Case 1 – Individual or Team Reward?
The case considers the consequences of implementing an incentive-based payment scheme in order to increase employee efficiency in producing furniture. Sally Boston, the CEO of Metropolitan Furniture, is trying to evaluate whether an individual or team-based incentive approach would be better in motivating employees. Jack Hopson, a new employee with over ten years of experience in making furniture, advises Sally to use a piece-rate pay plan to motivate her employees to produce more furniture. This plan would award each employee based on their individual output. Jack claims that the plan worked well at his previous employer, but Sally considers the ramifications of such a plan due to Metropolitan Furniture discerning itself from its competitors through its promise of on-time deliveries. Due to the need for employees to oftentimes work as a team to complete furniture pieces, Sally believes that a piece-rate pay plan could hinder their delivery times. Therefore, Sally feels conflicted in whether to choose a team-based incentive or to follow the advice of Jack and choose the piece-rate pay plan (which has previously seen success at other companies).
1. What are some of the advantages of offering a piece-rate pay plan to the furniture builders at Metropolitan Furniture?
According to pages 91-92, there are four advantages of offering an individual incentive pay plan.
2. What are some advantages of offering a team-based incentive pay plan?
According to page 98, there are two main advantages to using group-based incentive plans.
JUST ANSER THE FOLLOWING QUESTION
3. What do you think Sally should do?