- Measure Productivity. The most effective incentive programs can drill down to individual performance. Once you start including more areas into the formula the less impact it may have.
- Set Accurate Labor Standards: People need to know how they are measured and rewarded. The standards must be fair, demanding and attainable. Reevaluate and reset standards after any equipment or process change that impacts work content. Incentive should accurately reflect worker performance.
- Keep it Simple. Try to go to the most basic measurements possible. You need to eliminate any mystery on how people make incentive pay.
- Post performance quickly. Posting worker performance quickly and publicly gives associates visibility into process and builds credibility in the program.
- Pay incentives quickly. Production and quality incentives weighted with attendance performance should be paid on the paycheck that corresponds to hours worked.
- Identify best practices. The best process ideas come from the people who are doing the work. When you find a better method, integrate that into the SOPs and training and get everyone to embrace it.
- Remove obstacle to performance. Work the floor personnel to identify any impediments that reduce worker effectiveness and try to remove them.
- Equip with the right tools. Make sure employees have the right equipment to do their job and that all of the equipment is at full functional capability.
- Train the workforce for results. Create a training program that embraces all of the elements of high performance and don’t omit training for temporary workers. If they are essential to your labor strategy then it is essential to onboard them correctly.
- Promote safe practices. Give employees quality tools and the right environment in which to do their job. If they are not working in a safe environment, efficiency, productivity, and risk will sabotage your results.
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 email@example.com.
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
You hear all the time, don’t sweat the small stuff as it really does not make an impact in a business. I beg to differ. At nGROUP, we are a company that works with distribution and manufacturing companies that have manually intensive processes. That means that at nGROUP, we are masters as looking at the details of all processes and utilize engineering and six sigma techniques to improve performance. We do not say work harder, we say work smarter.
Here is a great example of this. nGROUP has a customer in distribution.
Notice the markings for where the trash can was placed. There were a total of 30 trash cans placed like this.
nGROUP noticed that the trash cans at the end of the tables partially obstructed a potential walkway and moved them. This new location improved productivity and decreased travel time for all of the intake positions in receiving. Additionally, there were safety benefits from decreasing the daily walking distance. By moving the trash cans about two feet, it would open up another clear pathway that would save them about 10 feet of walking, probably 100x a day. This elimination of waste translated into saving significant time and dollars for all in receiving and nGROUP’s customer.
So you see minor details DO make a difference!
By Tom Taetsch
Throughout the U.S., the greatest obstacle for Operational and Human Resource professionals hit while trying to improve their labor management is a resistance to change. The pressure to succeed makes companies less open to taking risks and trying new techniques. Yet, businesses have to make modifications to keep up with a shifting national and global economy.
Across the world, Japanese companies have gained traction as the global leaders in manufacturing. This is a result of their history in creating sustainable labor practices and implementing a cost-per-unit (CPU) based labor model. So, what makes the CPU labor model so compelling and effective?
After World War II ended, American statistician, Dr. W. Edwards Deming, would visit an economically devastated Japan during his work at the USDA. He became fond of the culture and people and eventually influenced a group of top Japanese managers who were eager for new ideas to improve quality. His approach was based on statistical analysis centered on 14 points for management. Demings is also credited with devising and implementing some of the most influential concepts in today’s manufacturing industry, such asTotal Productive Maintenance (TPM) and Plan, Do, Check, Act. Beyond Deming’s body of work, other manufacturing concepts originated through Japanese industry like Lean Manufacturing or TPS (Toyota Production System) and 5S Methodology.
The Japanese began to and still set the standard for sustainable production practices. It is through consistent and automated implementation of these same practices that one workforce management company, nGROUP performance partners, has developed a highly effective CPU model for the American culture and business environment, and is able to achieve significant results for their partner companies.
nGROUP developed an integrated approach of converting traditional hourly rate workforces into a fixed cost per unit (CPU) arrangements, and helps clients budget labor cost more effectively, enhances stagnated quality programs, and integrates value stream mapping philosophies. Through a commitment to lean manufacturing and Six Sigma philosophies, plus innovative human performance coaching, the nGROUP model guarantees clients positive financial and performance results, and a positive change in the production culture.
For more information on nGROUP performance partners visit www.ngroup.biz
Tom Taetsch, nGROUP Vice President, has 25 years of supply chain experience, including 11 years of recreational vehicle manufacturing experience with Yamaha Motor Manufacturing Corp of America. His logistical and engineering workload has embodied Supply Chain consulting for Tompkins International and within the 3PL industry, working for companies such as Exel, Saddle Creek, and Weber Logistics.
By David Hair, President and CEO, nGROUP performance partners
Labor-intensive businesses in today’s economy are up against a number of revised tax laws, making it increasingly difficult to maintain or increase profit. The Affordable Care Act alone places additional costs and compliance burdens on businesses with 50 or more employees. Adding to this weight is the increased litigation and costs associated with labor unions and “permatemp” employment. So, how can a company stay in compliance, reduce or maintain labor costs, AND increase their top line? Here’s a look at three innovative labor strategies that may be a viable solution for current companies to reach top line business growth:
- Reduce the Workforce
Reducing the workforce is the “solution” that many political and business leaders quickly cited in response to the ACA’s “50 or more” mandate.
A reduced workforce decreases ACA cost but hinders the ability to keep up with demand which may well exceed 50 workers. Simply put, if a business grows or has a peak production season, it needs a larger workforce. Beyond reducing hours or limiting the workforce to 49 employees, businesses may want to consider splitting their companies into smaller entities.
Entrepreneur Magazine noted that during a webinar on Obamacare, Bob Graboyes of the NFIB Research Foundation “advised participants that entrepreneurs may not be able to avoid the large-employer fines by splitting their companies into smaller, separate businesses. Even an entrepreneur with completely separate companies may find his or her workforces combined for the purposes of the health law.”
With the law being unclear as to how the government will treat multiple companies with the same owner, reducing your workforce or splitting your company into smaller, separate businesses is a very limited, short-sided approach to begin finding real solutions.
- Hire Independent Contractors
In a recent article, “Data Spotlight: Independent Contractors on the Rise,” Jeffrey Eisenach, an economist at George Mason University, cited that “the number of so-called independent contractors is up by more than 1 million since 2005.” Independent Contractors work on a contract basis, file a 1099-MISC with the IRS and don’t draw the benefits of a full-time employee. When a service provider is classified as an independent contractor, the company is no longer liable for:
- State workers compensation
- Federal unemployment tax
- Federal employment tax
- State income tax withholding
- Employer Civil Liability (wrongful discharge or entitling the employee to benefits plans)
- Minimum Wage Laws
While avoiding these liabilities sounds like a winning solution, any HR Director can quickly point out that the legal requirements of hiring independent contractors is limited in scope. The popular website, LegalZoom, states, “Should employers incorrectly define a worker as an independent contractor, they may find themselves liable for past taxes including FICA and federal unemployment tax.”
In relation to labor-intensive operations, retaining Independent Contractors is particularly limited in its ability to provide solutions. Typical distribution and plant workers do not fit the legal definition of an Independent Contractor.
- Partner with a 3PHL
Third Party Human Logistics (3PHL) is an innovative business model that offers services with best-in-class practices for a fixed cost. Most often they operate on site in the client’s facility. These amenities include labor solutions for manufacturing and distribution facilities and process management.
Unlike traditional temporary labor providers, 3PHLs are experts in engineering labor standards and production efficiencies. It is the responsibility of 3PHL firms to provide expert analysis and oversight of the production systems that provide a safe, efficient, and compliant-based operation that meets quality standards.
Additionally, 3PHL firms are financially accountable for delivering efficiency by means of process improvements and human (workforce) improvements, making a firm more competitive in speed, quality, cost and capacity.
When it comes to meeting compliance, remaining profitable, and increasing the top line, the 3PHL model is an attractive new solution. 3PHL produces the same flexibility as temporary labor while going a step further to provide a company with efficiency. The model offers reduced cost and liability with increased throughput and quality.
Workforce optimization is no longer just an HR issue. It touches all aspects of the business and requires the strategic input from top executives. Companies must concentrate in staying compliant with ever changing labor laws, controlling payroll cost while being competitive for good workers, managing risk for an increasingly ligatious workforce and avoiding the pitfalls of a collective bargaining table. They must do all this without losing focus of their business. In 2016 CEOs and CFOs will want to consider the competitive advantages of the innovative 3PHL production model to maintain labor effectiveness and efficiency.
by Jim Zimmerman
Many executives within the manufacturing and distribution industry are facing a budgeting process that will ultimately make or break their company’s 2016 earnings. Now is the time to think about what strategies will deliver desired results.
New regulations and a changing business climate are creating an environment that forces a company to find prosperity in innovative ways.
One area often overlooked but with excellent savings potential are departments with labor intensive production. Operating costs associated with labor intensive operations are a paramount concern for companies operating in the U.S. Whether it is the uncertainty of regulations associated with the Affordable Care Act (ObamaCare) or increasing legal risks associated with staffing companies and labor unions, many American industries will need to rethink their labor strategy.
A trending new alternative to traditional labor strategies has been started by a U.S. company, nGROUP performance partners. nGROUP encourages executives to group employees by type of function, then evaluate if there is better way to drive results for each group.
For example, nGROUP has coined the term ‘Human Logistics’ to describe the groups of employees who do repetitive tasks to move product from A to B. Not the trucks and boat logistics, but the people who do the work pre and post transportation. They are often general labor workers that assemble products, pick and pack products, stack and unstack the pallets, load and unload the trucks, hang and tag garments, perform quality control, etc.
As a specialized 3rd party human logistics (3PHL) provider, nGROUP is leading the way in facilitating changes by providing midsize companies and major corporations with an alternative, more cost effective, human logistics strategy.
Instead of assuming the universal burden of budget cuts, nGROUP’s 3PHL model enables companies to outsource specific work cells or facilities. This allocates budget cuts into manageable units that do not sacrifice productivity and quality. This ‘a la carte approach reduces the burdens of labor and production in the areas they choose.
With this alternative strategy, companies can partner with nGROUP as a consultant or vested outsourcing partner. nGROUP applies a data driven lean manufacturing philosophy, 6Sigma principles and specialized workforce management technologies to improve performance metrics and drive down unit labor costs 10-25%.
In a recently published study, nGROUP revealed how one company’s adoption of the 3PHL model produced record breaking results in not just one facility – but three facilities.
*Per man hour
What strategies could companies consider for 2016 to make it a record breaking year? Perhaps an alternative strategy that goes beyond being cost effective, such as the 3PHL model from nGROUP, that will produce the quality, speed, flexibility and scalability that are vital for companies to be successful in the upcoming year.
To read more nGROUP Case Studies, click here.
With the majority of the “Obamacare” Affordable Care Act (ACA), mandates going into effect in 2014, executives and human resource professionals across the country are scratching their heads trying to figure out the best strategy for labor compliance and cost improvements. nGROUP Performance Partners, a national on-site outsourcing provider, is answering their call with a business model that offers solutions in both critical areas.
“Our proven business model guarantees cost savings in labor, meets the ACA mandates, and eliminates most compliance and co-employment issues,” says David Hair, President of nGROUP Performance Partners.
nGROUP provides labor and process management services to companies with labor intensive operations. nGROUP oversees entire operations or a singular work cell. For example, a client may outsource an entire manufacturing facility to nGROUP, or nGROUP may only be responsible for one work cell within the facility, such as packaging.
According to Hair, it is the role of assuming responsibility that sets nGROUP apart from other industrial engineering efficiency consultants and other flexible workforce options, such as temporary staffing. “This year our clients are expressing concerns about a number of labor compliance issues, particularly those aimed at temporary employment. At the end of the day our job is to not only produce the results we guarantee but to also deliver a workforce that is motivated, trained, and in compliance.”
When it comes to compliance regulations, the ACA has gained a lot of attention from critics, citing that the law offers little guidance as to how mandates will be regulated. For example, one of the most controversial regulations of the ACA is the mandate that companies with more than 50 full-time employees shall provide “qualified” health coverage for all their full-time employees, or pay an annual penalty of $2,000 per full-time employee. If a company does provide such coverage but it’s not “affordable,” the penalty is $3,000 per employee. (Affordable is defined as less than 9.5% of the employee’s family income.) Many economists have reported that the financial impact of the penalties associated with this mandate will reduce profit margins and drive higher prices.
Regardless of any direct financial impact, the ACA will most certainly increase compliance burdens. As reported on the Committee on Ways and Means website, the ACA will add nearly 80 million man-hours each year to individuals and businesses. Critics point out that the IRS compliance burden is the tip of the iceberg. With agencies such as Health and Human Services and the Department of Labor, the fear is that additional and duplicate oversight and regulations will continue to add unparallel compliance burdens on corporations, small businesses, and individuals.
“Whether or not the ACA is here to stay or is destined for mass revision, one solid truth remains,” Hair says. “Companies throughout the United States need to take measures now to ensure compliance when the majority of its mandates go into effect in 2014.”
In instances involving the need for cost improvements, risk protection and a flexible workforce, companies are looking for new business models that ease compliance burdens. A performance based partnership is an emerging example of how companies are adopting alternative workforce models on U.S. soil.
By Ryan Cates,
nGroup VP, National Sales and South East Region
One of my favorite themes in Malcolm Gladwell’s work is his perspective on talent. Several of his books and essays focus on how we identify talent, how it develops and what it is. The concepts are worth revisiting as I see a lot of essays, blogs, and articles focused on the theme of how to find and engage the “best talent”.
The first exhibit I submit for consideration is an essay titled “The Talent Myth” written in 2002. (http://gladwell.com/the-talent-myth/)
For those too busy to read the whole thing, here are some of the highlights…
- Much of the essay revolves around Enron and their interaction with McKinsey.
- “The War for Talent”, a term that still gets thrown around today, was coined by McKinsey back in the late 90’s and was based on the idea that the best companies were stuffed with the most talented people. So, if you wanted to be successful, it was necessary to do whatever it takes to attract the sharpest tacks in the box.
- The war for talent developed into the “Talent Mindset”, which can be summed up as “I’ve hired the smartest people, I should let them do whatever they want”. This was a guiding principle at Enron and we all know how that panned out…
- Studies show that people who believe in malleable intelligence (“I may not be smart but I can become smart”) are more effective than those who believe in fixed intelligence (“I was born smart”).
- In many cases great systems being run by “average people” will outperform “great talent”.
- Companies such as Southwest Airlines, Proctor and Gamble, and Wal Mart do quite well without chasing the latest and greatest fresh out of Ivy League MBA programs.
- “They were always around [McKinsey consultants at Enron]. They were there looking for people who had the talent to think outside the box. It never occurred to them that, if everyone had to think outside the box, maybe it was the box that needed fixing.”
Just to be clear, I don’t think Malcolm Gladwell would say that talent isn’t valuable. Nor do I. In certain instances talent can be supremely valuable (i.e. pro sports). However, in most cases, success relies a good and flourishing system and not so much on elusive and expensive genius.