Incentive Motivation – A Productivity Boosting Technique

INTRODUCTION

Gone are the days when in many API / pharmaceutical manufacturing industries, the management used the technique of fear motivation to extract work from employees.

The fear motivation technique is based on punishment and it works only initially.? When people realize that their employers are exploiting them, either they ignore the pressure of fear or run away from it.? Sometimes they collectively resist the pressure of fear.

Instead, incentive motivation is based on reward and it works in present times.? This is an inducement given to an employee to improve his effectiveness.? Human beings are basically a lazy lot.? They try to avoid working.? They never work to their full capacity.? They require motivation to better performance.

What is a motivation?

Motivation is the process that creates interest and urges among people and drives them to act in a specific manner to attain a specific task.

Most times, an inducement need not always be of a financial nature. Senior staff and those drawing heavy pay packages generally respond better to non-financial and semi-financial inducements.

A group incentive scheme is a better option for API / pharmaceutical manufacturing companies, as it is very difficult to measure individual performance in most of these industries. For instance, without the procurement of raw materials in time by the raw material procurement department, one cannot meet production targets.

Without proper maintenance of equipment by the maintenance department or if maintenance personnel do not respond to breakdowns in time, productivity suffers, which in turn, leads to failure to meet production targets.

Without timely analysis of materials/products by the quality control department, the materials do not move on for further processing or the finished goods cannot be dispatched on time. Thus, delivery schedules fail.?

Hence, coordination among departments is essential in the API / pharmaceutical manufacturing industries.? Therefore, group incentive scheme works in most of these industries.

Group incentive schemes foster a sense of common interest and mutual cooperation among employees.? Senior operating personnel tend to help new operators and unskilled operators in their difficulties. It also minimizes wastage of time and offers good training to new entrants.? It also reduces supervision by managers, since senior operating personnel or more experienced people do a part of the supervisory function.???

While planning a good incentive scheme to fulfill the management’s targets, consider the following A to Z guidelines.

Adequate guaranteed minimum amount

The scheme must ensure an adequate guaranteed minimum amount to all incentive employees, regardless of their output. However, it must not become a burden to the employer. The management should never regard incentive earnings of the employees as a substitute for poor wages.

Based on the consistency of standards

The management should not change standards once fixed unless there is a permanent change in methods, equipment, or materials. The scheme should also include provisions to modify performance standards.

Consistency of incentive plan

The scheme should be consistent over a period of time. Frequent changes in the scheme make its functioning difficult. Faith in the scheme is lost if there are frequent revisions.???????? ?

Depending on direct output

Incentive payments should be increased in direct proportion to the increase in output, as it is difficult to produce extra material in the same equipment and facility without proper planning and without coordination among employees as well as departments.? This higher level of production results in a significant reduction in overheads.

Employees’ coverage

The incentive system should cover the maximum number of employees who are directly or indirectly involved in the production targets. The scheme, which is applied to a few workmen, has a demoralizing effect on the morale of those not covered by the scheme.

Female employees

There should not be any discrimination between male and female employees. Both should be paid equally.

Gradual (regular) checking

Gradual checking should be exercised on the employee against achieving a higher bonus by poor workmanship.

Half-done jobs or partially completed jobs

The problem of payment for incomplete work arises only in the case of long-cycle jobs. Situations do arise when the jobs are of very long cycle duration and cannot be finished within the bonus period. Hence, the scheme should clearly spell out as to how the assessment of work shall be done and how disputes arising out of such assessment would be resolved.

Inbuilt checking system

While designing an incentive scheme, an inbuilt checking system has to be introduced to monitor employees.? This is to ensure that more bonus is not paid to employees who did poor quality work or those who are absent during the incentive period.

Justice

The incentive scheme should do justice to all employees and departments who are involved in the production targets/assigned tasks/jobs.

Key personnel

The incentive scheme should take care of key personnel at higher levels, who manage the overall show.

Labor body’s acceptance or Workers’ representative acceptance

The incentive scheme should finally be accepted by the labor body, wherever applicable. The basic incentive scheme and its provisions must be accepted by the body of workers' representatives to prevent any misunderstanding and ill-feeling later on.

Maximum ceiling on the earnings

The incentive system should have built-in control against earnings beyond a certain limit. Firstly, the system should discourage employees from working beyond a certain limit, thereby adversely affecting their health. Secondly, the system should ensure that in case of loose standards, the company does not lose financially.

No significant clerical work?

The incentive system should fit into the existing system of production and cost control and should not involve any significant addition to the clerical work.

Organize meetings of teams

Before announcing the incentive scheme, organize a meeting of all heads of departments/teams and explain the incentive scheme in detail.

Payment for idle time

Adequate safeguards must be provided to compensate employees for time lost due to reasons beyond their control. A good incentive scheme should ensure that employees do not suffer financial losses for reasons attributable to managerial weakness, e.g., lack of material due to bad buying, breakdowns of machines due to poor maintenance practices, non-availability of work, etc. Thus, the employees rendered idle because of factors attributable to the management should be given a lieu bonus.

Quality Products/materials

The payment should be made only for quality products/materials accepted by the in-house quality control department.

Reasonable payment period

The payment period should be as reasonable as possible and as short as possible.? It means instead of promising yearly, half-yearly, and quarterly, a monthly payment scheme or immediately after completion of the project/target is the ideal proposition.

Safeguarding clauses for employers

The incentive scheme should be fair, not only to employees but also to the employer. The following safeguarding clauses can be incorporated into the incentive scheme to protect the employer’s interest.

?? Management's right to change a performance standard when there are changes in methods, materials, and machines.

?? Management's right to initiate disciplinary action against employees who continually produce sub-standard or poor-quality products.?

?? Management's right to initiate disciplinary action against employees who, again and again, do not achieve a minimum standard of production, even in the presence of fair and accurate standards.

?? Management's right to initiate disciplinary action against employees who, again and again, are found deviating from SOPs / Process sheets.

?? Management's right to withdraw or discontinue temporarily a scheme during a bad period.

Temporary use of incentive scheme

The temporary use of the incentive scheme in good times and its discontinuation in bad times makes its functioning difficult and reduces the morale of employees.? Therefore, the scheme should be in continuous use.

Unviable

While deciding/designing an incentive scheme, it should be meticulously planned.? An unviable alternative should be scrapped.

Very simple and easily understandable

The incentive scheme should be very simple and must be easily understood by employees and their representatives. The incentive scheme, which involves the use of complex formulae or references and cross-references, is sure to fail. The incentive scheme should be such that any employee should be able to calculate his own earnings easily and quickly.

Work measurement-based performance standards

Set accurate and attainable performance standards through systematic work measurement studies. The standards of measurement should be based on the assessment by experts so that there is no dispute or malpractice and yet the standards are attainable; so that an employee working at a normal pace can attain them. The incentive scheme should be designed in such a way that it should provide an opportunity for all average workers to earn reasonable earnings.

Xtra cost

The incentive scheme should not result in extra costs.? It should result in a reduction in variable costs.

Yield

If an employee constantly produces sub-standard material with low yield and quality, he should be made liable for disciplinary action or he should be eligible for less bonus / no bonus.

Zestful

The employees with high levels of zest have better mental and physical health and greater life satisfaction

Glossary:

1.???? Non-financial incentives: Non-financial incentives are those incentives that do not offer any monetary benefit.? Good work is appreciated.? The names and photographs of outstanding employees are published in the company’s house journal.?Merit certificates are issued to sincere employees.

2.???? Financial incentives: Financial incentives are those where earnings are related to effort.? For example, a salesman is paid a commission on his sales, and maintenance personnel are paid incentive bonuses for limiting the downtime of the machines.

3.???? Semi-financial incentives: Semi-financial incentives are those that provide some monetary benefit – typical examples are: promotions, increments, sponsored training, company car, long service awards, discount purchase schemes, etc.,