Safelite Auto glass PDF

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Safelite Auto glass case Type of performance evaluation system: Objective and individual performance evaluation (number of installations)

Key issues addressed:  The trade-off between risk and incentives (productivity) • Controllable and uncontrollable risk • Multi-tasking problem (productivity versus quality) • The self-selection effect • Incentive pay => increase productivity

Financial incentive system: Piece-rate system Low productivity - When tracking system was in place, individual technicians were installing an average of only 2.5 glass units a day. - One of the reasons was that workers simply did not try very hard. - Other reasons for the low productivity: Technicians could not find the location of the customer because 1) the customer was for some reason not at the stated location, 2) the technician was given bad directions, and 3) the technician failed to use the manifest (the directions given to him) - 10-20% of the time, technicians discovered that he had been given the wrong parts by the warehouse. - Some DCC managers tended to assign jobs “equitably” rather than funneling more jobs to those technicians who worked the fastest.

Safelite had two major goals: 1) Create loyalty among its largely transient workforce 2) To combat the industry’s traditionally high turnover rates. The performance pay plan (PPP) PPP for Technicians - Piece rate for every windshield they installed. - If the number of installations did not reach a weekly average equal to the employee’s previous hourly wage, he would receive the hourly wage as a guarantee rate. - If he exceeded his hourly wage, he would be paid the PPP rate. - After the first 12-week period, the employee’s guarantee rate would be lowered approximately 30%.

PPP for store managers

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Stores were categorized according to size, from the largest (AA) to the smallest (D). Managers of lower volume stores however were expected to spend time installing. This provided an incentive for the manager to hire less technicians, so he could install more himself, and make more money.

Making the pitch - Some were worried about lowering the guarantee rate after the 12-week period would result in increased turnover. Technicians were in high demand. - One of the greatest problems was the fact that there were a number of factors that affected a technicians’ productivity, and now his pay, out of his control (controllability principle). Ex: Inclement weather, scheduling errors or miscommunications and operational problems. Low season (winter) periods could remove the possibilities of meeting the piece rates. - CEO argued that increasing the productivity would make the company stroner, and thus offer greater opportunities to its employees. - Employees thought the lowering of the guarantee rate was an attempt to pay them less....