copyright atomic dog publishing, 2004 chapter 10 implementing productivity improvement programs

Copyright Atomic Dog Publishing, 2004

Chapter 10 Implementing Productivity Improvement Programs


Outline

• 10-1 Gaining Competitive Advantage

• 10-2 HRM Issues and Practices

• 10-3 The Manager’s Guide


10-1 Gaining Competitive Advantage

• Linking productivity improvement programs to competitive advantage

• Expectancy theory


Improvement Programs and Competitive Advantage

• Extrinsic rewards Rewards given to employees by someone else (e.g., the

employer) Examples—pay raises and bonuses

• Intrinsic rewards Rewards that come from within Examples—a good feeling one gets from successfully

completing an assignment

• Can motivate employees to increase productivity

• Can facilitate an employer’s recruitment efforts


Expectancy Theory

• States that workers make conscious decisions about how hard they are going to work to achieve organizational goals

• Employees will be highly motivated when they perceive: Their efforts will lead to successful job performance Their successful job performance will lead to outcomes or

rewards they value


Expectancy Theory & Productivity Improvement Programs

• Successful programs are able to: Establish a clear connection between employee efforts and

rewards

• Employees must believe that they can gain valued rewards by working hard

• Increasing employee motivation leads to: Increased productivity Increased competitive advantage

• Enhancing recruitment efforts leads to: Hiring more productive workers Increased competitive advantage


10-2 HRM Issues and Practices—Pay-for-Performance Programs

• Employees’ financial rewards are linked directly to their performance

• Provide extrinsic rewards

• Can favorably impact competitive advantage

• Could cause legal problems If administered unfairly, could cause potential problems with

Title VII of the Civil Rights Act


Standards for Effective Pay-for-Performance Programs

• Effort-performance links

• Performance-reward links

• Value of reward

• Timeliness of rewards

• Performance-organizational mission links

• Cost efficiency


Merit Pay Plans

• Grant employees annual pay raises based on their levels of job performance Job performance is usually measured on an appraisal

instrument completed by the supervisor

• Merit pay guidechart

• Supervisory discretion


Merit Pay Guidechart Example

Performance Rating Merit Increase (Percent of Salary)

5 8–10%

4 5–7%

3 2–4%

2 No increase

1 No increase


Merit Pay Plan—Strengths

• Establish effort-performance link

• Establish performance-reward link when publicized


Merit Pay Plan—Weaknesses

• May impede the effort-performance link

• Sometimes fail to establish a clear performance-reward link

• Fail when employees do not value the rewards

• Performance-reward link is hindered when supervisors fail to distinguish between employees

• Time lag between behavior and reward

• Not very cost-effective

• Can hinder productivity if the wrong behaviors are rewarded


Recommendations for Starting a Merit Pay Plan

• Think big

• Make pay increases public

• Don’t deliver rewards as a salary increase; use bonuses

• Deliver rewards as soon as possible

• Accurately measure individual performance

• Get employee’s input in developing the system


Piece Rate Plan

• Base an individual’s wages on the number of “pieces” or product units he or she produces

• Used mainly in production settings Jobs are simple and highly structured Achievement of performance goals is within employee control


Piece Rate Plans

• Strengths Cost efficient Employees know what to do

to earn reward Performance standards are

objective Performance standards

cannot be influenced by supervisors

Rewards are tied directly to performance—higher outputs result in higher pay

• Weaknesses Pressure placed on

employees to produce Uncomfortable employees May create job stress May have negative side

effects for the organization


Gainsharing Plans

• Offer employees a cash award for meeting or exceeding goals based on the collaborative performance of a team of employees


Characteristics of Gainsharing Plans

• The organization has productivity goals that can be achieved through effective teamwork

• Employees receive cash bonuses if those goals are met

• Productivity is measured by an explicit formula with objectives measures

• Employees are encouraged to submit suggestions for cutting production costs or increasing productivity


Scanlon Plan

• Aims to cut production costs, relative to output

• Calculate the ratio of production cost/sales value of production that would be expected in a typical year

• Decide how production costs are to be cut

• Allocates bonuses in the following manner: 75 percent is paid out 25 percent is held in reserve for lean periods in which there

are no bonuses


Gainsharing Plans

• Strengths Effort-performance and

performance-reward links are strong

Link performance with the organization’s mission

Promote teamwork Cost-effective

• Weaknesses Employees may perceive

rewards as being unfairly distributed

Employee suggestions for improving efficiency may dwindle over time

May suffer if payout formulas are inflexible


How to Make a Gainsharing Plan Successful

• Company culture must be one of respect, cooperation, and open communication Management must demonstrate its willingness to:

- Listen to and support employee suggestions

- Go out and talk with employees

- Communicate honestly with employees

• Designed so that the payout is dependent on factors the employee can control

• Meet regularly with employees to share information and ideas and gather information


Profit-Sharing Plans

• Similar to gainsharing

• Reward the group performance rather than the individual’s performance

• Payout is based on profits rather than gains


Types of Profit-Sharing Plans

• Deferred plans An individual’s profit-sharing earnings are distributed at

retirement

• Distribution plans The company fully distributes each period’s earnings as soon

as the profit-sharing pool is calculated

• Combination plans Employees receive a portion of each period’s earnings

immediately, while the remainder awaits future distribution


Provisions Included in Profit-Sharing Plans

• Eligibility requirements

• Employer contribution

• Allocating profits

• Investment options

• Employee contribution

• Vesting schedule

• Withdrawal provisions

• Loan provisions

• Distribution


Profit-Sharing Plans

• Strengths Improve productivity by

making employees’ interests compatible with employers’ goals

• Weaknesses Only marginally address

effort-performance-rewards links

Not always cost efficient Rewards are not timely


Employee Empowerment Programs

• Informal participative decision-making programs

• Job enrichment

• Quality circles

• Self-managed work teams


Informal Participative Decision-Making Programs

• Managers and subordinates make joint decisions on a day-to-day basis

• Strengths Have a positive impact on productivity

• Weaknesses Success hinges on whether employees want to participate in

decision-making


Job Enrichment

• Aims to redesign jobs to be more intrinsically rewarding

• Characteristics that make a job intrinsically rewarding Skill variety Task identity Task significance Autonomy Job feedback


Job Enrichment

• Strengths Makes jobs less automated Makes jobs more interesting

and rewarding Enrichment leads to

improvements in productivity, quality, absenteeism rates, and retention

• Weaknesses Production may become

less efficient Employees may oppose job

enrichment efforts


Quality Circles

• A group of 6 to 12 employees who identify and resolve production problems within their unit

• Usually meet once a week

• Are led by a coordinator who may be a supervisor within the work group or a member elected by the group


Quality Circles

• Strengths Improves productivity and

efficiency Gains valuable input from

employees Improves communications

among workers and between workers and management

Increases motivation through employee empowerment

• Weaknesses Often used as a quick fix Do not address the real

problems underlying poor productivity

Often creates an “insider-outsider culture”

Sometimes operated improperly


Steps to Quality Circle Process

• Step 1: Problem identification and selection

• Step 2: Problem analysis

• Step 3: Recommended solutions

• Step 4: Review by management

• Step 5: Management response


Self-Managed Work Teams

• Teams consist of 6 to 18 employees

• Employees are from different departments who work together

• Produce a well-defined segment of finished work


Self-Managed Work Teams

• Strengths Empower employees to

make day-to-day business decisions

Greater flexibility

• Weaknesses Possible “turf battles” may

arise Departmental rivalries often

flare up Absence of a supervisor

may cause problems Use peer rather than

supervisory appraisals


10-3 The Manager’s Guide

• Productivity improvement and line managers

• Informal participative decision-making and line managers

• Self-managed work teams and line managers

• Productivity improvement and the HRM department


Productivity Improvement and Line Managers

• Employee motivation Strengthen the effort-performance link Strengthen the performance-reward link Provide rewards that are valued and perceived as being fair


Informal Participative Decision-Making and Line Managers

• Level of participation granted should be commensurate with each employee’s desire for challenge, responsibility, and opportunity

• Managers must provide their commitment to participation


Self-Managed Work Teams and Line Managers

• Serve as technical consultant to teams

• Serve as a facilitator

• Serve as an area manager


Productivity Improvement and the HRM Department

• Changing corporate culture to be compatible with program

• Provide training for programs

copyright atomic dog publishing, 2004 chapter 10 implementing productivity improvement programs

Documents

rewards employees

competitive advantage

successful job performance

valued rewards

effective pay

increased productivity

civil rights act slide

organizational goals