Econ-301

LINCOLN ELETRIC COMPANY

1. Based on the readings of quota restrictions & gold bricking it shows how employees banned together to battle against the firm by lowering their output and wasting time, causing the firm profits and production time.

Based on this payment system the slope is positive for low performance, but there is no gain for superior performance. The employees have no incentive to go beyond the required minimum. This pay system was a disadvantage to the workers if they went beyond the expected the firm would have changed the rates against them. They would have to work harder for an even lesser pay.

The easiest way to solve this problem is to introduce the performance pay plan. The switch would increase the workers performance and raise the competition level between the Employees. The incentive for moving from fixed rate to piece rate is the average output will rise. Output would be affected in a positive way, because this pay method would raise the standard and encourage speed and productivity.

2. Roy’s machine shop is facing many problems such as low production due to unmotivated employees. The employees have no incentive to cooperate with the firm because of its bad payment system. This firm lowers the money earned for over producing. It means that if a worker is going over his hourly limit, the management will have to pay workers more since earnings are relative to the amount of work completed. Thus the management will either reduce the pay rate or make the job harder. In the article it states that many workers deliberately slowed down, and reduced their efforts to the base rate level. If this firm maintains this pay system it will not improve in production or produce with high quality because there is no incentive to do so. One of the workers says, “They’re not going to get much work out of me for this pay.”(Donald, p 436) Many workers realized that they would have to put forth very little effort without getting fired. The employees feel that they are being cheated with the pay, so in turn the lower their output.
3. Lincoln electric company has no problems with quota restrictions or gold bricking because they were using a piecework system which was completely fair to the workers, as opposed to Roy’s plant whose pay system was working against the workers. Roy’s plant would change the rates or machines because they had to pay for the amount of output and they didn’t want to pay over $10/a day. The Lincoln electric system didn’t cap off the possible earnings as Roy’s system did, or change their methods because workers were earning too much. There were no quote restrictions or gold bricking because the employees enjoyed working for the company and were treated equally.

4. Based on the readings the employees from the Lincoln electric company their employees have incentives to cooperate with the firm because they receive fair pay, they were guaranteed employment and had no restriction on how much they can earn in contrast to Roy’s plant. The worker were allowed to improve because the were given the freedom to challenge the price if they felt it was unfair, as opposed to Roy’s plant who had no option. The employees will produce high quality because they have the incentives to do so; also they had a merit rating system which determined their semiannual bonus. In the article it stated that most employees liked to work at Lincoln as opposed to workers in Roy’s plant who hated working for their management. Lincoln’s employees felt the management was fair, trustworthy, and honest and that’s why there such cooperation within all levels. The management works with the workers and the workers work with the management that’s why Lincoln electric was so successful and had high productivity. Roy’s plant didn’t have high output because they weren’t fair with the employees; therefore the employees weren’t fair with the firm. They felt the firm was cheating them so they worked slowly and produced the bare minimum.

5. The company that I used to work for had a similar pay system. I use to get paid hourly plus extra for every checking or saving account I would obtain. This is a great system that gets the employees encouraged and involved with the company. I believe the piece rate system will work for many companies because as employee output increases so will the companies overall production, both the company and the employee are better off. There are many incentive ideas that I would take from this case such as being fair to the employee, ad to treat the worker as an equal. I believe that if the employees are happy then firm will be happy in turn you will see happy customers.As