Changing of its compensation and incentive plan
Read the Performance Pay at Safelite Auto Glass case, which describes a company’s changing of its compensation and incentive plan. In particular, it shows how a change from hourly pay to “piece rate” pay (for windshield installers) affected productivity, pay, and turnover. Write a case analysis that addresses the following questions:
- What events led Safelite Auto to consider changing its compensation approach.
- What conditions led to low levels of productivity of the Safelite installers.
- 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.
- Is the installer position job design appropriate for piece rate pay plan design? Why or why not?
- Should there be a guaranteed wage? If so, what would you recommend in terms of compensation leverage (mix between base and incentive compensation)?
- What are the likely consequences of a switch from wage to piece rates for the following:
- Turnover
- Recruitment
- Productivity
- Product quality
- Coordination between roles at Safelite
- What recommendations, if any, would you make to improve the plan design for Safelite?
