Out of the Crisis.Org

[Louis Altazan]

Part One

Incentives are so much a part of life in the automotive industry, it may be hard to imagine life without them. Flat rate, commission, piece work, bonuses, they go by many names and very few question the practice. Many will cite individual faults, within individual plans, but the concept is rarely called into question.

The majority of discussion on the topic seems to revolve around seek new and ever more innovative plans. What I would like to do is present a case in multiple parts, based on my experience, which may offer an alternative view.

My experience includes working as a commissioned technician, working with other commissioned technicians and having commissioned technicians work for me. I have also studied the subject at some length and interviewed a great many people, on both sides of the discussion.

When my business was started in 1974, like most shops of the time, I paid employees on commission. Since 1987 my employees have been paid a salary, and the changes have been phenomenal. Cooperation, attitudes and constant sharing of continual improvement methods has greatly increased production as well as joy in work.

If a person is having success with incentives or if they are happy working for incentives, this discussion may not interest them. I realize this can be an emotionally charged topic, and I am not here to criticize any system. My intention is to mention what I feel is an alternative for any who are not happy with a current pay system or are seek new approaches.

I do not feel incentives are inherently good nor bad when used only as method of payment. I also do not believe they are normally employed only as a method of payment. Rather they are most often used as a management style, perhaps a management substitute.

There may be as many reasons for incentives as there are managers. In my opinion, and from a management point of view, it comes down to one thing, TRUST. I feel managers do not trust their ability to inspire workers. They may not trust workers to do their best without prodding. Incentives allow them to withhold reward from employees that do not meet their expectations.

In this manner, the incentive becomes a style of management or I believe, lack of management. A carrot and stick approach, where responsibility for production is shifted to the employee. Many will argue that benevolent programs do not include a "stick," rather only a carrot for increased production.

This is simply not in keeping with human psychology. Any remuneration a person receives becomes part of their income. Whether it is called a bonus, hourly wage or commission payment, it is the amount they feel they earn. This is the first problem with using an incentive as a management method. The amount of money a person earns will not motivate them. Reducing the amount will however de-motivate them.

As an example, give any group of people a bonus. They will normally be grateful and may even work a bit harder in gratitude for a short while. Continue the bonus every week for twenty-six weeks, and then discontinue it. The amount has become part of their normal income. They no longer work harder, because they feel it is earned. Taken away, it is like a cut in pay [stick] and will serve instead to de-motivate them.

The same will hold true with any incentive. It will soon be seen as earned and no longer a reason for extra effort. When it can no longer be earned, it instead becomes a de-motivator. Many managers have seen immediate results that can be generated by an incentive system, without the need for leadership. Immediate results are easy to measure and hard to argue with, long term results and other problems created are much harder to quantify and often go overlooked.

(End of part one)

Part two http://www.outofthecrisis.org/forum/viewtopic.php?t=54

_________________
Louis Altazan
Owner/Manager AGCO Automotive Corporation
Baton Rouge, LA

[MattFMN]

I firmly agree with the assessment that incentive pay is a substitute for leadership. If a manager/owner believes (or has proven) that they cannot motivate their fellow employees, putting those fellow employees in a situation that forces them to motivate themselves seems to be an easy way out.

Many techs I know will/would only work in a flat-rate shop. They liked the "challenge" of having their pay or amount earned firmly in their hands. I also feel this is an illusion. Both the challenge and the control of their pay.

[Louis Altazan]

Hi Matt,

[Bud]

Matt wrote:

"Many techs I know will/would only work in a flat-rate shop. They liked the "challenge" of having their pay or amount earned firmly in their hands. I also feel this is an illusion. Both the challenge and the control of their pay."

How true. The rule of thumb across all industries is that 80% of what affects most employees' productivity is beyond their control. For a tech, he is at the mercy of 1) the type of work that comes in, 2) the type of customers the shop attracts, 3) how well the shop is organized and managed, 4) how good the service writers are, and many other things any tech could add to the list.