7 Questions to Ask When Thinking About Installing Individual Incentives in Your Warehouse

With the increased difficulties of finding qualified labor for warehouse operations, many companies are turning to options that increase the productivity of their existing labor force.  One common way of doing this is to offer monetary incentives for the warehouse workforce.  Not only does this drive increased throughput and lower cost per unit, but it’s a great tactic for HR teams to recruit and retain top talent in a competitive labor market.

When considering individual incentive programs, here are 7 questions to ask:

  1.  Is the process standardized?  Are your SOPs accurate and are best practices being followed?  No operation is perfect, but if you don’t have standard processes, then you are not ready for incentives. 
  2. Is there a Labor Management System (LMS) in place?   Warehouse incentives are typically calculated off dynamically ‘Earned’ Hours and performance calculations versus a static rate (e.g. units per hour). To calculate dynamic performance, an LMS is typically needed.
  3. Is the Labor Management System established and tested?  When incentives go live, associate behavior typically changes, and this can be monitored in the LMS, but only if you have established baselines of a ‘daywork’ environment. It is imperative to have a period of testing and baseline data collection before implementing incentives.
  4. Are the Engineered Labor Standards (ELS) accurate?  Engineered Labor Standards need to be fair and accurate.  Individual incentives demand +/- 5% accuracy which means standards need to validate at that level.   Launching a program with inaccurate Engineered Labor Standards will create a long-term problem both financially and culturally.  
  5. Are operations ‘On Standard’?  To ensure a fair and equitable plan, the entire operation should be ‘on standard’ and included in the incentive opportunity.  Excluding departments establishes a culture of the “haves” and “have nots”.
  6. Is adequate support staff in place?  Incentives require additional support to administer and maintain.  Not only administrative, but also Industrial Engineering, front line Leads and Supervisors.  One fatal flaw is the set it and forget it approach.  Incentives plans require constant attention and maintenance to be successful.
  7. Is performance actively being managed?    Basic Performance Management fundamentals should be in place to support incentives.  Supervisors should complete daily observations to address performance and utilization issues and recognize good performance.  Incentive plans are not a replacement for front line supervision, they are simple another tool to help establish a high-performance culture.

If you can check the box on these qualifiers, then performance incentives may be a great solution to drive additional productivity.

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Jonathan Huesdash, industry thought-leader and Director at Connors Group, leverages his deep experience both in distribution and consulting to craft innovative workforce management and execution solutions for clients. He can be reached at [email protected]
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