Answer the Prediction Questions on this Case Study

Please answer the Prediction questions and the answers at the end of Part VI.

Part I.

The Hovey and Beard Company manufactured wooden toys of various kinds: wooden animals, pull toys, and the like. One part of the manufacturing process involved spraying paint on the partially assembled toys. This operation was staffed entirely by women. The toys were cut, sanded, and partially assembled in the wood room. Then they were dipped into shellac, after which they were painted.

; The toys were predominantly two-colored; a few were made in more than two colors. Each color required an additional trip through the paint room.

; For a number of years, production of these toys had been entirely handwork. However, to meet tremendously increased demand, the painting operation had recently been re-engineered so that the eight employees who did the painting sat in a line by an endless chain of hooks. These hooks were in continuous motion, past the line of workers and into a long 6 horizontal oven. Each employee sat at her own painting to carry away fumes and to backstop excess paint. The employee would take a toy from the tray beside her, position it in a jig inside the painting cubicle, spray on the color according to a pattern, then release the toy and hang it on the hook passing by. The rate at which the hooks moved had been calculated by the engineers so that each employee, when fully trained, would be able to hang a painted toy on each hook before it passed beyond her reach.

; The employees working in the paint room were on a group plan. Because the operation was new to them, they were receiving a learning bonus, which decreased by regular amounts each month. The learning bonus was scheduled to vanish in six months, by which time it was expected that they would be on their own—that is, able to meet the standard and to earn a group bonus when they exceeded it.

Prediction question: What will the new hook line do to productivity and satisfaction?

Part II:

By the second month of the training period, trouble had developed. The employees learned more slowly than had been anticipated, and it began to look as though their production would stabilize far below what was planned. Many of the hooks were going by empty. The employees complained that they were going by too fast and that the time-study person had set the rates wrong. A few employees quit and had to be replaced with new employees, which further aggravated the learning problem. The team spirit that the had expected to develop automatically through the group bonus was not in evidence except as an expression of what the engineers called “resistance.” One employee whom the group regarded as its leader (and the management regarded as the ringleader) was outspoken in making the various complaints of the group to the working supervisor: The job was a one, the hooks moved too fast, the incentive pay was not being correctly calculated, and it was too hot working so close to the drying oven.

Prediction question: What do you believe management will do immediately while it awaits the arrival of the consultant?

Part III:

A consultant who was brought into this picture worked entirely with and through the working supervisor. After many conversations with the consultant, the working supervisor that the first step should be to get the employees together for a general discussion of the working conditions. This step was taken with some hesitation but without input from upper management.

; The first meeting, held immediately after the shift ended at 4 P.M., was attended by all eight employees. They voiced the same complaints again: The hooks went by too fast, the job was too dirty, and the room was hot and poorly ventilated. For some reason, it was this last item that they complained of most.

; The supervisor promised to discuss the problem of ventilation and temperature with the engineers, and a second meeting was scheduled to report back to the employees. In the next few days, the supervisor had several talks with the engineers. They and the superintendent thought this was really a trumped-up complaint and that the expense of any effective corrective measure would be prohibitively high. The supervisor came to the second meeting with some apprehensions. The employees, however, did not seem to be very concerned, perhaps because they had a proposal of their own to make. They believed that if several large fans were set up to circulate the air around their feet, they would be much more comfortable. After some discussion, the supervisor agreed that the idea might be tested. The supervisor and the consultant discussed the question of the fans with the superintendent, and three large propeller type fans were purchased.

Prediction question: What will be the impact of the fan decision on morale and relations with the supervisor?

Part IV:

; The fans were brought in. The employees were jubilant. For several days the fans were moved about in various positions until they were placed to the satisfaction of the group. The employees seemed satisfied with the results, and relations between them and the supervisor improved visibly. The supervisor, after this encouraging episode, decided that further meetings might also be profitable and asked the employees if they would like to meet and discuss other aspects of the work situation. The employees were eager to do this. The meeting was held, and the discussion quickly centered on the speed of the hooks. The employees maintained that they would never be able to reach the goal of filling enough of them to make a bonus.

; The turning point of the discussion came when the group’s leader frankly explained that the point was not that they could not work fast enough to keep up with the hooks but that they could not work at that pace all day long. The supervisor explored the point. The employees were unanimous in their opinion that they could keep up with the belt for short periods if they wanted to. But they did not want to because if they showed they could do this for short periods they would be expected to do it all day long. The meeting ended with an unprecedented request: “Let us adjust the speed of the belt faster or slower depending on how we feel.” The supervisor agreed to discuss this with the superintendent and the engineers.

; The reaction of the engineers to the suggestion was negative. However,

after several meetings, it was granted that there was some latitude within which variations in the speed of the hooks would not affect the finished product. After considerable argument with the engineers, it was agreed to try out the idea.

; With misgivings, the supervisor had a control with a dial marked “low, medium, fast” installed at the booth of the group leader; the speed of the belts could be adjusted anywhere between the lower and upper limits that the engineers had set.

Prediction question: What will be the impact of the dial control decision on productivity and satisfaction?

Part V:

; The employees were delighted and spent many lunch hours deciding how the speed of the belt should be varied from hour to hour throughout the day. Within a week, the pattern had settled down to one in which the first half hour of the shift was run on what the employees called a medium speed (a dial setting slightly above the point marked “medium”). The next 2.5 hours were run at high speed; the half-hour before lunch and the half hour after lunch were run at low speed. The rest of the afternoon was run at high speed with the exception of the last 45 minutes of the shift, which was run at medium.

; In view of the employees’ reports of satisfaction and ease in their work,

it is interesting to note that the constant speed at which the engineers had originally set the belt was slightly below medium on the dial of the control. The average speed at which the employees were running the belt was on the high side of the dial. Few, if any, empty hooks entered the oven, and inspection showed no increase of rejects from the paint room.

; Production increased, and within three weeks (some two months before the scheduled ending of the learning bonus), the employees were operating at 30 percent to 50 percent above the level that had been expected under the original arrangement. Naturally, the employees’ earnings were correspondingly higher than anticipated. They were collecting their base pay, a considerable piece rate bonus, and the learning bonus, which, it will be remembered, had been set to decrease with time and not to function in relation to current productivity. The employees were earning more now than many skilled workers in other parts of the plant.

Prediction question: How will other personnel react and why?

Part VI:

; Management was besieged by demands that this inequity be taken care of. With growing irritation between superintendent and supervisor, engineers and supervisor, superintendent and engineers, the situation came to a head when the superintendent revoked the learning bonus and returned the painting operation to its original status: The hooks moved again at their constant time-studied designated speed, production dropped again, and within a month all but two of the eight employees had quit. The supervisor stayed on for several months but then left for another job feeling aggrieved.

a. What conclusions can be drawn from this case about piece rate incentive systems?

b. Review the problems introduced by the new system and discuss how they might have been avoided.

2. The Henley Brothers Machine Shop performs batch drilling for numerous organizations in its area. Skilled drill press operators at the shop currently earn $10 per hour. Donald Henley, vice-president of production, is considering putting drill press operators on a piece rate incentive system when they work on these large batch drilling operations (other work would be straight hourly work).

; As a skilled tool and die maker and a trained engineer, Donald Henley has undertaken a time study for these large batch drilling operations. He has observed that his two slowest employees average 60 drilling operations in an hour and the fastest employee to perform the task does 72 drillings in an hour. The average across all employees is 66 drilling operations. If he goes to a piece rate system, Henley would not want maximum pay to exceed $11.20 per hour because of equity considerations for other employees.

a. Would you recommend to Henley that he use or not use a piece rate incentive plan? Why or why not?

b. Design at least two different piece rate plans that Henley might use. Which do you recommend? Why? Which would keep labor costs at a minimum?

c. How would you administer the piece rate plan? Are the costs and troubles worth it?

d. What do you think employees will think of the new plan you propose?

3. Generic Services, Inc., is a small company of employees with no fringe benefits other than a two-week paid vacation policy after one year of service. The owner is considering offering a profit-sharing plan to these employees. Five percent of net profits would be distributed to employees as a percentage of their salary to total payroll.

The five-year history of payroll costs and net (after tax) profits is as follows:

Year ; Number of Employees ; Payroll ; Net After-Tax Profit

Year 1 ; ; ; ; ; ; ; ; ; 4 ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; $40,000 ; ; ; $60,000

Year 2 ; ; ; ; ; ; ; ; ; 4 ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; 42,000 ; ; ; ; ; (3,000)

Year 3 ; ; ; ; ; ; ; ; ; 4 ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; 43,500 ; ; ; ; ; 81,000

Year 4 ; ; ; ; ; ; ; ; ; 5 ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; 55,000 ; ; ; ; ; 42,000

Year 5 ; ; ; ; ; ; ; ; ; 5 ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; ; 56,500 ; ; ; ; ; 96,000

a. What do you recommend to the owner?

b. In the absence of prior employee benefits, would you recommend initiating some benefits before profit sharing?

Why or why not?