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Incentive plan for employees

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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 coworkers 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 preordered 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.

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Solution Summary

Discusses piece rate and team based incentive plan for employees in an organization.

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1. Identify and describe at least three advantages of offering a piece-rate pay plan to the furniture builders at Metropolitan Furniture.

The first advantage is increased employee motivation and morale as employees will feel like an integral part of the organization and would consider themselves partners in the growth and success of the organization. The second advantage which stems out from the first one is improved productivity as workers will increase their productivity to earn higher salaries. The third advantage is that workers will improve the delivery timeframe by ...

Solution provided by:
Sheetal Jain, PGDM
Education
  • BComm, University of Delhi
  • Post Graduate Diploma in Management (Equivalent to MBA), All India Management Association
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