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An analysis of changes to a team-based incentive plan and its effects on productivity, pro

This is a research report on An analysis of changes to a team-based incentive plan and its effects on productivity, pro uploaded by Jasmine Pvk in category: All Documents »  Finance »  Project Management section of our research repository.
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Tags: Productivity and quality
Description:
Using data from three production units of a large manufacturing plant that employs production teams in its assembly
operations, this paper examines how changes made to an existing team-based incentive plan affects labor productivity,
product quality, and worker absenteeism. The firm switched from a piece-rates contract and an attendance bonus and instituted
a two tier incentive plan comprising two different but complementary performance-based bonus schemes: one tier
based on individual team performance and the other tier on plant-wide performance. The incentives were introduced concurrently
with management control initiatives intended to facilitate cooperation and monitoring among the teams. I find
significant productivity gains and improvements in quality and absenteeism associated with the new incentive plan. These
findings underscore two important points that have not been emphasized in existing empirical studies of incentive pay:
incentive contracts for teams generate superior performance using combination of incentives, and the need to introduce
organizational changes to facilitate cooperation and peer monitoring in tandem with incentive pay to capture greater
incentive effects in team production.



 

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