Ask the Expert: Human Resources
A: There is no absolutely right way to structure a pay system. At one extreme, we can pay people an hourly rate just to be present for work regardless of what they do; at the other extreme, we can pay people a piece rate so that they are only paid based on only what they produce. Depending on your situation, the best would be somewhere in between. Over the years, I have devised some rules of thumb with regard to implementing pay systems:
- Unless you can closely monitor employees to see that they are working on the right things at the right pace without a lot of wasted effort, you are better off providing them with some incentive to produce to the estimated rate. This approach makes them want to improve the process and achieve more. However, there must be an understanding that if there is a substantial improvement in the manner in which the process is conducted, management reserves the right to renegotiate the rate and incentive plan.
- In a combination basic pay and incentive pay system, the incentive pay should be substantial to make them want to earn it. If the basic pay is $12 and the incentive is $2, they may feel that the extra effort of producing is not worth it since the company pays them $12 for being there anyway.
- The incentive pay should be such that the company gets the entire benefit. Example: If the company wants an extra 40 percent production and is paying $8 basic pay plus $2 per 10 percent more production, employees might decide that an extra 20 percent is all that they need and leave the company short on its goals.
It’s hard to predict the behavior that incentive systems will bring about on the part of employees. Only after implementation and monitoring over a period of time does one come to understand how the employees are responding. It is essential to keep the system fluid for a while so you can iron out rough spots and ensure you are getting what you’re looking for. In the end, incentive pay should help you obtain a fair amount of effort from employees and pay them a fair wage in return. In addition, it is a way for management to share the benefits of innovations that employees have come out with. Keeping this in mind, some companies have altogether gotten rid of incentive pay and pay a market- based basic pay for skills plus a bonus to everyone that is a percentage of the basic pay. This allows all parties to benefit.
Merwan Mehta, Ph.D.
A: Herzberg’s two-factory theory can certainly be used in today’s environment. This theory suggests that there are two types of factors with regard to employees: maintenance and motivational. Maintenance factors are expected by employees and include such things as a safe working environment, pay, and job security. These factors generally do not motivate employees to work harder.
Motivational factors include recognition, advancement, and achievement. These do motivate employees.
Job enrichment arose from this theory that empowers and provides a sense of fulfillment for employees. Methods for job enrichment include working in teams, cross-functional skills, and increased empowerment.
Beth Cudney, Ph.D.
A: There are a few new studies that seem to show a significant increase in errors between eight and 12 hours into a shift, but these are not focused just on inspection tasks; they include medical errors and other applications. They also show that within the two-hour period immediately following a break, error increases linearly. So the last 30 minutes has twice the error rate of the first 30 minutes within the two-hour block.
There is also evidence that night shifts have more errors than day shifts, especially when they are recurring. For example, the error rate was 36 percent higher in the fourth consecutive night shift than on the first night shift.
As far as what you can do about it, that depends a lot on the details. Supporting good human factors can be just as important as setting the work/rest schedule and the shift schedule. But without more details about your situation, I can't be more specific than that.
Marc Resnick, Ph.D.
A: Hiding hours to make efficiency look good is exactly what can be expected in a system that measures efficiency based on calculating the hours it took to make the product against standard hours.
In lean philosophy, we discourage using standard hours in favor of allowing workers to have a feeling of more ownership of the process, and thus induce them to contribute continuously to improve the process. If you insist on a metric, install one that will encourage people to work as a team and at the same time not make the team feel that the true management intent is to make them work harder. Metrics once in place often bring about unintentional results and behaviors, and in lean it is preferable to use the simplest possible metric with an understanding that it will be changed if it is inducing detrimental behavior on the part of the operators.
One such metric could be the value-added hours at the operation station per worker-hour expended. This is a ratio of the value-added hours from the customer's point of view captured at the station divided by the total hours that the operator was present on the job for that operation, expressed as a percentage. For operations that process the same product, for simplicity the value-added hours can be calculated by taking the average value-added time for the operation (processing time) multiplied by the number of pieces made at the operation. For operations that process different products, you will have to find out the value-added hours separately for all the products produced in a time period and add them together. In implementing metrics, consistency in how you get the numbers over time to monitor trends contributes to the value in promoting the type of behavior that you want to see from the operators.
Merwan Mehta, Ph.D.
A: This is a challenging problem and one that does not have a cut-and-dried answer. One of the issues is that there is a lot of planning and other cognitive work that is hard to observe. Additionally, there is generally a lot of variability in the time it takes to do lab work. But standards are still good for measuring and managing performance and improvement.
To develop standards for expense and indirect labor, which includes lab work, many companies use work sampling methods and then either apply them directly or use simulation techniques to develop confidence intervals for expected times. If you know how to apply these techniques, you can get started right away. If not, you may want to take a short course or get some professional assistance. You may also be able to get help from a local university with students in need of a project for their work measurement or senior design course.
Marc Resnick, Ph.D.
Indirect labor needs
A: There are several ways to compute indirect labor requirements:
Comparative estimating is most often used for developing time standards for maintenance activities. By taking time standards from known benchmark tasks that are common in an indirect labor function, you can apply uncommon task times to determine the total unusual function time. Often, the indirect uncommon tasks can only be described in words, so don't feel you are at a dead end. Apply the task description to a similar common benchmark task and take advantage of known requirements for the task. This estimate can be used with volume fluctuations to determine standard indirect labor needed to support direct labor.
Comparative estimating using time gaps uses upper and lower control limits to exercise variations in benchmark times as well as task times.
Analytical estimating uses estimates of time from job knowledge and practical experience as well as from synthetic data (standards). Experience, honesty, and details are key issues. The more standard times can be applied, the more reliable your estimate.
Baseline measures development involves performing time studies of the indirect labor task per unit, lot, batch, week, month, etc. Document possible variances to the task that could be common to any period of volume or season. Create reasonable benchmark times for the variances and apply them as you see fit. The overall estimate of indirect labor functions are, at best, dependent on skill level and the degree of training given to perform the task. Annual reviews of indirect labor tasks are highly recommended due to the fact that skill level and experience should lower benchmark standards over time.
Paul F. O'Connell
Tuning in to productivity
A: There is some research on the effect of listening to music in the workplace but less on listening to talk radio or ball games. For music, productivity is generally improved when employees get to select the kind of music played and when the background noise is less than 70 decibels. If workers can't agree on the music, it creates more problems than it is worth. And if the music has to be played loudly to be heard, it can interfere with communications, alarms, or OSHA regulations.
For talk radio or ball games, it depends a lot on what kind of work is being done. Either of these can attract a large part of workers' attention. So if the work requires directed attention, it is probably not a good idea. But for monotonous work that can be accom;lished with little conscious attention, there should be no problem. There is some evidence that for variable work in which mental workloads rise and fall, workers are able to shift their attention as necessary, but this is true only if they notice the change. Another problem with talk radio or ball games is that they can create disagreements among workers that can hurt productivity and, in extreme cases, hurt morale.
The best bet is to go with music if workers can agree on the kind. You can use special occasions to relax the rule, allowing workers to listen to a playoff ball game, for example. The productivity you lose in the short-term is easily compensated by the morale you gain overall.
Marc Resnick, Ph.D.
Shedding some light
A: The original work on this topic was done in the Hawthorne studies in the 1920s. You may still be able to find a copy. There's background at www.accel-team.com/motivation/hawthorne_02.html.
Another useful source is the Illumination Engineering Society of North America (www.iesna.org).
Larry Aft, P.E.