Rowan Plan: A Performance-Based Wage Incentive

A comprehensive look at the Rowan Plan, a wage incentive method similar to the Halsey Plan but with a unique time-based premium calculation.

The Rowan Plan is a wage incentive scheme designed to boost employee productivity by offering a bonus based on time saved compared to a standard. It is similar to the Halsey Plan but introduces a unique element by incorporating a time factor that caps the maximum premium.

Historical Context

The Rowan Plan was developed in the early 20th century as a part of the scientific management movement. This period sought to increase efficiency and productivity in industrial settings through structured, incentive-based compensation systems.

Key Characteristics

• Time Factor: Unlike the Halsey Plan, the Rowan Plan includes a cap on the premium percentage relative to the time saved.
• Formula: The bonus is a function of the standard time, actual time, and the hourly wage.

Formula and Calculation

The Rowan Plan uses the following formula to determine the wage:

$$ \text{Wage} = \text{Time Taken} \times \text{Hourly Rate} + \left( \frac{\text{Time Saved}}{\text{Standard Time}} \times \text{Time Taken} \times \text{Hourly Rate} \right) $$

Where:

• Time Taken: The actual time taken by the worker to complete the job.
• Standard Time: The time set as the standard for the job.
• Time Saved: The difference between the standard time and the time taken.

Example Calculation

Assume:

• Standard Time = 10 hours

• Time Taken = 8 hours

• Hourly Rate = $20

• Time Saved: \( 10 - 8 = 2 \) hours

• Basic Wage: \( 8 \times 20 = $160 \)

• Bonus: \( \left( \frac{2}{10} \times 8 \times 20 \right) = $32 \)

Total Wage: $160 + $32 = $192

Importance and Applicability

• Increases Productivity: By linking compensation to performance, employees are incentivized to work more efficiently.
• Balances Risk and Reward: The time factor cap ensures employees are motivated without creating unsafe work speeds.
• Fair Compensation: The method provides a fair premium relative to the effort and time saved.

Considerations

• Implementation Costs: Setting up and managing this system requires careful monitoring and initial investments.
• Employee Acceptance: The success relies on clear communication and acceptance by the workforce.
• Standard Time Accuracy: Misestimating standard time can either demotivate employees or lead to excessive wage payouts.

Related Terms

• Halsey Plan: A wage incentive plan that provides a fixed percentage of the time saved to workers.
• Performance-Based Pay: Compensation systems that tie employee earnings to their productivity or performance.

FAQs

How does the Rowan Plan differ from the Halsey Plan?

While both plans are performance-based, the Rowan Plan caps the premium based on the proportion of time saved, whereas the Halsey Plan provides a fixed percentage.

What industries benefit most from the Rowan Plan?

Manufacturing and industrial sectors where tasks can be standardized and measured for time efficiency are most suitable.

Inspirational Story

A manufacturing plant in Detroit reported a 20% increase in productivity after implementing the Rowan Plan, with workers receiving fair compensation boosts and feeling more motivated.

Famous Quotes

“The best way to increase productivity is to provide fair incentives tied to performance.” - Anonymous

Conclusion

The Rowan Plan is an effective and fair method of performance-based pay that incentivizes employees to work efficiently. By understanding its characteristics and implementing it thoughtfully, organizations can achieve notable productivity gains while maintaining employee satisfaction.

References

• Taylor, F. W. (1911). The Principles of Scientific Management.
• Nadler, D. A., & Lawler, E. E. (1983). Motivation: A Diagnostic Approach.
• Cohn, E., & Geske, T. (1990). The Economics of Education.

By integrating the Rowan Plan, organizations can harness the potential of their workforce, ensuring both efficiency and fairness in compensation.