Explain the motivational properties of the pay structure, based on expectancy theory’s model.

Below is an
example of a pay structure commonly used in the mechanic division of the
automotive industry. Using this pay structure, you will practice analyzing a
real system for strengths and weaknesses and identify improvement strategies
based on reality. You will need to look beyond the obvious and take a true
managerial perspective. Remember, life is complicated and filled with necessary
trade-offs. Focus on how this system likely affects the majority of people
based on theory–don’t get hung up on the small group of people who may have
unique reactions to situations.
Papers should
be 2-3 pages (double spaced, 12pt, Times New Roman, indented paragraphs, no
spaces between paragraphs, and 1-inch margins).

Directions
Read the pay structure description carefully. It’s complicated and may take some thinking to
understand how it actually works.

After studying the pay structure described below, apply
the expectancy theory to analyze the pay structure in terms of
motivation. Explain the motivational properties of the pay structure, based on
expectancy theory’s model. Make sure you are justifying your analysis using
both the theory and specific details of the pay structure. Excellent analyses
will integrate at least one other motivational concept or theory into this part
of the analysis.

Next, identify two major problems with this incentive
structure (hint: the problems are not related to the difficulty of
motivating certain employees). Consider the fundamental assumptions built
into the pay structure that may not align with reality but are necessary for
the system to work AND consider reinforcement theory.
Finally, for each of the two problems that you identified, outline a
strategy to address that problem. The strategies should be realistic and
address the fundamental problems you identified without creating more or worse
problems than the one you are solving. Provide enough details of your solutions
that a naive manager would understand what they should do and justify your
solution well enough that a manager would understand why you are making these
recommendations (i.e., it is clear WHY these solutions would be likely to
work).

Description
of Mechanic Pay-structure in the Auto-industry
The
Automotive Repair Industry uses a pay-system referred to as the “Flat Rate”
system. In the “Flat Rate” payment method, an automotive
technician’s hourly pay-rate is determined by the type of work they do, as well as their certification level.

Each
task a technician does (e.g., change oil or replace a transmission) typically
takes a certain amount of time—basic tasks should be performed quickly, while
complicated tasks will take longer. Technicians are paid based on how long a
task typically takes, rather than how long it actually takes. A flat-rate
hour is based on each “hour” of tasks the technician is assigned, rather
than each hour the technician is in the garage. To elaborate, an oil change may
pay a flat-rate of .3 hrs, so a technician would earn a “flat-rate hour”
of work if they completed 3 oil changes. Because an oil change typically takes
20 minutes (.3 hours), a technician will be paid for 20 minutes of work whether
it takes them 10 minutes or 40. If a car is brought in needing an oil change
(.3 flat-rate hours), a tire rotation (.3 flat-rate hours), and their engine
drive belt replaced (1.0 flat-rate hours), the technician would be compensated
a total of 1.6 flat-rate hrs at their hourly rate for completing these 3 tasks,
regardless of the amount of time (s)he spends working on the vehicle. A
technician who performs these tasks in 45 minutes (.75 hrs) would still be paid
for 1.6 hours. With this style of pay-structure, a good technician can be
paid for 20 hours of work after completing an 8-hour workday.

How
much a technician is paid per flat-rate hour is determined by their
certification level, which indicates skills and expertise. There are four
different areas of vehicle repair that a technician can get certified in, and
four levels of certification within each area: Certified, Expert, Master, and Master
Diagnostic Technician. To achieve the first level, “Certified,” a technician
completes online and in-person (“hands-on”) training, and then passes the
related ASE certification tests. They can do this for each of the four areas of
vehicle repair. After “certified” status is achieved in a specified
area of vehicle repair, the technician can advance to “expert” level
certification after 3 years of work experience in the field. A technician
advances to “Master” status after they have achieved “expert” status in all 4
areas of vehicle repair—including passing all 8 certification tests—and have at
least 5 years (total) work experience in the field. Finally, Master technicians
can complete the ASE “L1” advanced diagnostics test and achieve the level of “Master
Diagnostic Technician.”

The
tasks a technician is qualified to work on and their hourly pay rate is
dependent on their certification level. Technicians who have achieved
“certified” status are only qualified to work on simple tasks and may only make
$17 per flat rate hour. A technician that is “Master
Diagnostic” certified can work on any vehicle and any task coming in the
door and may make up to $25 per flat rate hour. Thus, base pay increases
each time a technician achieves a new certification level within any of the
four areas of vehicle repair, as does the number of tasks the technician is
qualified to complete.

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