Myth- Labor rates and labor costs are the same thing

In 1990s, Ford and General Motors fell prey to it.

• Result- Fall in productivity, GM was 68% less efficient than

Nissan.
• Myth- Competing on labor costs will create sustainable
advantage.
• Result- High turnover> lack of business awareness among
employees> lack of customer satisfaction
• Myth - Effectiveness of individual incentives
• Result- Undermine teamwork, encourage employees to focus
on short term, and
• lead people to link compensation to political skills rather than
performance.
Myth- People work for money
1. At SAS some of the unique perks were - plenty of opportunity
to work with the
latest and most up-to-date technologies, flexible work
environment.
2. Core value of AES were fun - working in a place where people
can use their gifts
and skills and can work with others in an atmosphere of mutual
respect.
 • Individual merit pay has problems
• Undermines team work
INDIVIDUAL • Encourages focus on short term
• Creates perception of winning bonus through
INCENTIVES ingratiation
• Can negatively impact customers
VS GROUP • Sears
• Highland Superstores
INCENTIVES • Investors
• Air Products and Chemicals, Pennsylvania

• Difficult to quantify individual contribution in a group

effort

• Internal competition discourages knowledge sharing