Chapter 10 Implementing Productivity Improvement Programs © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved Chapter Outline • 10-1 Gaining Competitive Advantage • 10-2 HRM Issues and Practices 10-3 The Managers Guide â 2010Cengage Learning.Atomic Dog is a trademark used herein under license All rights reserved 10-1a Opening Case: Gaining Competitive Advantage at Lincoln Electric • Problem: Figuring out how to motivate employees • Solution: Implement an employee incentive system   • Pay by the piece Provide year-end bonuses and stock options How the incentive system enhanced competitive advantage    Low turnover rate Productivity rates two to three times greater than competitors Stable price structure despite high salaries © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-1b Linking Productivity Improvement Programs to Competitive Advantage • The goal of productivity improvement programs is to improve productivity by increasing employee motivation   Extrinsic rewards: given by the employer to employees Intrinsic rewards: those that come from within a person • Successful productivity improvement programs are able to establish a clear connection between employee efforts and rewards • Many theories attempt to explain the motivational process © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved Figure 10-1 The Expectancy Theory Model © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-2 HRM Issues and Practices • Pay-for-performance programs    Link financial rewards to successful job performance Provide extrinsic rewards Can create legal problems when administered unfairly © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-2a Pay-for-Performance Programs (cont.) • Merit pay plans   • Grant employees annual pay raises based on their levels of job performance The merit pay guidechart shows the size of a merit pay raise associated with each level of job performance Merit pay plan—strengths   Established effort-performance and performance– reward link Publicized merit pay guidecharts to strengthen the performance–reward link © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-2a Pay-for-Performance Programs (cont.) • Merit pay plan—weaknesses       Fail to establish a clear performance-reward link Fails when employees not value the rewards offered by the company Hinder performance-reward link when supervisors fail to distinguish between employees within the team Time lag exists between behavior and reward Is not very cost-efficient Productivity hinders if these plans fail to reward behaviors that contribute to organizational goals © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-2a Pay-for-Performance Programs (cont.) • Recommendations for properly designing and implementing an effective merit pay plan:      Make objective assessments of employees’ job performance Measure an employee’s performance on the basis of job behaviors that have a proven impact on the success of the business Make payouts quarterly, not annually Frequently communicate performance expectations to employees Train managers to properly implement the system © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-2b Employee Empowerment Programs (cont.) • Job enrichment    Aims to redesign jobs to be more intrinsically rewarding Characteristics that make a job intrinsically rewarding are skill variety, task identity, task significance, autonomy, and job feedback Some specific techniques for enriching a job: - Combine tasks Establish client relationships Reduce direct supervision Increase identification with product/service © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-2b Employee Empowerment Programs (cont.) • Job enrichment • Strengths   Makes jobs less automated, and more interesting and rewarding Enrichment leads to improvements in productivity, quality, absenteeism rates, and retention • Weaknesses   Production may become less efficient Employees preferring highly automated jobs may oppose job enrichment efforts © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-2b Employee Empowerment Programs (cont.) • Quality circles    A group of to 12 employees who identify and resolve production problems within their unit Usually meet once a week Are led by a coordinator who may be a supervisor within the work group or a member elected by the group © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-2b Employee Empowerment Programs (cont.) • Steps to quality circle process      Step 1: Problem identification and selection Step 2: Problem analysis Step 3: Recommended solutions Step 4: Review by management Step 5: Management response © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-2b Employee Empowerment Programs (cont.) • Quality circles • Strengths    Gains valuable input from employees Improves communications among workers and between workers and management Increases motivation through employee empowerment • Weaknesses     Often used as a quick fix Does not address the real problems underlying poor productivity, quality, and employee morale Often creates an “insideroutsider culture.” Sometimes operated improperly © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-2b Employee Empowerment Programs (cont.) • Continuous quality improvement programs   Attempt to build quality into all phases of the design, production, and delivery of a product or service Companies empower their workers to: -  Trace problems to their root causes Redesign production processes to eliminate them by using various problem-solving and statistical techniques Worker empowerment takes the form of self-managed work teams © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-2b Employee Empowerment Programs (cont.) • Self-managed work teams    Consist of to 18 employees from different departments who work together to produce a welldefined segment of finished work Team members are given the authority to plan, organize, and coordinate, and take corrective actions To prepare team-members for self-management, the organization must provide training in three areas: - Technical skills Interpersonal skills Administrative skills © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-2b Employee Empowerment Programs (cont.) • Self-managed work teams • Strengths   Empower employees to make day-to-day business decisions Greater flexibility • Weaknesses      Possible “turf battles” may arise Departmental rivalries often flare up Absence of a supervisor may cause problems Lack of time to handle supervisory responsibilities Problems may arise with peer evaluations © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-3a Productivity Improvement Programs and the Manager’s Job • Employee motivation    • Strengthen the effort–performance link Strengthen the performance–reward link Provide rewards that are valued and perceived as being fair Informal participative decision-making programs   The level of participation should be commensurate with each employee’s desire for challenge, responsibility, and opportunity to have a say in work unit decisions Employees must believe they have the right to share work decisions with the manager © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-3a Productivity Improvement Programs and the Manager’s Job (cont.) • Self-managed work teams  A manager can perform the following functions: - Serve as a technical consultant to teams Serve as a facilitator Serve as an area manager © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-3b How the HRM Department Can Help • Work with top management to establish the appropriate corporate culture—one that emphasizes the importance of employee participation and makes employees feel their input is desired • Training is required to enhance the success of any productivity improvement program implemented by the organization © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-3c HRM Skill-Building for Managers • Using extrinsic rewards to motivate employees Reinforcement theory    Developed by B.F Skinner Stipulates that worker behavior can be shaped, modified, or changed by manipulating the system of rewards given or withheld for the relevant behavior Hinges on three basic assumptions:    Behavior that leads to positive consequences tends to be repeated Behavior that leads to negative consequences tends not to be repeated By manipulating consequences, you can shape a person’s behavior © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-3c HRM Skill-Building for Managers (cont.) • Steps to apply the principles of reinforcement theory to increase the motivational levels of subordinates:     Determine the specific behaviors in which you want your employees to engage Establish a baseline measure for this behavior by measuring current performance levels Analyze performance consequences Change the consequences You have three options: - Eliminate positive consequences associated with the behavior Add positive consequences for improved behavior Add negative consequences to the behavior © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-3c HRM Skill-Building for Managers (cont.)   Monitor and evaluate the effectiveness of the program by keeping records of the employee’s behavior and comparing them with baseline figures Once performance has improved, it will not be practical to reinforce it each time the behavior occurs © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 10-3c HRM Skill-Building for Managers (cont.) • Using intrinsic rewards to motivate employees   Provide employees with stimulating job assignments According to McClelland’s need-achievement theory, all individuals are primarily motivated by one of three needs -  Need for affiliation Need for achievement Need for power To motivate employees, one should try to assign work activities that help employees satisfy their most important need © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved ... objective assessments of employees’ job performance Measure an employee s performance on the basis of job behaviors that have a proven impact on the success of the business Make payouts quarterly,... Piece rate plans • Strengths • Weaknesses Pressure placed on  Cost efficient employees to produce  Employees know what to  Workers may resist to earn reward management s attempts to introduce... Profit-sharing plans • Strengths   Improves productivity by making employees’ interests compatible with employers’ goals Employees may gain a greater sense of ownership • Weaknesses    Only marginally