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Recognition Programs and Pay For Performance Systems

2009.08.10 14:41:21

Recognition Programs and Pay For Performance Systems

A Pay For Performance (PFP) system is not limited to the payment of production bonuses. While the direct sharing of productivity gains in an additional bonus payout on an employee paycheck will likely have the most impact on employee performance, other methods of compensation and recognition can be utilized effectively as well.

The primary goal of labor performance improvement programs is to incentivize workers for productivity improvement. There are many published works available with a core premise that wages alone are not the most powerful form of incentive for labor. Recognition, listening to input and suggestions, feeling engaged with the work and the company, and other examples that do not reflect in a bigger paycheck are now accepted as important aspects in employee motivational efforts.

Savings in cost due directly to a PFP program can be tracked and used for incentives other than production bonuses. The pool of cost savings generated can be partially or in whole used for activities, prizes, or added to motivational programs already in place. For example, if a company already has a popular quarterly celebration event, part of the saving from productivity gains can be added to the budget for prizes for the event. Perhaps a larger cash bonus could be given at the event to the individual with the highest productivity percentage for the quarter. An organization may choose to use part of the labor savings to take everyone beating the mark rate (usually a 25% increase in productivity above status quo) to a baseball game. There are many options for how to apply part of the savings to fun and motivating events that may actually mean more to an employee than cash payouts alone.

One of the important aspects of any incentive program is objectivity. We all have seen motivational programs have the exact opposite effect of their intention specifically because part or all of the criteria for the program was subjective. Accusations of favoritism will inevitably arise in these situations and may eventually kill the program. However, if everyone involved honestly believes they have the same opportunity for recognition by the program, favoritism claims cannot hold any weight. The goal would be to recognize someone for their hard work and have everyone in the audience nodding and saying to themselves, “well, that’s no surprise.”

Another stumbling block for recognition programs is inattentiveness. Programs are sometimes left to falter because of the difficulty in administrating the program. It is a sad situation to enter the front lobby of a facility and see the plaque on the wall for highest performing team for the month with the last entry being six months ago. Or, the “employee of the month” parking space empty and collecting dust and trash. The best thing to do in this situation is to end the program publicly before it starts to sap motivation. Hopefully it can be replaced by a program that is new, fresh, and easier to maintain.

There are several significant benefits in creating a recognition program in conjunction with a PFP program. Objectivity is a core feature of PFP and also an integral part of successful recognition programs. The collection and communication of hard data lends credence to the results of both. A successful PFP system also has a component of detailed productivity reporting which can be used to easily identify the individuals deserving recognition. This reduces administration requirements for the recognition program and makes it easier to maintain over time.

A PFP system can be an integral part of a successful recognition program. Recognition helps create employee engagement, which in turn strengthens the results from the PFP program. That, in turn, increases the level of recognition. It is a very positive cycle of results based on objective and fair labor standards supplied by the pay for performance system.

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How to Keep an Employee Engaged

2009.03.29 20:53:10

Engaged workers produce more, make more money for the company, and create emotional engagement and loyal customers. They contribute to good working environments where people are productive, ethical and accountable. They stay with the organization longer and are more committed to quality and growth than are the other two groups of not-engaged and actively disengaged workers. How do they do so?

• Employees have a strong relationship with their manager
• They have clear communication from their manager
• They have a clear path set for focusing on what they do best
• They have strong relationships with their coworkers
• They feel a strong commitment with their coworkers enabling them to take risks and stretch for excellence

Engaged employees tend to get the least amount of focus and attention from managers in part because they're doing what they are needed to do. They set goals, meet and exceed expectations and charge enthusiastically toward the next tough task.
The challenge for managers comes when the first signs of disengaging appear from an engaged worker. The symptoms need to be addressed immediately or else the disconnection is likely to continue. Most of the time this disengagement process can be interrupted by having meaningful conversations that strengthen commitment through relationship.
Great managers don't leave these excellent employees alone. They spend most of their time with the most productive and talented people because they have the most potential.

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Characteristics of Disengaged Employee

2009.03.29 20:52:19

Tend to concentrate on tasks other than the goals and outcomes they are expected to accomplish.
Do just enough work to get by.The disengaged adversely affect productivity simply because it takes them longer to produce. Simply, time is money.
Non-engaged employees are highly individualized and can have a collective effect on an organization’s profitability and performance.
Can adversely affect the organization in the manner in which they speak to clients and customers.
Disengaged employees can affect client satisfaction and increase customer attrition.
They rarely take the initiative and prefer to stay in the background.
They focus on accomplishing a task rather than achieving an outcome. Actively disengaged employees aren't just unhappy at work. They spread their discontentment to other employees.
They are not just indifferent to company goals and mission but also express their mistrust and animosity.
Employees who are not engaged tend to feel their contributions are being overlooked, and their potential is not being tapped.
Employees who feel disconnected emotionally from their coworkers and supervisor do not feel committed to their work.
They hang back and do the minimum because they believe their contribution hardly counts.

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9 Key Aspects for Successful Pay for Performance Systems

2009.03.28 16:59:47

A properly designed Pay for Performance (PFP) Program enables companies to reduce their cost of labor while increasing the average take home pay of their workforce. IMS’ Pay for Performance Solution is a sophisticated, end-to-end incentive system that is accurate, fair and very effective. The cornerstone of our program is a proprietary software system that handles the complexity of the incentive program and enables us to reward employees based on their own level of productivity.

1. Employees have a direct impact on their bonus. The majority of PFP programs base an employee’s bonus on factors that they cannot control. The highest impact PFP programs directly reward the employee on their individual performance.

2. Daily reporting. Daily reports give employees, supervisors and managers vital performance information. An employee should know where he or she stands on a daily basis.

3. Production goals are set at a fair, achievable level. Setting production goals is a critical aspect of rewarding. Production goals need to be achievable and motivating.

4. The PFP Program does not reward the status quo. There should not be an increase in employee pay without an even greater increase in productivity.

5. The system should be automated with technology. The tracking and management of a comprehensive PFP system can be quite complex. This complexity can be greatly reduced by automating the business processes with technology.

6. Productivity constraints are identified. Some productivity issues are beyond the employee’s control. These issues should be factored into the PFP Program and accounted for so employees remain empowered.

7. Work type variances are incorporated. It is vital that a PFP Program accurately incorporates the labor requirements for varying types of work. If work projects are just averaged, this can lead to favoritism in the work place. An effective PFP program generates the same bonus for the same amount of effort across all projects.

8. Bonuses are individualized as much as possible. The PFP Program should bonus the individual or small work team to maximize the effect of the program. Bonuses based on large teams do not motivate the high producers as much, thus lowering the overall effectiveness of the program.

9. Employees are trained on the PFP Program. It is vital that management and employees understand and embrace the PFP Program. If they do not, then it will struggle to gain traction.

Fee or Performance Licensing
IMS works long term with clients to create significant labor savings while improving productivity and morale. IMS licenses its programs to companies on a fixed fee basis or a pay for performance basis or a combination. Remuneration is customized for each account based on the design of the program. IMS always strives to provide the right level of service for each client.

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What is a Pay For Performance Solutions Program?

2009.03.28 15:50:51

The IMS Pay-For-Performance Solutions program is a unique system that enables companies to reduce their cost of labor while at the same time increasing the average take home pay of their workforce. The program is based on a proprietary software system that utilizes a combination of individual productivity metrics and daily bonuses. When designed properly, this combination can be a powerful driver of higher productivity and lower costs.

The PFP system motivates employees to work harder and smarter by providing daily feedback on their performance and by giving them the ability to earn bonuses on a daily basis. The Productivity Metrics give the supervisors and management visibility to see exactly how each employee is performing in their position regardless of the work performed. This allows supervisors to recognize and praise good performance and to counsel and eventually replace those employees who fail to meet the required standards.

Many companies have implemented Company Bonus Programs. These programs tend to be based on the performance of the facility or the company as a whole. Although employees always enjoy earning a reward, Company Bonus Programs usually fail to create a significant change of behavior within the workforce. Even when these programs are considered successful they leave a significant amount of productivity improvement on the table.

The Pay-for-Performance systems used by IMS have four attributes that make them much more effective at changing employee behavior than most Company Bonus Programs:

1. Employee bonuses are based directly on the employee’s productivity level – not on the performance of a large group of people or on factors the employee cannot control.

2. Employees receive daily feedback on their productivity level and the bonus that they earned.

3. Employee bonuses are earned daily – not monthly, quarterly or yearly.

4. Employee bonuses are paid out every pay period – this impacts behavior significantly more than bonuses that are paid out infrequently.

Although a PFP program is much more effective than a Company Bonus Program, it is very data and systems intensive and requires extensive software systems in order to run effectively. IMS utilizes a customized software program that compiles all of the production data, produces the required reports and performs the necessary Quality Control processes that enable the program to run smoothly and efficiently.

Without this program clients would become overwhelmed with data and would scale back the incentive program to the point that it would lose its effectiveness. Incentive programs can be very effective tools when designed properly, but they can be a waste of money if the design is too simplistic or if the algorithm used to calculate Production Goals does not properly calculate projected time across the spectrum of work performed.

IMS has extensive experience in determining the labor algorithms necessary to develop Production Goals that will reward employees consistently regardless of the freight worked, the order picked, or the product produced. We have seen time and time again that a properly designed PFP system can increase employee wages by 30% or more while decreasing labor costs by at least 10%. For labor-intensive industries a reduction in labor costs of 10% can have a significant impact on their bottom line.

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Improve Your Warehouse Productivity

2009.03.28 15:48:04

Efficient warehousing operations are vital to a firm competitiveness in today’s economic environment. Increasing productivity is a goal common to all competitive warehouses. Labor Performance LMS can help you improve your warehouse productivity. Productivity problems aren’t easy to see. They are hidden within the day-to-day operation.

Improving Your Processes

As businesses evolve, a number of inefficiencies get embedded in the processes and systems of the firm. Deliberate efforts aren’t made to review the processes involved in your operations and carry out optimization. There’s often a lack of focus on efficiency and eliminating delays and bottlenecks that hamper workflow and increase processing time. Increased operating costs, poor capacity utilization and low quality and service levels are the result.

Labor Performance LMS gives you a software program detailing the vital processes and a method for working and reporting on the performance of these processes.

Use Improved Labor Standards
Working with employees who perform repetitive tasks, time studies and workload information studies are done to create labor standards. These standards define productivity. It is a good performance measurement tool and forms a valid basis for feedback and implementation of incentive programs. If labor standards don’t exist or if employees aren’t following them productivity often suffers.

Labor Performance LMS gives you a platform for utilizing improved labor standards and benefiting from continuous improvement.

Improve Employee Training
It is very important to train employees for achieving and sustaining productivity levels. It yields consistent results and improves the product quality. Trained employees follow proper methods and procedures while doing their tasks. This leads to higher productivity levels. More importantly, these levels are then sustained over time. In addition, it provides management with an effective tool to evaluate associates who have been brought up to common level by training.

Labor Performance LMS gives you daily reports on productivity so you can interact with employees from a position of knowledge.

Utilize Improved Productivity Reporting
This is an essential part of any operation and provides managers with essential quantifiable data about the efficiencies of the system. It forms the basis of all activities to sustain productivity over time. A productivity tracking system is generally put in place, it generates reports, and data that are used to evaluate performance, implement incentive programs and monitor productivity. It is particularly useful as the charts and graphs outputted by the system give a graphic view of the health of the operation.

Labor Performance LMS gives you the reporting you need to make improvements. It shows you strengths and weaknesses to you can save time and money and be more productive.

Manage Attendance

In order to meet shipping deadlines and production goals it is critical that employees maintain outstanding attendance records. Working with attendance problems is a challenging aspect of management. Company policies need to be in place and enforced to handle problem employees.

Labor Performance LMS gives you a comprehensive program where attendance and productivity go hand-in-hand. The bonus program gives employees more motivation to show up, be one time and be more productive.

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Tags: productivity | warehouse

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