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Additional Case 11.2 Richland Manufacturing Uses an Individual-Based Pay-For-Performance Plan for Employees

question 77

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Additional Case 11.2
Richland Manufacturing uses an individual-based pay-for-performance plan for employees.
Manager input in the form of performance evaluations primarily determines individual employee rewards. Performance appraisals at Richland are used for multiple purposes including compensation, training, and work planning. Since implementing the plan, many managers have noticed that employees tend to play it safe by setting modest rather than challenging goals for themselves. Employees have also been avoiding important tasks, such as satisfying the needs of customers and keeping work areas neat. In addition, most employees express disbelief that pay and performance are actually linked. As a result, Richland is considering making modifications to the system.
The HR Director wants a system that will reward all employees based on the entire company's performance because he wants to increase employee commitment. The VP of Operations wants to reward specific productivity and quality improvements with a simply structured system that considers labor costs as well as other production expenses. The VP of Operations also believes that labor and management should work together to allocate the rewards.
-Refer to Additional Case 11.2.Most Richland managers want to use an individual-based pay-for-performance plan to reward high performers but are concerned about increasing employees' base pay permanently due to costs.Which of the following would most likely be appropriate in this case?

Definitions:

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life uniformly.

After-Tax Discount

The reduction or deduction from the gross amount on which tax has already been calculated and deducted.

Working Capital

The gap between a firm's current assets and its current liabilities, signifying the available liquidity for operating its business activities.

Incremental Sales

The additional revenue generated from an increase in sales activities or volume above a baseline level.