What should be done?
Walt should motivate his employees by resetting current piece rate. Meanwhile, he should reinforce his control system and redesign his reward system to encourage high productivity performance.
Why should it be done?
First, there will be less incentive for employee to increase production output when the pay differential between piece-rate and hourly paid work is not enough. That's why most of guys would not "bust ass" unless they could make at least $16 an hour on a job. Lower wages were more likely than higher wages to lead workers to a leisure time during working hour or an early exit.
Second, if any experienced worker is able to earn more bonus for a job, Walt's method department retime and reduce the piece rate for that job and worker will not be able to earn bonus from that job. The policy actually punish the high productivity without realize the folly effect of this action.
The beauty of piece rate is higher productivity bring more profit to company. Employees earning more with piece rate means the company will earn more too. In addition, there's nothing wrong for employees to earn more bonus if they're doing a quality job as well as getting the work done quicker than others.
Third, some of the working procedures and tools in Gillette seems outdated and there is no program for newcomers and existing worker to encourage therm to learn and exchange their idea about improving current procedure and tools in order to achieve high productivity as a whole.. Some experienced workers designed tools themselves.
The last but not least, Gillette Metal did not seem to have any policies discouraging workers from leaving early or sleep in warehouse during working hour. So Employees in Walt feels free to do such behavior.