How Industry 4.0 Improves Manufacturing Employee Productivity: Part 2 of 3

In our last blog we discussed the capabilities of Industry 4.0 solutions to provide real-time employee Performance Dashboards. These solutions use data directly from each equipment and is complemented using Process Control Plans executed with tablets connected via WiFi. The benefits are reliable, real-time results your employees can monitor to instantly address and correct performance issues.

In this post, we will discuss what are the major considerations to create an Employee Incentive Program. Please note these suggestions are limited to creating a Production Incentive Program. They are not meant as design considerations for your company’s overall official Employee Evaluation. These programs should be designed and managed by Human Resources.

Determine Your Goals 

Like any project, you should agree, prior to the start, what you want to achieve with the Production Incentive Program. The goals of the program should be documented and agree by all involved in the authorization, design, construction, implementation, and administration of the program. When creating an effective Employee Incentive Program, there are at least two objectives we want to achieve; 1) Improve employee efficiency and 2) reduce employee turnover. These two metrics can be easily measured prior, during, and after your program implementation. Other requirements that should be considered are:

1. Cost: Your incentive program will provide some type of recognition and payment to employees based on their contribution to achieving your production goals. These payments will represent a cost to your organization and should be considered in your project Cost Benefit Analysis (CBA). You should strive for your Production Incentive Program to be cost neutral, meaning the program should pay for itself. Add a project task to analyze production costs due to quality issues, re-work, customer-imposed penalties, equipment OEE, etc. One of your goals should include reduction of production costs associated with these factors.
   
   
2. Employee Satisfaction: You can have a Production Incentive Program that is well designed, implemented, and managed, yet you may still experience unacceptable levels of employee turnover. There are other factors that can trigger employee departure that are not addressed by the Incentive Program such as Poor Management Relationship. There are two ways you can identify reason(s) for employee churn.
   
   
3. Conduct Employee Survey: if your organization is not already doing this, implementing an employee survey program is a project on to itself with many factors to consider.

4. Exit Interviews: Another source is conducting Exit Interviews, most employees will “speak their mind” during an exit interview providing that it is well conducted and administered by someone who instills trust. Part of the interview process should include documenting the reasons that motivated the employee departure with a plan to eliminate them

Once your goals or requirements are established and agreed upon, the design of the Production Incentive Program must include functionalities to achieve them.

The employee assessment tool or Personal Dashboard is critical to the success of your program. Careful considerations should be given on how you will calculate employee productivity. Some organizations make the mistake of using a linear approach in which they use the number of units produced during a specific time without factoring the difficulty level of producing different product types in the same equipment or process. By using this approach, employees will “cherry pick” the easiest products available to boost their performance. This can have the opposite effect of what your Production Incentive Program is designed to achieve and can lead to unwanted production results like missed Delivery SLA. Your Industry 4.0 solution must factor in product difficulty when calculating productivity, quality, takt time and other metrics used to assess employee performance. Remember it is critical for your employees to trust the assessment tool.

Recommended Awards

Now that you have a solid tool to measure employee efficiency, lets focus on the Reward Program. Remember one human trait is recognition. As employees we like to be recognized for a job well done. Sometimes a pat in the back for a “job well done” by our immediate supervisor is enough to boost productivity and morale. By the same token, avoid off-the-cuff reprimands when an employee makes a mistake. This will lead to low morale and finger pointing; traits you want to avoid in your organizational culture. Dealing with low performing employees will be discussed in our next blog, Training for Results.

When developing your Reward Program, do not go directly to Incentive Pay. Make sure to include other factors that will improve employee morale, satisfaction, and engagement. Remember we humans have a need for recognition which should not be overlooked. However, you want recognition rewards to be honest and sincere. Do not simply add them to your Reward Program because they are inexpensive. Your employees will see right through this and will not value them. Here is a list of recognitions to consider for your Reward Program:

1. Certificate of Achievement: These are certificates awarded to employees when they surpassed a certain threshold. The threshold must support one of your production KPI or Metrics, such as surpassing productivity rate or having an excellent attendance record. Take caution not to use this reward too often, otherwise it will lose its value and employees will not take it seriously. The certificate itself should be printed in quality paper and presented during a small ceremony with mandatory attendance from all employees including organization leadership team.
   
   
2. Tokens of Appreciation: These can include movie tickets, gift cards or other items of useful or monetary value for the employee to recognize their achievement. Remember these instruments have a cost and should be budgeted into your program with a well-established process that clearly outlines the merits for the reward. You do not want your leaders to hand these out freely, otherwise it will eat into your CBA.
   
   
3. Team Lunch: An offer to buy lunch for your operators on the condition of surpassing a new threshold is also a good form of recognition. Like all types of recognitions, use this one sparingly, remember it will eat into your CBA and using it too often can dilute its effectiveness. Have clearly defined criteria as to what qualifies buying group lunch.
   
   
4. Dinner with The Boss: Another form of recognition is a dinner invitation to employees and their significant other by one of the senior leadership team. This type of recognition provides a setting outside of the company for both the employee and the leader to get to know each other. If you choose this type of recognition, limit the participants to one or two leaders and their significant others. Limit discussions about work, avoid contentious topics like politics and religion and choose topics the employee feels comfortable discussing. Also, avoid sidebar conversation between leaders and/or their spouse as it may lead to the employee feeling left out. Ask the leaders and their spouses to limit querying the employee and their spouses about their personal lives. You do not want to turn the dinner into an interrogation and make them feel uncomfortable. It should be an enjoyable experience for everyone.
   
   

Incentive Payouts: This is the main part of your Production Incentive Program and the one of most interest to your employees. Your incentive payment program should be tied to your overall company goals, specifically the ones assigned to the production department. Your production goals should be agreed upon, authorized, and clearly communicated to each employee. In our next blog, Training for Results, we will discuss how to use your training program to propagate your goals to employee in your organization.

Following are some considerations for merits and payouts:

1. Merits: Careful consideration should be given to establishing the process to determine the merits for the incentive pay. Always focus on your customer when designing merits. They are primarily interested in receiving a quality product at a competitive price and delivered in the contractually agreed timeframe. Any deviation from this can result in customer penalties, excessive production cost or worse: customer attrition. By focusing on these you can also achieve the cost savings necessary to fund the payouts of the program and achieve higher customer loyalty and satisfaction.
   
   Avoid the mistake of using Productivity as the only merit for receiving the bonus. Organizations that only focus on productivity do it at the expense of product quality. Your merits should be balanced by your customer quality requirements, expectations, and final product specifications.
   
   

2. Selecting Winners: Avoid the mistake of rewarding one or a select number of employees with the highest results. Organizations that do this promote an environment of unhealthy competition with a cutthroat attitude. We have seen instances where an operator would purposely sabotage their equipment before the end of their shift to hinder the productivity of the next shift operator. Your Production Incentive Program should promote teamwork across different units, processes, and shifts.
   To promote teamwork, have a documented process of how payouts will be distributed. It should clearly explain that payouts will be based on; 1) final production results across all units and shifts. 2) customer satisfaction with payment in full 3) Individual payouts will be a weighted average using the results of all employees and items 1 and 2. The goal of these three criteria is to promote teamwork and collaboration.
   
   Take for example the employee that sabotages the equipment.  Using these criteria, the employee understands that if the next shift does poorly, it will ultimately affect his/her payout. So is to his/her advantage to turn over the equipment in optimal condition.
   
   

3. Real-Time Production Status: Lastly, employees need to be equipped with the tools needed to succeed. This is one of the most critical items of any Production Incentive Program; your employees’ ability to monitor production results in real-time and take corrective action to achieve the company’s goals. Industry 4.0 solutions like MetricSoft include functionalities that can display Live Dashboards on large screen TVs on your production floor. Your supervisor can also access their process dashboard using tablets and share them with their employees.
   
   

4. Incentive Payouts: Give your Production Incentive Program a meaningful name such as “Team Incentive Pay’ or TIP. Use Incentive Points that can be accumulated for payment distribution on scheduled timeframe like quarterly. You can award points at the end of each production order using the criteria outlined in bullet number 2. All your production employees should have access to your Industry 4.0 so they can see how many points they have accumulated.
   
   

5. Penalties: The primary goal of your Production Incentive Program is to promote and reward positive employee engagement. Rewarding positive behavior is just one of two ways to incentivize employees. You can also apply disciplinary actions to discourage unwanted behavior. Take for example an employee with good production results but a poor attendance record, if you use the point system with quarterly payments, you can deduct points for tardiness. Be mindful of today’s market conditions and the difficulties of attracting new hires when incorporating a disciplinary policy into your incentive program. Make sure it is well documented and share it with all employees. It should not come as a surprise that points were deducted from their TIP account