Incentive scheme

[CJM]

One more thing the bonus scheme can't be based on individuals it has to be spread fairly. Some guy can be busting his knacker on a big tree dismantle and break even some other team could be felling little birches and flying through the work making loads of money if has to go into a pot and split equally. You could even give team leaders/charge hands a few % more for running and completing the job

[agg221]

Bear in mind this experience isn't in arb, but I've worked for two companies which had incentive schemes, one very small (5 people) the other very large (900 people). A few comments from my experience.

 

The two schemes were very different in their reason for existence. The first one was a non-performance related bonus. Jobs had contingency on. At the end of the year, the un-used contingency went in the pot and was shared out between everyone, based on days worked, regardless of salary or anything else.

 

The second one is a very complex performance-based structure which defines objectives which every function in the company can contribute to, with a threshold value above which performance is high enough that the function is making a contribution to the total. This includes things like profit targets for the income generating functions, safety (measured against accidents), appropriate investment in new equipment (purchasing function) etc. If enough functions exceed threshold, and there is enough profit, a pay-out is made.

 

Having worked with both, I liked the former, I don't like the latter, even though it pays out a lot more. The former had no real bearing on the job, other than making people happy and being a good reason not to do something stupid and raise costs. The latter, which in theory looks like a better way to incentivise, by allowing everyone to make a defined contribution, actually drives a whole load of short-term and conflicting behaviours - burn the orderbook now, don't worry about long-term investment as you will get a pay-out today and who knows what tomorrow will bring. There is also an unofficial, discretionary bonus scheme for senior staff based on local profit, which makes things even worse (if I have won a job, I am better off getting my team to do it badly than to let another team do it better as the former will get me a bonus, the latter will get me a slapping and the other manager a bonus as his figures will look better). Large, complex bonus schemes also become used as an excuse not to make reasonable pay rises, which then leaves people dependent on the bonus, which puts them at financial risk.

 

It's also worth thinking about the scale, the impact and the timing. An extra hundred quid is very welcome in the November pay-packet as it pays for Christmas, whereas a well-meaning extra two-hundred to the wrong person in February/March could see them just pushed over a tax/benefit threshold and see them filling in a tax form, or failing to do so and getting fined most of the bonus back (or having to pay an accountant more to straighten it out for them than the bonus was worth in the first place). FWIW, I once had a bonus paid out at the wrong time, which I resolved by deferring it to the next tax year, but you look really ungrateful when you do it.

 

Overall, something token and simple (like the first one was) worked much better - the latter is better replaced with a modest pay rise in my opinion.

 

Alec

[difflock]

Your first scheme sounds a bit like a very simple example locally.

One of the large private sector grounds maint contractors, who employed a lot of casual help for the busy summer season, despaired of the horrendous repair bills for simple lawnmowers, and the associated lost and down time.

Simple solution, each of the next seasons casual staff was given a brand new lawnmower, and told; "at the end of the season this lawnmower is yours"

They did not need to be told to look after it.

There was significently less down time, they reported any minor things early to get them fixed.

etc etc

Writing off the cost of the mower, over one season was apparently very cost effective

[GardenKit]

Be careful of incentive schemes.

 

Example.

 

When I was manager of an Ag engineering business I had trouble getting the guys to work fast enough. Something like changing a clutch on a certain tractor was achievable in around 8hrs, but was consistently taking 12, which was eating into the best part of another day, so in reality a 1day job was taking 2 days, but we could only charge for 8 hours.

 

So I introduced an incentive scheme. Do it in 8 hours and get paid 10 hours.

 

Suddenly the job was achievable. Brilliant.

 

But the guys proved they were able to do it in 8, so why hadn't they? I was now paying 10 hours for what took 8, but when I tried to take the incentive away there was uproar and a 'go-slow'. The incentive had become the norm.

 

My point is that employees should need no incentive to provide their best service. If they can do it, but don't, then they should be working (or not) somewhere else.

[kevinjohnsonmbe]

Your first scheme sounds a bit like a very simple example locally.

One of the large private sector grounds maint contractors, who employed a lot of casual help for the busy summer season, despaired of the horrendous repair bills for simple lawnmowers, and the associated lost and down time.

Simple solution, each of the next seasons casual staff was given a brand new lawnmower, and told; "at the end of the season this lawnmower is yours"

They did not need to be told to look after it.

There was significently less down time, they reported any minor things early to get them fixed.

etc etc

Writing off the cost of the mower, over one season was apparently very cost effective

 

 

Clever!

[agg221]

My point is that employees should need no incentive to provide their best service. If they can do it, but don't, then they should be working (or not) somewhere else.

 

This is very true, but from experience it is no better if they are already providing their best service and you incentivise exceeding it. This is how my second example ends up.

 

To extrapolate from your example - imagine they were achieving a clutch change in a day, but you give them an incentive to achieve two clutch changes in a day. They get themselves organised and really efficient, and by parallel working etc they can cut the time to 12hrs for two - looks good, you are in profit, they are paid more. But, actually they are working 12hr days, you are paying them for 10. Anyone who needs to get away (maybe to pick up the kids etc) is seen as not being prepared to pull their weight, so you let them go. That encourages the others to up their game - maybe 14hrs a day will be better. After a while, you have a really shattered workforce who are run-down and drained, on the treadmill. Any sense of work-life balance has gone. They are getting their 'bonus' but they don't really care anymore as they are too tired to use it. Then they don't need a decent pay rise as the 'bonus' covers it.

 

I don't know how the above ends, as we haven't quite got there yet, but I don't see how it ends well. I do know that most of my team will respond if I drop them an email now, with a fair number still responding up to midnight and a couple at one or two in the morning, and they will all be in by 8 tomorrow, and this goes on 5 or 6 days a week, with probably some work on the 7th day too. Not suggesting that all bonus schemes end up this way, but it's certainly food for thought.

 

Alec

[Marc]

 

My point is that employees should need no incentive to provide their best service. If they can do it, but don't, then they should be working (or not) somewhere else.

 

My sentiments exactly, pay your staff a good wage. Buy them coffee, take em out for a meal every now and then, show them you appreciate what they do, put them on paid courses which will benefit both you and them give them good kit that they want.

This for me is the best incentive.