How to use incentives to raise productivity

By Laddie F. Hutar, CMC President Hutar Growth Management Institute

fougher competition and tighter I gross margins make employee productivity and profitability more important than ever. Obtaining productivity is not easy. Motivating employees, creating a need or desire (to express one's talents and skills or be accepted as part of the team), is essential.

Desire for recognition (an award, certificate, commendation at an employee event, bonus, raise, promotion, etc.) or fear of having a pay cut

lncentives That Work

How do you inspire employees to maximize productivity? Dick Ledermann, Olshan Lumber Co., Houston, Tx., shares techniques used by his company.

o Cashiers are paid a certain amount for each transaction they ring up.

o Order fillers are paid a percent of total value of material they load.

O Lift operators are paid a certain amount for each truck unloaded or loaded.

a Security guards are paid a percent of value of mistakes they catch, o Truck drivers are paid a percent of value of material delivered. o Salesmen are paid totally on commission with a flat percent of sales plus a bonus percent on high margin items or items the company is trying to move. a Free lunch certificates are awarded on the spot for exha effort in job performance. o Profit sharing. a An experimental program based on reduction of inventorv sbrinkage. or being assigned tro a lower level job are both motivators. To create effective incentives, managers must understand individuals have four basic needs: emotional, psychological, financial and social. This means incentives must make them feel good, reward them psychologically or financially or give them recognition among their peers.

O Specific dollar bonuses are awarded to first, second and third place winners in weekly sales contests.

The best incentives are tailored to stimulate and excite an individual io positive action. Example: an avid fisherman can be interested and motivated by an award tied into his hobby. On the other hand, a shong family person with small children can be equally motivated by a $5 or $10 McDonald's certificate. Incentives, like any other management tool, must be understood and used properly to be effective. An incentive program with weak appeal or interest will fail.

Incentives can be short term or long tenn. They can be programmed into a slore progrun to increase sales, reduce waste or funprove productivity or they can be varied and spontaneous to recognize achievemenl The same incentive used year aftet year loses its luster, especially if it is expected and received without outstanding effort

Money is an excellent incentive. Usually tied o a specific goal, a sales target" a number or dollar imount, it should be predetermined with the employees lmowing what they need to accomplish in order to receive the additional compensation. The award can be a bonus, a commission or a raise.

Financial incentive programs range from simple to sophisticated. Research, analysis and evaluation can make them attractive to the persons involved and affordable for the company.

Non-financial incentives vary greatly depending on the level of the job and what the employer is trying to accomplish. Some perks, such as uniforns, personalized shirts and caps, annual picnics and holiday parties, are offered to build a positive relationship between employer and employee.

To be effective, an incentive must relate to the importance of the employee's contribution to the company. For example, if unifomrs are furnished, an insignia designating the number of years the employee has been with the company or merit badges for cus0omer service citations or outstanding achievements can crcate pride and be important to the wearer. A bulletin board, often at the front of the store, can become a motivator if it displays narnes and pictures of employee of the week, month,

Story at a Glance

Use incentives to increase productivity and profitability ... ways to tailor awards to individuals, catch their interest and desire to participate.

quarter or some other period of time.

Gifts, trips, dinners, an afternoon or day off can be successful incentives. Certificates, awards, a letter of appreciation or recognition at an employee dinner are other effective motivators. Announcement of the awards in the company newsletter or the local paper increases the motivation.

With thought and efforr it is possible to create a motivational program that rewards both the employee and the store, but recognizes everyone marches to a different drummer.

flespite economic downturns, engilJneered lumber products (ELP) will continue to gather greater market share over the rest of the decade.

A large part of the growth will come in the repair and remodeling market where expenditures could climb to over $100 billion by the end of the 1990s, George Carter, George Carter & Affiliates, forecasts.

Lack of knowledge on the part of builders, architects and re0ailers is about the only negative seen ahead for ELP which includes wood I-beans, laminated veneer lumber (LVL), glulam beams, parallel strand lumber (PSL) and parallel chord trusses. Increased consumption of all ELP except wood I-beans is anticipated.

Story at a Glance

Opportunities in engineered lumber products market will continue to climb $100 billion possible by end of decade Consumption will increase for all ELP except wood l-beams which will be replaced by parallel strand lumber. This decline can be attributed to the expected growth of PSL. LVL use will stablize and remain constant through 2000.

Although these products offer many advantages to both builders and homeowners, such as quiet floors and ease of installation, they remain obscure products in the minds of some. Carter tells the story of talking with one retailer who insisted that the laminated ven@r lumber he sold was calledplywood.

Fducation of those in the market place is factored into the expectation that ELP sales will increase approximarely 160% by the end of rhe decade, the equivalent of an additional I billion linear feet of product. Anticipating the demand for wood building products in new housing and R&R nurkets, Carter's company will update its ELP study in 1993.

Qucstions about the ELP markct can be directed to George M. Carter, president, George Carter & Afriliates, 767 Park Ave., Oradell, N.J. 07649, (201)265-7766 - editor.