Organizational Architecture andStandards

Background Woodhaven Service is a small, independent gas station located in the Woodhaven section of Queers, The station has three gasoline pumps and two service bays. The repor facility specializes in automo- live maintenance (oil changes, tune-ups, etc.) and minor repairs (mufflers, shock absorbers, etc.). Woodhaven generally refers customers who require major work such as transmission rebuilds and electronics to shops that are better equipped to handle such repairs, Major repairs are done in-house only when both the customer and mechanic agree that this is the best course of action. During the 20 years that he has owned Woodhaven Service, Harold Mateen's competence and faimess have built a loyal customer base of neighborhood residents. In fact, demand for his services his been more than he can reasonably meet, yet the repair end of his business is not especially profitable. Most of his competitors earn the lion's share of their profits through repairs, but Harold is making al- most all of his money by selling gasoline. If he could make more money on repairs, Woodhaven would be the most successful service station in the area. Harold believes that Woodhaven's weakness in repair profitability is due to the inefficiency of his mechanics, who are paid the industry average of $300 per week. While Harold does not think he overpays cher, he feels he is not getting his money's worth. Harold's son, Andrew, is a student at the university, where he has learned the Socratic dictum, "To know the Good is to do the Good." Andrew provided his father with a classic text on employee morality, Dr. Weisbrollen's Work Hard and Follow the Righteous Way Every morning for two months, Harold, Andrew, and the mechanics devoted one hour to studying this text. Despite many lively and fascinating discussions on the rights and responsibilities of the employee, productivity did not improve one bit. Harold figured he would just have to go out and hire harder-working mechanics. The failure of the Weisbrouen method did not surprise Lisa, Harold's daughter. She knew that Andrew's methods were bunk. As anyone serious about business knows, the tree science of produc- uvity and management of human resources resides in Professor von Drecken's masterful Modify. Ing Organizational Behavior through Employee Commitment. Yes. employee commitment was the answer to everything! Harold followed the scientific methods to the letter, Yet. despite giving out gold stars, blowing up balloons, and wearing a smiley face button, he found Lisa's approach no more successful than Andrew's. Compensation Plans Harold thinks that his neighbor Jack Myers, owner of Honest Jack's Pre-Enjoyed Autorama, might be helpful. After all, one does not become as successful as Jack without a lot of practical knowledge. Or maybe it is Jack's great radio jingle that does it. Jack tells Harold, It's not the jingle, you Idiot! It's the way I pay my guys. Your mechanics make $500 a week no matter what. Why should they put out for you? Because of those stupid buttons? My guys my guys get paid straight commission and nothing more. They do good by me and I do good by them. Otherwise, let 'em serve. Look. it's real simple. Pay 'ero a percent of the sales for the work they do. If you need to be a nice gay about it, make that percent so that if sales are average, then they make their usual $500. But if sales are better, they get that percent extra. This way they don't get hurt but got real reason to help you out This hurt Harold. He really liked those butons. Still, Jack did have a point Straight commission, however, seemed a little radical. What if sales were bad for a week? Thet would hurt the mechanics. Harold figured that it would be better to pay each mechanic a guaranteed $300 a week plus a commission rate that would, given an average volume of business, pay them the extra $200 that would bring their wage bock co $500. Under this system, the mechanics would be insulated from a bad week, would not be penalized for an average week, and would still have the incentive to attempt to improve sales. Yes, this seemed more fair. On the other hand, maybe Jack knows only about the used car business, not about business in general. Harold figured that he should look for an incentive pay method more in line with the way things are done in the auto repair business. Perhaps he should pay his mechanics as he is paid by his customers-by the job. It is standard practice for service stations to charge customers a flat rate for the labor associated with any job. The number of labor hours for which the customer is charged is generally taken from a manual that outlines expected labor times for specific jobs on specific vehicles. The customer pays for these expected hours regardless of how many actual labor hours are expended on the job. Many shops also pay their mechanics by the job. Harold thinks that this ap- proach makes sense because it links the mechanic's pay to the labor charges paid by the customer