Jack Hopson has been making wood furniture for more than 10 years. He
recently joined Metropolitan Furniture and has some ideas for Sally Boston, the
company’s 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 Jack’s previous employer, a competing furniture maker, Jack was paid on a
piece-rate 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 Jack’s 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 piece-rate
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 piece-rate pay plan at
his previous employer, she is unsure of which path to take.
Questions:
1. What are some advantages of offering a piece-rate pay plan to the furniture builders at
Metropolitan Furniture?
Generally, research shows that incentives are associated with higher
employee performance. In the Metropolitan Furniture company, the individual
incentive of Piece-rate pay plan has many advantages starting from:
1- It helps to increase the efficiency of all workers: one of the greatest
advantages of this system is how it helps to raise the efficiency of
employees by making them engaged in the work most of the time.
Which they are excellently conscious of the fact that they will be paid or
not based on their own working output. It also promotes the relationship
