Pay for productivity

Everyone likes a little more money, especially foremen who work hard
in tough conditions. Increasing hourly pay causes problems, though. First,
many long-term foremen are maxed-out on the pay scale. Second, in a competitive
market, you can’t pass on all your cost increases, and still keep
your margins.

The way to address these issues and continue to motivate your foremen
is to pay for productivity — actual (realized) productivity gains—instead
of the promised gains associated with fixed pay increases.

There are three steps to paying for productivity: measure, report and
reward.

Measure: Productivity can be measured using the realize rate,
which is calculated as adjusted sales divided by paid production hours.
This rate is compared to the realize rate goal established in your budget.
(The Measure chart example above demonstrates the calculation.)

Report: Post the new realize rate every month using a simple
bar graph. Be sure to calculate the realize rate on a rolling basis using
year-to-date data. This helps take seasonal fluctuations and good job/bad
job bids into account.

Reward: Pay every time the realize rate goal is met or exceeded,
and pay it monthly. All payments are based on the “All win”
or “All lose” philosophy. This may seem to punish some superstars,
but this situation can and will be addressed in a future article. To keep
the system simple, pay a flat dollar amount to each foreman that equates
to about a $.75 to $1 per hour raise. (See Reward chart for an example.)

Everyone likes a little more money to keep motivated during the long hours
and hot days of the season. Keep the motivation fires burning by measuring,
reporting and rewarding productivity gains.