Company-wide bonus schemes

Some of the company wide incentive systems are the well known Scanlon Plan and Rucker Plan. While, the latter uses the ratio ‘added value to cost of labor’ as a measure of productivity, the former believes in establishing a suitable measure individually for any company. One of the important aspects of Scanlon Plan is the establishment of productivity committees and through them the frequent interaction between the management and the workers. This scheme can be described as one of the many methods of the labor’s participation in the management of the company; because, through productivity committees many aspects of company policies such as marketing, purchasing, quality management, etc. get discussed as they affect the overall productivity. Perhaps this worker participation in management, although in a different garb is the reason for the positive results achieved earlier through the Scanlon and other company-wide incentive plans.

Merits of the Company-wide Incentive Plans:

An advantage of these plans lies in the relative ease with which technology and method changes can be brought in, whereas, in the PBR (payable by results) or Group Schemes technology/methods changes means changes in the time standards and hence the resistance to change from the affected employees.

But, the success of the company-wide incentive schemes lies in how much the workers feel a part of the company and come up with extra efforts and novel suggestions to increase the overall productivity. It is in the hands of the company management as to how they use this financial motivation, by creating the right atmosphere and conditions, to usher in company-wide fellow feelings and unity purpose.

In any case, an annual review of the incentive plan and adjustments to the productivity measures to reflect as truly as possible the changes in the productivity and the contribution by the labor in it, are necessary adjuncts.

Behavioral aspects of Incentives:

Incentive schemes, whether PBR or group or company wide system, rely on the presumption that every man is capitalist at heart. Human behavior is, however, much more complex. Firstly, it is well known through the theories of behaviorists that money is most often only a ‘hygiene’ factor or that the lack of it is a ‘dissatisfier’. Money could perhaps be used as a motivator provided various other ‘dissatisfiers’ are minimized, which means:

1. supervisory and other social relationships at work are good;
2. the worker feels secure, physically and emotionally; and
3. working conditions are adequately satisfactory;

Then the financial reward could work as ‘recognition’ for the accomplishments of the employee/s. There are many other motivators such as

1. interesting, varied and challenging job,
2. responsibility over one’s own job,
3. advancement in status, and
4. Continuous growth and learning opportunities.

At best, the PBR and group system of incentives seem to deal with only one of the several motivating factors. The companywide incentive scheme with labor participation in management perhaps goes a little further. Therefore, if a company is facing a problem of low labor productivity there are more things to be done than just resorting under the financial incentive scheme.

Financial Incentives:

We may recapitulate a few other points about financial incentive schemes:
1. The time-study ratings are much less accurate than normally thoughts, and the incentive schemes are based on the time studies. This leaves much room for labor-management bargaining. This further leads to the observation that only a good bargainer benefits and a good worker may not be a good bargainer. And, more often, not-so-good workers benefit from the scheme most. It should also be noted that the time-study analyst is under much social pressure in cases where time-study is linked with monetary gains.
2. Financial incentives, particularly of the PBR and Group kind, have in-built in them (so to say) a resistance to technological/equipment/method change. Even when such changes take place gradually over time, they only cause a ‘wage drift’ which means enhanced wage payments without the labor contribution to productivity really changing. Thus, incentive schemes, once thought to be good for the company, may perpetuate old technologies and practices, which is harmful to the company in the long-run.
3. Many incentive schemes, particularly the multifactor schemes, may be difficult for the comprehension of the employees. This may defeat the very purpose of financial incentive.
4. In addition to the grey area in the time-study, many a time, quality of the output is a judgmental issue. Plus, quality depends on various motivational factors and needs an integrated company-wide outlook, which is lacking in most of the financial incentive schemes.
5. Management loses much of its control over the performance/output of the employees. This poses many problems in planning of production, marketing and other operations.
6. Moreover, management will be saddled with the additional burden of providing materials, supplies, good-working equipment to the production workers on a more or less continual basis.