Your distribution center has a warehouse management system (WMS) for inventory management, you are using radio frequency (RF) or voice functionality for accuracy during direct labor functions, and you have a discrete labor management system (LMS) to accurately track productivity. As a manager, the next logical step to leverage your investment in the WMS and LMS as well as empowering your employees may be to implement an incentive program. But, before you do so, make sure you are including the correct metrics to qualify for the incentive program. Here are some metrics that any incentive program should include as well as some metrics that may want to be included.
Metrics that a pay for performance/productivity incentive program MUST include:
- Discrete labor management minimums. Associates should qualify for incentive based pay on performance against the standard. Outdated techniques such as cases per hour, line items per hour, or pieces per hour are discouraged because of the variability of work. A proper discrete labor standard will award associates who are performing above the standard.
- Preferred methods compliance. Is the associate performing the job correctly and following the methods as prescribed by the preferred work methods (PWMs)? Each job function has specific methods and best practices that an associate must comply with in order to help other associates further down the supply chain. One associate should not be rewarded if it is going to obstruct another associate in the supply chain.
- Mis-picked or damaged items/cases. The product that an associate picks needs to be correct and damage free. With customer satisfaction being paramount in business and order accuracy being a key contributor to overall customer satisfaction, accuracy needs to be part of any incentive program.
- Minimum number of indirect hours. Associates qualifying for an incentive should be spending a majority of their work shift doing measured work.
- Safety violations. Safety is imperative to a smooth operation and when an associate does not follow the safety rules, others are at risk for injury.
- Shift, break, and lunch compliance. Associates have a defined shift, break, and lunch schedule. Although employees doing work outside of these hours will pad their numbers, this practice should be discouraged because starting early or working through breaks or lunches will cause additional wear on the body and eventually cause burn out. As a manager, the best associate is one that is productive and consistent each day.
- Minimum period of time with company. When an associate starts, there is a training period needed to learn the best methods and policies of an organization. During this time, an incentive is discouraged to allow for the best practices and methods to become ingrained.
Metrics that a pay for performance/productivity program MAY want to include:
- Training adherence. There is work outside of daily operations that is important to a healthy organization including: company compliance, re-training, and personal growth. Associates should be up to date with all training obligations.
- Out of work due to an injury. An associate that has recently missed time due to an injury needs time to re-acclimate to the work environment when returning to work. There needs to be a minimum amount of time after an injury before an associate can qualify for incentive to allow for re-training. It is important that you have a program in place to report injuries properly and in a timely fashion. In some cases, employees may try to hide injuries to avoid lost wages.
Incorporating all or some of these metrics will help your organization develop a high quality, sustainable incentive program that will benefit both the company and the employee. If you are looking to setup an incentive program and need help doing so, West Monroe Partners can help assess all requirements for your organization by auditing the current processes and creating a performance based incentive program.