ADMS 3490 Chapter Notes - Chapter 5: Variable Cost, Group Conflict, Employee Retention

• School: York University
• Department: Administrative Studies
• Course: ADMS 3490
• Professor: Parbudyal Singh

Document Summary

Reduce the need for external control of employees. Link compensation to output and reduce employer risk from fixed costs. Employer provides specific information about the (cid:498)standard(cid:499) level of output expected. Can be applied in only a limited number of circumstances, e. g. where producer has complete control of process (machines may breakdown) Piece (production) rates need to be recalculated each time a major change in product or process occurs. Setting the piece rate may not always be calculated scientifically. Frequently does not motivate maximum effort (cid:523)(cid:498)gold-bricking(cid:499)(cid:524) Can create conflict among workers, e. g. high production may lead to increased expectations: sales commissions, sales commissions. Relatively easy to set and measure, e. g. % of sales revenue. Reduces the need for other types of behaviour control mechanisms (self-managing incentive) Serve as a source of feedback to sales person and is self-correcting. Reduces employer labour-cost risk (labour cost becomes a variable cost) Income is highly variable, making personal financial planning difficult.