Chang Koh Ptd Company

Questions:

1) Comment on the fixed salary system that Andrew adopted from his former employer. Why was this system not effective for motivating the plant workers?

2) Do you think that scrapping the fixed salary system and replacing it with the piece rate system was a good idea? What are some of the strengths and weaknesses of the piece rate system?

3) Why was Andrew unsuccessful in his efforts to improve product quality? Do you think that a system of demerit points and wage deductions of the quality control workers would have been effective? Will more supervisors in the quality control department and shipping products to Singapore for final inspection solve the problem? What do you think would be an effective way to improve product quality?

4) Were cross-cultural differences a factor on the effectiveness of the salary system? How effective do you think each system would have been if the plant was located in North America?

5) Discuss the potential effects of implementing an MBO program in the plant. Do you think it would improve productivity and solve some of the problems?

6) Are there any conditions under which the piece-rate system might have been more effective?

7) What are some alternative ways to use pay to motivate the workers at the plant? Are there alternatives to the piece-rate system and how effective are they likely to be? What does this case say about using money as a motivator?

8) What should Andrew do now? What would you do?

Answers

Question 1:

The system was not effective for a number of reasons. It did not link pay to performance. Workers were paid a fixed salary based on the number of hours worked. This system does not take productivity into account as workers are paid the same amount per day regardless of the quantity produced. There is no incentive to reward workers for higher productivity and quality under this payment system.

Another reason why the fixed salary system did not work was that it did not take cultural differences into account. Andrew imported an American business model that suited American employees who tend to have a highly individualistic culture. This is where workers perform their job based on what is required of them and do not care so much about other worker salaries but place more precedence over their own. The Chinese tend to have a culture of collectivism where each worker looks out for the best interests of their co-workers. Employees tend to place their collective goals ahead of those of the company and if both do not agree, a situation of lack of goal congruence results.

Question 2:

Andrew adopted the same salary system as he seen used by his former employer and paid his workers a fixed salary based on the number of hours worked. The results of his actions were low productivity rates, and the workers demonstrated very little commitment to meeting the company's goals. Providing salaries for everyone changes labour cost from variable to fixed with serious employment security implications. The success of a fixed salary system requires stable, mature, responsible employees, a cooperative union, willing supervisors, and a workload that allows continuous employment.

Based on the case it is evident that the fixed salary system adopted by Andrew was not successful hence we think that scrapping the fixed salary system and replacing it with the piece-rate system was a good idea but it must be implemented with strict quality control programs.

Piece-rate system usually works like this: An employee is guaranteed an hourly rate (probably the minimum wage) for performing an expected minimum output (the standard). For production over the standard, the employer pays so much per piece produced.

Some of the strengths and weaknesses of the piece-rate system are as follows. Compared with a fixed salary system, the introduction of a piece-rate system usually leads to substantial increase in productivity. This system is a form of extrinsic motivation to employees. This means that the piece-rate pay, which stems from the work environment external to the task, motivates employees. According to the case, if workers produced at or below the minimum production standard for the day, they received additional money for each extra piece produced; hence they are motivated to produce above the rate in other to receive additional money.

The piece-rate system may be designed to affect output other than performance. For example, employers may use the system to lower absenteeism and turnover. The system also allows employees to monitor the performance of individual employees, compare them and take the necessary actions based on the results and reduces non-value added activities which in turn lower cost.

Along with the many strengths of the piece-rate system there are also some weaknesses. The use of the piece-rate system does increase output. Although production increases, other performance criteria may suffer for example quality. As mentioned in the case, after a short period of introducing the piece-rate system customer complained about low quality of the goods they were receiving from the company. Some employees are more inclined to perform better than other, since people have varying motivation to work. Employees may be dissatisfied if they have to work harder or if they feel manipulated by the system. And finally a piece-rate system that rewards individual productivity might decrease cooperation among workers.

Question 3:

Andrew's efforts were unsuccessful mainly because of the culture of the workers. The Chinese culture is one of collectivism which explains why the quality control inspectors chose to ignore products of poor quality. An implementation of a demerit system and wage deductions of quality workers may have worked but may have also had an adverse effect on the workforce's motivation and their morale.

The employment of additional supervisors and the shipping of final products may have also eased the situation but the question of whether the benefits outweigh the costs should be of major importance to Andrew as the chance of the company facing losses increases. Again, considering the culture of the workforce, there is a great possibility the most of the new supervisors can adopt the same attitude as the current ones.

Presently, the method used by Andrew is a reactive one; an effective way to improve quality may be to have a more proactive system. Along with training the quality staff, Andrew should also train the production workers. The use of this preventative method will save a lot of resources that would otherwise