Performance Pay at Safelite Auto Glass

Performance Pay at Safelite Auto Glass

What events led Safelite Auto to consider changing its compensation approach?

One of the events that made Safelite Auto consider altering its compensation plan was reduced employee productivity. The company’s workers were not committed to their work and spent too much time doing things unrelated to their assigned tasks. The second event was high turnover. Technicians were promised higher salaries and benefits by other companies, making it hard for Safelite Auto to retain them. The third event was the end of truck privileges, making it hard to get technicians from other companies.

What conditions led to low levels of productivity of the Safelite installers?

One factor that reduced Safelite installers’ productivity is difficulty finding the customer’s location. According to Hall et al. (2001), Safelite installers complained that they could not reach customers because they did not find them at their shared location when they arrived, had wrong directions, or used the wrong manifest. The second factor was the wrong allocation of parts by the warehouse, leading to costly reschedules, delays, and order cancellations. The third factor was the poor delegation of tasks. The installers stated that some DCC managers would assign tasks equally rather than giving more tasks to installers who were fast in completing tasks.

Does the proposed pay-for-performance plan (PPP) address the problems discussed in Question #2? Analyze the underlying economics of the plan (utility analysis). Does the new plan introduce new problems? Support your answer.

The proposed pay for performance addresses the problems at Safelite Auto because it creates job satisfaction, thus increasing commitment, productivity, and job satisfaction, which contributes to reduced turnover. The plan helps the company increase profitability through increased employee productivity. It also reduces the high costs associated with high turnovers, such as costs incurred in hiring and training new employees. One of the problems introduced by the proposed plan is that it may create unhealthy competition among employees when they focus on money rather than the company’s goals. The second problem is increased work stress among employees as they strive to increase performance to get more pay. According to Pawirosumarto & Iriani (2018), high work stress reduces employee productivity, thus negatively influencing organizational performance. The third problem is reduced morale for employees who do not perform well. Reduced morale may increase turnover, thus disrupting operations, especially when employees quit abruptly.

Is the installer position job design appropriate for the piece rate pay plan design? Why or why not?

The installer position’s job design is inappropriate for the piece rate pay plan approach. The position requires the installers to take their time to ensure that the customer is satisfied with the installation. Therefore, they need to schedule a reasonable number of installations per day. The piece rate pay plan approach may influence them to schedule many installations per day, leading to errors that arise when they do their job hurriedly. The plan may also reduce morale among installers who do not earn as much as their colleagues. Safelite Auto has no control over the variations in earnings among installers because their output is determined by the number of customers in their market. Therefore, installers in a market with less demand for installation may be demotivated, leading to turnover and reduced morale, which may influence their market’s customer satisfaction rate and performance.

Should there be a guaranteed wage? If so, what would you recommend in terms of compensation leverage (mix between base and incentive compensation)?

Safelite Auto should consider a guaranteed wage to prevent turnover among employees who deliver less output. The company can achieve compensation leverage by offering a base salary for all employees and incentive compensation for employees who meet the company’s performance expectations based on the number of hours they work per day, the number of customers served and the number of pieces installed.

What are the likely consequences of a switch from wage to piece rates for the following:

Turnover

Shifting from wage to piece rates increases turnover because employees may feel pressured to increase their performance to avoid a reduction in what they were earning before the shift. Other companies may also use the shift to lure employees who feel pressured by the change. For example, truck drivers and installers may not be comfortable with the change due to increased workloads that increase fatigue, prompting them to explore opportunities in other companies.

Recruitment

The increase in turnover due to the shift from wage to piece rate payment will reduce recruitment because potential employees are willing to join an organization with a history of high employee turnover. It may also be challenging for Safelite Auto to hire talented staff due to the piece rate pay because talented employees may feel that their skills and competence are not recognized when the company’s focus is on the amount of output rather than the quality of work.

Productivity

Shifting from wage to piece rate pay is likely to reduce the company’s profitability because of employees’ reduced quality of work. According to Heywood et al.(2013), a piece rate pay plan is linked to deterioration in the maintenance of work quality and an increase in injuries because employees focus on completing as much work as possible to get more pay without focusing on the organization’s goals and welfare. Productivity may also be reduced due to the undermining of cooperation and teamwork because employees will be more interested in delivering as much work as possible on their own to receive a high piece rate pay.

Product Quality

The product quality at Safelite Auto will reduce after the shift from wage to piece rate pay because of the reduction in morale and the rush to handle a large workload within a short time for higher pay. However, the company can limit the negative impact on product quality by specifying that the piece rate pay is based on the quality of work delivered. For example, the company may reject pay for poor quality work or impose fines on poor quality work based on the results of quality assessments done by the DCC managers and customer complaints.

Coordination between roles at Safelite

Safelite Auto might experience reduced coordination between roles when they shift from wages to piece-rate pay due to internal competition among employees and departments. According to Davis (2017), the piece rate pay increases competition among employees and across departments, thus limiting the coordination of roles in an organization. For instance, at Safelite Auto, it may be hard to coordinate truck drivers and installers because installers may schedule installations when truck drivers are unavailable. It may also be hard to coordinate the role of the warehouse dispatch team and the installers when the warehouse dispatches the wrong product when they rush to dispatch as many pieces as possible, forcing the installers to reschedule installations.

What recommendations, if any, would you make to improve the plan design for Safelite?

Safelite Auto can improve its piece-rate pay plan by ensuring that the rate per piece is fixed and equitable by consulting the employees and reviewing the piece-rate pay plans used by other companies within the same industry. I would also recommend setting reasonable expectations on the minimum output an employee can deliver based on the nature of their job. For example, the minimum output for the truck drivers should be set by considering factors such as the distance covered, traffic jams, and waiting time. I would also recommend adding incentives to the piece rate pay to encourage employees to improve their productivity. For example, the company should consider offering paid leave to give employees time to rest to be more productive. I would also recommend setting quality standards that will be used to determine eligibility for piece rate pay to avoid poor quality, especially in installation jobs.

References

Davis, M. E. (2017). Pay matters: The piece rate and health in the developing world. Annals of Global Health, 82(5), 858. https://doi.org/10.1016/j.aogh.2016.05.005

Hall, B. J., Lazar, E., & Madigan, C. (2001). Performance pay at Safelite Auto Glass (A). HBS No. 9-800-291. Harvard Business School Publishing.

Heywood, J. S., Siebert, S., & Wei, X. (2013). The consequences of a piece rate on quantity and quality: Evidence from a Field experiment. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2342532

Pawirosumarto, S., & Iriani, D. (2018). The influence of work stress, working cost, compensation, and work discipline on employee productivity. International Journal of Economics and Business Administration, VI (Issue 4), 62-75. https://doi.org/10.35808/ijeba/175

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Unit 7 Assignment ForumUnit 7 Assignment Forum
This week’s assignment forum examines how invasion of privacy and intrusion could impact the monitoring and surveillance of employees. This is the seventh assignment forum related to your course project.

Performance Pay at Safelite Auto Glass

Your unit 7 assignment forum is based on the Koeppel v. Speirs case study found in Chapter 15 of your textbook. The case involved a private-sector employer’s installation of a concealed video surveillance camera that was challenged in an intrusion upon seclusion privacy tort claim. At issue was the legality of whether surveillance equipment secretly installed in a bathroom can support a claim for invasion of privacy when the equipment could not be operated after it was discovered to produce identifiable images. The court ultimately concluded that an intrusion upon seclusion claim does not require evidence that the offending party actually succeeded in viewing or otherwise intruding on the plaintiff. You will explore the facts leading up to a decision in this case and evaluate the importance of this ruling to human resources practice and your role as a human resources practitioner.