Throughout the year I make a point to take notes on the common and not so common questions I receive from clients, attendees at one of presentations, conferences, networking events, etc. One of the main themes I heard over and over was how companies can effectively balance and improve productivity, quality and safety. I’ll add in an additional point and that is the customer experience as the companies’ productivity, quality and safety record can and does affect their customers. There are many different angles and facets to this topic but in this article I want to begin to address one aspect of it—how incentives and/or culture affect this vital balancing act.
I frequently start working with companies on their ergonomics and efficiency issues only to have the scope expand into assessing and improving the work processes as a whole because those issues are intimately connected. This has led me to recognize and explain to those company leaders I work with that ergonomics and efficiency directly effects their productivity, quality and safety which in turn is impacted by their work design, workflow, and work practices which stems from management processes, procedures, policies and company culture. It is more rare than common that the problem and solution is a single person, single workstation issue. It is very often an organizational work system issue. With this in mind let’s consider the role of incentives and culture on balancing productivity, quality, safety and customer experience.
I had the privilege to speak last month at the Tree Care Industry Association conference. My topic was Reducing Loss to Improve the Bottom Line. This was based on the experience of one company I’ve been working with to transform how they look at their incidences and the typical “costs of doing business” from one that accepts them as “normal” to one that is focused on prevention and significantly reducing loss. The loss came from incidences and their associated costs which were thousands of dollars annually. The incidences ranged from employee injuries to client property damage to company equipment/vehicle damage to lost productivity from inaccurate work orders. These costs essentially negated any meaningful profit for the division. This was despite incentives for production workers on productivity, safety and customer service. I had a number of people contact me about incentives either right after my talk or by phone a few days after the conference. The goal of the people asking was how best to structure incentives to produce the wanted result, i.e. increase productivity and reduced injuries.
I’m personally not a huge fan of incentives as they have a way of creating a “false sense of security” for companies on whatever the incentive is used for, i.e. incentives for safety have a way of keeping injury incidence report number down; likewise, incentives for production can cause workers to produce more and meet the numbers goal for a length of time but…for how long? At what cost to the worker? At what cost to the company? Are the numbers an accurate measurement of business performance or are they a measurement of luck? I’m always leery of numbers when there are incentives tied to them. I’d much rather have the work process designed to optimize man’s abilities rather than having to coerce them. Given the right type of incentive, i.e. where the reward outweighs the risk, people will do whatever is asked for as long as they can.
But the question still remains; can incentives be used to balance productivity, quality, safety and customer experience? In my opinion, the answer is “Possibly”—if the incentive program uses a systems approach and equally weights and rewards all four areas as a whole. For example, I’m working with a company in which we are trying to do just that. The company has used incentives for years and years and doesn’t want to end them abruptly so we are attempting to create an incentive system where the each area is treated equally. Without going into detail the incentive system is on a monthly basis. Each area (productivity, quality, safety and customer experience) has a goal for each production employee to meet. The performance goals of all four areas have to be met for the employee to be eligible for the incentive. If one area is not meet then that employee is not eligible for the incentive. This new incentive system is just a few months old so it is too early tell if it is accomplishing the goal of the incentive system. The initial feedback from the employees was not positive as they liked the old incentive program that rewarded productivity, safety and customer experience separately. The feedback has gotten more positive as time has gone on but they still would like to return to their old incentive program.
What’s Culture Got To Do With It?
For some companies when I suggest getting rid of incentives they can’t fathom doing so. Often it’s because they don’t believe their employees will perform at the same level without the incentive. This is just the opposite reason given by companies that don’t use incentives. When I ask them why they don’t use incentives the most common reply is that they don’t need to—the workers perform the job they are expected to do. For example, there was a worker at one company that I was working for who said everyone puts in long days in order to get the work done right and on time. I asked if they were given any incentive pay and she immediately said “No, it’s just how we do things here. Everyone knows what needs to be done and we work until it gets done right.” This illustrates the effect of company culture. Culture can either enable or disable a company in many ways, not just when it comes down to using or not using incentives.
Performance and productivity of a company is highly correlated to the organizational culture. Company culture is an asset that money cannot buy. Every company, regardless of its size, has two dimensions of performance improvement – Work process and company culture. Work process is relatively easily measured and is the basis for the majority of process improvement projects but all too often the cultural aspect of performance improvement—culture—is overlooked. Ignoring culture and its effects on the organization will limits the organization from obtaining the total benefit from process improvements. A culture in which everyone feels invested and involved in the company are key measures of company culture. Feelings of investment and ownership create a greater company commitment, less need for an overt control system (in this case, a need for an incentive program) and in turn this improves the business effectiveness—in productivity, quality, safety and customer experience.
There are many factors that prevent your company from achieving and balancing its productivity, quality, safety and customer experience goals. There are definitely work process issues that impact this. Identifying those issues and solving/eliminating them is a major key in optimizing worker performance. After all of those issues have been resolved and your company is still not achieving those goals then the next step automatically shouldn’t be adding/improving the incentive program but instead evaluate your company’s culture. How do you know if your business cultural improvement or not? Obviously, no one else can answer this better than you/your business itself. As business grows the existing culture may become obsolete and may hinder the progress rather than supporting it. In a more static business, cultural issues may be responsible for other difficulties such as decreased production, reduced customer satisfaction with increase in complaints, inability to implement new strategies or on time, increased employee turnover, etc. If these things are present then one needs to take immediate measures to improve cultural issues. We need to link measurement and management to not just monitor the production process but also to monitor company culture to motivate and to improve it.