Question

Erin is Yard and Shipping Supervisor for a Modular/Manufactured home company in Edmonton, Alberta. The company, in business for over 25 years, has a good reputation but does not have a formal quality control/assurance program. Erin has been the yard supervisor for 4 years and prior to that she worked a variety of jobs in the assembly plant.

In her position she is responsible for the supervision of the storage yard where finished homes are held prior to shipping. In addition she supervises 2 yard work crews. The first crew installs appliances and does touch ups or minor finishing in the yard not completed in the plant. This work could on occasion include installing doors, windows or flooring which was not installed in the plant due to a shortage of material or manpower on the assembly line. The second crew prepares the homes for final shipping, loads homes on a trailer and arranges actual delivery to retail sales agents across Western Canada.

Demand for the company’s homes has steadily increased in recent years and management has been anxious to increase production. To that end the company introduced a new bonus program where all employees would receive a small gift if weekly production exceeded 26 homes. Gifts included company promotional items like caps, shirts or lunch vouchers. If monthly production met or exceeded 110 homes each employee, supervisor or manager would receive a bonus that month of up to $350 dollars. Individual bonuses were calculated by a formula which considered actual wages or salary earned during the month. In this way it was thought absenteeism would also be reduced and he company would be a more exciting and fun place to work.

After 3 months production targets were actually exceeded. Management was pleased. Employees, supervisors and managers were happy to receive the small gifts and looked forward to the extra cash each month. In fact the union had asked management if the company would match the bonus if payment was directed to the employee’s RRSP(Registered Retirement Saving Program).

In the 4^th month Erin noticed that the number of finished homes being held in the yard for final touch ups and finishing was increasing. Homes were usually in the yard for 3 to 5 days prior to shipping. It was now common for homes to be in the yard over a week. Touch ups and finishing work had increased to the point she had to put on an afternoon shift. In addition she was getting calls and complaints from retail agents over delays in shipping and quality problems after delivery such as cracked plaster, missing trim and water leaks. She had also recently attended a meeting with the accountants who were alarmed that warranty claims were on the rise. Erin was asked to step up her vigilance and not overlook any quality issues prior to shipping. She was also criticized for having to put on an afternoon shift. Senior management asked her for a detailed report by the first of next week outlining her plans to fix problem.

Erin is very concerned. Everyone likes the bonus program. There is talk by employees that an increase in target production levels may also increase the monthly cash bonus.

Multiple Choice Questions

1. For individual employees the company production bonus plan is what type of reward program?

1. Merit based
2. Piece rate
3. Variable
4. Skill-based

2. To be more effective the company should research and examine “group or organizational” based pay-for-performance programs?

1. True
2. False

3. Organizations must be careful not to send the wrong message when offering rewards. Which of the following obstacles is not generally associated with developing an effective employee reward or recognition system?

1. Management often focuses on short term results
2. Individuals find it difficult to break out of old ways of thinking
3. Organizations don’t look at the big picture and how business units actually interact
4. Collective agreements

4. Erin's report may have to be critical of the new production bonus program. Which of the following ideas should Erin not include in the report?

1. Suggest that employees be directly involved in establishing production targets
2. Ask management to better define what constitutes a finished home
3. Request management implement a formal Quality Control(QC) program
4. Recommend employees caught cutting corners or doing shoddy work not be included in the program
5. Arrange for meetings with assembly line units to discuss the increasing problems with quality and shipping delays
6. Over time a cash reward performance program with poorly developed targets will become less and less effective and employees will simply regard the payments as part of their regular compensation and benefits package?

5. A poorly designed reward or recognition program will, over time, simply become part of an employee’s compensation and benefits package and no longer be an effective way to motivate employees to influence better performance.

1. False
2. True

        6. What did the Company do wrong in the design and implementation of the bonus plan?  

7. What steps must Erin take do to fix the bonus problem and, in turn, improve both production levels and at the same time ensure product quality?

Answer 1

Answer for Question 1 : Merit based

Answer for Question 2 : False

Answer for Question 3 : Individuals find it difficult to break out of old ways of thinking

Answer for Question 4: Suggest that employees be directly involved in establishing production targets

Answer for Question 5 : True

Answer for Question 6 : Company failed to implement a formal Quality Control(QC) program prior to shipping.

Answer for Question 7 : Erin should include quality of work as an important aspect in calculating bonus for the employees. Timely period inspection should be done to check the work updates and a check list should be prepared showing underrlying parameters for checking quality of the finished product.