David Kelley is considering the implementation of an incentive wage plan to increase productivity in his small manufacturing plant. The plant is nonunion, and employees have been compensated with only an hourly-rate plan. Julie Phelps, Vice President–Manufacturing, is concerned that the move to an incentive compensation plan will cause direct laborers to speed up production and, thus, compromise quality. Step 1 - With that information in mind, discuss the following questions.  Your posting should be at least 500 words* in length.  This means you should elaborate on your answers, not simply answer each question with one or two words.  You should also reference information already learned in our studies.How might Kelley accomplish his goals while alleviating Phelps’ concerns?Does the compensation have to be all hourly rate or all incentives?Can incentive compensation also apply to service businesses?

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Asked Jun 5, 2019
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David Kelley is considering the implementation of an incentive wage plan to increase productivity in his small manufacturing plant. The plant is nonunion, and employees have been compensated with only an hourly-rate plan. Julie Phelps, Vice President–Manufacturing, is concerned that the move to an incentive compensation plan will cause direct laborers to speed up production and, thus, compromise quality.

 

Step 1 - With that information in mind, discuss the following questions.  Your posting should be at least 500 words* in length.  This means you should elaborate on your answers, not simply answer each question with one or two words.  You should also reference information already learned in our studies.

  1. How might Kelley accomplish his goals while alleviating Phelps’ concerns?

  2. Does the compensation have to be all hourly rate or all incentives?

  3. Can incentive compensation also apply to service businesses?
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Expert Answer

Step 1

Definition and Goal Accomplishment Plan:

Incentive wage is the income earned by the employees in case of achievement of certain sales targets.

David Kelley wishes to implement Incentive wage plan to increase the productivity of the manufacturing plant. The employees are compensated on an hourly-rate plan. The best way to achieve the goals of increased productivity without compromising on quality is by:

  • Review of the existing flow of operations: Processes, Resources and Technology.
  • Ascertain standards for labour time, quality and other important aspects.
  • Eliminate the process not adding value to the product by updating the process and technology.
  • Conduct proper employee training.
  • Implementation and Review of the process at intervals.
Step 2

Identifying the Best Compensation Plan:

A compensation plan shall be designed as per the need and resource availability of the organisation.

An hourly-rate of compensation plan is actually the compensation computed on the basis of the number of hours worked. This plan does not distinguish between productive hours and non-productive hours.

An all incentive plan is the compensation paid based on the performance of the ...

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