The goal of any organization is to have a payment program that motivates its workers to perform their best. This goal got its importance when most companies in the United States realized that they were losing markets to their foreign competition. Safelite, being one of them launched the performance related pay program that encouraged employee cooperation and to work harder to make the companys products competitive and better. A performance-based management system provides the workers with monetary rewards that link to various assessments on their work performance. Such rewards include bonuses, sales commissions, financial profit sharing and piecework payments.
Lazear (2000) tested this system using data from Safelite Glass Auto Company. The authors hypothesis was that the company would be able to attract more qualified employees, and average productivity per worker will rise when the company shifts to piece rates. In the year 1994 and 1995, the new management of Safelite Glass Auto changed the payment methods for its employees moving from the hourly pay to the piece rate pay. The effects of this change in the company management system by adopting the piece rate were that the switch led to a significant change in the levels of output per employee. The system also allowed the company to employ some of the most qualified workers, and this improved on production. The increase of the worker's productivity results from the incentives they receive. An increase in productivity meant that the company was going to increase its income. This benefited the workers in that Safelite Auto Glass shared the gains with the workers. As a result of the shift from hourly pay to piece rate, each worker was able to get a 10% increase in their pay ((Hall, Lazear and Madigan, 2000).
Choosing a performance management system also entails profitability, in that the system ought to have more benefits and minimize costs. Safelite Auto Glass chose the piece rate because it increased the overall productivity of the company by 44%. Part of this gain reflected on incentives, sorting as well as in the pattern in which the system was implemented. The piece rate accounted for 22% of the increase in productivity while the rest was a result of employing able employees. Sorting in the company occurred through the hiring process, and most of the hiring also was from groups after the shift to piece rate. However, this process was disproportionate when compared to sorting. Further benefits from this shift that made Safelite Auto Glass Company the leading glass repair company was that it was able to tap into maximum employee output by reducing absenteeism. According to Lazaer (2000), the output of individual worker increased from 2.02 to 2.53. This shows that incentives matter and the change from the shift was statistically precise and large. However, the company moved gradually in the adoption of the system, and this made it sure that the adoption was done carefully and correctly for the benefit of the company and its workers.
For piece rates, performance management system to be effective performance ought to be measurable, and the quality should be easy to control. This applies to all reward systems, in that any approach adopted by the company should acknowledge that employees are motivated by different things. For Safelite Auto Glass Company to enhance employee retention and engagement as well as to align the system with organizational goals, it ought to ensure that the remuneration arrangement is tailored to meet the needs of the employees as well as those of the company (Suff, Reilly and Cox, 2007). In the world today, people recognize that money is not the only motivator for most workers, and that there are other elements and the job itself that motivate workers. Such elements in the work place include good communication, recognition, career progression, and teamwork can increase the levels of commitment and engagement in employees (Hallock, 2012). Safelite Auto Glass Company ought to consider these elements as they continue to implement the new remuneration system. If the company has to use money as the tool to motivate its workers, Safelite should ensure that a clear line of sight is set that will align the financial payment with the employee efforts.
Safelite Auto Glass Company also needs to ensure that they factor in events such as low inflation, which can affect the reward system. This is because in times of low inflation, the company might find it difficult to incentivize their employees, and this will demotivate them as they were already glued to the new system of remuneration. For the system to work for the good of all stakeholders, factors such as training, transparency, good communication and clear objectives have to be laid down clearly (Hallock, 2012). This means ensuring that the line managers in every department have the skills to manage the performance based rewards. It is important for managers to have the competency required to differentiate rewards regarding individual output as well as be able to foster a better relationship with their workers.
In summary, the performance based reward system can be of great benefit to the company as well as the employees if managed properly. Safelite Auto Glass Company set the pace for other companies in the United States. It is therefore important to involve every individual in the company in the inception stage of the remuneration system if the system is expected to improve.
Lazear, E. P. (2000). Performance pay and productivity (No. w5672). National bureau of economic research.
Hall, B. J., Lazear, E., & Madigan, C. (2000). Performance pay at Safelite Auto Glass (A).
Hallock, K. F. (2012). Pay: Why people earn what they earn and what you can do now to make more. Cambridge University Press.
Suff, P., Reilly, P., & Cox, A. (2007). Paying for performance: New trends in performance-related pay. Institute for Employment Studies. URL: http://www. ephemerajournal. org/contribution/% E2, 80.
If you are the original author of this essay and no longer wish to have it published on the collegeessaywriter.net website, please click below to request its removal:
- Course Work Example on Compensation and Benefits in a Company
- Essay Sample: What Are the Strategic Issues That Are Facing an Organization?
- My Personality Type and It Implication on My Leadership and Management Skills - Paper Example
- Case Study Example: Analysis of Engstrom's Organizational Issues
- Creative Writing on Management: Organizational Innovation
- The Impact of Leadership Style on the Success of a Companys Supply Chain: A Case Study of Laerdal Medical ASA
- Importance of New Ideas and Concepts in Corporate World - Essay Sample
- Vision and Organizational Capacity - Paper Example
- Essay Example: Group Communication Competencies Survey
- Paper Example on Market Orientation and Innovation
- Essay Example: Management of Virtual Organization
- Leadership Style Assessments Analysis Paper Example
- Essay on Transformational and Authentic Leadership
- Management Report: First Few Weeks as a New Junior Project Manager
- Essay on Whitemores Grow Model