10 Questions To Determine If Your Pay For Performance Program Is Effective
by David Hair, CEO nGROUP performance partners
Incentivizing workers is at the heart of free enterprise. However, in order for a pay for performance program to work in a labor intensive system, certain conditions and variables are necessary to consider when planning an EFFECTIVE incentive pay program.
- Does your pay for performance program involve a labor intensive workforce?
- Do your workers truly control their output? (If it is machine paced or the flow of work or availability of work restricts their production it probably is not a good application.)?
- Does your incentive program increase measurable productivity?
- Does your performance program include your key success indicators, such as attendance and attitude?
- Did you invest time and resources to set accurate and attainable labor standards?
- Is there a system in place to capture the work content on a consistent basis?
- Do you continue to monitor the program to ensure that standards remain fair?
- Do you quickly reset standards anytime there is a change in work content?
- Do you post performance results so workers can get immediate results and feedback? Creating a culture of competitiveness is key.
- Do you expedite incentive pay immediately?
If you answered “yes” to all 10 questions, congratulations on developing and more importantly maintaining a truly effective pay for performance program. If you would like to learn more about how nGROUP can incorporate pay for performance into a system that increases productivity, boosts morale and reduces your labor costs by a minimum of 10-25%, please message me, or email me at firstname.lastname@example.org.
To Whom It May Concern,
I am pleased to offer a recommendation of nGROUP’s management services.
I was heavily involved with nGROUP throughout their time working with Crunch Pak. Their team is uniquely knowledgeable about our industry, the application of Lean, Continuous Improvement and addressing production challenges associated with our more manually intensive processes.
Crunch Pak has had workforce related issues that have adversely affected our manufacturing capabilities. Additionally, our business has grown rapidly, we’ve experienced turnover in our management team, and competitive pressures have increased.
nGROUP not only brought fresh ideas to the table and offered us insights into our managerial process that had been faltering, but added stability and resources to help drive improvements while we focused on the day-to-day. I found nGROUP P complemented and enhanced our operation and stimulated new ways of thinking about our business and driving results.
nGROUP’s team, including Jim Rossini, Jim Daniels and Brian Sessions, effectively diagnosed many of our communication, leadership and productivity problems and were able to develop tools that enabled the front line leadership of the plant to run their business more effectively.
The assessment of our operation and the ensuing planning, development and implementation of tools and methodologies were performed flawlessly. Adding nGROUP to our ongoing efforts enhanced our operation throughout multiple areas.
nGROUP was key to the development of our Continuous Improvement Team, which had not existed prior to engaging them. They have been able to train and mentor our leadership throughout the company to engage in the business and develop solutions to problems to drive results.
Should you engage nGROUP in the future, I am certain you will have a similar experience. Please feel free to contact me if you have any questions.
Engineered standards are key to implementing production planning, management reporting, incentive structures, and individual accountability. Standards are developed using techniques that create fair expectations of the output projected over a specific time frame.
The approaches to develop standards include traditional work measurement, random sampling, standardized systems like MOST, and the utilization of historical data. I personally like to use work measurement in conjunction with historical data to help validate my findings.
Depending on the complexity of the work being done, it can take as little as a few days, to as long as a few months to develop comprehensive and fair standards. Once the standards are created, implemented, and put to work as a baseline for efficiencies, it is incredibly important to ensure they MAINTAIN fairness and objectivity. This means re-evaluating on a periodic basis. So then the question becomes: How often should you evaluate engineered standards?
The answer is relatively simple and based on common sense. First and foremost, anytime work content is changed in any significant manner we need to recalculate the standards based on that new scenario. This is important in order to maintain the fairness of the standards, particularly if utilized for incentive.
The second way to time an evaluation is based on performance against the existing standards. In other words, since you are measuring performance and comparing the results to the standards, you will notice fluctuations in the results. If those variabilities begin to fall outside of the historical norms, it is a good prompt to check the standards for changes. You may notice the standard has become too easy to achieve, or maybe your team can no longer meet the expectations.
Regardless of what prompts reevaluation, it is important to determine why the results are changing and adjust accordingly. Some subtle factors that may affect results include:
- Different materials are being used, like packaging that is more difficult or easier to fold, changes in vendors, or use of new components or products.
- The workforce has become acclimated to the work and 100% standard has increased due to training or learning curve. This can be tricky. Be careful of new trainees and use a time based standard to get to a new 100% for new employees.
- Small incremental work content changes, like additional labels, production recording, or paperwork changes.
- In any case, it is important to maintain fair and objective standards for both your management team and your employees. I have always said, “bad standards are worse than no standards….” Once you have your expectations in place, keep your eyes open for valid reasons to reevaluate your engineered standards.
Jim Zimmerman, COO