Case: Safelite Glass Company (A) [9-800-291] 11 pages Spreadsheet supplement for
ID: 1189091 • Letter: C
Question
Case: Safelite Glass Company (A) [9-800-291] 11 pages
Spreadsheet supplement for case: XLS629-XLS-ENG
From Harvard Business Review
Brief Overview of case:
The headquarters of Safelite Glass Corporation is located in Columbus, Ohio and is America’s largest installer of automobile glass. Recently, Safelite, under the direction of CEO, Garen Staglin, and President, John Barlow, instituted a new compensation scheme for the autoglass installers. Until January, 1994, glass installers were paid an hourly wage rate, which did not vary in any direct way with the number of windows that were installed. During 1994 and 1995, installers were shifted from an hourly wage schedule to performance pay - specifically, to a piece rate schedule. Rather than being paid for the number of hours that they worked, installers were now paid for the number of glass units that they installed. The rates varied somewhat, but on average installers were paid $21 per unit installed. At the time that the piece rates were instituted, the workers were also given a guarantee of approximately $11 per hour. If their weekly pay based on piece rates came out to less than the guarantee, they would be paid the guaranteed amount. Many workers ended up in the guarantee range.
Safelite has a very sophisticated computerized information system, which keeps track of how many units of each kind that each installer in the company installed in a given week. For the purposes here, monthly data were used. Since PPP (performance pay plan) was phased in over the 18 month period, most workers were employed under both regimes. Thus, data on individual output are available for most installers both during the hourly wage period and during the PPP period. This before-and-after comparison with person specific data provides a very clean body of information on which to base an analysis of performance pay. Some of the results of the analysis will be presented in class. Your task is to predict the results before you see them. Specifically, be prepared to answer the following questions.
Questions:
A) Is it a good idea for a firm to switch from paying hourly wages to paying piece rates?
B) How, specifically, is output affected by a switch from time rates to piece rates?
C) Should there be some guaranteed wage?
D) What does the switch do to turnover?
E) What does the switch do to recruitment?
F) What happens to product quality?
G) What happens to supervision?
Explanation / Answer
Yes, as it improves both output and motivation of employees Increases Yes, so as to attract workers and keep them going Improve the overall turnover Stable recruitment Quality might go for a toss, as workers would try to produce more in order to earn more, while compromising on the quality Needs to be improved, so as to keep a check on the quality