" . . . I
have used piecework for over 30 years but it now gives me more problems than benefits.
I constantly hear of other firms with the same predicament. Is there a more effective
replacement for piecework? What can you suggest, or what have you done for others–in
my situation–that might help me?" D.Y., Harrisburg, PA
THE INDUSTRY ADVISOR
PROFITABLE ALTERNATIVES TO PIECEWORK
By Gene Levine - www.genelevine.com
In my considered opinion, individual piecework is becoming
obsolete. So I will try to explain why you should consider replacing piecework with a new
pay system that may achieve even more than the benefits you seek.
Dr. Marc Wallace Jr., who heads the new Center for Work Force Effectiveness in Northbrook, IL, was once quoted as saying, "The challenge for companies will be work design—how we let our employees work, how we compensate them and what behaviors we reinforce."
This means that you need to consider developing an effective pay system that retains the primary features and advantages of straight incentive piecework, group incentive and gain sharing plans, yet injects the many benefits of merit pay systems.
For example, a merit bonus system provides employees with financial and psychological incentives and rewards when they make contributions toward higher company profits. These contributions may include, but are not limited to, better quality, lower costs and shorter delivery times. A merit bonus system only should provide rewards when employees become more responsible, which is exactly what I find today’s employees want to be. So, when this type of system begins to work, you will find your people earn more because there is more profit to distribute.
You can develop your own merit bonus system. Begin your approach to higher performance (and fewer problems) by bringing your employees together and carefully explaining what you want them to accomplish. You need to clearly explain how positive employee contributions (faster delivery time, lower costs, improved quality, etc.) make more profit; and that when profit goals are reached, the company will share those additional profits with all of the people who made them possible.
The employees who will be measured under the merit bonus system must help develop it. This empowerment procedure allows employees to learn what drives the business, and then through their contributions, they will develop confidence in making continuous positive changes.
Let your employees define and control those expectations that will improve your company. Next, have your employees decide what they wish to receive when they reach the goal. Then, train and develop employees to help them reach that goal. Finally, when they do achieve, pay them.
Here’s an example of a simple plan, based on the premise that you can only manage what you can measure. Under such a plan, individual piecework earnings are replaced by an hourly wage guarantee (which can be a weighted variable related to a job’s required skill level) and a monthly bonus ($160 for example). Then, your system will add money to, or take money away from (should a company policy be violated), each employee’s monthly bonus, based on his or her performance against the factors.
Most problems with piecework are universal. As such, there are many factors that must be addressed if a new pay system is to be better. While your approach is being developed, understand that merit factors and merit factor weightings change as conditions change. Initially, you will want to limit your focus to three to five of the most measurable factors, such as: dependability (being at work on time every day); quality (doing a job right the first time, using preferred methods); production (meeting or beating standard allowed times); safety (using the provided safety equipment, methods and practices); suggestions (offering ideas to improve the company); or any other easy to-assess factor.
Using your initial factors as a guide, let employees develop written policies for each one. Let them also decide the money they will receive in addition to (or have taken from) their monthly bonus. The decision as to how much bonus money each employee takes home is in effect made by the employees. Management is blameless." In short, the employees who contribute the most to the success of the business earn the most. (Note that although the system recognizes many factors other than individual output, production quota performance is still factored into the pay rate.)
Here are two excellent policy examples to get you started: . . .
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