The Incentive Plans of Mice and Men
The meeting lasted several hours, as we talked about many aspects of our industry, including incentive programs for employees. He informed me that, at his former employment, they started such a program to award employees based on productivity to motivate them, and he suggested we should do the same. That struck a chord with me!
At the time, I was right in the middle of trying to implement systems to measure productivity, and was finding it very difficult to accurately measure the productivity of individual employees. So, I was a bit surprised that this guy's company had somehow been able to pull that off.
I had come to the realization some time ago that, to find the productivity for a production employee, you need to measure Estimated Time versus Actual Time (for their jobs), to get a ratio. Then you need to measure Chargeable Hours versus Un-Chargeable Hours to obtain another ratio. Combining these TWO ratios gives you yet another ratio, which should be an accurate measurement of an employee's productivity. But—not so fast!
You also need to measure the amount of errors/waste an employee is responsible for, and what it cost the company for a given period. And, in order to be fair to an employee, you need to determine if the errors are Personal Errors or System Errors.
Stay with me...there's more.
What if an employee (the "Go-To Guy") is called upon to help other employees when someone is having trouble operating a machine or for other issues, which then affects the Go-To Guy's productivity. To be really fair, you need to consider giving some kind of exemption for such Go-To people, when they are called away from their work or interrupted. Whew! More systems!
I don't want to get into the weeds here, regarding all the variables management must consider when determining how to award or bonus employees, based on productivity. However, in order to do it FAIRLY, I have learned from experience, it takes a whole lot of systems working together in concert to pull that off.
Philip Beyer, founder/president of Ebiz Products LLC and founder of Beyer Printing Inc. in Nashville Tenn., is a chronic entrepreneur, business systems analyst and consultant. Author of "System Busters: How to Stop Them in Your Business" and recipient of an InterTech Technology Award for the design and development of System100 business process management software. Beyer speaks to business owners across the country on how to bring lean, sustainable order to their businesses. Contact him at (615) 425-2652.