October, 2008

How to Create Win-Win Incentives

By Tom Fife

I am often asked about incentives. Questions range from, “why should we pay someone extra to do the job they were hired to do?” to “what tasks deserve incentives?” and “how large should incentives be?” I do believe that a good incentive plan can give positive results and provide a benefit to the personnel as well as the company.

I have developed and implemented many different incentive programs for all kinds of operational areas, from drivers to
shops and everything in between. Individual incentives will help to ensure that your employees have the ability to be in charge of a measure of their pay. Healthy competition in the team should transfer to a heightened awareness of productive performance.

It will not take them long to understand how to become top producers, thereby gaining a maximum monetary return for their efforts. The beauty is that as they are increasing their pay, the company benefits from increased production, higher efficiency and lower operational expenses. Let’s see how it works with a couple of “Win/Win” incentives.

FIRST: Pay $5 to any person who catches a mistake in the receiving process.

– It could be a mistaken quantity of goods from a vender or perhaps damaged goods before they become part of your inventory. We all know how time-consuming and difficult it is to get returned merchandise picked up for credit, to say nothing about the multitude of ways it can be destroyed in the meantime.

– Yes, that would include marking the top and bottom sheet of sheet goods damaged by the bands cutting through the material. Why pay for someone else’s damage? After all, we only want to have resalable goods in inventory.

– The bottom rows of long lengths are another area where we often see forklift damage—the bottoms often look more like a great white shark bite than useable material. Is it worth $5 to have your people check and write off those damaged materials keeping them out of our inventory? You bet! How many bunks of sheet goods are you buying? How many of those are you paying top dollar for that arrive unsaleable? Considering the low margins on many products, how many sheets do you have to sell just to make up for the discarded damage?

– A simple written statement of the damage goods will suffice to hold you harmless for the bad materials. Another method is a photo of the condition (digital cameras make this fast and easy).

SECOND: Pay $5 to any truck driver who does an unscheduled pick-up of return materials.

– How would you like to stop having the last few days of the month spent with more pick-ups than deliveries? How would you like to stop dealing with full truck returns that take hours to unload and re-inventory, let alone stopping those two truck material pick-ups?

– Be sure to pay them the incentive on anything returned without being told. Then track who does the most pick-ups, and who is doing the most unscheduled ones. I’ve never asked a driver who did the most pick-ups without them saying they did almost all of them already. Tracking the results gives me some proof to show.

– Post the return incentives where they can be readily seen by your team, then don’t be surprised to hear comments like this: “Hey, Dave made $125 this month by asking what can be brought back. I guess I’m going to start asking too!” Remember: the $125 you paid Dave would have cost you much more in wasted time and fuel come month-end.

Get your teammates involved in what they think is a proper incentive for the tasks. If they are part of the design they
will make it work. Remember: incentive systems need to be constantly tweaked to assign and re-assign fair value to the tasks preformed.

If you implement some “Win/Win incentives,” please share with me how they work for you.

I can help. Just holler.

TOM FIFE is a 20-year veteran of the construction supply business and president of Unionville, Ind.-based Challenges Inc., a speaking, training and consulting firm. Seminar topics include employee motivation and retention, customer service, management skills and yard foreman skills. For additional information, call at 812.330.1640, e-mail tom@tomfife.com, or visit www.tomfife.com