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Incentive Program Helps Companies
Motivate Employees and Increase Profits
Employee involvement is the driving force of a
profitable company
By: Betty Vannatter
The most important resource any company possesses is
its people. When those people are unhappy, unmotivated, or feel detached from the overall
workings of their company, the entire organization suffers through reduced productivity,
low morale, and high employee turnover, to name a few maladies. Companies have to be
profitable to remain in business; thus they must be able to convince their employees that
increased production will benefit them as well.
With that in mind, companies have sought practical ways to
encourage positive employee attitudes in order to strengthen the company and its profit
margin, while simultaneously keeping costs down. Different techniques have been tried,
including offering shorter hours, shift trading, flexible work schedules, and job sharing.
However, the challenge in motivating employees really lies in determining what will get
their attention and inspire them to view their relationship with the company as mutually
beneficial.
Modern human resource theory suggests that this mutually
beneficial relationship may be achieved by giving employees a voice in company
decision-making. Employees typically believe their contributions are one-sided, and need
to be convinced that the company recognizes and appreciates them. They want to feel
important, even essential to the company's survival.
Paul Allair, CEO of Xerox, responding to a Ford Foundation
study called Relinking Life and Work: Toward a Better Future, remarked, "The bottom
line is this: People who have a say in how the work gets done have a greater sense of
control over their lives. Workers with a sense of empowerment are more efficient,
productive, and satisfied on the job, and companies that treat their employees with
respect-as key members of the team-are repaid in dividends of employee motivation,
productivity and commitment."
One method that many companies have often considered as a
way to motivate employees is the monetary incentive program - more money available to
employees who increase their production. However, incentive techniques can be especially
difficult to establish because management is often reluctant to part with the very tools
necessary to implement them: information about sales and profits.
"Traditionally, the company's goals, profits and
structure are a big secret in companies," stated Jim Warren, owner of Sunset
Manufacturing in Tualatin, Oregon. "It doesn't make employees feel part of the team. The
average worker today wants to be a part of something. They want to know exactly what
they'll get for their efforts. I believe if you just sit down with them and define exactly
where your company is heading, what role you expect them to take, and then reward them
when they succeed, you'll get a measurable return."
When Warren's father started Sunset Manufacturing in the
early 1950s, Warren helped with production overloads after school and on weekends. He grew
up with the business and learned how important it is to keep costs down and production up
in an industry where many companies can fail.
"I have personally tried many things," Warren
said, "And what I've discovered is that you can tell people what you want, but unless
you share all the information of exactly what you need from them, let them take
responsibility for it, and then reward them, you won't get results."
While searching for a way to help his employees understand
what they could contribute to keep the company profitable, Warren created an incentive
program that would not only track employee attendance and punctuality, but also reward
them for their job-related suggestions and improved performance. He took his idea to
Insyst! Information Systems Inc. in Beaverton, Oregon, and developed it into a software
program that shows users how to implement it step by step.
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The end result was PIP Plus, a reasonably priced
incentive/gainsharing software program for Windows that allows companies to reward
individual employees and groups with bonuses for improved performance. Although the
product was initially created for his own company, it can be applied to any business.
In his drive to improve the way companies do business,
Warren has created several programs dedicated to improving workplace efficiency in the
industrial arena. PIP Plus is the first program he designed that applies to every company.
PIP Plus is offered through ShopWerks Software, a company Warren established to market his line
of software programs.
Warren created PIP Plus on the premise that every company
has room for improvements, whether it's absenteeism, late deliveries, or cost overruns.
The need to motivate employees to increase productivity while reducing costs creates a
perfect environment for an incentive program.
"I developed PIP Plus as a solution to the problems I
had in my own company when dealing with incentives," stated Warren. "But it will
work for any company. It is my desire to share this expertise with other businesses in
this country."
The first step a company should take, according to Warren,
is to firmly commit to implementing an incentive program.
"If you don't have the commitment at the very top, and
all the way down through the organization, the program won't work. Everyone should be
heard from to make sure the plan is refined and works within their organization,"
asserts Warren. "When management implements an incentive program that hasn't been
thoroughly planned, many times the program isn't carried through, and you end up with a
demoralized company. PIP Plus is the closest thing I've ever been able to get to true
teamwork."
The next step is developing a plan. Warren feels it is
extremely important for management to examine where they are, where they have been, and
where they want to go. They need to set realistic goals for individuals and groups
company-wide, and track these goals to measure improvement. Warren coined the term,
"Flexible Metrics" to describe the goals, or specific employee behaviors, such
as punctuality, attendance, cost overruns, waste, or other areas management and employees
agree would be beneficial and attainable.
By tracking established metrics, employers can monitor
individual production and adherence to goals. The program allows management to share that
information with employees through Performance Sheets that graphically represent their
performance as compared to their peers
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A company sets up the basic PIP Plus program by entering
the metrics, key values, employee names, group divisions and percentage of gross profit
available to share. Basic employee payroll and job performance data are input on a regular
basis, and PIP Plus does the rest. The program's parameters control the bonus calculation,
chart employee and group performance comparisons, print Employee Status Reports, and
deliver the feedback to change the way employees do their jobs.
Companies need to understand that sharing cost savings with
employees does not mean a lower profit margin. They are actually sharing the increased
profit gained through cost savings and improved employee productivity.
"The increase in your employees' performance is going
to pay for the program," said Warren. "You're not giving bonuses out of the
profits, but out of the money you save by increasing efficiency. So, in addition to saving
money, you get more profits because you're actually using the time that used to be lost
through inefficiency to generate revenue."
"If, right off the bat, you couldn't add 10%-15% to
your bottom line," Warren stated, "You're not using the program fully. I
know if PIP Plus is promoted and implemented correctly, and you give responsibility to
your employees, they will really perform, and so will your profits."
Before making PIP Plus available to the general business
world, Warren implemented the incentive/gainsharing program at his own company, Sunset
Manufacturing. He went through the same planning and testing methods, and set up the
metrics he felt were necessary to improve employee performance. Initially, he was
concerned with improving attendance and punctuality. Following the program's guidelines,
he explained PIP Plus to the employees, and demonstrated how improved performance and
communication would mutually benefit both the employees and the company.
"I worked mainly with my production staff," said
Warren. "I told them we had some obvious problems with tardiness and absenteeism that
were making us inefficient. The program started to show results right away."
"Attendance changed drastically," agreed Bob
Keller, Sunset's Shop Foreman and 25-year veteran. "People started showing up for
work on time. There weren't as many absences, and that made a big difference right away.
Both management and people on the shop floor accepted it."
According to Daryl Hunt, a machinist who has been with the
company for over ten years, "Because it's in black and white, you really want to make
sure you're here on time, putting in your hours, and not missing any days."
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Warren soon found that PIP Plus could be expanded to solve
additional employee incentive problems. In 1996, he examined areas in the plant that
needed improvement, and consulted with management. After receiving input from the
employees, he added the metrics and incentives that would produce profit-realizing
results.
"I had this idea to bring other key values of the
company into the program. I told employees what I felt was needed," Warren said,
"And they came back with their own suggestions of what to track."
True to the program's guidelines, Warren and his team
didn't immediately implement the new metrics, but ran them parallel with the existing
program. Management tracked the metrics, and assessed each new category to make sure it
would properly measure employee performance.
When the team finished the evaluation process, management
held a meeting and introduced the metrics and incentives to the employees in July 1997. It
quickly became apparent that some inefficient work methods, that had previously gone
unnoticed, began to change.
"Everybody in the shop knew of the ramifications of
losing time when setting up a work center at the start of a job, for instance," said
Keller, "But it never hit home till this program came around. It made people aware of
the problem. Also, with the new metrics, making mistakes created a penalty by reducing the
monthly bonus, and that started making people think."
"I had my reservations about the new metrics,"
said Hunt. "But overall I thought it would be a good way for everyone to more or less
keep in line and do their jobs more fully. Everyone started looking around to see if you
were doing your job because it would affect their bonus. It makes you look over your work
a little more carefully, and keeps you communicating with other people."
By including both management and employees in the
decision-making process before implementing the new metrics Warren, found that employee
reaction to the program was positive
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"It made me realize that I can't just do my job. I
have to communicate and help others communicate so we're all at the same level," Hunt
said. "Communication's always important for productivity so everyone understands
their jobs on the same level. I definitely like that. It's hard when no one really cares
about doing a good job the way you do, and this program encourages us to work together.
It's more of a team effort now, and although it makes it a little more pressured, it gives
us a chance to make a better paycheck."
"The employees are much more aware of how they do
their jobs, now," agreed Keller. "They're not making nearly as many mistakes as
they used to. And this makes my job easier, too, because it relieves some of the pressure
on me, and moves it to the people who are doing the work.
By clearly outlining how to measure job performance, PIP
Plus has allowed management and employees at Sunset to understand how they need to work
together to create an efficient, cost effect work environment.
"To me, it showed they're willing to help us out more
if we improve everything. Everyone can put in their input, instead of just letting things
stay the way they are," related Hunt. "Everyone, including management, is
working together to meet the goals of the PIP Plus program. It eliminates bad attitudes
people can get when they feel they're not getting a fair share of the profits"
"Due to better ideas, people are working more
efficiently," affirmed Keller. "There's open discussion with the people on the
floor continually as to how things could be improved."
According to Warren, rewarding his employees and making
them part of the team has resulted in significantly improved profits.
"The first month we were working under the PIP Plus
program," said Warren, "Overrun hours decreased, productivity increased and
employees got 28% of the scheduled bonus. The next month, they got 87% of it."
Warren reported that before PIP Plus, the shop could run up
to 800 hours over the scheduled production time in a monthly period.
"That was costing us a lot of money," said
Warren. "Right now, we're down to three hours overrun, and generally not more than
100. That's a significant savings with a shop of 30-35 people. We actually opened up an
additional 800 hours work time which increases our profits because not only are we getting
new jobs to fill the time, but we're not eating into the profit on the existing job."
Sunset has also improved its on time delivery from 74% last
year to 94% this year, which Warren says increases profits because they get more business
Although the PIP Plus Program uses a monetary bonus to
motivate and reward its employees, the results extend beyond mere financial gain. It
enables them to feel connected to their place of work, and allows them to enjoy their jobs
more.
"When Sunset outlined the PIP Plus program and showed
what percentage of money they were putting into it, that showed their commitment and made
us feel like we all were important and more valued," concluded Hunt. "PIP Plus
definitely makes a nice work setting. Everyone has the bottom line of bringing home a good
paycheck, and when you can do that in a good, comfortable setting, that's a big
factor."
Companies interested in purchasing PIP Plus can download it
from the company's web site at www.teamresearch.com. The program is activated when payment
registration has been completed. ShopWerks Software guarantees this product will change the way
your employees work for you and your customers.
PIP Plus is designed to run on Windows 95 and Windows NT
operating systems, with a 486/DX33 or better computer and a minimum of 16MB or RAM and at
least 12MB of hard disk space available.
For more information about PIP Plus, or other useful
applications, contact
ShopWerks Software
P.O. Box 1102
Tualatin, OR 97062
Voice:800-619-2055
Fax: 503-692-4136
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