Global Power Tools has now implemented a standardized pay system to ensure that

Question

Global Power Tools has now implemented a standardized pay system to ensure that females and males receive equal pay for equal work. However, the company is still being hurt by low-production, high turnover, higher safety violations, and low-morale, particularly amongst the hourly, nonexempt employees who work on the assembly lines. The CEO has asked the HR Department to develop an incentive plan for these assembly line employees in an effort to turn things around. What type of incentive plan would you recommend? Why? What are the pros and cons of this type of incentive plan? Responses should be no more than one page.

Explanation / Answer

Based on Analysis of production environments to maximize output and assessed the best incentive plan for low-production, high turnover, higher safety violations, and low-morale, particularly amongst the hourly, nonexempt employees who work on the assembly :

• Straight piece-work system is the most frequently implemented incentive system. This system is easily understood by workers and is more readily accepted than some of the other systems.

• Standard hour plans is a generic term for plans setting the incentive rate based on completion of a task in some expected time period. Standard hour plans are more practical than straight piecework plans for long-cycle operations and jobs that are nonrepetitive and require numerous skills for completion.

• Taylor plan and Merrick plan provide for variable incentives as a function of units of production per time period.

• In Halsey 50-50 method, the savings from completion of a task in less than the standard time are shared by 50-50(most frequent division) between the worker and the company.

Best Practice in Individual Incentive: Lincoln Electric’s Compensation System

• In appendix table 2, the compensation package for factory jobs at Lincoln Electric is described. Lincoln Electric’s success is so striking that it’s the subject of many case analyses because all the pieces of the compensation and reward package fit together,

• The company gives employees bonus (short term) and incentive (long term) based on performance review.

• Cash Profit Sharing is an award based on organizational profitability and sharing a percentage of profits. This is simple and easily understood. However, the profits are influenced by many factors beyond employee control.

• Stock Ownership or option is an award of stock shares or options. This option awards have minimal impact on the financial statements of the company at the time they are granted but the link between pay and performance is indirect and employees may be required to put up money to exercise grants.

• Productivity/gain sharing is awards that share economic benefits of improved productivity, quality, or other measurable results and focuses on group, plant, department, or division results.

• Team/group incentives is awards based on team/group performance goals or objectives and payout can be more frequent than annual. This reinforces teamwork and team identity/results and is effective in stimulating ideas and problems while it may be difficult to isolate impact of the team performance and to set equitable targets for all teams.

Best Practice in Team Incentive : Kraft Foods uses a combination of financial measures (e.g., income from operations and cash flow) with other measures designed to gauge success in developing managers, building diversity, and adding to market share.

Pros:

Incentive plan upgrades employee morale to do work and meet targets.

Employee performance showed the actual area of growth & skill improvement area.

Cons:

Some times due to official environment or politics stops the growth of an individual and some other person gets benefits of the incentive due to favourism in office.

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