The textbook, page 567, describes a study of the Safelite Auto Glass Company by

Question

The textbook, page 567, describes a study of the Safelite Auto Glass Company by Edward Lazear. Worker productivity and profits both increased when the firm abandoned a straight-time pay system in favor of a piece-rate system. Lazear found different results for Levi Strauss when the clothing company changed its compensation scheme in the opposite direction. Levi Strauss abandoned a piece-rate pay system in 1992. Under this system, the firm paid workers based on their performance on specialized tasks. The new system called for groups of ten to thirty-five employees to work together on shared tasks, with their pay based on the work the groups completed. But this system failed. Rather than motivating workers, the quality of work fell as skilled workers feuded with slower colleagues. Threats and insults were common. Labor and overhead costs rose by 25 percent. But Lazear found that a %u201Cteam incentive%u201D approach worked very well for British Petrol and Exploration (BPE). A team incentive approach rewards workers based on the output produced by a group of workers. BPE had an oil field in Prudhoe Bay, Alaska, with about 300 workers. Six months after introducing its team bonus approach, productivity increased more than 12 percent.

1. Why was the team incentive approach at Levi Strauss a failure but a success at BPE?

B. 2. Under what circumstances are piecework systems and team incentive approaches likely to be successful?

Explanation / Answer

1. the team incentive approach will be more successful if implemented on a large group of workers rather than on a small group. Therefore the team incentive approach failed in case of Levi Strauss but succeeded at BPE. Further the work at BPE was more labour intensive and all workers were equally skilled but in case of levi Strauss workers were differently skilled which created disharmony.

2. piece work system is likely to succeed when the work is to be completed through individual efforts and group effort is not required.

team incentive approach is successful where the work requires a large number on workers and team effort is required to get the job done.

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