National Clothesline

I often get asked about incentives, bonuses and piece-rate pay. Are they a good idea?

Well, it is not the same answer for everyone, so I can not make a blanket statement and say it ’s a great idea or it’s a lousy one. At some plants, it is perfect. For others it will accomplish nothing.

It is always about goals. What are you trying to accomplish? What is the path to your goal? Where are you and where do you want to go?

When I first started in management, I was asked about goals. “Goals? What goals?” I surely thought. It sounded a little too cosmic for me. Wait a minute! I have a goal! How about; “I want to get through this day without a catastrophe.” That’s my goal. Well, that is a rather silly goal, but I bet that I thought that it was a great one 30 years ago.

Back on track… I won’t tell you that you should or should not implement incentives, bonuses or piece-rate pay, but I will give you something to think about that, hopefully, will help you make a decision.

What are you trying to accomplish? Usually, management is trying to insulate itself from sub-standard production or dips in volume. It ’s a way to keep payroll in check.

That is hardly the dumbest idea that I’ve ever heard. But will it work?

This works best when competition, of sorts, is possible. For example, imagine two essentially identical shirt units — two conventional single buck units or two double units. The exact number of shirts that will be produced by this plant during this week is finite. Nobody knows exactly what this number is, but pressing shirts faster does not, of course, mean that there will be more shirts to press.

Conversely, if your job is to manufacture shirts, working faster means that you can make more shirts. Theoretically, there is an endless supply of shirts to manufacture.

Pressing shirts faster simply means that there will be fewer production hours. An hourly employee is wise to this. Assuming that service is not an issue, meaning that even if shirts are pressed at a rate that is 30 or 40 percent slower that the equipment is capable of producing, the customers are still served. If a presser presses more quickly, the net result for an employee is a smaller paycheck.

This is a tough problem. How do you motivate an employee to press faster so that they can get paid less? The easy answer is to never let it happen. It may already be way too late to implement that at your plant, but that doesn ’t make my statement any less correct.

Anyhow, let’s say that we have two competing shirt units and a total expected volume of 5,000 shirts.

When piece pay is implemented, one team of pressers has a goal to press the lion’s share of the available shirts. If I want to make more money than the other group, I want to press faster so that I can press 3,000 (of the available 5,000 shirts) versus the theoretical 50/50 split of 2,500 per shirt unit.

As for avoiding under-producing pressers, the only solution is to set standards and expect them. (See the Production MaxiMiser at www.
tailwindsystems.com, or the Garment Counter at www.wesvic.com).

It is wrong to allow under-producing on shirt pressing equipment with no penalty for non-compliance.

Free money!

A client in Tennessee has a policy in place to help guarantee attendance and limit tardiness. It doesn ’t work and he can hardly believe it. I was equally stunned that it didn’t work when he first explained the policy to me. It has taken me a number of years to understand why it doesn ’t work.

His policy is simple: Show up for work, every day that you are scheduled, be there, on time — not even a minute late — and you will be paid for 40 hours.

This, by the way, is good for him, but it is not necessarily a suggestion for you. It makes sense for him for at least two reasons. If these two reasons apply to you, then this policy could make sense for you, too.

This drycleaner is a client and, as result, he runs very lean. Last I knew, he was still at 30 pieces per labor hour: two people on a double buck doing 90 excellent shirts per hour and one other person doing inspection, assembly, touch-up, buttons and wash.

There is a measure of wiggle room when you are at 30 pieces per labor hour. Therefore he can afford to waste 10 to 15 labor hours and still have a PPOH number that is better than almost anybody ’s.

The second reason that this is a good plan for him is that he is already working close to 40 hours, year round. This would be a bad idea if all the shirts that he had to do could (or should) be done in, say 20 hours.

Wasting an additional 20 hours to get good attendance is not good business. This would probably be very effective, however ill-advised.

So, in his case he will do 3,000 shirts this week with three people. Two will press at a rate of 90 shirts per hour. Let ’s call it 34 hours — 102 hours in total, counting all three staff members, will yield a stellar 29.4 pieces per labor hour.

If the pressers are paid for 40 hours regardless (and remember, volume is quite steady year round), the total hours will be 114 hours. Divide that into the same 3,000 shirts and the PPLH is reduced to a still extraordinarily respectable 26.3. His pressers still come in late almost daily, but they get the job done and he takes his 29.4 PPLH to the bank.

But why doesn’t it work? It is free money!

There is a day-care center that had a problem with parents not showing up on time to pick up their children at the end of the day. It became quite a problem. The kids needed to be picked up at 3 p.m., but day after day, two or three parents were late.

The day care center needed to remedy this so they instituted an incentive to get people to be there on time. If you weren ’t there to pick up your child by 3:05, you would be penalized $3. What do you think happened? The tardiness went up. Way up, in fact. Almost everyone was late everyday!

The plan backfired. The “crime” was worth the penalty, and the “crime” was endorsed, so to speak. “Go ahead and be late, just give us $3.” The parents of the children feel that the $3 is less important than doing what it takes to be there on time. The same is true for my client in Memphis; the punishment does not fit the crime. It is not more complicated than that.

In the final analysis, know what you are trying to accomplish. Are you trying to reduce overtime? Are you trying to address service issues? Are you trying to reduce payroll proportionately with piece count?

Keep the examples that I put forth in mind and make sure that, in the end, you are the big winner.

I had a crisis years ago. I had to trim overtime and improve service. It did not take much investigating to clearly see that my pressers were under-producing. Collectively, my shirt pressing equipment should be able to generate 475 shirts per hour, but I was getting around 360.

The 100+ differential surely contained all of the potential profit. I devised an elaborate sliding pay scale in an effort to boost productivity. The higher the productivity rate, the more an employee would make per hour.

Seems like I worked on this for months. I analyzed it every which way, being sure that fraud wasn ’t possible, accounting wasn’t too much of a nightmare and that I was always the biggest winner.

When I finally had a program that I was sure was perfect, what do you think that I did? I scrapped it and never implemented it, because I came to terms with the real problem. The real problem was that I had shift supervisors that allowed pathetic productivity and I had no penalty for non-compliance. That is not acceptable. Why would I want to reward employees for doing what they should have been doing all along?

“If you do what you've always done, you'll get what you always got.”