WS.17 Pay for Performance Plans

Recall our previous worksheet regarding the automobile repair shop. You have various jobs in your company: general service technician, automotive technician, master mechanic, and service manager. Assume that you decided to pay them as follows:

• General service technician: $18 / hour
• Automotive technician: $25 / hour
• Master mechanic: $40 / hour
• Service manager: $45 / hour

Tire/ Lube Technicians (or general service technicians) touch most vehicles. They are the backbone of the business. Mostly, general service techs may find themselves rotating tires, checking and topping off fluids, changing oil, and performing other vehicle maintenance services. There are five tire/lube technicians.

Being an automotive technician involves problem-solving, diagnosis and repair, and a robust knowledge of cars. You have five automotive technicians. They hold one or more certificates issued by ASE (Automotive Service Excellence).

Master mechanics are experienced technicians who have taken their vehicle diagnosis and repair knowledge to the next level. These advanced professionals hold all certificates listed above and are tasked with performing repairs involving brakes, hydraulics, suspension, electrical, fuel ignition, air conditioning, computer systems, and more. You have two master mechanics.

The service manager oversees technicians and all work performed in our bays. You have one service manager. A large portion of the role is managing the production workflow and ensuring that work is being completed in a quality and timely fashion. Service managers continually interface with customers, making recommendations and selling jobs. They're also responsible for customer satisfaction, ensuring customers' needs are met, and their questions are answered. They're also tasked with maintaining a safe and clean work environment in their respective location, ordering parts needed, confirming all technician recommendations, and overseeing technicians' work products.

You are responsible for developing incentive plans. Please answer the following questions.

Question 1: What would you choose between merit pay and merit bonus? What is the reason for your choice?

Merit bonus
Merit pay
What is your choice?

Question 2: Which system do you think is better for the mechanics between the piecework plans and the hour plans? What is your rationale?

Piecework plan or hour plan?
Rationale?

Question 3: Following the previous question, what specific individual-based short-term incentive plan (the plans explained in Column "D" in the Study Material spreadsheet) do you want to use? What is your rationale?

What incentive plan?
Rationale?

Question 4: Assume that you want to develop a gainsharing plan for your employees. How do you explain this plan to your employees? Be specific about the productivity objectives of your choice.

Question 5: Assume that you want to develop group-based short-term incentive plans such as the gainsharing plan and the profit-sharing plan. Which plan do you think is more motivational? Why do you think so? Answer the question from the expectancy theory perspective.

Which plan is more motivational?
Rationale?