Compensation and reward for non-permanent employees is an area that requires a lot of understanding. Employees who are not full-time workers are mostly driven by the pecuniary reward that they receive from the employees. Given that labor cost should not exceed 30 percent of the total sales, the employer has to provide incentives as well as restrict the wage cost to this limit. Given this situation, this memo will try to understand if the incentive plan introduced by Charlie for William can be extended for other parts washers. Further, can this plan be extended for other employees working in other departments, and if some other incentive plan can be devised that can universally be used for the whole organization.
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Extending the Plan to Parts Washers?
In the case study, Charlie observed that William ended up earning the same amount of money over a week irrespective of the work done. On days when the work pressure is high, William cleaned 23 or 24 parts while when the workload was low; he cleaned 12 to 13 parts, taking almost the same number of hours. However, Charlie also realized that William had to earn approximately $300 a week for he had a family to run.
Therefore, he devised a wage plan that was based on performance rather than time. He decided to pay William based on the number of parts he cleaned. Thus instead of an hourly $8 wage, Charlie decided to pay William $0.33 per item washed. This wage scheme will increase the productivity of William, as he will clean more items per hour, reducing the unused fuel cost. This experiment worked well for William. I believe this experiment if applied to other employees cleaning parts, will be lucrative for the company, as this will increase productivity. The only problem is the number of items washed by each parts washer has to be accounted for by the manager.
Other Employees on Similar Plan
Charlie introduced a performance-based reward for the parts washers. The reward scheme is passed on the performance of the workers and the pay is adjusted accordingly. In departments where the quality of work must be maintained, a perceivable problem might be a reduction of quality of work when this reward plan is applied. If the managers are willing to trade off a slight fall in quality for increased productivity and reduced cost, this incentive scheme can be applied to all departments of the organization. However, this direct incentive plan may not be applicable to customer services. Employees engaged in direct sales may have a fixed and incentive-based wage scheme.
Another Incentive Plan
The other incentive plan that can be introduced in the company can be linked to the organizational performance as done in TESCO (Armstrong, 2010). As the present reward scheme is linked to individual performance, the workers are not looking at the bigger picture of the organizational goal. If the workers are provided an annual incentive related to the performance of the company, they will try to do better and increase accountability and aligning the goal of the employees with the business strategy (Hale & Bailey, 1998). This may reduce the quality issue now faced by the company.
Incentive Plan Suggestions for Store
A store manager must include compensation and reward plan not only for individual performance but also for team performance. The sales team must work seamlessly to raise the performance level of the organization (Coughlan & Narasimhan, 1992). Charlie’s incentive plan for the store manager should be a combination of individual, team, and organization performance.
Armstrong, M. (2010). Armstrong’s handbook of reward management practice: Improving performance through reward. London, UK: Kogan Page Publishers.
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Coughlan, A. T., & Narasimhan, C. (1992). An empirical analysis of sales-force compensation plans. Journal of Business , 65 (1), 93-121.
Hale, J., & Bailey, G. (1998). Seven Dimensions of Success Reward Plans. Compensation Benefits Review , 30 (4), 71-77.