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Lillie Finley HRM6632 Weekly Assignment #2 1

Summary For many years monetary incentive has been an established motivational technique used for improving performance. We have been asked to prepare a proposal to Sally Boston of the Metropolitan Furniture Company. She is considering changing the companys traditional pay plan because of an employee suggestion of piece rate plan. Before making a decision about individual or group piece rate incentive plans, there will have to be some research performed before presenting Sally with a proposal. Sally needs to know what the difference between the two incentive plans, what the advantages and disadvantages, and what she might expect from the employees. First, Sally need to understand there are two different types of piece plans. One piece rate plan in used in manufacturing plants and it rewards the employees based on their individual hourly production against an objective output standard and are determined by the pace at which manufacturing equipment operates. The second piece rate plan is based on individual performance standards that include both objective and subjective criteria. If she decides on the group piece rate plan, there are two difference types of group incentive plans. One is the Team based or small-group incentive plans and Gain sharing plans. Secondly, Sally needs to understand that there advantages and disadvantages of the group piece rate plan and the individual piece rate plan. Research suggests that incentive plans will possible lead to higher individual performance, but can present

Lillie Finley HRM6632 Weekly Assignment #2 2 problems. For example, a bonus pay to the workers with the highest sales volume or production level can lead to competition among co-workers. Individual incentive piece work plan maybe impossible to implement because of the output of individual workers are hard to measure. The advantages and disadvantages of the individual piece rate plan: Advantages Promote the relationship between pay and performance Promote an equitable distribution of compensation with a company Compatibility with such individualistic cultures within the US

Disadvantages Promote inflexibility Develop and maintain comprehensive performance Encourage undesirable workplace behavior

The advantages of the group piece rate plan are: More easily to develop performance measures for group Cohesive groups work more effectively Disadvantages Employee turnover-free rider effect Uncomfortable feelings among employees Before implement an individual or group piece rate incentive plan, Sally need to consider the different tasks that each employee will complete while working on group products. Performance on repetitive task has three parts that need to be considered they are the initial performance, improvement in performance due to learning, and performance once the task has been fully learned. Monetary incentives have been

Lillie Finley HRM6632 Weekly Assignment #2 3 known to affect performance, will act upon one or more of these factors. Proposal After doing the research, my proposal to Sally would ne to go with her original idea of the team based incentive plan. Sally should implement the team based incentive plan because this would mean that management and employees will share a common goal. Using a team based incentive plan, Sally can still use employees suggestions. She should use the Rucker Plan because not only will it improve productivity but also reduce her labor cost, raw material cost, service cost and possible other cost. Sally can still pay her employees a standard time rate for the job multiplied by an hourly rate. The Rucker Plan can provide: Financial Participation Ability to see the outcomes of work in monetary terms Reward tied to work behavior Expanded role for employee participation Equitable distribution of gains from productivity improvement

No matter what incentive plan Sally chooses their will be advantages and disadvantages. The Rucker Plan will still allow her to pay a competitive wage to her employees. Because of the Metropolitan Furniture competitive advantage over their competition, the company should be comfortable with the Rucker Plan. References: Bailey, C. D., Brown, L. D., & Cocco, A. F. (1998). The Effects of Monetary Incentives on Worker Learning and Performance in an Assembly Task. Journal of Management Accounting Research, 10119-131. Retrieved from August 25, 2011 from EBSCOhost Hansen, D.G. (1997, Oct) Workers performance and group incentives: a case study Industrial and Labor Review, (Vol.51). (1), 37. Retrieved from August 25, 2011 from Expanded Academic ASAP via Gale: http://go.galegroup.com

Lillie Finley HRM6632 Weekly Assignment #2 4 London, M., & Oldham, G. R. (1977). A Comparison of Group and Individual Incentive Plans. Academy of Management Journal, 20(1), 34-41. doi:10.2307/255460 Martocchio, J.J. (2011). Strategic Compensation (6th edition). New Jersey: Pearson Hall

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