Organizational behavior real research for real managers

I work at a company called Marvin Land Systems (MLS), and at MLS we sell cooling systems and auxiliary power units. These systems are used on tracked vehicles or tanks such as the M1 Abrams and the Stryker vehicles which are in turn sold to the US Government. Our company is a small company with about 40-50 members. One of the organizational situations that I have observed is that my company is not properly incentivizing good behavior. For example, my workplace has a manufacturing floor and one of our goals is to ramp up our production. My company is working through this effort by using time-studies to measure how much time it takes for the workers to complete their task. One might think that by adding pressure, the workers will be more efficient, but these efforts have had unintended consequences and now we are having difficulties to reach our goal.

I argue that one of the reasons that we are having difficulties ramping up our production is that we are unintentionally punishing our workers. As program manager, I have set goals along with my boss, VP of Operations, to increase our output of 10 systems to 20 systems per month to keep up with our customer demands as well as their customer’s demands. When the company started this effort, we did time studies and we were observing how fast the workers were doing their job. We set that as their baseline efficiency. On good months, where there were less distraction or if they had all the parts required, they would build up to 12-15 systems per month. What happened next was that the company used that data to set a new baseline. However, this was not necessarily a good thing because the workers were then expected to have an output of no less than 15 systems per month. If they did any less, then it would reflect poorly upon them. What has become apparent to me now is that the company has punished them for doing good work. They no longer want to go above and beyond for fear of having an additional baseline set. In their minds, if they ever give 120% to reach our goal of 20 systems per month, then their effort will be normalized and the company will discipline them if they go any lower than that. The company has created an organizational situation where good behavior has become punished.

In the reading “Organizational Behavior Real Research for Real Managers,” Jone Pearce states that “some organizations actually do punish extra effort without realizing it” (Pearce, 2009). This seems to be exactly what is happening at MLS. My company wants to promote ramping up our production, but when the workers start to do so, they get punished for not giving 120% effort every day. By giving a base salary, with no increases or bonuses, the employees will want to increase the price of the units the produce. For example, if they get paid $200 to produce 10 units, that equates to $20/unit. They have no incentive to get paid $200 to produce 15 units, which equates to $13.33/unit. MLS is effectively punishing them by demanding more production while lowering the employee’s market value. Their “piece rate” is what is rewarded so that is what they will try to maintain.

Another reason that we facing challenges to meet our goal, I would like to argue, is that we are rewarding bad behavior as well. Our main goal is to ship as much product out as possible. By adding additional pressure, the workers will do whatever they can to not fall behind in their work – one of which is rushing our inspection process. Ever since MLS did this, it has had an increased amount of returns or rejects from our customer, General Dynamics Land Systems, GDLS. However, these get swept under the rug because the customer never debits us, so they do not have high visibility on our accounting. MLS would eventually fix the parts and send it back, but at the same time, the workers are not really getting punished either. Since this does not affect MLS’s bottom line, the workers still end up getting their salary for shipping out less-than-perfect parts as long as they keep up with our monthly goals. MLS is effectively and unintentionally rewarding the workers for shipping out rushed product while desiring an error-free production line.

In the Article “On the Folly of Rewarding A, While Hoping for B,” by Steven Kerr, he states that there exists “reward systems that are fouled up” in which a behavior rewarded is something that needs to be discouraged (Kerr, 1995). This happens, because we are currently obsessed with our output and MLS simplifies things and seeks “to establish simple quantifiable standards” (Kerr, 1995). In this case, our quantifiable standard is units-per-month. On top of that, we have an “overemphasis on highly visible behavior” (Kerr, 1995). We are only looking at our output while ignoring the bigger picture which includes an increased amount of defected units which we are shipping.

Given the preceding analysis, I recommend that MLS no longer use the time-study method and create an organizational cash bonus system at the end of the year, meaning everyone in the company would get an equal percentage bonus. This system could be 5% cash bonus if they can maintain a net of 15 systems per month and maybe a 10% cash bonus if they exceed what they previously did and produced a net of 20 systems per month. Here is how this organizational cash bonus is rooted in the analysis. The assemblers will no longer feel like they have to hold themselves back in fear that the company will expect more from them; instead, they will want to do more because this will only benefit them. In the application of this bonus, employees will have higher job satisfaction because they will be paid more and Pearce states those with “higher job satisfaction will do more” (Pearce, 2009). This bonus will also be fair to them, because they are not lowering their market value or piece price while doing more for the company. If they feel like their organization is treating them fairly by not diminishing their worth, “they will do more to help the organization” (Pearce, 2009).The organizational cash bonus system will also allow them to work more carefully if the milestones clearly state that the goal is a net of 15 to 20 systems per month, meaning that they also need to limit the amount of returns that the customer will give to us. Also, by paying for organizational performance, this incentivizes the workers to check each other’s work to reduce the amount of defects.

Some potential problems that may arise is that, perhaps the some workers will be okay with not having a cash bonus at all. One consequence is that MLS may simply not meet their goals whatsoever and sink back to 10 systems per month; if they keep putting in more and more effort for the bonus, they might end up burning out. Another consequence is that there may be some slackers that other workers will constantly have to look after. Of course the bad worker will be fired, but when another worker feels like they have to constantly cover for another, they might feel like the bonus is unfair and will react negatively.

Overall, I believe that the biggest organizational problem that MLS currently has is that they are not managing their incentives properly. Not only is MLS punishing the assemblers for putting in the extra effort, it is also rewarding bad behavior by ignoring defected parts. From the analysis above, I believe that the path forward is to create an organizational cash bonus system where the milestones are stated explicitly with a goal of minimizing defects while increasing production. Although, it does come with its own problems, it will mitigate many other issues that MLS has and will put them in the right direction.

References:

“On the Folly of Rewarding A, While Hoping for B.” Kerr, Steven. In Academy of Management Executive (journal) , Vol. 9, Iss. 1. P. 7-14. Published February 1995. Academy of Management.

“Chapter 6: Managing Incentives.” In Organizational Behavior: Real Research for Real Managers , by Pearce Jone L. pp. 109-133. Melvin and Leigh Publishers, 2009. (25 pages)

An Huynh

Week 4

-

Individual Reflection Paper

I work at a company called Marvin Land Systems (MLS), and at MLS we sell cooling

systems and auxiliary power units. These systems are used on tracked vehicles or tanks such as

the M1 Abrams and the Stryker vehicles

which are in turn sold to the US

Government.

Our

company is a small company with about 40

-

50 members

. One of the organizational situations

that I have

observed

is that my company is not properly incentivizing good behavior.

For

example, my workplace has a manufacturing floor and one of

our goa

ls is to ramp up our

production.

My company is working through this effort by using time

-

studies to measure how

much time it takes for the workers to complete their task.

One might think that by

adding

pressure,

the workers will be more efficient

, but these efforts have had unintended consequences

and now we are having

difficulties

to reach

our

goal.

I argue that one of the reasons that we are having difficulties ramping up our production

is that we are unintentionally punishing our workers.

A

s program manager, I have set goals

along with my boss, VP of Operations, to increase our output of 10 systems to 20 systems per

month to keep up with our customer demands as well as their customer’s demands. When the

company started this effort, we did t

ime studies and we were observing how fast the workers

were doing their job. We set that as their baseline efficiency. On good months, where there

were less distraction or if they had all the parts required, they would build up to 12

-

15 systems

per month

. What happened next was that the company used that data to set a new baseline.

However, this was not necessarily a good thing because the workers were then expected to have

an output of no less than 15 systems per month. If they did any less, then it w

ould reflect poorly

upon

them

.

What has become apparent to me now is that the company has punished them for

doing good work. They no longer want to go above and beyond for fear of having an additional

baseline set. In their minds, if they ever give 120%

to reach our goal of 20 systems per month,

An Huynh

Week 4 - Individual Reflection Paper

I work at a company called Marvin Land Systems (MLS), and at MLS we sell cooling

systems and auxiliary power units. These systems are used on tracked vehicles or tanks such as

the M1 Abrams and the Stryker vehicles which are in turn sold to the US Government. Our

company is a small company with about 40-50 members. One of the organizational situations

that I have observed is that my company is not properly incentivizing good behavior. For

example, my workplace has a manufacturing floor and one of our goals is to ramp up our

production. My company is working through this effort by using time-studies to measure how

much time it takes for the workers to complete their task. One might think that by adding

pressure, the workers will be more efficient, but these efforts have had unintended consequences

and now we are having difficulties to reach our goal.

I argue that one of the reasons that we are having difficulties ramping up our production

is that we are unintentionally punishing our workers. As program manager, I have set goals

along with my boss, VP of Operations, to increase our output of 10 systems to 20 systems per

month to keep up with our customer demands as well as their customer’s demands. When the

company started this effort, we did time studies and we were observing how fast the workers

were doing their job. We set that as their baseline efficiency. On good months, where there

were less distraction or if they had all the parts required, they would build up to 12-15 systems

per month. What happened next was that the company used that data to set a new baseline.

However, this was not necessarily a good thing because the workers were then expected to have

an output of no less than 15 systems per month. If they did any less, then it would reflect poorly

upon them. What has become apparent to me now is that the company has punished them for

doing good work. They no longer want to go above and beyond for fear of having an additional

baseline set. In their minds, if they ever give 120% to reach our goal of 20 systems per month,