[Fred Nickols (971130.1341 ET)]
Bill Powers (971130.0500 MST)
To understand the relationships among these variables in terms of the
immediate casual relations involved in each part of the system, you have to
understand how the whole control system works. Any attempt to explain
behavior just by looking at the overall effects will lead only to illusions
and misinterpretations. The system does not work the way it appears to work.Consider an example. Suppose a lathe operator turns out x pieces per hour.
You offer the incentive of a 10% salary increase if the operator will turn
out x + 10 pieces per hour. The lathe operator does so.Now you replace the lathe with a more efficient model, so with the same
amount of effort, twice as many pieces per hour can be produced. Under the
new incentive, how many pieces per hour do you expect will be produced?The answer, according to PCT, is very nearly x + 10. Does incentive theory
agree? And can you explain why this result is expected, in either case?
PCT predicts x + 10 after the new lathe. So does Nickols. So would almost
anyone I know who is familiar with incentives. I can't say why PCT predicts
that except to guess that the potential of the new lathe will not be
realized because the lathe operator is controlling for a rate of x + 10 and
simply introducing a new lathe doesn't alter that. The new lathe probably
constitutes a disturbance in the sense that the same level of prior effort
will result in double the output, so my guess is that the lathe operator
will also slack off on the level of effort so as to maintain output at x + 10.
Assuming the new lathe can double production, I see no reason why a 2(x +10)
level of production can't be reached, provided the lathe operator can be
persuaded to do so (perhaps by way of the proper incentives or gain
sharing). However, I would also wager that 2(x +10) won't be reached because
management will seek to keep the vast majority of the gain in the form of
reduced unit costs. The reasons needn't detain us.
My explanation for why the lathe operator won't automatically leap ahead to
the 2(x + 10) level of productivity the new lathe makes possible is simple
conservation of energy. No one works any harder than he or she has to to
obtain whatever inducements constitute the deal under which he or she is
working. When they do, it's not for the inducements, but for some other
outcome. At 2(x + 10) the lathe operator and the company have worked out a
deal. Equilibrium has been reached.
If the management introduces the new lathes and, at the same time, raises
the production levels, the lathe operator can refuse, comply, negotiate, or
whatever. This is classic rate-busting and labor relations and management
still doesn't get it right. Why? I think it boils down to greed.
Regards,
Fred Nickols
nickols@worldnet.att.net