Reference no: EM133243712

Case: The Greenley Corporation has increased its profits over the last 5 years, increasing its annual rate by 13.5. Most of this increase was a direct result of subcontracts that the company had obtained from other companies. Six months ago, to deal with his 90-day backlog of orders, Greenley introduced an incentive plan to increase production. There were several versions of the plan, each tailored to specific jobs. The assemblers and packers offered a 25 percent bonus for all work done on the standard.

The average assembler-packer earned $9.00 per hour and was expected to assemble and pack ten units within this period. With the time allowed for lunch and rest breaks, people put in eight hours of work and were expected to produce seventy units, resulting in a base of 90 cents per unit. If the assembler-packer chose to work on Saturday, the rate was time and a half, and management also promised the 25 percent bonus for production over standard. Assembler-packers who packed eighty-two units a day received a weekly gross wage of $497.25. The calculation was done as follows: Average weekly wage (8 hours x $9.00 per hour x 5 days $360.00 Bonus for 12 extra units per day (90 cents per unit x 1.25% bonus x 12 extra units x 5 days) 67.50 Saturday Overtime (8 hours x $13.50 [$9.00 per hour x 1.5 for overtime]) 108 Bonus for 12 extra units on Saturday (90 cents per unit x 1.5 overtime x 1.25% incentive x 12 units) 20.25 TOTAL $555.75 Last week, the production department reported that there was a 100-day backlog of orders.

The vice president in charge of production told the president that it would be a good idea to start finding subcontractors for some of these orders. The president acquiesced, but urged the vice president to try to do as much of the inside work as possible. "If necessary," the president said, "increase the incentive to 35 percent of base salary." The vice president agreed to do so, but pointed out to the president that only 6 percent of the entire plant workforce was willing to work on Saturday. "I don't think we're having much success with our incentive program. You can't get good help anymore if you ask me."

Question 1. Does Greenley management think money motivates people? He explains.

Question 2. Why is the incentive plan not being effective? Explain.

Question 3. Based on the Vice President's last comment, how would you characterize the Vice President's view of human nature? He explains.