Question

Erin is Yard and Shipping Supervisor for a Modular/Manufactured home company in Edmonton, Alberta. The company, in business for over 25 years, has a good reputation but does not have a formal quality control/assurance program. Erin has been the yard supervisor for 4 years and prior to that she worked a variety of jobs in the assembly plant.

In her position she is responsible for the supervision of the storage yard where finished homes are held prior to shipping. In addition she supervises 2 yard work crews. The first crew installs appliances and does touch ups or minor finishing in the yard not completed in the plant. This work could on occasion include installing doors, windows or flooring which was not installed in the plant due to a shortage of material or manpower on the assembly line. The second crew prepares the homes for final shipping, loads homes on a trailer and arranges actual delivery to retail sales agents across Western Canada.

Demand for the company’s homes has steadily increased in recent years and management has been anxious to increase production. To that end the company introduced a new bonus program where all employees would receive a small gift if weekly production exceeded 26 homes. Gifts included company promotional items like caps, shirts or lunch vouchers. If monthly production met or exceeded 110 homes each employee, supervisor or manager would receive a bonus that month of up to $350 dollars. Individual bonuses were calculated by a formula which considered actual wages or salary earned during the month. In this way it was thought absenteeism would also be reduced and he company would be a more exciting and fun place to work.

After 3 months production targets were actually exceeded. Management was pleased. Employees, supervisors and managers were happy to receive the small gifts and looked forward to the extra cash each month. In fact the union had asked management if the company would match the bonus if payment was directed to the employee’s RRSP(Registered Retirement Saving Program).

In the 4^th month Erin noticed that the number of finished homes being held in the yard for final touch ups and finishing was increasing. Homes were usually in the yard for 3 to 5 days prior to shipping. It was now common for homes to be in the yard over a week. Touch ups and finishing work had increased to the point she had to put on an afternoon shift. In addition she was getting calls and complaints from retail agents over delays in shipping and quality problems after delivery such as cracked plaster, missing trim and water leaks. She had also recently attended a meeting with the accountants who were alarmed that warranty claims were on the rise. Erin was asked to step up her vigilance and not overlook any quality issues prior to shipping. She was also criticized for having to put on an afternoon shift. Senior management asked her for a detailed report by the first of next week outlining her plans to fix problem.

Erin is very concerned. Everyone likes the bonus program. There is talk by employees that an increase in target production levels may also increase the monthly cash bonus.

1 What did the Company do wrong in the design and implementation of the bonus plan?  

2. What steps must Erin take do to fix the bonus problem and, in turn, improve both production levels and at the same time ensure product quality?

Answer 1

The design and implementation of bonus plans have gone wrong in many ways:

1 With the implementation of the bonus plan, a step should also add that only quality checked homes would only be certificated for further steps and then only that home, which counts in the total number of homes furnished.

2 By this bonus plan, employees will get motivated and increase sales, but at the same time, we need to keep customers' satisfaction at the top.  

The company should move on with the following steps to fix the problem and at the same time, keep the production level and product quality as a priority:

Scratching the bonus plan and implementing it in a way that creates enthusiasm in the employees by taking care of the quality level too. It should be kept simple by increasing a step that is quality check desk that will approve the homes, and then only delivery will be done.

Alternatively, homes with no complaint will count for a bonus; other homes will not consider for the bonus implementation.

Such a bonus plan should be thought upon and then implemented wholly.