Reference no: EM133076292

Korey owns a plumbing repair service company that has been in business for thirty years in Shreveport Louisiana (population 198,675). The company employs 50 repairmen and repairwomen that work in two person teams doing plumbing repair jobs. Korey's son Martin is going to be taking over the business and has lots of ideas about improving incentives. Equipped with what he has learned in his MBA program, he has established that (1) customer satisfaction, (2) capacity utilization (the plumbing repair service people need to be working when they are on the clock) and (3) the profit margin of the service (some repairs involve more parts than others and the mark up the customers on the parts is high) are the company's profit drivers.

Martin has decided to implement a program where the plumber's bonuses are based on a formula that depends on (1) customer satisfaction (measured by post-service customer satisfaction surveys), (2) capacity utilization (measured by number of jobs completed) and (3) profit margin (measured by number of high mark-up jobs completed).

Explain to Martin why, while he would like to see improvements in the plumbers' performance on all three dimensions, he is more likely to see significant improvement on one dimension and little or no improvement on the other two dimensions.