Increase Productivity Without the Need for Large Capital Improvements
Incentive pay programs are becoming an increasingly popular supply chain initiative to increase productivity without the need for large capital improvements. Tom Stretar, Vice President of Technology at enVista, offers the following tips for implementing a successful incentive plan.
1. Understand the need for incentives
The first item to consider when implementing an incentive plan is to answer the age old questions of “Who, What, When Where, Why and How.” Understanding the responses to these questions will help align the behaviors you wish to reward as you develop the actual incentive program details.
2. Involve the employees
It’s important to understand the employee’s perspective and interest level when developing the framework for an incentive plan. Additional pay, paid time-off and rewards are the three most common types of incentives used. The use of focus groups and questionnaires will identify which type of incentive, if any, will motivate the employees to perform above normal expectations.
3. Simple is best
When developing the framework for an incentive plan, the “KISS” principle (Keep it Simple) will be easily understood by the employees and will result in a higher implementation success rate. Employees want to be able to calculate what they have earned. Incentive plans that are too complex will not be adopted by the organization as a whole and will not achieve the desired results that management expected.
4. Include all employees
Avoid segmenting out certain employee workgroups when developing the incentive plan. Incentive plans that focus on a small subset of the overall employee staff will lead to jealousy and resentment within the organization. Be creative with individual and team incentives and don’t forget about the supervisors!
5. Use work methods and labor standards
Just like every house needs a solid foundation, an incentive plan needs a solid foundation based on Preferred Work Methods and Engineered Labor Standards. An employee observation program should be established to ensure each employee is reviewed on a frequent basis to ensure the employee understands the method so he or she can be successful. Multivariable or discrete labor standards are recommended over single variable labor standards, such as line or units per hour.
6. Reward direct work
Reward work that supports movement of goods in the facility (receiving, transport, put-away, replenishment, picking, packing, shipping, etc.). Indirect work, such as cleaning, meetings, or prep activities, should not be part of the incentive plan as this promotes a lack of motivation to get the required work done in a timely manner.
7. Consider other factors
When developing the incentive plan, consider other measurable factors besides direct productivity to ensure a holistic approach. Other common factors to consider include attendance, indirect labor percentage, quality, safety and turnover. A plan that focuses solely on productivity may experience issues with high indirect labor, poor quality work and increased safety violations.
8. Communicate the program
Build a company communication plan that establishes the expectations of the employee and management team. Make sure to review the plan with the human resources, legal and payroll departments as they also need to understand their objectives and roles. Train the program administrators and supervisors. Present the plan to the entire organization prior to kick-off through meetings and company announcements.
9. Minimize administration needs
Avoid having employees fill out daily production cards as the employees could “write” their own bonus payment. Utilize existing systems, such as warehouse management systems (WMS) and time & attendance systems for data capture. Export the data to the in-house payroll system for monetary based incentive programs.
10. Don’t wait to reward
Reward the incentives as close to the desired behavior change as reasonably possible. If you wait too long, the motivation for continued success will wane. Align the reward with your normal compensation schedule. Consider a separate paycheck if monetary rewards are used.