Case Study Analysis: Performance Pay System, Fast Frock Logistics

This case study analyzes the performance pay system at Fast Frock Fashion Logistics, a retail logistics warehouse company. It examines the challenges related to an aging workforce, the clash between distribution center chairmen regarding performance targets and penalties, and the impact of incentive schemes on employee productivity and motivation. The study highlights issues such as the need for health and safety measures, the potential for new employees prioritizing speed over quality, and the absence of retirement plans for older employees. The analysis explores advantages and disadvantages of the current system, including the experience and responsibility of older employees versus potential health issues caused by workload. The paper concludes with recommendations for fair and equal opportunities for all employees, emphasizing work quality and the implementation of new policies, including a pension plan and part-time facilities for older workers, to improve overall performance and motivation.

Running Head: Organizational Behavior: Case Study
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Case Study: Analysis on Performance Pay System of Fast Frock Fashion Logistics
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Organizational Behavior: Case Study
Executive summary
The purpose of the paper is to discuss about the issues which reflect in the case study for the Fast
Frock Fashion Logistics warehouse company in respect to performance pay system in the
company which distinguish its employees in two sections and thus raise issue between two
distribution center chairmen of the company. A Few key issues and solution to help the
performance system.

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Organizational Behavior: Case Study
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Background of the case:...............................................................................................................3
Facts:............................................................................................................................................4
Key Issues....................................................................................................................................4
Advantages and disadvantages of the issues:..............................................................................5
Other issues and solutions...........................................................................................................7
Conclusion.......................................................................................................................................7
Reference.........................................................................................................................................9

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Organizational Behavior: Case Study
Introduction
This paper focuses on the analysis of the “performance pay systems” prevailing in the
retail logistics sector. It focuses on the incentive system of the Fast Frock Fashion Logistics
warehouse company. Employees are the asset to an organization which helps in gaining
competitive advantage. Hence, it is essential to introduce such an incentive system that matches
the changing workforce, matches with their productivity and efficiency. It further discusses the
performance of the employees and the problem faced while performing their job. Here the half
percent of the employees are aged and above 50year, and 63% of employees are women. The
challenge faced by this retail logistic regarding the old aged employees and their performance-
based incentive bonus. Secondly, the scheme added that there would be no penalties for the
employees even when they missed the target, this can motivate the employees, but it might cost
the company heavily. Thirdly, employees are given with the performance bonus incentives to the
premium employees as well as to the performing employees, but employees are not provided
with any health and safety measures (Kleinsmit, Koene, & Jaehrling, 2018). The paper aims to
examine how performance pay scheme affects employees productivity in retail logistics, and
how a changing workforce can be matched with the regulating incentive scheme.
Discussion
Background of the case:
The case discusses the performance of the warehouse company with its efficient
employees who work to earn more and get motivated by the work performance bonus to meet the
“SLA (Service Level Agreement)” with the “KPI’s (Key Performance Indicator)” of the

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Organizational Behavior: Case Study
employees, which evaluate their performance level. There is a difference in opinion between the
two work council chairmen in respect to REFA methods and its application in the distribution
centre with its employee's performance. There is a disproportionate level of performance in the
company among all the employees in age and scheme as per one of the work council chairman
name Dieter Schulz, who considers pressuring the employees to increase the performance target
is not helpful for both the employees and the company, it also stated that no penalties for the
employees for not achieving the target is cost for the company which it cannot be borne, it has to
be voluntary scheme for employees. However, on the other side, the senior chairman, Heidi
Koch of the work council states that without providing a performance bonus, the employees will
not get motivated at work. If cutting down the performance bonus, employees get de-motivated
and reduce the performance and affect daily production. This occurred ones and resulted in a
reduction of 15% to achieve the daily target (Kleinsmit, Koene, & Jaehrling, 2018).
Facts:
The CEO, Martin Fischer when he came to know about the aged employees working
performance which affects their health and performance target, reduces the rate of the
performance target for them to 90% to encourage and motive to earn incentives for more
production. Thus, the company increased the performance bonus by 12% to 15% next year even
though there is a performance bonus many employees unable to work as per their schedule hours
and want to work part-time which will affect the performance target (Kleinsmit, Koene, &
Jaehrling, 2018).

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Organizational Behavior: Case Study
Key Issues
The issues that the Fast Frock Fashion Retail Logistics warehouse company is facing in
respect to the performance of the employees and planning the performance incentive for
employees are as follows:
 The major point for this logistic retail warehouse is old employees who are above 50year
age and working for this company for years and 63% of the employees are women
workers. They are working in the company to get the extra pay based on their hard work
or performance incentives.
 Secondly, the clash between the two chairmen of the distribution center work council
Heidi Koch (senior) and Dieter Schulz related to the performance pay system of the
employees who are aged and low performing employees (Gerhart, 2017).
 The third issue related to the employees who are working for the companies for years and
not provided with anything related to the health and safety structure of the employees
majorly who are aged. However, CEO of the Logistics Company, Martin Fischer, with
the approval of the employees' work council had planned for the aged employees to
motivate their work and to get incentives based on the fixed lower performance target.
This plan can improve in checking the health of the employees, even in the work
pressure.
 The fourth issue is that there are chances the employees who are new to the organization,
who are young and inexperienced might in order to achieve the target would prefer speed
over quality. This attitude is not correct and will lead to failure and a bad reputation of
the company in terms of delivering not high-quality work.

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Organizational Behavior: Case Study
Advantages and disadvantages of the issues:
There are probable limitations imposed by the current situation and as well as it offers
some benefits which are discussed below:

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Organizational Behavior: Case Study
Benefits:
The advantage of the company is aged employees are more responsible towards their
work and well understand the work culture and the system and pattern of the work. They are
experienced and easily handles the work without any extra effort and gain Appreciation based on
the work in terms of incentives and bonus due to their performance as in the case of Gertrude
Schwach. A 54-year-old employee who works efficiently and maintaining the performance in the
warehouse department to gain the bonus pay and get motivated for the performance pay bonus
every month and mostly due to the upcoming Christmas month for filing up her little grandson’s
emotions.
Disadvantages:
 The disadvantages for the same is that too much workload deteriorates the health of the
employees and may cause damage to the employees’ health and safety due to prolong
workload and pressure to complete the work on time. This may affect the work accuracy.
However, in the given case, Schwach, irrespective of facing a health issue, she gets
motivated on the performance bonus.
 The clash between the two chairmen of the work council concerning the performance
target and the penalty charges of the employees. As per the senior chairman, motivating
the employees by not charging the penalties for not achieving the target. He considers
that working more and providing incentives to the aged employee will increase to meet
the target as they are experienced and this will motivate them to perform in meeting the
daily target. Whereas, the chairman states that it is not appropriate for the company to
meet its profit by pressuring the employees to work based on bonus. He considers the

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incentive plans to be unrealistic as employees are earning for their extra effort not getting
the bonus on their performance.
 The benefits for the employees, who have crossed the age of 50, the CEO of the company
reduced the performance target rate to 90% so that they can achieve easily. However,
there is no old age plan for the old employees like a retirement plan, and also there is no
plan for the younger employees which are 37% to get motivated at work.
Other issues and solutions
 There are no opportunities for young employees to enjoy the benefits of the company.
 There is no retirement plan and benefits for old employees.
 There has to have part-time facilities for the old worker, based on their capacity and
ability
 New policies have to be introduced to encourage young employees and to motivate them
to improve their performance.
Conclusion
From the above discussion, it can be concluded that the company should not be biased to
a particular section of an employee to get more productivity and to complete the target. It should
not create pressure for the old employees to work in such an environment but can motivate some.
However, equal opportunities to be given for all the employees. The work quality is of utmost
importance, and the people who give all their to accomplish it successfully must be rewarded
without any fail. Even to encourage and motivate the young employees with special benefits to
perform at par with the senior employees. A new policy to be added for the old employees like a
pension plan and part-time facilities. Voluntary incentive plans have to be introduced to

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encourage all the employees but not a particular section. Deserving employees should get
incentives to meet their target.

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Reference
Kleinsmith, N., Koene, B., & Jaehrling, K. (2018). Performance Pay Systems in Retail Logistics:
Adjusting an Incentive Scheme to Match a Changing Workforce.
Gerhart, B. (2017). Incentives and pay for performance in the workplace. In Advances in
Motivation Science (Vol. 4, pp. 91-140). Elsevier.
Loyalka, P., Sylvia, S., Liu, C., Chu, J., & Shi, Y. (2019). Pay by design: Teacher performance
pay design and the distribution of student achievement. Journal of Labor Economics, 37(3), 621-
662.
Perry, J. L., Engbers, T. A., & Jun, S. Y. (2017). Back to the future? Performance-related pay,
empirical research, and the perils of persistence. In Debating Public Administration (pp. 27-65).
Routledge.