Renuga Navaratnarajah

June 25, 2015

Diagnostic Products Corporation

Problem Statement
Diagnostic Products Corporations newly implemented Performance Bonus Program cannot
measure the performance of FSEs in all critical aspects of their job in an objective manner, and
have decided to combine instrument groups to calculate one overall call back rate per FSE. This
has caused FSEs to worry about uncertainty about their ability to influence their own
performance.
Analysis
DPC is a leading manufacturer of immunodiagnostic testing lab instruments and their objective
is to increase DPCs value to their customers.
The Field Service Organization
Provides on-site support to customers and distributors, ideally within 4-6 hours, 24/7
86 field service engineers (FSEs) organized into 6 regions. Most have associate degree in
technical field, bachelors degrees, trained in military
FSO was ran as a cost centre, and emphasis was on total customer satisfaction
FS managers monitored using repair rates, productivity, call back rates, incomplete call rates,
return call rates, mean time to repair, mean time before failure, travel expense per call, and onsit response time, reported monthly at quality management meeting
Preventative Maintenance (PM) important part of FSEs jobs
o Done on time = increased chance of no problems
o Not completed to standard = increase chance of call back, unhappy customer, increased
costs to repair
Ideally FSEs should complete job on first visit because downtime is not affordable by most
customers; they must screen the job in order to prepare for the visit
Performance Dependent Compensation
Bonus Program: Measures critical performance in 6 areas of a FSE as it pertains to aspects of the
job leading to total customer satisfaction
Cross-training: # of instruments qualified to service
Preventative maintenance (PM) completion: # of PMs completed
Teamwork factor for PMs: % of PM goal in region completed

Possible to game system if FSEs focus on completion but fail to perform service

adequately
Complete first visit: completion of PM or repair on first visit
Uncontrollable factors such as delivery delays means low probability of achieving this,
resulting in employees being frustrated with unattainable goals
Call back rate: multiple visits within 30 days of each other for the same relative issue
Original bonus plan only takes into consideration IMMULITE and IMMULITE 2000
since failure rates are well established, but not the case for IMMULITE 2500 and SMS
Administrative Functions: customer satisfaction, expense reports, service reports completion,
dispatch feedback, synchronization, company car maintenance, conference call roll call,
inventory management (subjective)
New Call Back Rate Measure: one overall rate per FSE with higher payouts for more calls and
fewer callbacks. There are a few issues employees feel about this measure:
Being held accountable for something with environmental factors affecting results
Being placed at disadvantage if customer mix tends to be one with high call backs
Taking away bonuses for results they can influence, and giving them unreasonable goals

for bonuses may lead to lack of motivation and ultimately declining productivity
Rewards do not seem to be as motivational as before due to the new goals