Can Efficiency Wages be the Incentive Answer to Soldiering
I had
the opportunity recently to read an article in the March 2011 edition of
WORKSPAN written by Cornell University Professor Kevin F. Hallock
titled “Motivating With Efficiency Wages and Delayed Payments. Mr.
Hallock wrote this article after a bad experience with having a bug in
his food at a fast food restaurant. This article got Hallock thinking
about the various aspects of why people are paid the way they are.
As
Hallock focused primarily on the fast-food and hotel industries, he
talked about how it is assumed that employees may not always do what is
best for the company and may loaf around or waste time at work. I
immediately reflected back to when Frederick Winslow Taylor worked at
the Midvale Steel Company and during his early years of experience in
management as gang boss, he recognized then an employee practice called
“soldiering” where employee output was low deliberately or due to a lack
of incentives. After time study, Taylor sought ways to improve job
performance. One of those ways included a piece-rate incentive. Taylor
also believed there was a need to match the abilities of an employee to
the right job.
Hallock’s article offered two types of
incentives, Delayed Payments and Efficiency Wages. The Delayed Payments
option, although efficient, is stifled by the minimum wage and other
constraints. As a better option, the article considers Efficiency
Wages, paying employees a wage higher than the next-best offer they
could get. Hallock suggests that this premium wage would make employees
who are slacking fear losing their jobs and then having to settle for a
lower wage elsewhere. Also, offering this premium wage may result in
hiring a more capable employee.
In closing, the article gave some
comparisons within both industries, company-owed versus franchisees and
which is better at monitoring employees and paying higher wages based
on performance. The industry results proved many things including the
inseparability of how closely employees can be monitored and other
attributes of employee compensation design.
By Brian
ReplyDeleteI'd never heard of "efficiency wage" by title, but have always thought about the concept. As an employer, if you make a habit of paying top employees what they would make in the next-highest level somewhere else, you could essentially lock them into staying with your company. Although the fear of losing their job and having to work somewhere else for less money may be effective at preventing soldiering, I think that the natural tendency to relax kicks in at some point regardless of how much money you're making.
As the owner of a company, what are your thoughts?
In a smaller environment like mine, it is much easier to monitor employees and it is also very noticeable when one is slacking. I do think most people, at some point, relax but good employees make sure their work doesn't suffer because of it.
DeleteWhat about the idea of efficiency wages? As a business owner, would it make sense to pay a rockstar account executive what a senior AE would make at a competing agency? Then, when they advance to senior AE, you pay them what a director would make?
DeleteDefinitely not the most cost effective method, but it seems like it could be effective in retaining top-level talent and motivating them to work hard so they don't have to go somewhere else and sacrifice at least some quality of life.
Audrey, your post is timely because I have read many recent articles about gross stuff in food! In addition to the incentive system you mention, do you think any of Fayol's management principles could be implemented to avoid soldiering in the fast food industry?
ReplyDeleteCertainly! One of Fayol's principles "Discipline" would set the tone as an understanding between manager and employee as to consequences for slacking behavior. Additionally, Fayol's principle of "renumeration" not only offers earned incentives of pay based on performance but he suggests many incentive options. I believe that many employees are also motivated by many types of incentives besides just pay. Also, Fayol's "unity of direction" principle really speaks to the opinion of most companies today when selecting the right employee and company loyalty. You really want those who will put the company first over personal interest.
ReplyDeleteFast food seems to be one of the last industry sectors where more traditional "mechanized" industry techniques are still in useful practice. The restaurants depend on uniformity of product and mundane, repetitive action to get the burgers out the window. Wage incentives are non-existing, though opportunities for advancement exist for a select few. It's really a nod to a bygone time, and somehow it works. It doesn't offer much in terms of creativity or rewards (spiritual or pecuniary) but it's an easy job option for those who need it. I can still remember working at McD's as a kid and my supervisor putting us through practice rounds ... with a stopwatch. Hello Taylor!
ReplyDelete