# Answer the Prediction Questions on this Case Study

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Part I.

The Hovey and Beard Company manufactured
wooden toys of various kinds: wooden animals, pull toys, and the like. One part
of the manufacturing process involved spraying paint on the partially assembled
toys. This operation was staffed entirely by women. The toys were cut, sanded,
and partially assembled in the wood room. Then they were dipped into shellac,
after which they were painted.

The
toys were predominantly two-colored; a few were made in more than two colors.
Each color required an additional trip through the paint room.

For
a number of years, production of these toys had been entirely handwork.
However, to meet tremendously increased demand, the painting operation had
recently been re-engineered so that the eight employees who did the painting
sat in a line by an endless chain of hooks. These hooks were in continuous
motion, past the line of workers and into a long
6
horizontal oven. Each employee sat at her own painting booth designed to carry
away fumes and to backstop excess paint. The employee would take a toy from the
tray beside her, position it in a jig inside the painting cubicle, spray on the
color according to a pattern, then release the toy and hang it on the hook
passing by. The rate at which the hooks moved had been calculated by the
engineers so that each employee, when fully trained, would be able to hang a
painted toy on each hook before it passed beyond her reach.

The
employees working in the paint room were on a group bonus plan. Because the
operation was new to them, they were receiving a learning bonus, which
decreased by regular amounts each month. The learning bonus was scheduled to
vanish in six months, by which time it was expected that they would be on their
own—that is, able to meet the standard and to earn a group bonus when they
exceeded it.

Prediction
question: What will the new hook line do to productivity and satisfaction?

Part II:

By the second month of the training
period, trouble had developed. The employees learned more slowly than had been
anticipated, and it began to look as though their production would stabilize
far below what was planned. Many of the hooks were going by empty. The
employees complained that they were going by too fast and that the time-study
person had set the rates wrong. A few employees quit and had to be replaced
with new employees, which further aggravated the learning problem. The team
spirit that the management had expected to develop automatically through the group
bonus was not in evidence except as an expression of what the engineers called
“resistance.” One employee whom the group regarded as its leader (and the
management regarded as the ringleader) was outspoken in making the various
complaints of the group to the working supervisor: The job was a messy one, the
hooks moved too fast, the incentive pay was not being correctly calculated, and
it was too hot working so close to the drying oven.

Prediction
question: What do you believe management will do immediately while it awaits
the arrival of the consultant?

Part III:

A consultant who was brought into this
picture worked entirely with and through the working supervisor. After many
conversations with the consultant, the working supervisor thought that the ﬁrst
step should be to get the employees together for a general discussion of the
working conditions. This step was taken with some hesitation but without input
from upper management.

The
ﬁrst meeting, held immediately after the shift ended at 4 P.M., was attended by
all eight employees. They voiced the same complaints again: The hooks went by
too fast, the job was too dirty, and the room was hot and poorly ventilated.
For some reason, it was this last item that they complained of most.

The
supervisor promised to discuss the problem of ventilation and temperature with
the engineers, and a second meeting was scheduled to report back to the
employees. In the next few days, the supervisor had several talks with the
engineers. They and the superintendent thought this was really a trumped-up
complaint and that the expense of any effective corrective measure would be
prohibitively high. The supervisor came to the second meeting with some
apprehensions. The employees, however, did not seem to be very concerned,
perhaps because they had a proposal of their own to make. They believed that if
several large fans were set up to circulate the air around their feet, they
would be much more comfortable. After some discussion, the supervisor agreed that
the idea might be tested. The supervisor and the consultant discussed the
question of the fans with the superintendent, and three large propeller type
fans were purchased.

Prediction
question: What will be the impact of the fan decision on morale and relations
with the supervisor?

Part IV:

The
fans were brought in. The employees were jubilant. For several days the fans
were moved about in various positions until they were placed to the
satisfaction of the group. The employees seemed satisﬁed with the results, and
relations between them and the supervisor improved visibly. The supervisor,
after this encouraging episode, decided that further meetings might also be
proﬁtable and asked the employees if they would like to meet and discuss other
aspects of the work situation. The employees were eager to do this. The meeting
was held, and the discussion quickly centered on the speed of the hooks. The
employees maintained that they would never be able to reach the goal of ﬁlling
enough of them to make a bonus.

The
turning point of the discussion came when the group’s leader frankly explained
that the point was not that they could not work fast enough to keep up with the
hooks but that they could not work at that pace all day long. The supervisor
explored the point. The employees were unanimous in their opinion that they
could keep up with the belt for short periods if they wanted to. But they did
not want to because if they showed they could do this for short periods they
would be expected to do it all day long. The meeting ended with an
unprecedented request: “Let us adjust the speed of the belt faster or slower
depending on how we feel.” The supervisor agreed to discuss this with the
superintendent and the engineers.

The
reaction of the engineers to the suggestion was negative. However,

after several meetings, it was granted
that there was some latitude within which variations in the speed of the hooks
would not affect the ﬁnished product. After considerable argument with the
engineers, it was agreed to try out the idea.

With
misgivings, the supervisor had a control with a dial marked “low, medium, fast”
installed at the booth of the group leader; the speed of the belts could be
adjusted anywhere between the lower and upper limits that the engineers had
set.

Prediction
question: What will be the impact of the dial control decision on productivity
and satisfaction?

Part V:

The
employees were delighted and spent many lunch hours deciding how the speed of
the belt should be varied from hour to hour throughout the day. Within a week,
the pattern had settled down to one in which the ﬁrst half hour of the shift
was run on what the employees called a medium speed (a dial setting slightly
above the point marked “medium”). The next 2.5 hours were run at high speed;
the half-hour before lunch and the half hour after lunch were run at low speed.
The rest of the afternoon was run at high speed with the exception of the last
45 minutes of the shift, which was run at medium.

In
view of the employees’ reports of satisfaction and ease in their work,

it is interesting to note that the
constant speed at which the engineers had originally set the belt was slightly
below medium on the dial of the control. The average speed at which the
employees were running the belt was on the high side of the dial. Few, if any,
empty hooks entered the oven, and inspection showed no increase of rejects from
the paint room.

Production
increased, and within three weeks (some two months before the scheduled ending
of the learning bonus), the employees were operating at 30 percent to 50
percent above the level that had been expected under the original arrangement.
Naturally, the employees’ earnings were correspondingly higher than
anticipated. They were collecting their base pay, a considerable piece rate
bonus, and the learning bonus, which, it will be remembered, had been set to
decrease with time and not to function in relation to current productivity. The
employees were earning more now than many skilled workers in other parts of the
plant.

Prediction
question: How will other personnel react and why?

Part VI:

Management
was besieged by demands that this inequity be taken care of. With growing
irritation between superintendent and supervisor, engineers and supervisor,
superintendent and engineers, the situation came to a head when the
superintendent revoked the learning bonus and returned the painting operation
to its original status: The hooks moved again at their constant time-studied
designated speed, production dropped again, and within a month all but two of
the eight employees had quit. The supervisor stayed on for several months but
then left for another job feeling aggrieved.

a. What conclusions can be drawn from
this case about piece rate incentive systems?

b. Review the problems introduced by the
new system and discuss how they might have been avoided.

2. The Henley Brothers Machine Shop
performs batch drilling for numerous organizations in its area. Skilled drill
press operators at the shop currently earn \$10 per hour. Donald Henley,
vice-president of production, is considering putting drill press operators on a
piece rate incentive system when they work on these large batch drilling
operations (other work would be straight hourly work).

As
a skilled tool and die maker and a trained engineer, Donald Henley has
undertaken a time study for these large batch drilling operations. He has
observed that his two slowest employees average 60 drilling operations in an
hour and the fastest employee to perform the task does 72 drillings in an hour.
The average across all employees is 66 drilling operations. If he goes to a
piece rate system, Henley would not want maximum pay to exceed \$11.20 per hour
because of equity considerations for other employees.

a. Would you recommend to Henley that he
use or not use a piece rate incentive plan? Why or why not?

b. Design at least two different piece
rate plans that Henley might use. Which do you recommend? Why? Which would keep
labor costs at a minimum?

c. How would you administer the piece rate
plan? Are the costs and troubles worth it?

d. What do you think employees will think
of the new plan you propose?

3. Generic Services, Inc., is a small
company of employees with no fringe beneﬁts other than a two-week paid vacation
policy after one year of service. The owner is considering offering a
proﬁt-sharing plan to these employees. Five percent of net proﬁts would be
distributed to employees as a percentage of their salary to total payroll.

The ﬁve-year history of payroll costs and
net (after tax) proﬁts is as follows:

Year   Number
of Employees   Payroll   Net After-Tax Proﬁt

Year 1          4                            \$40,000    \$60,000

Year 2          4                              42,000      (3,000)

Year 3          4                              43,500      81,000

Year 4          5                              55,000      42,000

Year 5          5                              56,500      96,000

a. What do you recommend to the owner?

b. In the absence of prior employee beneﬁts,
would you recommend initiating some beneﬁts before proﬁt sharing?

Why or why not?