USA Motors I Do Not

USA Motors

I do not believe that the absentee plan will work. It appears that the plan will not provide sufficient economic incentive for employees to show up to work. Vacation/holiday/sick pay being reduced by 10% or 15% should be less than the loss associated with missing work in the first place. It is difficult to ascertain this without having specific knowledge of the vacation pay scheme, however. Further, the current plan does not work with chronic absentee workers because they are dishonest in reporting their other absences in order to retain their paid absence days. These dishonest employees will find a way to game the new system as well -- and if their pay is not docked in a manner that is 100% correlated with the additional sick time, this penalty will not be a deterrent. I would also be concerned that the union will balk at this strategy since it would have the effect of penalizing employees that legitimately have a run of bad health during a year. The optics for the company are poor.

The new absentee plan is a "stick" approach compared to the previous "carrot" approach, but does not address the underlying problems of the absenteeism. Moreover, it does not create sufficient economic incentive to behave. It punishes many that should not be punished, which will have a negative impact on morale, and passing such a plan will likely require too many concessions from the union.

2. A significant portion of absenteeism is under the employees' control. Evidence shows that when financial incentive is created to show up for work, employees do. In the UK, absenteeism fell from 6.5% to 5.7% after the introduction of a bribery scheme (Amble, 2005). Both 'stick' and 'carrot' approaches have proven to shift absenteeism rates, anywhere from 10-15%. To this one needs to add an estimate of how much absenteeism is under the control of the employee but which will not be affected by any incentive or disincentive. If 5% is factored, then the amount of absenteeism that is controllable is anywhere from 15-20%.

Other surveys have shown to be more pessimistic. An American survey showed two-thirds of absences are for reasons other than illness. Entitlement mentality accounted for 11%, and to this it could reasonably be assumed that other factors listed are actually entitlement mentality in disguise (CCH, 2006). This indicates that the estimates given above may be even higher once all types of unscheduled absenteeism are taken into account.

3. The paid absence plan worked in some respects. It appears that for many employees, the plan did reduce absences. However, it did not work for many employees because no controls were put into place to prevent dishonest employees from gaming the system. Essentially, they were allowed to use other reasons to avoid having their paid absence days charged. By having this loophole in place, management simply allowed the employees to walk through it. Moreover, management has failed to address the issue properly by firing the dishonest employees. They are stealing from the company and should be removed. Management can address the issue by closing the loophole and dismissing the worst offenders.

In addition, the paid absence plan contributed to a culture of entitlement. Given that entitlement is the cause of 11% of all absences, the company needs to avoid creating such a culture. By paying employees to perform the most basic of all tasks -- showing up -- the company fostered this entitlement culture. It is little reason that the employees subsequently abused this. The company has major cultural issues that the paid absence plan exacerbated rather than ameliorated.

4. I would recommend the following plan to USA Motors. The first is to remove the loophole. This could be done by forcing the classification of missed days into either physical illness or paid absence. That classifications such as "unexcused absences" are not charged to the paid absence account of the employee is unacceptable. These must be charged against paid absence and the managers responsible for this must be held accountable. If the loophole cannot be removed, then the entire paid absence plan needs to be removed.

The second recommendation is that USA Motors needs to fire its worst offenders. There is no reason to keep employees around who are stealing from the company. The carrot approach has been abused by the employees and it is now time to utilize negative reinforcement. I recommend letting go the top 50% of those identified as chronic offenders in the first round. This may require additional steps, such as inputting absenteeism into performance reviews to ensure that the employees are fired for cause.