries from their employers and thus the process of recruitment would result in better outcomes for the organization. But there can be other impacts too as selection of ineligible workers in terms of quality performance can result in lowering of quality standards for the organization. Customer Satisfaction Implementation of piece rate system enhances employee performance and at the same time results in higher customer satisfaction. Employees’ efforts to improve their performance level provides rise to better service to the customers and thus leads to greater customer satisfaction. A company with a diverse and well formed workforce can enhance customer satisfaction to a large extent. Customers demand on-time delivery of products and on-time provision of services. Piece rate would create increased productivity and will reduce lead time. Thus, in case of satisfying customers, piece rate system would be an effective move for Safelite. Bibliography Hall, Brian, J. & Et. Al. Performance Pay at Safelite Auto Glass (A) Harvard Business School, 2001. Read More