Evaluate the arguments given by Freddie Jones in support of a $10 piece rate:
• Freddie's argument stated that the employees did not produce more because there was no motivation in terms of financial incentives being given to them.
• According to him the pay should be based on production to motivate the employees to give more production even in the odd and difficult working conditions.
• The salary paid to the employees is not very low as compared with the minimal skills which they offer.
• The salary being paid is the major factor, if the salary is increased and incentives scheme is introduced, the problem of turnover will be solved. The organization's money and time both are saved which was involved in training the employees.
• The calculations shown by Freddie seem to be reasonable. There is an increase of 13% pay which is considered to be a significant amount when in the duration of 6 months the total labor hours are 253,750. Thus, it can be said that there is an increase in the wages of $126,875
Evaluation on the counter-argument by Freddie's father in support of the current pay system:
• Freddie's father Mr. Jones calculation seems more reasonable than his son, as there was no increase in pay.
• Mr. Jones in early 1960s has tried a profit sharing plan which was not successful. Thus, Jones considered that decreased turnover and increased productivity are termed as speculation without any evidence. Freddie speculated high turnover and low productivity because of the unskilled labor.
• Mr. Jones did not forget the industry turnover rate was 50% whereas Freddie failed to make a comparison between the industry average being 50% and the high turnover.
• From the balance sheet Mr. Jones perspective is that the organization cannot afford the increase in the pay. Though the demand is in excess yet Mr. Jones is not interested in increasing the capacity of the business due to the declining level of profit.
• The company should hire skilled employees instead of hiring from the unemployment agency.
• Advertising skills should be developed by Mr. Jones such as posting the ads in local newspaper and magazine.
• Skilled employees will definitely increase the productivity rate thereby decreasing the turnover rate.
• For meeting the demand more and more employees should be hired.
• As the organization is not meeting the projected production so there is no requirement of storing the castings.
• This will reduce the time between the order which is placed and the delivery being made.
• Mr. Jones's way of doing business will be preferred by the customers.