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Individual Incentive Plans
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- all incentive plans are designed to reward performance that exceeds some established standard incentive plans vary:
i. in the method of rate determination (how standards are set)
a. units of output in a certain time period
b. time period per unit of output
ii. the specified relationship between output and wages
a. wages as a constant function of output
b. wages vary as a function of production
Types
i. straight piece-rate (i.a x ii.a)
- easily understood by workers
- difficult to set appropriate standard
ii. standard hour plan (i.b x ii.a)
- sets incentive based on completion of task in expected period
iii. Bedeaux plan
- combination of straight piece rate and standard hour plan
iv. Taylor differential plan (i.a x ii.b)
- intended to reward efficient and penalize inefficient workers
v. Merrick multiple piece-rate system (i.a x ii.b)
- intended to reward efficient and penalize inefficient workers
- similar to Taylor plan except three rates are established
vi. Halsey 50-50 (i.b x ii.b)
- splits between workers and firm, any savings in direct costs
vii. Rowan plan (i.b x ii.b)
- similar to Halsey plan except incentive increase as time to complete task decreases
viii. Gantt plan (i.b x ii.b)
- standard time is purposely set high
- failure to reach standard time results in guaranteed wage while achievement of the standard time results in an incentive
Advantages
- raise productivity, lower production costs
- increase earnings
- less direct supervision required
- objective evaluations
Disadvantages
- quality vs. quantity issues
- encounter resistance of introduction of new technology
- new production methods/improvments may be resisted
- lack of cooperation in on-the-job-training
- elevated levels of mistrust between management & workers
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