Stacey Womack is considering the implementation of an incentive wage plan to increase productivity in her small manufacturing plant. The plant is nonunion, and employees have been compensated with only an hourly rate plan. Jane Moore, Vice President—Manufacturing, is concerned that the move to an incentive compensation plan will cause direct laborers to speed up production and, thus, compromise quality.
Required:
1. How might Womack accomplish her goals while alleviating Moore’s concerns?
2. Does the compensation have to be all hourly rate or all incentive?
3. Can incentive compensation also apply to service businesses?