Leadership Pulse
Variable Compensation for Groups
At one time in my career I introduced a variable compensation plan for two manufacturing facilities (Gainsharing). I really liked the idea of rewarding people based upon increasing value. I found over time that this was difficult to sell in manufacturing facilities where sales were stagnant or increasing slowly because big gains in productivity would result in job elimination. We spent alot of time educating people, communicating results and guaranteeing that we wouldn't reduce headcount as a result of productivity gains (except through attrition). But still met heavy resistance. What is the current thinking about group variable compensation plans?
Replies to This Discussion
-
Permalink Reply by Don Kelly on -
Several years ago, I replaced a general "profit sharing" program in three of our Mexican operations with a location-specific gainsharing plan tied to actual cost improvements in the plants. I specifically stayed away from measures like absenteeism reduction, quality, customer satisfaction and (heresy!!!) safety. The measures were tied to the operations; scrap reduction, downtime (or uptime), headcount utilization. The program worked well for the first year. Payouts were quarterly and reports were visible monthly. Nice line of sight engagement.
I found that the program worked well as long as I kept pushing it. I had difficulty passing ownership of the program over to local Plant management even though it was their workforce, their measures and even their performance.
To this day, I still believe the plans work. Given the emphasis on 6 Sigma and Continuous Improvement or Operational Excellence, these plans can be right in the wheelhouse in providing specific, directed reinforcement for moving the operational needle. They take a lot of work, not just initially but even to sustain and grow them. I'm still a believer...but I am a bit bruised...
-
Permalink Reply by Steve Meckes on -
Thanks for the insight Don. I agree that plant leadership must be engaged and supportive in order for Gainsharing to work. The people on the shop floor are always looking and sensing the support or lack of support from the leadership team. I agree that logically Gainsharing based upon specific performance metrics (we used team cost as a ratio to value added and paid on improvement) closely supports 6 Sigma, Continuous Improvement, etc. It's like everything you must get the entire team pulling in the same direction.
© 2010 Created by Theresa M. Welbourne, Ph.D.
