Performance Pay at Safelite Auto Glass - Case Study Example

? Case Study: Performance Pay at Safelite Auto Glass of the of the Case Study: Performance Pay at Safelite Auto Glass Does the proposed PPP plan address the installers productivity problems described in the case? Does it introduce new problems? Performance Management is undoubtedly one of the most important areas in managing the operations of a business enterprise. It is clear that the present management of Safelite Auto Glass, particularly the CEO John Barlow and COO Staglin want the firm to be profitable and expand into new markets. Ever since the change of management in 1987, there have been efforts towards expanding Safelite’s reach and markets. For this purpose, Barlow hit upon the idea of allowing the setup of franchise operations all across the USA, a move which increased the number of Safelite outlets from 250 to 550 within two years from 1987 to1989 (Hall et al., p 1) . The problem here was that stores were opened up rather haphazardly and customers had problems locating the stores. To deal with this issue, the CEO then hit upon the idea of using mobile trucks to provide repair and installation services to the customers at their own location. There was no need to bring the vehicle to the repair outlet. But here again the problems faced were coordinating the needs of the customers and reaching the locations correctly. To solve these issues, it was decided to open up warehouse style locations complete with technicians and fitters who could service, repair and fit out a car windshield all from this central location. The communications network installed here was used to route calls to the technicians so that service and repair work could be carried out with a minimum of time wastage. A limiting factor here was that too many calls came into the more central and popular locations while others stayed idle, but this too was being addressed by forwarding calls to locations that were not so busy. It is quite evident that these expansion efforts came with a cost. To make more use of idle capacity on the part of those warehouse locations that were not too busy, the managers of those locations had themselves been put on a performance pay plan that required them to do some actual fitting, repairing and servicing when the place was not too busy. Quite possibly some of the managers might have resented this double role. Yet the fact is that they had to improve the productivity of the warehouse before they could be considered for a rating upgrade. While it is clear that the present performance pay plan is not working, part of the reason is management’s lack of strategic long term thinking. This is evident from the way that problems creep up and are solved on the run. In the beginning the franchise system created a glut of stores in some locations and scarcity in others; it also created internal competition which was counterproductive. The use of trucks as mobile repair shops was innovative but included a cost that should have been considered before launching this initiative. Safelite’s own deficiencies in the current performance pay plan make it seem that the workers are being discriminated against after the initial guarantee period of 12 weeks have passed. At the initial stage, the worker is being guaranteed a 12-week basic wage rate depending on his previous productivity. But after 12 weeks have passed, the worker has to prove himself again by meeting the difference and also make efforts to increase his productivity. This might not always be possible due to seasonal variations, intensity of competition and manager bias in a particular warehouse. As indicated, the workers would take it easy in the first 12 weeks of the plan unless pushed by conscientious managers. They would prefer to play pinochle (Hall et al., p 5) while maintaining a minimum of productivity. Secondly, despite the best communication systems there is a lack of proper coordination between the order takers on phone and the technicians and the drivers. This point needs to be addressed because it is having an effect on productivity. Too often the location is botched up, as the directions are not taken correctly. The drivers may be inexperienced and the order takers themselves should know how to ask what problems the callers are facing and give the technician a full and proper report of the call so that they know exactly what is wrong and what parts and tools are required to fix the problems. Proper attention to this factor will undoubtedly improve productivity. Some training needs to be given to the call center receptionists. Drivers should be locally employed and should know the areas they are going to be deployed in. Their sense of direction and driving skill may be tested by good drivers already on the job. On every call, the name, address and mobile phone number of the caller should be taken and given to the driver and technician prior to proceeding on a service call. Maps should be provided in every truck and if possible a GPS system with Google Maps also installed. The CEO Barlow is right when he exclaims that productivity is pathetic if only one windshield is being repaired per day, taking into account at most two out of eight and a half hours of a worker’s time on the job. In my opinion the duration of the wage rate guarantee should not be for more than four weeks. A worker can have one bad month, but then he has to start producing or just told to leave. There is high competition in this industry and if workers are seen to leave for just a dollar more per hour, having a 12-week guaranteed wage is a luxury Safelite cannot afford. 2- What are the pros and cons of switching from wage rates to piece rate pay? Are Safelight installers good candidates for piece rate pay? The use of wage rates, it has been seen determine daily emoluments to workers employed in a regular or temporary job where the nature of work is largely standardized. They form the means of calculating rates of pay per hour for a given job in a given industry. This is usually determined by the demand and supply situation regarding a particular skill set in that industry. Secretaries and managers in offices are usually paid a monthly salary that is fixed, but can be restated on wage rate basis for temporary workers if needed. On the other hand, piece rate pay systems are used in those industries where productivity can be measured on a piece by piece basis. In this case, the output per day is calculated on the basis of the actual number of cars repaired or windshields fitted. Since the worker knows that he will get a fixed rate per number of windshields fitted, he will do his best to earn more by increasing the number of windshields fitted per day. In some cases, once he crosses a minimum threshold of productivity, say 5 windshields, any additional work done beyond this may attract a higher rate. The worker is being motivated to produce more by getting a higher rate for additional work done. I would think that implementing this at Safelight Auto Glass would be a good strategy to increase productivity, especially in the summer months. The technicians who work fast would be able to fit more windshields per day, and would be rewarded more. They would also be able to reduce the worker wage rate guarantee to 4 weeks, affecting cost savings there. In fact there should be no need for a guarantee period at all in the summer season, if all the workers are productive and Safelight is not overstaffed. The workers need to be motivated properly and systems implemented with end to end clarity, and a piece work rate system would be able to do this very effectively. 3-What are the likely consequences of the switch for important organizational outcomes (i.e. turnover, recruitment, and customer satisfaction)? Both organizations and workers are known to resist change, and often cling on to the notion that the old system was more efficient. It is therefore important to get all levels of workers and management involved in the communication of the decision to switch from a wage rate system to a piece rate per unit completed. If the worker is productive, there is no need for him to be worried for he will be rewarded for his honest efforts. In the past it may be explained that Safelight had to bear the cost of a 12 week guarantee in wage rates for even new and unproductive workers, which had affected the bottom line. It’s a free world and workers would be welcome to switch employers, but it is likely they would come back or reconsider because now all workers will be paid on the basis of their individual productivity. The worker would only have to look at the level of competition in this industry before he reconsidered his decision to leave. It is not likely that turnover would go up; on the other hand it is likely that recruitment may increase as more productive workers join the company from other organizations as the non-performing workers would be weeded out by the new system. Customer satisfaction would also increase if a standard of quality is maintained on the windshields that are fitted. A worker should be penalized for slipshod work done. Works Cited Hall, B.J.; Lazear, E. & Madigan, C. (2001). Print. 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