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Jackson Productivity Research Inc.
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Industrial Engineering includes the contents of Time and Motion Study, Layout, and Cost Reduction; but not Construction Piece Rates .

Productivity and Management Article Series click for Index

Employee Incentive Pay

 Or, Piece Work, Piece rate, Work Incentive, Incentive Program, Incentive Plan, Pay for Performance.

A. Incentives can be effective in any organization.
If you consider incentive pay in a manufacturing setting, that was the original use for incentives and still is as appropriate as ever. But service organizations, and construction firms, and warehouses, and labs and call centers are also prime candidates for incentives. incentives are quite effective for an individual, a team, or a group.

Incentive plans also include sales incentives and management bonus; the author is not adequately experienced to address these specialties.

B. Why do incentives work to everyone's benefit?
From my experience, incentives are effective employee motivators because most people go to work for money in the first place, and incentives offer an opportunity for them to increase their pay by their own efforts both physical and mental.

But incentives also benefit a company, who will pay closer attention to labor performance, to measure it and relate it not only to costs but also to output, and calendar performance, and customer service, and capacity. Good performance in these factors will benefit the company balance sheet, P&L, and corporate image.

Good company performance will also motivate employees indirectly because people want to feel that their contribution matters.

C. What employees actions are encouraged by incentives?
Incentives often reward output, or units produced. But any criteria may be selected, such as widgets built or installed, or customer satisfaction, or first time quality, or phone calls, or customers served, or tests processed, or concrete block laid, or applications processed, or feet of cable wired, or cubic yards of concrete poured, or cartons shipped, or tests completed.

The key is to create a measurement system to meet the client's objectives. Usually those objectives are to create a win - win situation, where employees are compensated for actions that benefit employer performance and financial results.

D. Incentives need attention; constant, careful and exceedingly fair
And honest, frank, transparent, timely application, followup and judgment.
1. Clear lines of responsibility, prioritized
Define, talk about, write down the specific responsibility and priority that a person has in advance and continually. A job description may be enough but it is probably written to cover a multitude of actions with no sense of the present or of the relative priorities of today's activity.

2. Measurable performance
The work of organizations is expressed in numbers. A situation that is better or worse is expressed in percent change. Give a person or group a specific quantified objective; units, performance, or improvement, timing perhaps, or percent.

An employee should be able to measure his standing, how he is doing. (I know this applies to women and men equally, please allow me to substitute his for his / hers.) This injunction is true for factory or office or field workers ; people will learn how to understand the arithmetic that affects their pay.

3. Ability to affect results
An employee must be able to affect results in order to be responsible; that statement seems too obvious for inclusion. But financial systems are often used to generate measurable data, and financial systems are not usually targeted at individual responsibility.

Most efforts in organizations are related; progress depends to some degree on the actions of someone else. It is not an acceptable excuse to claim "he didn't give it to me". Nevertheless we rely on others. A boss can usually sort out the claims of subordinates, but interdepartmental issues are be more complicated. Watch carefully the measurements applied, and how they are constituted, to understand the ability of an employee to control.

4. Outside the lines
Employees who work with other departments or facilities are difficult to measure directly. Even if their project work has a measureable result, was it because of or despite them? Create another unit of measure to incent those with multiple responsibility.

5. Accurate recordkeeping
Recordkeeping is another obvious requirement of an objective appraisal. But it too is subject to interpretation. What is more important, cost results or timing of results? Quality or inventory? The guidance is to choose in advance the units of measure that most accurately reflect the results, and organization, desired. Then collect the data carefully.

6. Timing
Make appraisals as an umpire does, be on top of the action and call it fast. Then hang around to allow discussion. While the ump doesn't change, you will have to decide whether to reconsider or not.

7. Change
Organizations constantly change, so all features of their work change as well. Assignments, priorities, resources, timing, strategy and tactics are different over time. Responsibilities are usually not difficult to modify in the short term; "Mary, give this job priority and then pick up that one when you are done." But if reassignment interferes with a person's opportunity to earn an incentive, the person will have a legitimate concern.

Remember to keep your paperwork up to date when you modify assignments and priorities. Make a note of judgments you implement intelligently in the heat of the effort, for the record. Then review the record later on when the time for review comes. This attention to detail will be useful as you manage through the year, and later on as you add up the results.

E. The commercial
If the idea is to motivate employee performance in return for a monetary reward, Jackson Productivity Research Inc. can help you establish a fair and consistent system. We've done this before, and can apply our experience to generate a successful application for you, quickly and objectively.

F. How to start: A cost / benefit study
A first step is to define the performance objectives that are important to your company. Then we'd identify specifically what employee actions will help to accomplish those actions; define motivating factors likely to be effective with your work force, and estimate costs and benefits of specific incentive options.

If the preliminary analysis seems to be favorable, the next step is to determine what criteria to use to measure the work that generates the expected output, what reporting and administrative detail would be needed, and the checks and balances to regulate the plan.

G. To put a plan into action
When management decides that a course of action is promising, JPR would form the detail to support an incentive plan, define guidelines, determine the expected individual or crew performance levels, and set up reporting and administrative framework.

JPR will perform a project, work with your people, lead a project, or tailor its services to supplement client resources as the client chooses. Please give us a call.


Thanks for your attention; I hope this adds to your perspective. As you consider how the principals of incentive pay can benefit your organization, JPR will be glad to share what we know about the subject, and will welcome your inquiry. And if you then seek experienced help, Jackson Productivity Research Inc. will help you take practical actions to accomplish your scope, based on your organization's situation and objectives, timetable and budget.

Jack Greene Jackson Productivity Research Inc.

 

There's no cost or obligation to contact Jack Greene at 843-422-1298
jack@jacksonproductivity.com