Situation: A company pays employees based on skill level. Raises are given as an employee learns additional skills. In some cases, when they give an employee a raise, productivity drops. The company has tried other approaches including bonus systems and profit sharing but did not find these effective. How do you effectively motivate hourly employees?

Advice from the CEOs:

• Before trying a new motivation scheme, find out what matters to your employees. It may not be either bonuses or profit sharing.
  • Develop and send out a questionnaire listing different factors – revenue sharing, bonuses, creativity, doing quality work – ask what matters to you? Get their feedback.
  • People work for respect – many studies have shown that as long as the payment offered is fair, salary is secondary.
• Hire an advocate for your employees – a part-time HR person. An important role for this individual will be to determine what motivates employees, what they want from their jobs, and how improvements in both processes and the working environment can boost productivity.
• What is the real issue: employee motivation, employee productivity or cost reduction?
  • If material waste is more expensive that labor – create metrics and rewards to reduce waste.
    • At companies that use the Toyota Production System employees receive points for process improvements. At the end of the year they receive a cash payout based on the points earned during the year.
    • Employees are rewarded publicly. The incentives are cash, recognition and respect. These companies find that recognition and respect trumps cash.
  • Depending upon your cost structure, it may be more productive to focus on scrap reduction. Bring in someone with experience who can find the sources of scrap. The effort will pay for itself rapidly.
• During the hiring process, require educational attainment as evidence of the individual’s commitment.
  • Look for skills experience – machinist, etc. Match skills and experience to your needs. This will lead to faster learning curves and will help to reduce waste.

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