What metrics should I use to design an incentive plan for my warehouse team?
I'm employed in a trading firm (IT Components & Accessories). We have a warehouse team of 6 people inclusive of the warehouse manager. I'm tasked with designing the incentive plan for the Warehouse team. What are the various metrics that I can use?
What's driving the perceived need to incent your staff? Underperformance?
I would caution the use of any financial incentives in the workplace as they generally lead to dishonesty and corruption and destroy any positive culture a company may have. I would strongly suggest modeling the exact job (or jobs) and hiring people who fit that mold. Those “good fits” are exactly what you need. Bear in mind that the job model (description) and metrics for the job need to be developed, clearly outlined, and results need to be tracked on a daily basis. Pay your people fairly, and you will achieve your business goals.
The study, "The effects of goals and pay structure on managerial reporting dishonesty," provides valuable insight into the relationship between pay structures and motivation.
Findings suggest that setting compensation goals can increase dishonesty when managers are also paid a bonus for hitting certain targets. "These unintended negative consequences can lead to dishonesty, unethical behavior, increased risk-taking, escalation of commitment, and depletion of self-control," says Becker, co-author of the study and associate professor of management in the Pamplin College of Business at Virginia Tech.
Incentives work best when all employees are included to some degree. This provides motivation to all, emphasizing an overall team approach to superior performance. In order to make it work and be appreciated by employees it must be simple, easily understood and directly connected to specific measurements of performance for each functional position in the company.
It should be directly related to excess gains that the company achieves in productivity, revenues and profits. The gains are then equitably shared with the employees through an incentive pool based on surpassing predetermined productivity or financial goals. Level weighting can be applied based on any chosen criteria such as position, wage rate, years of service, etc. The weighting should logically be placed on the degree of responsibility and direct participation in decision-making and execution.
To send the correct message to employees, incentives must reflect consistent performance over time. Planned objectives are achieved over specific time periods, fiscal quarters, and annually. They must reflect responsibility and ownership for cumulative results. Clearly, it would be inappropriate if recognition in one month were followed by a poor and unacceptable performance in the next.
Each individual’s performance should be connected to the functional position's specific measures of performance contained in the job description. This must be evaluated at least annually and rigorously scored. The level weighing and the performance evaluation score ultimately define the incentive payout for each employee.
Putting together an effective incentive plan is made easier by using an appropriate spreadsheet and guidelines. Check out: https://gsmbizsystem.com/priceandplans/organizational-structure.