Case Study

Whirlpool is a major manufacturer of washing machines in the United States of America. It has Subsidiaries and sub-contractors who make some of the parts for the final product. One of these companies, Whirlpool Corporation, has a plant located in Michigan State that turns metal rods into washing machine parts. The Plant is not a high-tech state of the art facility, but only a small, old fashioned tooling and planting shop. The company employs 265 workers. Because of low productivity, the company was even considering closing the plant. The company also did not want to invest additional capital to upgrade the technology. It did, however revamp the manufacturing   process and held training workshops for the workers to improve the quality of product. However, the productivity per man hour remained low, the rate of defective parts in the production remained high and the employee morale remained generally low. Then the company decided to introduce a profit sharing plan, whereby the workers would be encouraged to improve upon productivity as well as the quality of the product and they would share in the extra costs saved or extra profits earned.

Even though the workers were skeptical when the programme was initiated, they negotiated a gains sharing formula that was suitable to both the management and the workers. It was agreed that there would be no increase in base pay, but the worker’s share in the additional bonuses would be proportional to savings achieved. Since the inception of the programme, the productivity has improved 19% to 110.6 per units per worker as against 92.8 parts per workers prior to this programme. Similarly, the number of defective parts has decreased from as high as 837 per million down to only 10 per million. During this time, the total worker pay increased by 12 %.The workers have become so involved that they themselves keep looking for ways to cut costs. For example, one group of workers has been involved in finding ways to recycle the oil used to cool and lubricate machines. If these efforts are successful, the workers feel that can save about $ 41000 – that can be shared by them.

Even though the programme has been successful, some workers are unhappy that the gains are shared by all workers equally and this inhibits individual motivation. They feel that some unproductive workers are being benefitted because of some highly productive workers and this arrangement does not seem to them to be equitable.

Questions                 

Q1. Do you think gains sharing programmes are considered to be motivators for workers as individuals? Explain how the programme has motivated the workers at Whirlpool Corporation.

Q2. What can management do about the unproductive workers who are getting the same benefits as the productive workers?