Charlie's Spot-Out Company 

Charlie Chandler provides a service to clean used equipment and machine parts for area manufacturers. The question of whether to pay his employees at Charlie's Spot-Out a straight hourly wage or an incentive of some kind has always intrigued him.  

His basic policy has been to pay employees an hourly wage for a 36-hour, 5-day workweek. His floor supervisors receive an end-of-the-year bonus depending on, as Charlie puts it, "whether their stores do well or not that year." 

However, he is considering implementing a piecework system in one of his eight stores. Charlie knows that parts washer employees should clean about 25 bread basket-sized parts per hour. Most of his parts washers do not attain this ideal standard, though. In one instance, a washer named William was paid $10 per hour, and Charlie noticed that regardless of the amount of parts that were in William's bin at the beginning of his shift, William always ended up working on the last part just before quitting time. If there were lots of parts to clean, he might average 22 to 23 parts per hour. But when things were slow in the store, his productivity would drop to perhaps 12 to 15 pieces an hour. Parts washers are instructed to seek out extra duties from the floor supervisor if they run out of parts to wash during a workday. William, however, never seemed to have time for extra duties.

Charlie spoke with William several times, and while William always promised to increase the pace, it gradually became apparent to Charlie that William was simply going to wash parts and not seek out extra work. The problem was that the longer William kept washing each day, the longer the pressure washers, boilers and compressors had to be kept on to power his machines, and the fuel/water charges alone ran close to $10 per hour. Charlie clearly needed some way short of firing William to solve the problem, since the fuel/water bills were eating up his profits. Finding employees who were willing to clean oily, dirty, and sometimes smelly parts was not easy, and William seemed to fit the work better than most.

Charlie's solution was to tell William that, instead of an hourly $10 wage, he would henceforth pay him $0.42 per item washed. That way, said Charlie to himself, if William cleans 25 items per hour he will in effect get a small raise. He'll get more items done per hour and will therefore be able to shut the machines down earlier and go home. 

On the whole, the experiment worked well. William generally averages 26 pieces per hour now and usually works a 34-hour, 5-day workweek. (For safety reasons, he must not work before or after the work shift of the 36-hour employees.) He is happy with his new schedule. Two problems have arisen, though. The quality of William's work has declined, plus his supervisor has to spend time each hour counting and inspecting the number of pieces William washed. Since the pieces vary in size, sometimes it is difficult for the supervisor to determine what a "breadbasket size equivalent" would be. This causes some friction between William and his supervisor. The parts that need rewashing are put back into William's bin for the next workday. Charlie is fairly pleased with the results of his incentive plan, and he is wondering whether to extend it to other employees in other jobs across the remaining 7 stores.

Let's hear your ideas on Charlie's plan. Address the following questions in a well-integrated essay. Make reasonable assumptions about Charlie's Spot-Out business as needed. State your assumptions early in your paper.

• Should this new incentive plan (as is) be extended to parts washers in the other stores? Discuss.
• Since the incentive plan was established, customer services representatives and floor supervisors are requesting to be put on their own piece-rate plans so they can have shortened workdays, too. If one was Charlie, what convincing responses would one provide to them?