Incentive schemes boost worker productivity and satisfaction

Jun 05 2006 by Nic Paton Print This Article

Performance-related pay and bonus schemes can significantly improve worker satisfaction levels as well as productivity, a U.S study has concluded.

The survey of 200 warehouses and distribution centres by Boston-based ARC Advisory Group found that 76 per cent achieved productivity gains of at least 10 per cent from incentive pay schemes, with 13 per cent indicating gains of more than 30 per cent.

Incentive pay programs also led to increased employee satisfaction and retention, it found.

Steve Banker, director of supply chain research for ARC, said: "The programs that made the greatest gains in productivity achieved their results by setting individual incentive targets based on granular labor standards, and by linking payment of incentives to maintenance of predefined levels for quality and safety." Respondents were asked whether they currently used incentive programs in their distribution operations, and if so, were asked a series of questions on their incentive program practices and results.

Those who indicated they did not use incentive programs were asked to indicate why they did not, and what their expectations were if they did employ such programs in the future.

"The results of this study were not surprising. In a previous study of labor management systems based on granular labor standards, ARC found on average these solutions had a payback period of less than one year," added Banker.