Reference no: EM133146014

Shifting Incentives at TechEx Repair

TechEx Repair allows local hardware stores to expand their service offerings to their customers by providing an off-site small engine repair service. Customers bring in small engines such as lawn mowers and chainsaws for repair at their local hardware store. The hardware stores then transport the engines to TechEx where the technicians quickly make the necessary repairs and return the engines to the hardware stores. The consistent quality work provided by the TechEx technicians has led to a significant growth in their business.

As the company continues to grow, top management is also looking for ways to improve productivity. In doing so, they have asked Human Resources Manager Joe Jones to examine the compensation structure for the technicians. The technicians are currently paid a base hourly wage and then receive incentive pay based on the number of repairs they complete each week. Supervisors distribute the work assignments to the technicians. The supervisors know which technicians are good at certain kinds of repairs and tend to give specific jobs to the same technicians. Many technicians like this arrangement as they have become experts at certain types of repairs and can complete them quickly, helping to earn more incentive pay.

As a result, the technicians do not have any incentive to learn how to complete different types of repairs. Many of the technicians are only experts at doing a few different types of repairs and have limited knowledge of how to complete other types of repairs. This creates a challenge when there are many of the same repairs needed during a given week. Because only a few technicians may be able to complete a certain type of repair, the work orders become backed-up, while other technicians do not have any work to do.

In order to provide some incentive to the technicians to learn new repairs, Joe is considering shifting to a pay-for-knowledge compensation program. His intent is to design a pay structure that provides higher base pay rates based on the number and types of repairs each technician is trained to complete. Joe believes that by eliminating the current bonus structure and giving employees the opportunity to increase their hourly pay rate by learning new repairs, the company will be able to better meet demand due to a more flexible workforce. However, he is concerned about potential resistance from the technicians.

Question. What do you think TechEx should do?