HRMG 4201 Week 5 Flat-Rate Pay Reward Analysis Example

Does Flat-Rate Pay Reward the First-Visit Promise? Three Rivers' Technician Pay Read Through Vroom's Expectancy Theory, the Diagnostic Hour It Leaves Unpaid and a Revision That Pays for Getting It Right

Student Name

Walden University

HRMG 4201: Strategic Human Resource Management

Instructor Name

Month Day, Year

Does Flat-Rate Pay Reward the First-Visit Promise? Three Rivers' Technician Pay Read Through Vroom's Expectancy Theory, the Diagnostic Hour It Leaves Unpaid and a Revision That Pays for Getting It Right

The Pay Structure as the Case Gives It

Technicians at Three Rivers Auto Care, the course's composite group of repair shops, are paid flat rate. Each job is credited with the hours a published labor guide allows for it, whatever time it actually takes. A brake job rated at 1.5 hours pays 1.5 hours at the technician's rate whether it takes one hour or two. A job that comes back within 30 days for the same complaint pays nothing the second time, because the customer promise makes the repair free. Diagnostic time is credited only when it leads to a billed repair; an hour spent tracing a fault that the customer then declines to fix, or that turns out to be a loose connector, may earn 0.3 hours or none. General-service and diagnostic technicians earn an average of about $26 an hour credited.

Expectancy Theory

Vroom (1964) proposed that people direct effort toward an activity as far as they expect that trying harder produces good work, that good work earns something and that the something is worth having. All three beliefs must be present. The theory is useful here because it asks, for each behavior the strategy needs, whether the pay system connects effort to a valued reward.

Diagnostic Time: The Gap

The strategy depends on technicians spending enough time to find the real cause of an electrical fault. Under flat-rate pay, the first link holds: effort leads to a correct diagnosis. The second link is weak. A correct diagnosis that takes an hour may pay a fraction of an hour, while a quick guess, replacing the battery the customer suspected, pays the full guide time for a battery replacement. If the guess is wrong and the car returns, the technician who made it is not paid for the second visit, but often a different technician handles the comeback, and the original technician kept the pay for the first job. The pay system therefore rewards the opposite of what the strategy needs: speed and parts replacement over careful diagnosis. Kerr (1975) described exactly this trap, where the pay slip says "be quick" while the poster on the wall says "be right."

Who Bears the Comeback

Under current rules, the cost of a comeback falls mainly on whichever technician receives it, who works without pay on someone else's mistake, and on the chain, which pays for parts. The technician who made the error bears little. That weakens the third of Vroom's links for accuracy: there is no valued reward for getting it right, and little penalty for getting it wrong.

A Revision

Three changes would align pay with the first-visit commitment without abandoning flat rate, which technicians generally prefer for routine work. First, pay diagnostic time at actual clock hours, up to a cap, whenever an adviser codes the job as diagnostic. Second, charge comebacks back to the original technician's credited hours rather than leaving them with whoever receives the car. Third, pay a quarterly bonus to technicians whose comeback rate is below a target, such as 5 percent. Shaw et al. (2001) found that compensation systems perform best when they are congruent with how the work is actually organized, which argues for adjusting flat rate rather than replacing it. Employees must also see any new measure as fair and within their control, so the comeback charge-back should apply only to comebacks that a foreman judges were caused by misdiagnosis, not by a new failure.

What Technicians Would Notice

For a general-service technician who rarely takes diagnostic jobs, little would change: routine work stays on flat rate, and the bonus is available to anyone with a low comeback rate. For a diagnostic technician, the change is large. An hour tracing an intermittent fault would pay an hour, not a fraction of one, and a quarter of accurate work would pay a bonus. For the technician who replaces parts on a guess, the change is unwelcome but fair: a misdiagnosed comeback would cost the hours originally credited. Over time, the revision should push electrical jobs toward the people best able to do them, because they would now be paid for doing them well.

Risks of the Revision

Paying clock hours for diagnosis invites padding. A cap, foreman review and comparison with typical diagnostic times would limit it. The charge-back could discourage technicians from taking hard jobs; pairing it with the quarterly bonus, so that accurate work on hard jobs is rewarded, addresses that risk.

References

Kerr, S. (1975). On the folly of rewarding A, while hoping for B. Academy of Management Journal, 18(4), 769-783. https://doi.org/10.5465/255378

Shaw, J. D., Gupta, N., & Delery, J. E. (2001). Congruence between technology and compensation systems: Implications for strategy implementation. Strategic Management Journal, 22(4), 379-386. https://doi.org/10.1002/smj.165

Vroom, V. H. (1964). Work and motivation. Wiley.