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© A. Kavtreva, S. Sychev, TRIZ-RI Group

Many companies have difficulties in establishing standards. And often the following misunderstandings occur: the director introduces a new system of remuneration because he is not satisfied with the "slack" work rate, low productivity, "scattering" of a small volume of work by the employees for the whole day etc. On establishing new plans, quite often, he faces existing "achievements" or the best achievements of the past periods resulting to a maximum actual profit of ~ 15-30%, "in order to have somewhere to grow".

As a result, the orientation of the past "achievements" inevitably leads to the numerous overfilling of the start of low significance (only if the employee does not wish to "hide" results). And when the "efficiency" rockets from a low start to 2-4 times, then together with it, inadequately (relative to the average market value) rises the salary.

Then some directors increase the norms and decrease the rates, and the employees "symmetrically" stop trying. But of course, the reader understood already where the root of the problem lies.

For example, in one company, sales were slack and employees at the plant were used to working slowly (and why work fast if there is not much work). When establishing the plan of the plant, the management studied the statistics of past years from which it was concluded that during the best months, in this plant, an average of 100-110 units were produced per shift. Then the plan was set for 120 units and for that system of remuneration, the rates stayed the same.

After an insignificant raise in the number of orders, the workers started to produce 150 units per shift (which was also funny since for a good work organization, the equipment of this enterprise allows the production of 600 units per shift). But the salaries of the workers – for the same rates – increased by 1,5 times, and they were still working slowly as before.

Although, officially, the productivity of the plant increased in relation to past periods, but as we can see, it consisted of only ¼ of the standard value, and the salary became unfairly high.

Later in this company, all the errors of management, described by Frederik Taylor in 1896, were committed, namely: for this system of remuneration, rates for units of work were reduced, since the management decided to correct the disproportion which occurred without changing the approach to a specific salary itself.

As a result, the workers decreased productivity to 130 units per shift and agreed not to allow its increase for any reason. The reason for such a behavior is understandable and is in a way motivated. And thus such a situation arose when a fully equipped plant with highly productive equipment, works at a rate of 22% of its capacity and all the attempts to change the situation result in a strong resistance, up to strikes and damage of the equipment.

In accordance to this, a few useful recommendations:

Productivity is defined by technology. This idea is well-known and hence we shall not develop it here. Here we shall only note the salary part of the problem.

Recommendation 1. When creating salaries rates should not be used for the work, units and operations.

Your technology may change, You can upgrade your equipment, instruments, tooling; You can produce different models etc. – the current productivity – is not a constant.

But You will not be able to increase productivity even when You have all the technological prerequisites, if You will have money rates for each unit of work. When productivity increases, rates, of course, do not increase, and decreasing them will cause the employees to think that now they are doing more for the same salary and that it is a lie.

See also "About errors in planning "from the achieved".

Furthermore, the level of salaries on the market can also change – not paying attention to that is not possible. And finally, the prices for units which You produce can change on the market and they are not in linear proportion with neither the salaries of Your employees nor the productivity of Your enterprise.

Hence do the following:

1.Define the technological grounds and standards of your task per shift, without thinking about how much an employee gets for completing it, and of course, without at all thinking about how productivity was during the past periods.

2. Define the salary for completing the given shift standard task. Guide your actions on the following recommendations from Taylor F., namely:

  • set the range in such a way that the monthly salary of the employee who (when going to work for each working day of the month, he fulfils the shift standard and does not allow faults), overcomes the average market salary of a worker with such a qualification in town by ~ 20-30%;
  • note that the sum of the salary "for fulfilling the standard task" is such that it already contains award (relative to salaries on the market) for productivity. We shall call this sum the "plan", and the method of stimulation itself, according to Taylor F. will be called "by the lesson". (Note: the technologically tuned standard shift task was named "lesson" by Taylor F.);
  • of course when the standard result is not achieved, salary falls.

In other words, when the technology, the norms of time for each operation are known, and also when seeing those orders which need to be completed today, a standard/lesson can be given for the shift (that is, these orders (Your works) which are here-above described will fit in the time frame of today’s shift – here are the technical cards – you can be certain – this is actually the "lesson").

Each worker who fulfilled his "lesson" during the current shift, will have an effectiveness of = 100% for that shift. For example, using the technical card You found out that for a specific shift, 3 orders can be filled of the 1st type, 4 orders of the 2nd type and 7 orders of the 3rd type. Hence if such a task is fulfilled = 100%. It does not have to be overdone, but doing less is also not needed.

For an equal report of profit (in case the item differs by volume), the items should be divided into groups and by specific rules, each group is attributed its own weight. Then it will be possible to calculate the efficiency if instead of Your lesson "3 orders of the 1st type, 4 orders of the 2nd type and 7 orders of the 3rd type" they fulfilled for example only "2 orders of the 1st type, 3 orders of the 2nd type, and 6 orders of the 3rd type".

3. Set the "minimum efficiency" as written here (option 2).

That is, if the worker shows a "minimum" result for any of the indicators or less, his general efficiency will be equal to this low value. And his salary per lesson will fall considerably.

Recommendation 2. All the parts of the work should be inquired for visible and hidden stalling. This not only means finding and analyzing the periods and places where discussions and smoking happened, observing the rate of work (though this is also without saying, necessary to make), but also find out on which operations for volume growth, materials and half-products are accumulated.

Inclusively, follow the flow of materials and do not allow them to go to the workshop immediately after purchase, but have the following: a store for raw materials, a store for instruments, a store for products and one for wastes. And make an internal invoice for the exact amount of material required for one shift task.

Then, after the shift, if the normative for the amount of products was not met at the store for products, You will see a typical image from the accumulated material – not only what was not completed, but also which operations are the main "brakes". And if You would have sent the materials to the workshop in excess (or unfortunately, all), then You would have seen a mass material everywhere. And You would not have got any information.

Read these two discussions which not only clearly illustrate what we are talking about, but also show the possible solutions:

  • Example 1."Paradox" during the production of Venetian blinds (in the Russian language)
  • Example 2. About the hidden stalling of a turner (in the Russian language)

Recommendation 3. If the number of orders is not sufficient, the existing small number should still be fulfilled immediately and in the given time frame, and not extent the work over the whole shift. And then let the workers go home.

And then walk around the empty company thinking about profitable deals which are not. And not "cover up" the problem, creating a hidden stalling, that is, "distributing" the small amount of orders over the whole working day.

Do not allow changes in the "production time" and in the "stalling time". And literally, in the report. For a necessary stalling (for example, due to a small number of orders) set a fixed time compensation (with a decreasing coefficient from the value of the "planned salary" (including how it is defined here), since though this compensation is righteous, the salary should be paid less for the work in order for stalling not to be profitable).

Let the following lines be in the salary registers:

  • Total salary value __________________
  • From which for work ________________
  • From which for stalling ______________

Reading this will be horrible, but honest.

Each stalling at work should be considered as force-majeure. But there should be a stimulus which would cause a "useful scandal" about the matter. That is why the employees who are responsible for causing the stalling should bear the responsibility, i.e. "feel" it on their salaries.

Then all the sections of the company will work on reducing stalling: the sales department will think about searching for Clients; the marketing department – about introducing new products and/or improving the existing ones; the managers of the enterprise – about preparing standards for the low seasons and frequently ordered units/products from the store. Etc.

When we distribute small tasks over the whole day and pay no matter basic pay or piece-rate pay, we hide stalling and hide its value. This is not good.

Stay with us and read the methodical material and discussions, links to which are listed below.

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