GM500 Unit 7 Per-Stop Pay Motivation Theory Case Example

Paid by the Stop: A Unit 7 Motivation Theory Case on a Delivery Contractor's Pay Plan

[Student Name]

Purdue University Global

GM500: Management Theories and Practices I

Unit 7 Motivation Theory Case

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[Date]

The delivery contractor, its drivers, its pay plan and its figures are composite and illustrative; the theorists and studies cited are real.

The Situation

Crossroads Parcel is a composite contractor that delivers packages for a national carrier across one metropolitan area and three surrounding rural counties. It employs about 120 drivers. Each driver receives a daily guarantee of $60 plus $1.85 for every stop scanned as delivered or attempted. A stop marked attempted, when the driver cannot complete the delivery, pays the same as a delivered stop, because the carrier pays Crossroads for each attempt.

Routes differ sharply. A dense apartment route in the city averages about 175 stops in a ten-hour day, which pays roughly $384. A rural route averages about 95 stops in the same time because of the distances between houses, which pays about $236. The difference is about $15 an hour.

Three patterns appear in the company's records:

1. Route avoidance. Senior drivers bid away from rural routes as soon as they can. Rural routes are covered mostly by drivers with under six months of service.

2. Attempted scans. On city routes, the share of stops marked attempted rose from 3 percent to 7 percent over the past year, concentrated on apartment buildings without lockers, where each delivery requires a long walk.

3. Turnover. About 60 percent of new drivers leave within their first six months, most of them from rural routes.

McGregor: The Assumptions Behind the Plan

Douglas McGregor described Theory X as a set of managerial assumptions: that people dislike work, avoid it where they can, and must be directed and controlled, often by money (McGregor, 1960). The per-stop plan expresses those assumptions in its design. It presumes that without a payment attached to each stop, drivers would deliver fewer packages, and it measures nothing else about the work: not accuracy, not customer satisfaction, not safety. The plan's designers did not have to believe drivers were lazy. They only had to believe the stop count was the thing worth paying for.

Expectancy Theory: Predicting the Avoidance

Victor Vroom proposed that motivation depends on three links: whether effort is expected to lead to performance, whether performance is expected to lead to a reward, and how much the reward is valued (Vroom, 1964). Applied to Crossroads, the first link is strong everywhere: a driver who works harder completes more stops. The second link is where routes differ. On a rural route, the same effort produces far fewer stops because time goes to driving, so the reward per unit of effort is lower. A driver who can choose will choose the route where effort converts to pay most efficiently.

Expectancy theory also predicts the attempted scans. At an apartment building without lockers, a delivery may take eight minutes of walking and waiting. An attempted scan takes one minute and pays the same. Effort spent completing the delivery produces no additional reward, so the rational driver under this plan marks the stop attempted.

The drivers are not gaming the plan; they are following it, because it pays the same for a one-minute attempt as for an eight-minute delivery.

Equity Theory: Explaining the Resentment

In Adams's equity account, a driver tallies her pay against her hours, miles and risk, holds that tally up against a colleague's, and responds to a gap by reducing effort, by changing her comparison or by leaving (Adams, 1963). New drivers on rural routes work the same hours as senior drivers in the city and earn about $15 an hour less. Their inputs are equal or higher, since rural driving involves more miles and more risk on unpaved roads, and their outcomes are lower. Equity theory predicts dissatisfaction and exit, and the 60 percent six-month turnover is exactly that.

Exit interviews support the reading. Departing drivers rarely complained about the work itself. They complained that the route assignment system gave them the lowest-paying work because they were new, while the people with the easiest money had seniority.

Kerr: Rewarding A While Hoping for B

Steven Kerr gathered examples from universities, hospitals, governments and firms whose reward systems paid for the opposite of what their leaders said they wanted (Kerr, 1975). Crossroads hopes for completed deliveries, satisfied customers and stable staffing on every route. It rewards scans, which can be attempts, and it makes rural routes the least rewarding work in the company. The behaviors it gets, attempted scans and rural turnover, are the ones its pay plan pays for.

Is the Plan Failing or Succeeding?

By its own measure, the plan succeeds. Stops per driver per day have risen, and the cost per stop to Crossroads has fallen. The carrier pays for attempts, so attempted scans cost Crossroads nothing directly. But the carrier has begun to issue penalties when attempted rates exceed 5 percent on a route, and customer complaints about missed deliveries have doubled. Turnover costs about $2,400 per new driver in training and supervision, so 60 percent turnover on 40 new hires a year costs roughly $58,000. The plan is succeeding at what it measures and failing at what the company needs.

Implications

The analysis points to three changes, and each answers one of the theories above:

1. Pay differently for attempts. Paying less for an attempted stop than a delivered one, with an exception for documented reasons such as a business that is closed, restores the expectancy link between effort and reward at difficult buildings.

2. Equalize pay across routes. A route factor that raises the per-stop rate on rural routes, set so that a typical day pays about the same per hour as a city route, addresses the equity comparison that drives turnover.

3. Measure the whole job. Adding a small monthly bonus for low complaint rates and low attempted rates would reward the behavior the company hopes for, in Kerr's terms, rather than only the count.

None of these changes abandons pay for performance. They change what performance means so that it includes the parts of the job the current plan leaves out.

Conclusion

The per-stop plan reflects Theory X assumptions and works exactly as expectancy theory predicts: drivers choose the routes and the actions that convert effort into pay most efficiently. Equity theory explains why new drivers on rural routes leave. Kerr's analysis explains why the company gets attempted scans while hoping for deliveries. The plan is not broken. It is paying for the wrong thing.

References

Adams, J. S. (1963). Towards an understanding of inequity. The Journal of Abnormal and Social Psychology, 67(5), 422-436. https://doi.org/10.1037/h0040968

Kerr, S. (1975). On the folly of rewarding A, while hoping for B. Academy of Management Journal, 18(4), 769-783. https://doi.org/10.2307/255378

McGregor, D. (1960). The human side of enterprise. McGraw-Hill.

Vroom, V. H. (1964). Work and motivation. Wiley.