Case 2 Individual or Team Reward? Jack Hopson has been making wood furniture for

Question

Case 2 Individual or Team Reward? Jack Hopson has been making wood furniture for more than ten years. He recently joined Metropolitan Furniture and has some ideas for Sally Boston, the companys CEO. Jack likes working for Sally because she is very open to employee suggestions and is serious about making the company a success. Metropolitan is currently paying Jack a competitive hourly pay rate for him to build various designs of tables and chairs. However, Jack thinks that an incentive pay plan might convince him and his co-workers to put forth more effort. At Jacks previous employer, a competing furniture maker, Jack was paid on a piecerate pay plan. The company paid Jack a designated payment for every chair or table that he completed. Jack felt this plan provided him an incentive to work harder to build the furniture pieces. Sally likes Jacks idea, however, Sally is concerned about how such a plan would affect the employees need to work together as a team. While the workers at Metropolitan build most furniture pieces individually, they often need to pitch in and work as a team. Each worker receives individual assignments, but as a delivery date approaches for a pre-ordered furniture set due to a customer, the workers must help each other complete certain pieces of the set to ensure on-time delivery. A reputation for on-time delivery differentiates Metropolitan from its competitors. Several companies that compete against Metropolitan have a reputation of late deliveries, which gives Metropolitan a competitive edge. Because their promise of on-time delivery is such a high priority, Sally is concerned that a piecerate pay plan may prevent employees from working together to complete furniture sets. Sally agrees with Jack that an incentive pay plan would help boost productivity, but she thinks that a team-based incentive pay plan may be a better approach. She has considered offering a team-based plan that provides a bonus payment when each set of furniture is completed in time for scheduled delivery. However, after hearing from Jack about the success of the piecerate pay plan at his previous employer, she is unsure of which path to take. 1. What are some advantages of offering a piecerate pay plan to the furniture builders at Metropolitan Furniture? 2. What are some advantages of offering a team-based incentive pay plan? 3. What do you think Sally should do?

Explanation / Answer

1)

In piece rate incentive plan, the company needs to pay a specific amount to the workers for producing each unit of a product.

Advantages of using this plan are given below:

Piece rate incentive plan would motivate the employees for increasing their productivity.

It is also considered to a cost effective method, as the employer is paying the workers for successful completion of a product.

In hourly pay system, an employee would get same compensation even if he produces less number of units in an hour. Contrary to this, in piece rate system, employees can get paid as per their production rate and efficiency.

2)

As per the team-based incentive plan, Sally is planning to provide bonus to the employees when each set of furniture is completed in time for scheduled delivery.

Advantages of using this plan are given below:

Team based incentive plan would encourage collaboration and coordination among the team members. It would motivate the workers to work together.

As per a research, employees working as per this plan would put their extra efforts for completing the task, because they would not want to let their team members down. Hence, it would increase the overall performance of the team.

This plan would enhance employee satisfaction at workplace. Hence, it would reduce employee turnover.

3)

In piece rate incentive plan, employees would get incentive for their individual work. It might hinder teamwork in the organization, because employees might resist themselves from helping their team members. Furthermore, it might also result in lack of coordination and increase conflict at the workplace.

Contrary to this, in team based incentive plan employees would work together to achieve the overall goals of the company. Furthermore it would improve coordination and collaboration at the workplace. It would create a positive work environment. Hence, it is concluded that Sally should implement team based incentive pay in her organization.

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