Safelite
Group 5 - Case Write-Up # 2
Background
As a largest nation-wide auto glass company maintaining the largest market share, Safelite faced what was called ‘glass ceiling’ in productivity. Low productivity as well as traditionally high turnover rate were a crucial issue, especially accompanying with high installation demand, if Safelite could not find an effective way to address this surplus installation demand brought in largely by the strategy of creating partnership with insurance companies and partly by its growth strategy leading to rapid expansion between 1987 and 1989. The advent of PPP (Performance Payment Plan) was under such circumstances. Management expected that this payment incentive could motivate their employees, here specifically referring to technicians and managers of lower volume stores.
Shifting from inflexible wage rate to piece rate could be an uncertain venture. While there exists a possibility that PPP would remarkably increase productivity and at the same time keep the turnover rate at an acceptable level, PPP could also result in losing a lot of installers and make Safelite lose a large amount of customers. Is it worthwhile to institute PPP and take the risk of losing business? Our opinion is yes. This essay’s structure is as following: first, answering the four questions associated with Safelite case one after one; second, presenting our standpoint and our assumptions and evidence to support our conclusion while answering these four questions; finally, giving Safelite specific approaches about how to implement PPP in a more realistic and less risky way. 1. What are the pros and cons of switching from wage rates to piece rate pay? / What are the likely consequences of a switch from wage to piece rates for turnover, recruitment, productivity? (Here I make some changes to the question 4,because I think there are some overlaps between question 1 and 4,and answers to them can be putted together, expect for ‘product quality’ which will
Background
As a largest nation-wide auto glass company maintaining the largest market share, Safelite faced what was called ‘glass ceiling’ in productivity. Low productivity as well as traditionally high turnover rate were a crucial issue, especially accompanying with high installation demand, if Safelite could not find an effective way to address this surplus installation demand brought in largely by the strategy of creating partnership with insurance companies and partly by its growth strategy leading to rapid expansion between 1987 and 1989. The advent of PPP (Performance Payment Plan) was under such circumstances. Management expected that this payment incentive could motivate their employees, here specifically referring to technicians and managers of lower volume stores.
Shifting from inflexible wage rate to piece rate could be an uncertain venture. While there exists a possibility that PPP would remarkably increase productivity and at the same time keep the turnover rate at an acceptable level, PPP could also result in losing a lot of installers and make Safelite lose a large amount of customers. Is it worthwhile to institute PPP and take the risk of losing business? Our opinion is yes. This essay’s structure is as following: first, answering the four questions associated with Safelite case one after one; second, presenting our standpoint and our assumptions and evidence to support our conclusion while answering these four questions; finally, giving Safelite specific approaches about how to implement PPP in a more realistic and less risky way. 1. What are the pros and cons of switching from wage rates to piece rate pay? / What are the likely consequences of a switch from wage to piece rates for turnover, recruitment, productivity? (Here I make some changes to the question 4,because I think there are some overlaps between question 1 and 4,and answers to them can be putted together, expect for ‘product quality’ which will