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Motivate Your Workforce & Achieve Greater Productivity with Incentive-Based Pay

Oct 16, 2017

Most supply chain personnel want to do well at their jobs. However, you can drive greater productivity from the same workforce by introducing a fair, well-publicized incentive program. Incentive-based payment programs are a method of paying associates who exceed clearly stated expectations when completing value-added activities within the warehouse, such as picking, replenishment, packing, etc. It is best if these programs are tySupply Chain Workforce Optimizationpically created in conjunction with the successful implementation of a Labor Management System (LMS) and Engineered Labor Standards (ELS). 

Implementing an incentive program for your company’s workforce can be an effective tool to increase productivity, reduce downtime, and improve morale. An incentive program motivates workers to talk, think, and act based on attributes that directly drive improved operational productivity. Because a company’s success depends on the performance of all employees, it is beneficial to reward high-performing employees to attract, retain, and motivate the workforce.

Academically speaking, there are several incentive plan options that can be deployed within the supply chain. A comprehensive assessment of your company’s existing operations is necessary to choose the best plan. The following table summarizes the different plan types:

Scanlon Plan Based on the ratio of labor costs to sales value of production
Rucker Plan Based on the ratio of labor costs to production value
Improshare Plan    Based on the measured change in relationship between outputs and the time required to produce them        
Custom Plans Based on defined input/output costs as well as other metrics that are important to a company’s specific operations

A Roadmap to Incentives 
The following list shows a high-level overview of the required steps to implement an incentive program within your supply chain.

  1. Establish the “right way” to perform activities. This is done by documenting and implementing best practices and preferred methods.
  2. Open the lines of communication between leadership and front-line supervisors. Fostering a culture of positive, two-way dialog helps ensure culture alignment across all levels of your organization.
  3. Develop Engineered Labor Standards. These standards are typically created in tandem with the implementation of a Labor Management System to establish a performance baseline. Learn more about ELS.
  4. Utilize preferred methods and coaching to get your workforce to the baseline performance standard.
  5. Outline the details of the incentive program. It’s key to reward high performers within your supply chain operations. In addition to making top-notch employees feel valued, an incentive program also helps overcome the performance “plateau” effect that typically occurs once labor standards are implemented.

Establishing the Incentive Program
When it comes to the overall approach to structuring incentive programs, companies can create either individual or team-based rewards, or a combination of the two. The benefits of team incentives include fostering group cohesiveness and cooperation, facilitating a flexible workforce that can shift between tasks as needed, and developing an overall process that is subject to fewer individual measurements. On the other hand, individual incentives can motivate goal-oriented employees to perform at a higher level, especially if there is a reward that can be earned multiple times. The important thing to remember is that financial incentives can shape company-wide goals. This is because improving performance can lead to better efficiency, higher employee retention rates, greater throughput, and cost savings that ultimately impact the bottom line. Increasing Workforce Productivity

All of these considerations must be taken into account to find an incentive plan that best fits the company’s goals and workforce. A good first step is to solicit input from the workers themselves so they feel their input matters and is helping to shape the culture—and even their own future. They are likely a source of interesting ideas and will know best what is truly motivating for themselves and their peers.

There can also be challenges associated with implementing an incentive program. Some of these can include:

  • Lack of cooperation between employees and groups
  • Lack of employee control over incentive structure/policy
  • Difficulty measuring true performance
  • Resistance to change

However, if managed properly, these issues can be mitigated early in the process by communicating clearly and often, accepting feedback from employees, and clearly presenting the incentive program’s benefits and how it can directly affect take-home pay. 

Ultimately, an incentive program can be the largest driver of workforce performance because it is directly tied to an employee’s pay. It also encourages the entire organization to adhere to best practices, maintain their Engineered Labor Standards, and continue to improve coaching and feedback exercises across the workforce. At the end of the day, a happy, motivated workforce will have far-reaching benefits when it comes to the efficiency of overall operations.

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