Before executives undertake to design a performance pay plan (PPP), they should carefully think about the objectives that they want employees to pursue. In Safelite case, they want to increase installers’ productivity, create loyalty among its largely transient workforce and combat the industry’s traditionally high turnover rate. A good PPP should address all those problems.
PPP should have a good measurement for the performance to the people who is eligible to the plan. They should also try to eliminate the factors which can affect installers’ productivity but not under installers’ control. Otherwise, piece rate will let installers feel unsecure.
A potential problem with Safelite Glass’ proposed PPP is that installers could be misled to pursue installing quantities over qualities. One can imagine that poorly installed glass can, over time, adversely impact Safelite’s reputation as a quality installer. That, in the long run, will hurt the company/shareholders’ best interest.
The cost for the measurement should not be too high. If incentive plan do improve productivity, it can be self-funded in that profit gains or cost savings can be used for bonus payouts.
Before and after PPP installation, surveys are good approach to find out employee’s satisfaction to the new plan. Base on the survey results, necessary changes will help establish a better PPP to build up loyalty. A good PPP should incentive better workers to stay.
Overall: be smart, as you get what you pay for.