fenvessy on personnel

Oct 01, 2000 9:30 PM  By

Writing the Job Description As in most enterprises, the success of a fulfillment operation depends, in large part, on the quality of its people at all levels of the organization.

Sound personnel practices begin with an accurate definition of the job qualifications and requirements followed by the location, recruitment, and evaluation of qualified applicants. Finally, once good people have been hired, it is essential that they be properly trained, organized, and motivated. This chapter addresses those aspects of personnel management that are particularly pertinent to the operation of an efficient fulfillment center: namely, employee recruitment and evaluation; other relevant personnel practices; and outplacement.

JOB DESCRIPTIONS Q. We are looking to fill several positions in our fulfillment operation. In this connection I have been asked by our personnel manager to describe in writing the requirements of these jobs and the traits or qualifications needed. What type of information will be of most help in finding the people and in what format should it be?

A. In today’s competitive labor environment, it is important that the hiring process be approached in an organized manner. The first step is to define the qualifications of the individual being sought. This requires the preparation of a formal job description that will serve one or more of the following purposes.

- Specify to those charged with recruiting the type of person and skills needed.

- Outline to potential hires what the position will involve.

- Describe to those who might suggest possible candidates, such as employment agencies and your own employees, the scope of the position and how it contributes to the company.

The form of the job description depends upon the level of the position that is to be filled. For senior managers, the statement should be both more expansive and detailed. For hourly workers, a succinct job description should be sufficient.

A job statement should involve these elements:

- Company Synthesis of the company’s business, market, history, facilities, and goals

- Position Title of job and to whom it reports; descriptions of the responsibilities and authorities of the position

- Experience required Desired work background and technical knowledge and activities needed

- Personal characteristics Education, personality traits, and interpersonal skills

- Compensation Salary, other payment plans, and benefit package

Exhibits 1, 2, and 3 on pages 149-153 are examples of job statements for an executive, a manager, and a worker.

HOW TO FIND GOOD PEOPLE Q. How should we go about looking for personnel to fill the job openings we have among our fulfillment staff?

A. When a new position is created or an existing one becomes vacant, a company should look for talent from both inside and outside of its organization. To cover all possibilities, seven recruiting approaches should be considered.

1. Job posting. This approach involves producing the job description discussed in the previous question and posting it on the company’s bulletin board in order to solicit applications from existing staff. This technique has been very successful in filling supervisory positions and those requiring special skills. Frequently, the job posting will indicate that the company will provide paid training to interested employees.

2. Employee referrals. In this technique, possible applicants are identified by existing employees. Employees then receive a bonus if the recommended person is hired and stays with the company for a specified time. This approach has proven to be particularly effective in recruiting part-time employees.

3. Advertising. Several factors should be considered in utilizing this prime source of applicants. These are:

- Place ads in publications specializing in employment advertising, although they may be more expensive; results are what counts.

- Have personnel experienced in writing recruitment ads prepare the copy.

- Pay special attention to the headline or ad caption, as that attracts attention.

- List the company’s name in the advertisement, whenever possible; this practice is preferable to blind advertisements requesting that resumes be sent to a box number. Prospects feel more comfortable in knowing to whom they are writing.

- Emphasize the company’s location if it is desirable, such as a preferable area of the country or convenience to public transportation and shopping.

- Include a telephone number for lower-level positions, (a) to make it easier for an employed person (without a resume) to respond, and (b) to screen applicants.

- Advertise in local papers where your competitors’ employees reside or in trade publications, if you wish to approach that audience.

- Re-run an advertisement the next week, if responses were low; subsequent ads sometimes pull better than the original.

- Contact qualified applicants soon after their response is received. This creates a good impression and helps ensure that good candidates don’t take another job in the interim.

4. “Situation wanted” advertisements. This refers to ads placed in newspaper classified sections and in trade magazines by individuals seeking new positions. Frequently, employed individuals, who have neither the time nor inclination to respond to employment ads, use this approach to obtain and screen job opportunities. If your response is inviting, competent personnel can be persuaded to come in for an interview.

Exhibit 1 Executive Position Description JOB DESCRIPTION Vice President, Operations

1. THE COMPANY

The company is a major catalog and retail marketer selling state-of-the-art electronics, jewelry, and other executive-type gifts to high-income consumers. It operates 45 retail stores from Hawaii to Boston and is planning to open 20 additional stores within the next 18 months. Annual sales volume approximates $200 million.

The company strongly emphasizes customer service. It is one of the keystones of its merchandising character. It offers customers toll-free telephone numbers for both placing orders and resolving customer service problems. Telephone, computer, and materials-handling systems are sophisticated, well-engineered, and cost-effective, enabling orders to be shipped within two days of receipt.

2. POSITION

Vice president of operations, reporting to the president and supervising between 150 and 200 personnel involved in the following functions:

A. Telephone order taking and upselling

B. Mail handling and order processing, including an intensive fraud review activity

C. Physical distribution for both mail order and retail, involving:

-receiving, merchandise inspection, marking, and storage

-order assembly, checking, and packing

-return goods processing

-traffic.

D. Customer service, including customer inquiries, complaints and adjustments received by mail and telephone.

The above activities would be directed through four managers. The principal operating objectives to be achieved would be:

1. Maintenance of two-day mail order turnaround order service and prompt replenishment of retail store stocks

2 Courteous, effective, and prompt resolution of customer inquiries and problems

3. Efficient organization and scheduling of staff

4. Effective labor controls and production standards

The position requires working closely with other company executives involved in marketing, merchandising, finance, and retail store management to assure that the company’s operations have the flexibility, capacity, systems, and equipment to meet planned growth and any innovative marketing programs.

3. EXPERIENCE REQUIRED

Candidates should be seasoned and possess this background:

A. A minimum of 10 years’ experience in full charge of a direct marketing, publishing, or distribution activity, employing at least 100 persons and entailing the receipt, processing, and fulfillment of consumer/commercial orders. The orders should be multi-line and involve products that have to be assembled from a large picking area.

Examples would be: major catalogers; drug, stationery, electronic, or housewares distributors or retailers; direct sellers; book publishers; or general merchandise wholesalers.

B. Proven track record of training, motivating, scheduling, and controlling large numbers of clerical and material-handling workers to provide a high level of customer service.

C. Used to: (1) developing and working under budgetary controls; (2) creating and instructing others to utilize personnel scheduling and work control; and (3) viewing operations and systems from the customer’s perspective.

4. PERSONAL CHARACTERISTICS

The executive should have these characteristics:

A. College graduate, preferably with courses in industrial engineering and/or management

B. Mature, commanding respect from superiors and subordinates

C. Strong managerial skills; team player with a results focus

D. Ability to relate responsibilities to the total business

E. Flexible in terms of adjusting to changing requirements; cool under pressure; good oral communication skills

F. Ability to work in a non-smoking environment

5. COMPENSATION

Annual salary _____to_____, depending upon depth of experience and future potential. There would also be stock options and a bonus based on total company profitability.

Exhibit 2 Manager Position Description JOB DESCRIPTION Clerical Fulfillment Manager

1. Manages mail opening, data entry, cash handling, and customer service functions:

a) Provides schedules, goals, deadlines, and work procedures

b) Prepares for each seasonal sales campaign; establishes necessary personnel levels and types and quantity of supplies; updates procedures; and formulates special seasonal schedules

c) Expedites resolution of emergencies during seasonal processing, such as systems problems in data entry area

d) Handles overseas processing of orders, outputting of computer tapes, responding to customer calls and letters, and general operations as season progresses

e) Directs the preparation of merchandise complaint report

f) Authorizes the initiation of customer service adjustments and other transactions; assists in resolving various problems relative to specific orders, especially for VIP customers

g) Monitors the answering of VIP and presidential mail

h) Provides long-range organizational planning during off-season periods

i) Develops and writes new work procedures for newly created jobs; refines existing procedures for other jobs

j) Creates forms and form letters to meet needs of functional areas; refines and updates existing forms as necessary

2. Provides liaison with and advisory services to merchandising and marketing:

a) Reviews and suggests revisions or other input during development and creation of catalog order forms

b) Provides/obtains information from the inventory control department regarding merchandise availability

c) Coordinates contacts with merchandising on various matters

d) Provides liaison with data processing programmers and operations personnel as necessary

e) Handles external liaisons with shippers and telephone contractors for servicing of customer orders

Exhibit 3 Worker Position Description JOB DESCRIPTION Customer Service Representative

A. Overall responsibility

To handle basic customer inquiries received by mail and telephone in accordance with established company policies and procedures. Also, to perform other support duties necessary for the effective and successful operation of the department.

B. Specific duties

1. To solve basic problems regarding a customer’s account through use of computer terminals and according to established guidelines.

2. To handle all incoming contacts by:

a) Answering calls promptly and courteously

b) Investigating customer inquiries and complaints

c) Making the necessary adjustments or taking the action required to solve the customer’s problem

d) Notifying the customer by return telephone call or in writing of the action taken

C. Reporting/coordinating responsibilities

1. Report to either the supervisor of mail processing or the supervisor of telephone processing

2. Coordinate with mail sorter, audit clerk, and exception-order processor

D. Background knowledge

Knowledge of the following specific tools and techniques is required:

1. Use of computer terminal (CRT)

a) Alpha search

b) Accounts-receivable screen and detail screen

c) Old address/collection inquiry screen

d) Customer file maintenance screen

e) Inventory screen

2. Use of customer relations forms

a) Customer response from cards and letters

b) Standard word processing form paragraphs

c) Customer relations telephone inquiry forms

d) Customer relations adjustment form

e) Backorder cancellation form

f) Write-up of credit card payment or credits

g) Check requisition

3. Use of reference material

a) UPS shipping log

b) Tracer and claims files

c) Shipping authorization log

d) Call tag log

e) Undeliverable package listing

f) Unidentified returns listing

5. Employment agencies. These are often licensed by the individual states. The main thrust of their business is to: (a) interview and register individual job seekers; (b) evaluate their abilities; and (c) classify them according to skills or types of businesses for which they appear to be qualified.

When an employer contacts an employment agency, the agency reviews its files for those registrants who appear to be qualified and submits the resumes of such persons to the employer. Employment agency fees, for the most part, are established by state regulations and are based on the salary of the position. An employer is not liable for the fee until the individual recommended by the agency is hired. Employment agencies usually work on behalf of individual job seekers and concentrate on lower-salary-level jobs.

6. Executive search (recruiting) firms. These organizations, which are sometimes called headhunters, are used by large and small businesses alike to find middle management and senior executives. They are widely employed in burgeoning industries, such as direct marketing, where there is a shortage of management talent. The best search firms are professional experts who have developed a mixture of research and assessment capabilities and extensive background files in particular industries. They have developed techniques to locate pools of talent and to present the client’s opportunity to qualified candidates in an effective and confidential manner.

Usually, a prospective employer can make a selection from a well-screened group of interested and qualified candidates within two to three months. Search firms charge the employer a percentage of the annual salary established for the position, normally between 25% and 33% plus out-of-pocket expenses. The executive who is eventually placed is never charged a fee.

There are both the contingent and retainer-type executive recruiters. The former, like employment agencies, are compensated only if the company hires the individual recommended by the firm. The largest and best-known executive search organizations, however, work on a retainer basis. Such firms are paid for time applied to a search up to the agreed-upon percentage of the annual salary. For example, in the rare instances where the position is not filled, the company discontinues the search, or the company locates a candidate from another source, retainer recruiters are paid for the time spent in conducting the search to the point their services were discontinued.

For the most part, executive recruiters are employed to fill executive positions with annual salaries of $50,000 and above.

7. Airplane streamers. This refers to the banners towed by airplanes over populated beaches or parks. There must be some value in this technique. While writing this chapter near the Sandy Hook, NJ beach, the author saw an airplane towing the banner “Managers Wanted; Apply Roy Rogers.”

PRISONS – A POSSIBLE LABOR SOURCE? Q. We are a highly seasonal business. In the fall our telephone-order-taking staff increases five-fold, from about 30 to 150. It has occurred to me that prison inmates could be a possible labor pool for telephone operators. Has this source ever been tapped?

A. The next time you make a motel reservation with Best Western International, your call could ring inside the minimum security facility of the Arizona Center for Women, where about 30 inmates, using computer terminals, have been handling reservations 25 hours a week since 1981.

Inmates are paid the same salary and undergo the same training as other Best Western agents. The State of Arizona collects a portion of the salary to cover room and board and the rest is held in reserve until the inmates are released. It is reported that Best Western hires a number of these imprisoned personnel after they complete their sentences.

This idea makes a great deal of sense. First, the inmates can be easily checked to assure that they have not been involved in any credit card frauds. Second, after the personnel have been trained, the operation should not experience much personnel turnover. Third, it appears to be an excellent rehabilitation program and an eventual source of trained personnel.

CHECKING REFERENCES Q. Due to recent legal rulings, we are finding it difficult to do an effective job of reference checking. People we call are not hesitant to praise, but are reluctant to say any more about an individual. Are there any guidelines with respect to reference checking?

A. The value of reference checking is dependent upon two factors: (a) quality of the source being contacted; and (b) approach of the person asking the questions.

A company should develop an organized approach to obtaining the information it is seeking. The personnel departments of previous employers should be contacted for verification of dates, title, salary and the official reason for leaving the company. To substantiate educational credentials, there are specialized educational verification services that will corroborate receipt of a college or graduate degree.

It is recommended that heavy emphasis be placed on the comments of the individuals to whom the candidate reported, either directly or remotely, rather than the personnel department, working colleagues, or non-business contacts. Seek out the highest level in the company that would be familiar with the candidate’s work and then make direct telephone contact. Letter requests are not usually productive.

Before initiating the call, prepare detailed notes concerning the type of information you are seeking. Professional executive recruitment firms follow these steps:

1. Obtain from the candidate the names of superior, a peer, and possibly an outside supplier or other person with whom the candidate had regular contact. These sources should give a revealing picture of the prospect.

2. Indicate to the party called that you are calling to inquire about the candidate; ask whether the party is in a position to respond. If they are not, offer to call at another time or at the party’s home in the evening.

3. Involve the person in your evaluation process by describing the company and the position the candidate is being considered to fill.

4. Ask specific questions and phrase them in such a way that you are obtaining the person’s opinion and not merely confirming your own opinion or that of previous contacts.

5. Be aware of what the person is not saying and the tone of the voice or abruptness with which the answers are given. These frequently can be valuable clues.

6. Request the reference to enumerate the candidate’s strong points. Then, ask what shortcomings, if any, you should be aware of.

7. Inquire about the candidate’s general health, attendance, and whether he or she has any bad work habits.

8. Conclude with the question, “Would you hire the candidate, if you were in my position?”

USING HANDWRITING FOR PERSONNEL EVALUATION Q. I have heard that a number of direct mail companies are using handwriting analysis, in addition to in-depth interviews and detailed reference checks, in making final decisions with respect to employment candidates. Is this technique reliable?

A. In the continuing effort to upgrade techniques used to evaluate employment candidates, a wide range of new approaches are being applied.

Blood type, for example, is used in Japan to indicate employee potential. Citing 30 years of research, many Japanese firms claim that basic personality traits can be linked to the four blood types. The research has found that:

- Type O (most common) are high achievers

- Type A are deep thinkers

- Type B are highly creative

- Type A-B are natural problem solvers

Apparently, no information is available as to the blood type of “losers.”

Handwriting analysis (also known as graphology) is a technique that is making great strides in the U.S. business community. It is said that handwriting reveals potentials and hidden talents and can be used as a self-improvement tool to develop dormant sales and managerial skills. Further, it is reported that it is a valuable vocational guidance and marriage compatibility indicator, when used by trained professionals.

Sheila Kurtz, a graphologist, was quoted in The Wall Street Journal as saying that a number of executives switched careers after their writing revealed hidden qualities.

Graphology is gaining recognition in academia. For instance, the New School for Social Research in New York offers several courses in graphology as part of its psychology curriculum.

In direct marketing, prospective employees and executives are sometimes required to fill out applications in handwriting, not printing. The completed application is then scrutinized by trained experts for two purposes: (1) to obtain insights into character; and (2) to determine whether the applicant’s handwriting is clear and legible and therefore can be used in such tasks as responding to customer correspondence.

In some companies, no management position is filled without consulting a graphologist. Rates for analysis range from $20 for a checklist review to $150 for a detailed report. A typical handwriting analysis rates such factors as: initiative, enthusiasm, competitiveness, motivation (goal-mindedness), and self-confidence. Both the possession and degree of such traits can be determined.

TESTING FOR HONESTY Q. Our product line is small and of high value. We are interested in tightening our protection against internal theft. We have heard about a job applicant test called “The Paper and Pencil Honesty Test.” What is it and has it been successfully employed in the mail order business?

A. What you are referring to is officially called the REID REPORT, published by Reid Psychological Systems (RPS), 200 S. Michigan Ave., Chicago, IL 60604, (312) 938-9200. It is sometimes thought of as an unobtrusive alternative to polygraph testing and is available in a number of foreign languages.

The Reid tests are a series of questions that gauge a person’s attitude towards honesty, or the individual’s concept of what is normal and acceptable behavior. The questionnaire also provides comprehensive and accurate measurements of theft-prone attitudes, drug and criminal activities, citizen status, school and work performance, references, and job preferences.

There is no attempt to disguise the purpose of the test. It is given in a quiet room for an undisturbed period of 45 minutes to an hour.

The tests are then mailed or telephoned (on a toll-free number) to the RPS processing center in Chicago for analysis. Test administrators also have the option of scoring the tests themselves on a personal computer, using a keyboard entry system or an optical scanner for instant results.

According to RPS, only one state restricts the use of the tests: Rhode Island, and Massachusetts limits its use to certain portions of the test. A new four-part modular format of the REID REPORT allows test administrators to select the portions of the questionnaire they wish to use.

Over forty years of psychometric research has established that the tests are non-discriminatory and are highly reliable. They fully meet the Equal Employment Opportunity Commission’s guidelines and, when legally challenged, have always stood up in court.

Do the tests work? The RPS office issues a number of case histories going back to 1950 showing such successes as: (a) reducing inventory shrinkage 28%; (b) identifying and correcting employee attitude problems; and (c) upgrading the general quality of personnel. There are approximately 3,000 firms currently employing the REID SURVEY for current employees.

Among the mail order and retail firms on the RPS client list are General Nutrition Corporation, The Sharper Image, Gap Stores, and Commonwealth Trading, Inc. (Chadwick’s of Boston).

IMPORTANCE AND PROBLEMS OF PART-TIME PERSONNEL Q. I have heard that the use of part-time workers is the single most important labor-saving technique that any business, particularly a direct marketer, can use to reduce and maintain low fulfillment costs. Is that true? What problems are there in using large numbers of part-timers?

A. Part-time employment is growing in importance in general industry. It is reported that over 25% of all workers are part-timers; the practice is widespread in the fulfillment aspect of direct marketing.

The part-time phenomenon provides flexibility for both employees and employers. It enables businesses, such as direct marketers, that have daily, weekly, and seasonal processing peaks (following the mailing of catalogs and promotions), to bring in part-time people to handle spurts in workload. At the same time, it permits many secondary wage earners to join the workforce while they also care for their families or pursue further education.

Studies have shown that part-time workers are at least as productive as full-timers and in many situations, some, such as retirees, are more productive. Further, they are much more cost-effective since they don’t usually receive fringe benefits and can be sent home when the work runs out. Also, the part-time workforce constitutes a talent pool for full-time hires.

Here are some operations where part-timers are used very effectively in keeping costs low and maintaining a fast order turnaround: mail opening and sorting; taking telephone orders; data entry; receiving merchandise; order picking, packing, and processing returns; and responding to customer correspondence.

Most direct marketers with low fulfillment costs make heavy use of part-timers. They bring in a part-time workforce to handle peaks, without adding to the base full-time staff or incurring the expense of overtime. They also use less than full-time personnel in a particular activity on a regular basis where the workload does not merit a full-time addition to the staff. Examples would be the use of additional workers in the mail room on Monday and packers in the warehouse on Friday.

Although the number of companies using part-time and temporary workers in direct marketing is constantly increasing, many companies are not yet taking advantage of the substantial benefits that are attainable. Like all good things, however, very often there are problems associated with their use. Here are five of them:

1. Resentment on the part of full-time employees. According to James W. Walker, a consultant with the large personnel and compensation firm of Towers, Perrin, Forster and Crosby, New York, many regular employees resent workers with the relative freedom to come and go by a different schedule, or in some cases, keep no discernable schedule at all. Further, they question the company loyalty and customer interest of part-time employees.

Many companies counteract this attitude by announcing that new job openings and promotions will be offered first to full-time career employees. They also restrict such perks as paid sick leave and vacation days to full-time employees, even though part-time employees may be working a part of every week. Other companies hold a different view with respect to benefits; see discussion following.

2. Application of incentives. Many companies have found that it makes good business sense to include both part-time and temporary employees in incentive programs. Experience has shown that many seasonal or temporary workers, when they are included in work measurement programs, can be made more productive – by as much as 50% – when they are utilized on repetitive jobs that have a short training cycle.

3. Wage levels. Some companies, particularly banks, have resorted to paying part-time tellers a higher average hourly rate than regular employees. This practice has brought new workers into the labor market. It is reported that where this has been done, regular employees have accepted the situation because they welcome the assistance provided by the part-timers during busy periods. The approach reduces the pressure on the regular staff.

4. Payment of benefits and bonuses. Some companies have found that they are not able to attract good temporary and part-time workers, unless they provide some benefits. Therefore, they offer a program where prorated vacation and holiday time is based upon length of service and number of hours worked. Also, bonuses at Christmas and other times are sometimes paid to attract new workers.

5. Job training of temporary workers. Some direct marketers have established separate training departments for the specific purpose of training new workers or re-training individuals who return each year to help out in the handling of peaks. This process has proven to: (a) speed up the time when the employee becomes fully productive; (b) provide assurance that a high work quality is being maintained; and (c) minimize the supervisors’ on-the-job training burden.

EXECUTIVE COMPENSATION Q. Within the past three months two of our top executives have been lured to competitive direct marketing companies. I felt these individuals were fairly compensated. Others believe they quit because salary adjustments and bonuses in our company are at the sole discretion of the CEO. How important is a formal compensation program in retaining executive personnel?

A. The rapid expansion of direct marketing and the explosion of its technology have spawned a new breed of marketing and operating specialists who have their own place-and their own value in the business picture. Both compensation and the desire for new challenges stimulate executive mobility. Executive turnover must be addressed.

Companies with formal compensation programs experience markedly lower executive turnover. A formal executive compensation program provides these meaningful benefits:

- establishes base salaries and incentives at the level you want relative to your competition;

- assures that compensation will be equitable for all;

- simplifies compensation administration;

- provides flexibility where it is desired; and

- provides top management control over compensation decisions that are made by executives at all levels.

Installing compensation programs usually involves these three steps. First, determine by a compensation survey what is being paid in comparable positions in your location. The Direct Marketing Association has conducted salary surveys for various positions broken down by size of business and region. Second, determine the importance of each of the executive positions to your particular company through a job-evaluation process. Finally, establish appropriate salary levels and an incentive program based on the data developed in steps 1 and 2 above. If you do not have a senior human resources (personnel) executive in your company to undertake such a program, you should consider outside professional assistance.

EMPLOYEE TURNOVER Q. My management believes that our personnel turnover is resulting in lost production and increased administrative expense. Before we try to reduce it, I think we should try to measure it. How do you do that?

A. There is common agreement among retailers and direct marketers that employee turnover has escalated in recent years. Yet, few merchandising companies compute turnover, and even fewer make an attempt to estimate replacement costs. There are basically three ways to measure employee turnover. You can use any one of them.

1) Net turnover. This is the number of separations or additions (whichever is smaller) divided by the total number of employees on the payroll during a specified period.

2) Replacement turnover. This calculation excludes layoffs and divides only separations that require replacement by the total number of employees.

3) True turnover. This excludes from the calculation unavoidable separations, such as those due to retirement, deaths, and health or family problems.

In direct marketing fulfillment, it is said that if more than 15% of the workers have less than six months’ service, the company is experiencing excessive turnover.

Estimates across all industries indicate that these costs are experienced in replacing employees:

Percentage of Salary Hourly employees 7% to 20% Management 23% to 175% superscript *

Source: Personnel Journal, published by the National Retail Merchants Association

superscript *Higher range includes the cost of executive relocation and recruitment fees.

For example, the following is a list of some of the costs that could be incurred in connection with hourly employee turnover:

1) Separation costs

- reduced productivity prior to departure

- time lost by the employee and others in discussing departure

- Interview time and discussion of departure with supervisor and personnel staff

- administrative paperwork in closing out employee

- lower morale among peers in department

2) Acquisition costs

- advertising and employment fees

- screening and interviewing

- reference checks

- payroll and benefits entries

3) Training costs

- employee’s and trainer’s time

- on-the-job training and supervisor’s time

- substandard performance of new employee

- error rate of new hire

- lost production during training

QUALITY CIRCLES Q. To involve workers in the process of upgrading fulfillment operations, I understand that a number of companies have installed quality circles. What are they?

A. Quality circles (QCs) are a progressive technique for upgrading quality of work and increasing employee productivity. Although QCs were first utilized in this country prior to World War II, it has been the Japanese who have expanded, and accordingly have benefited from, their application in recent years. It is reported that 15% of all Japanese industrial and service companies use the approach – with dramatic results.

The basic premise of the technique is to involve individual workers in developing and installing changes to improve the specific work tasks in which they are involved.

This is how it works: small groups of employees (fewer than 10) from a given function (e.g., order processing, picking, packing, etc.) will meet on a regularly scheduled (usually biweekly) basis with supervisors. They discuss problems and explore how work can be performed faster, easier, and cheaper. These meetings usually last an hour.

QCs are not just another “suggestion system” approach. They are an aggressive program to encourage employees to identify solutions to problems. Supervisors must be trained in how to conduct the meetings and the entire effort must be fully supported by middle and top management.

The system has been effective in accomplishing such results as: (a) reducing the time required to process an order from three days to one; (b) rearranging a warehouse layout to make the picking talk simpler and faster with substantial reductions in labor; and (c) upgrading the accuracy of order picking with a 50% reduction in complaints about short shipments and wrong merchandise.

In sum, QCs are a fundamentally simple and low-cost method to improve fulfillment functions and develop better understanding between workers and management.

EXECUTIVE PERSONNEL TRAINING Q. How can we make our fulfillment executives more productive?

A. Jack C. Staehle, retired vice president, operations, personnel, and controller of Aldens, Inc., the now-defunct large Chicago catalog house, and a recognized authority on training executives, says that an efficient catalog executive spends his time as follows: listening, 40%; talking, 30%; reading, 15%; and writing, 15%.

Further, according to Staehle, the president of a catalog company should spend 85% of his time on future planning – that is, on matters relevant beyond one year; a vice president, 60%; and middle management, 30%. To have time available for this planning, a catalog executive must be proficient in handling day-to-day matters.

Here is a list of suggestions to improve the productivity of fulfillment executives. They are divided into two groups: company practices and personal habits.

Company Practices 1) Decrease paperwork sent to executives by minimizing the production and routing of copies of memos and letters, and curtailing the circulation of report copies.

2) Provide a meaningful and concise reporting structure, thereby keeping executives informed of events or information that may impact their operation; and issue reports on a timely basis.

3) Permit executives to utilize outside professional counsel to assist in the development of major capital expenditures and review technical drawings, specifications, and computer programs for accuracy and completeness.

4) Exercise meeting control by: reducing the number of meetings; paring attendance lists for meetings; stringing meetings together; limiting discussion time; providing pertinent information in advance; and preparing and distributing an agenda prior to each meeting.

Personal Habits 1) Don’t procrastinate. Organize personal time by: maintaining a list of projects that you are personally working on or monitoring; setting goals and a schedule for each day; pacing the day’s activities to accomplish the goals; starting the work day early (between 7 and 8 a.m.); and using the early time to catch up and set the priorities and schedule for the day.

2) Use commuting time profitably. Read reports and trade publications; record ideas; listen to tapes; and edit subordinates’ submissions.

3) Establish specific telephone hours by: not interrupting meetings or working sessions with colleagues by taking calls, unless of extreme urgency; and responding to calls either early in the morning or at the end of day.

4) Keep telephone calls as short as possible. Have a list of all items to be discussed and relevant back-up data before calling.

5) Take care of correspondence immediately. If a short response is required, write an answer on the correspondence itself or handle with a telephone call.

6) Reduce the amount of reading by reviewing the table of contents of publications to pinpoint articles that could be of interest, and practice scanning.

7) Avoid unnecessary “business” lunches. In addition to the time they take, heavy lunches greatly cut afternoon productivity.

FOUR-DAY WEEK AND FLEX TIME Q. I have read about alternative employee work-hour programs such as the four-day week and flex time. How do these programs operate and can they be effectively used in the catalog business?

A. In a four-day week plan, employees usually work for ten hours on each of four days during the week.

In a flex-time program, they work the regular number of hours each day, but can choose their hours within certain constraints established by the company (e.g., between 7 a.m. and 7 p.m.). Provisions are made to ensure that (a) there is at least minimum coverage of telephones and in-person contacts with customers during all normal business hours, and (b) regular daily production activities are not impaired.

Although both of these concepts have existed for some time, they are still not widely accepted in industry. They are considered by many to still be in the testing stage.

Here are some of the benefits that have been reported by companies that have undertaken such alternative work schedule arrangements:

- substantial reduction in chronic lateness;

- increased willingness to work extra time during occasional heavy workloads;

- fewer days off taken by employees for medical appointments and other personal needs – in one organization, the number of sick and vacations days taken dropped by an average of six per year for each employee in the program;

- increased productivity, which resulted in reduced overtime costs; and

- easier recruitment and hiring of employees.

The potential effectiveness of these programs in the direct marketing field, however, is limited. Due to the sequential staging of work steps (i.e., mail handling, order processing, check handling, keying, picking, and packing), it is not practical to have fluctuating staff levels during the day. For example, if all mail handlers decided to wait until 10 a.m. to start work, the rest of the sequence would fall behind schedule and order fulfillment would have to be carried over to the next day. Also, if you were fulfilling orders only four days per week, overall service would be impaired.

COMBATTING EMPLOYEE FATIGUE Q. During the past two years, our fulfillment operations have become more sophisticated. For example, we have installed an online order-entry system, an extensive conveyorized order-filling system, and an electronic shipping system. Recently, slumps in worker efficiency are apparent. We suspect these slumps are due to fatigue. How can we eliminate this fatigue factor?

A. Fatigue can be reduced, but never eliminated. Whether fatigue is a mental or physical condition, the result is the same – a decrease in worker efficiency. Contributing causes include (1) working environment; (2) repetitiveness of the work; and (3) the general health of the workers.

1. Working environment is the compilation of elements surrounding the workplace. Here are some ways to improve the working environment.

- Proper illumination is vital to maintaining a high performance level. The eye strain, headaches, and tension caused by poor lighting severely affect productivity. Adequate lighting should be maintained in the office and in the picking and packing areas of warehouses.

- Temperature and humidity are critical and extremes can seriously affect worker productivity. Acceptable environmental ranges are: temperature 65 to 73 degrees; relative humidity 20% to 60%. Fresh or circulated air can reduce the impact of heat in non-air-conditioned working areas, such as the warehouse.

- Color is a factor that can psychologically and emotionally affect worker fatigue. For example, purple and violet tend to encourage feelings of fragility, limpness, and dullness, while green imparts restfulness, coolness, and stability. Painting selected areas of the warehouse, particularly the employee facilities, in bright dramatic colors tends to keep workers happy.

- Noise can be a distraction. Extraneous and excessive machine noise is irritating; overheard conversations can be distracting. Facility equipment generating excessive noise should be repaired or replaced immediately. Work stations should be located a minimum of 15 to 20 feet from a major noise source. Other workers should be isolated from people who have frequent meetings or talk steadily on the telephone.

2. Repetitiveness of work is a psychological factor rather than a physical one.

- Assigning work to a person properly suited to the task is a key factor. Determining this cannot be done by testing alone. Close observation of the worker after starting a new job and review of his or her production will determine whether it was a proper assignment.

- Timing of breaks is important. Studies have shown that slumps tend to occur in the third hour in the morning and one to two hours after lunch. Slight increases in productivity usually occur in the half hour following lunch.

- Providing alternate standing and sitting positions, where this is practical, also tends to reduce fatigue for such physically demanding jobs as packing.

3. General health of workers is an important factor in maintaining productivity and reducing personnel turnover.

- On-site fitness facilities are being offered by a number of companies, such as L.L. Bean and Country Curtains.

- Sponsoring fitness programs in conjunction with community resources has contributed to fewer sick days and less tension.

Other factors affecting fatigue are the emotional stability of the worker and conditions at home, which the worker brings to his job. These are factors, however, that, for the most part, cannot be dealt with by employers.

OUTPLACEMENT Q. What is outplacement? Has it any application in an exploding industry such as direct marketing? Why is it used?

A. Executive outplacement is a personnel service developed in recent years by industrial psychologists and human resource experts to assist displaced executives in relocating. The service is usually paid for by the employer. Some of the benefits the terminated executive can obtain from skilled professionals are: (a) help in writing resumes; (b) interview training; (c) psychological guidance; and (d) job target research.

The recent merger mania has in many instances destroyed traditional organization charts and long-standing executive slots. In merged companies many line and staff positions have been eliminated because merged companies ended up with two managers for a single function. The result: Industry, in general, has found itself with an oversupply of executives.

In direct marketing, the situation is entirely different. There has been and still is a dearth rather than a surplus of highly qualified, direct marketing executives. Yet the field is faced with problems of terminating and relocating executives holding key jobs. Why this apparent anomaly? There are three reasons.

1. Some expanding mail order companies have developed so rapidly that the management and technical skills needed currently are beyond the capacities of many who initially contributed to the company’s early success. To say it another way, the Peter Principle came into play when executives were promoted upward, only to struggle unsuccessfully with problems that have become too complex for them. Such executives must be replaced.

2. These same rapidly growing direct marketing companies had to rush to hire executives for urgent new management jobs. In many cases, the hiring was done too hurriedly – without sufficient reference checking and without properly matching skill with need. These hiring mistakes frequently resulted in fish that are out of water. These executives, too, must be replaced.

3. Direct marketing ventures, which have leveled off to a predictable and reasonable growth rate after experiencing rapid expansion, often determine that better efficiency can be achieved at lower overhead costs, if certain executive posts are combined. In these cases, there is superfluous executive talent, which has to be removed or relocated.

In sum, although there may be no excess talent in the direct marketing industry as a whole, there are a large number of individual cases where executives are not fulfilling the current requirements and warrant outplacement assistance.

Here is a case history. A talented, “hands-on” direct marketing executive was recruited when the business was below $20 million in annual sales. He was a valued member of the team that helped build it to $100 million. That business now requires more technical and creative skills than he possesses. He has been outplaced to another organization doing about $25 million, where he presumably will make a meaningful contribution to its growth. His former position is now filled with an executive with more sophisticated technical skills. The outplaced executive, his replacement, and both companies have all benefited.

There are two sides to the use of outplacement services. From the terminated executive’s point of view, the service lends immediate and expert assistance during an apparent career crisis. He is given specific aid on how to practically handle his personal career situation.

On the other hand, the company’s funding of this help shows the corporation’s concern for its displaced executives. This demonstrated paternalistic attitude toward its people appears to have a favorable impact on the company’s overall morale, particularly in the executive group. Further, by retaining an outside firm to take over the problem, the company is directing its own time and resources to concentrate on the business’s current and future problems.

Ask a CEO what he or she wants most from their fulfillment operation. It is likely that the response will be:

“Fast service and high quality, but I want to achieve those goals at the lowest possible costs.”

In the next piece, suggestions are offered on how to run the tightest ship in the fulfillment business.


 

fenvessy on personnel

Oct 01, 2000 9:30 PM  By

Productivity Improvement and Cost Reduction The overall goals of the executive in charge of fulfillment should be three-fold:

- provide fast order turnaround;

- perform it competently and accurately; and

- produce the results economically.

This final chapter brings into focus the last goal. Specifically, this involves increasing the productivity of labor and reducing the costs of the non-labor aspects of the fulfillment function. In early sections of the book cost savings and productivity improvement suggestions were offered in the various functional discussions. To achieve the full perspective of what can be accomplished, it is recommended that the following references be re-read in concert with this chapter:

OVERALL PROGRAM TO IMPROVE PRODUCTIVITY Q. Our fulfillment staff now exceeds in number all other aspects of our business – management, marketing, buying, and accounting. What can we do to raise the productivity of that large group?

A. No subject is capturing the interest of the direct marketing and retailing industries to a greater extent. Increasing productivity is being looked upon as the answer to improvement in both service and profits. In fact, there are those who believe that raising productivity is the key to survival.

In an attempt to solve the serious problem of declining productivity in industry in general, a number of broad-based surveys have been conducted among business executives and workers. The following is a synthesis of eight major recommendations reported in those surveys appropriate to the fulfillment function.

1. Offer financial rewards for productivity gains. This should take one of two forms: (a) incentive payments to individuals or groups of clerical and warehouse workers for production above specific work standards, and/or (b) distribution of bonuses to all workers based upon the rise in the company’s profits. More on this below.

2. Involve employees in decisions that directly affect them. This could include such elements as new methods, equipment, and working hours. Have employees and supervisors meet regularly to discuss problems and to explore new ideas. Use of quality circles is one technique now being put to use in many companies.

3. Introduce better equipment and systems. Examples in fulfillment would be: (a) increased application of the computer to eliminate repetitive clerical chores (such as typing, editing and totaling), and to simplify picking and assembling orders; (b) installation of conveyors and other automated transport and storage methods to quickly deliver and take away work and to store and retrieve products; and (c) use of CRTs to expedite access to inventory and customer records.

4. Hire an industrial engineer to undertake a work-simplification program. A careful in-depth review of each clerical and material handling function usually produces evidence of duplication and unnecessary tasks that when eliminated result in substantial savings. Questions such as the following should be asked with respect to each processing step.

- Is each task necessary?

- Can it be done easier?

- Are the processing steps being performed in the right order?

- Can the work of one individual be combined with another, thereby eliminating passing?

5. Maintain workflow planning. To achieve high productivity, there must be adequate work flowing to each individual. This requires establishment of work-control records, incoming work-volume forecasts, and personnel scheduling techniques.

6. Provide pleasant and stimulating physical surroundings. Tests have shown that working conditions can have a major impact on productivity. This includes: clean and orderly premises; adequate lighting; proper ventilation; a sound-absorbent environment; adequate space between desks and workstations to inhibit visiting; and enough walls or other barriers, plus close visitor control to minimize visual interruptions.

7. Improve relations between management and workers. This is a factor that both executives and employees agree could have a material effect on increasing overall productivity. In particular, this refers to: (a) greater opportunities for employee recognition and promotion; (b) more and better communications from management about decisions that affect employees; and (c) employees being treated with more respect by supervisors.

8. Intensify employee training. Too frequently employees are left on their own on a job after limited indoctrination by a supervisor. This often results in the employee creating his or her work methods and work pace. To increase productivity, there must be: (a) introductory training programs; (b) written instructions for all major work tasks; and (c) on-the-job training and quality reviews by peer groups or team management.

It is the general consensus that management, employees, and consumers would all benefit substantially from increased productivity. Furthermore, it appears from the surveys that employees are amenable to achieving an overall increase in company productivity. Therefore, it is up to the company to act.

A SELF-PRODUCTIVITY AUDIT Q. My management says that if we improve productivity in the office and warehouse our profit problems will disappear. How do we conduct a self-audit of our productivity?

A. Here is a list of a dozen questions that will help evaluate your productivity efforts. The issues these questions raise should point out how you should proceed to achieve greater efficiency and labor control.

1. Have you sent overall service and cost objectives for each function in your operation?

2. Do you communicate those objectives to managers and workers?

3. Have you highlighted productivity improvement as a company goal?

4. Do you have a specific trained staff or individual assigned to the task of productivity improvement?

5. Do you accurately and formally record the production of individual workers or groups of workers?

6. Have you set standards for individual or group job tasks?

7. Do you compare actual to expected results?

8. Do you know that workers want pay tied directly to performance and if they get such a program, productivity will increase?

9. Do you reward workers for performance over reasonable standards with merit increases or incentive payments?

10. Do you measure the efficiency of staff personnel using budgets or performance goals?

11. Do reports on effectiveness and productivity performance reach top management?

12. Do you have an overall top management commitment to improving productivity?

Direct marketers that provide the fastest and best service and have the lowest costs will answer affirmatively to each of the above questions. If you can’t, there is a genuine opportunity to improve your bottom line.

RATIO ANALYSIS TECHNIQUE Q. We have heard about a cost-reduction technique called ratio analysis. How does it work and is it applicable to our fulfillment functions?

A. Ratio analysis is a technique to isolate and rectify the operating areas of your business that are not functioning on an economical basis. These are the steps involved:

1. Accumulate on a worksheet detailed departmental operating ratios for the past several years by year or period, showing labor and other costs as a percentage of net sales.

2. Highlight the years and/or periods that have the lowest ratios. The best ratios will not necessarily occur in the same year.

3. Compare the best ratios to current performance to highlight departments where costs are now higher than they have been in the past. Frequently, this approach isolates operations that are now overstaffed or have not maintained adequate cost controls.

4. Request that appropriate managers bring their costs in line with the best ratios, or explain why they can’t.

This ratio-analysis technique has been used successfully in reviewing mail opening, keying, warehousing, picking, packing, and customer service operations. In those functions, unit costs, for the most part, do not change, and therefore should maintain a constant percentage to net sales as the business either expands or contracts.

IMPACT OF NEAR-ZERO BACKLOG ON PRODUCTIVITY Q. I have been told that using part-timers throughout the fulfillment operation is the most important labor-saving technique. What is second in importance?

A. Maintaining a near-zero backlog is the second most important factor in reducing costs. It is also a major factor in providing fast order turnaround.

The most efficient fulfillment operations operate under this principle: keeping current daily is a desired interim goal, but weekly currency is mandatory. Currency means that, except for the small amount of work carried over from the previous day to get the operation started in the morning, there is no work in the unit other than that which came in today.

Of course, to match this standard, there must be sufficient personnel to process the work. This requires accurate forecasting of incoming orders and the use of part-time personnel to handle spurts resulting from seasonal and marketing peaks.

When the near-zero backlog approach is adhered to, an interesting phenomenon occurs. Productivity increases up to 40%. Personnel work faster in order to maintain the established standards of work currency.

Val Olson, vice president of Sentry Insurance Company, in an article in Chief Executive magazine, compares the zero-backlog management method with the Japanese management technique kanban. In the kanban approach, the Japanese plan for supplies to arrive at the plant just in time for production. The Japanese “run without the security blanket of an inventory,” said Olsen. In the zero-backlog technique, an office or warehouse runs without the security of a work backlog. In both approaches, according to Olson, management and the workforce are forced to provide a high level of service or they are faced with giving no service at all.

The near zero-backlog technique is precisely executed by such direct marketers as Quill Corporation and Inmac (office and computer supplies), Brookstone (tools and gifts), and General Nutrition (vitamins and health foods), each of which ships about 75% of orders the day of receipt.

SHORT-INTERVAL SCHEDULING Q. There is a great deal of controversy about a cost-reduction technique, called short-interval scheduling, that I understand originated in the mail order industry many years ago. How does the system work, and what are its strengths and pitfalls?

A. Short-interval scheduling (SIS) is a method of controlling labor expenditures. It is an element of a control system, not the system, as claimed by many of its proponents. More accurately, it is a method for dispatching (rather than scheduling) work assignments to individual (or groups of) employees in sequence.

Here are the basic principles of the technique. First, a job is broken down into various components. Then, the time needed (often estimated) to complete each component is determined. Next, the job is scheduled according to the sum of the individual component times. Finally, it is assigned to the worker.

The assignment of jobs makes SIS different. Instead of assigning the whole job at once, work is allotted in short segments (or intervals), ideally single person hours. Hence, the source of its name.

Typically, it works as follows: A batch of work is given to an employee with a statement of how long it should take to complete. If the task was estimated at one hour and the employee took longer to complete the task, the supervisor can inquire why. In other words, the technique focuses attention of supervision on a specific employee (or group of employees) and the work assigned. Implementation may vary, but that is the essence of SIS.

SIS is consistent with sound industrial engineering principles and has been installed in many fulfillment operations with positive results in terms of work control and cost reduction. It should not, however, be regarded as a fast and cheap alternative to engineered work measurement and incentives, which are discussed next.

HOW TO INSTALL LABOR INCENTIVES Q. I recently read that “workers want pay tied directly to performance, and if they get such a program, productivity will increase.” What are the benefits of such a program and how do we go about installing one?

A. The statement you refer to came from a study conducted by the Public Agenda Foundation of New York entitled, “Putting The Work Ethic To Work: A Public Agenda Report On Restoring America’s Competitive Vitality.” The study has stimulated a large number of companies to review their compensation programs with an eye to increasing employee productivity.

Most well-run businesses with a high volume of paperwork or material handling employ some form of work measurement. This includes catalog marketers, publishers, insurance companies, credit card firms, banks, and companies operating large distribution centers. Experience shows that their labor costs would be from 20% to 30% higher if they did not use work-measurement techniques. In the catalog industry, less than five percent of the companies are presently using work measurement, but most of the larger concerns do, including the “Big Three” catalog companies, plus Hanover House, Fingerhut, American Express, Arizona Mail Order, and Home Shopping Network.

As a general rule, companies using the technique provide markedly better service and experience substantially lower unit costs. They also achieve these additional benefits:

- Increased productivity. Working under a measurement system, employees realize how they can personally benefit and quickly do chores faster than they thought they could before.

- Improved methods and procedures. The job analysis associated with installing and maintaining the system usually results in elimination of unnecessary tasks and the streamlining of systems.

- Better supervisory control. A measurement system helps make an operation self-supervising, thus giving the manager or supervisor more time to plan, train, and refine existing methods.

- Employee evaluation. Both the company and fellow workers are made aware of an individual employee’s contribution, such as by posting performance results.

- Forecast workforce requirements. Using established standards, management is able to convert incoming workload into specific personnel requirements.

- Higher morale. Once a measurement system is in place, employees, almost across the board, like its impartiality and the way it rewards good workers.

- Standard costs. With labor effort now measurable, it is possible to develop meaningful cost data for individual operations or order types.

There are eight fundamental steps involved in installing a work-measurement and incentive-pay system.

1. Establish productivity improvement as a company goal. Productivity improvement starts with management’s commitment to raise productivity. Management should exude genuine enthusiasm and support for the project and commit the necessary funds and personnel when required.

2. Assign specific staff to accomplish the task. Productivity improvement will not succeed as a spare-time project of a manager or several managers. It requires a full-time engineer or an outside consulting group to initiate the project and then an internal industrial engineer to maintain it.

3. Follow up regularly to ensure that the program produces results. Assign specific projects, goals, and a timetable. Be sure that progress – successes or failures – gets back to top management.

4. Implement work-reporting procedures. Determine the countable and repetitive work output in each area. There should be counts by individual and group and records of hours applied.

5. Install a productivity information system. This should take the form of a weekly report that shows for each activity: service level; pieces per worker hour; and unit operating costs.

6. Establish basic productivity standards. Set standards by: (a) using historical records; (b) employing estimates of time by one familiar with the operation; or (c) conducting engineered time studies.

7. Review actual performance against the standards. Determine the reasons for variances, such as: (a) insufficient work received; (b) different kinds of work performed; (c) changes in work flow due to varying seasonal or marketing patterns; and (d) overstaffing.

8. Recognize outstanding performance. This can be accomplished by either rewarding workers who exceed standard performance with merit increases or by implementing an incentive system.

In sum, when a work measurement program is warranted, properly established, and continually maintained, it is a very effective industrial engineering tool, both in the office and in the warehouse. For more on the subject, obtain a 70-page pamphlet entitled Improving Productivity: A Self-Audit and Guide for Executives and Managers, published by the National Center for Productivity and Quality of Working Life. It is available from the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402.

WHERE CAN INCENTIVES BE INSTALLED? Q. What kind of work best lends itself to work measurement?

A. Jobs with the following five characteristics are where a work-measurement system should be initiated.

1. The work should be repetitive. The nature of the job should be such that the individual work tasks are relatively simple and are frequently repeated during short intervals.

2. Output must be quantifiable. That is, you must be able to count the output – number of orders entered, number of customer service responses handled, number of boxes packed. All work measurement is based on units produced within specific hours worked.

3. The work has to be consistent. During a specified interval, such as a day or week, the mix of work should remain relatively the same. For example, a single worker cannot both enter data using a CRT and also file correspondence, unless each of the differing activities is on a separate standard.

4. Volume of activity must be sufficient. The amount of work must be large enough to permit workers to meet and exceed standards. Otherwise, the application of work measurement is not appropriate.

5. Rate of production should be operator-controlled. Workers’ productivity cannot be limited by the speed of a machine or the receipt of work to be handled.

Fulfillment tasks that best meet the above criteria are: order entry; reading, researching, and responding to customer service mail; and picking products and packing shipments.

TYPES OF INCENTIVE PROGRAMS Q. What are the general types of incentive programs employed in fulfillment functions?

A. There are three types of measurement programs for clerical and material handling tasks:

1. Piece work. Here a worker’s earnings are directly related to output. For example, an employee would be paid a given amount for each shipping label/letter typed, or order packed. Currently, this approach is applied in direct marketing almost exclusively for cottage industry workers, such as home typists or workers performing alterations.

2. Measured-day work. This is the development of standards for individual jobs or a collection of work tasks. Individual workers or groups of workers are evaluated against those standards. In this approach, the standards are frequently based on either: (a) historical records of daily output; (b) historical averages modified by some intuitive adjustment factor; (c) time studies with a stop watch; or (d) using pre-determined time values for each action/motion and assembling the data into an overall standard in building-block fashion. If the employee does well, he or she receives a merit increase, usually at a regular review period, sometimes in between. What characterizes measured-day work is a formal program with established standards known by the employees and regular, usually weekly, reporting of results. Many companies know what average production rates are, but do not develop expected rates, do not inform employees of what is expected, and do not reward performance (at least in part based on production). These three steps, developing standards, monitoring production, and using results to help determine wage increases, constitute a measured-day work system.

3. Incentive pay system. With an incentive system, the employee’s base earnings are guaranteed, but more payment is added to the worker’s regular pay when productivity level exceeds a standard. Incentive earnings frequently average 20% to 25% of an employee’s base pay; outstanding employees may consistently earn more than that. In fact, a top employee may earn more than 60% of standard – and the employer is better off as a result. Some companies initially introduce measured-day work because it is easier to implement and by so doing obtain meaningful cost savings. Many then convert to an incentive pay system and gain additional savings. A further advantage of incentive pay is that while industrial engineers are conducting time studies, ways are often found to simplify the individual work tasks. This frequently results in additional savings of 10% and sometimes much more.

Regardless of the program, incentive systems are definitely morale boosters. Employees earning incentive pay particularly like the additional income and the impartiality of measurement of their performance. Managers like the way incentives motivate people to perform all day. They also like the way standards identify those who are not as productive. Before any incentive program goes into effect, there are a number of policies and approaches that should be considered and then promulgated. Specifically, it is suggested that workers be informed of the company’s policies concerning work measurement. A statement similar to the following should be issued: With respect to our contemplated work measurement program the company agrees to:

- clearly define and explain to each worker all elements of work to be embraced by each incentive standard;

- provide allowances in each standard to take account of unavoidable delays, fatigue, personal time, and other miscellaneous elements;

- revise an incentive standard after it has been put in place only if the work itself has changed, and then only if the change amounts to at least plus or minus five percent of the allowed time;

- modify a standard as soon as practical after it has been determined that the job has changed; and

- employ experienced and trained personnel to install and maintain the standards.

Finally, a productivity improvement system in the form of work measurement needs to be accepted as a way of life. Managers can’t just give it lip service. You have to understand its benefits and possible hazards if it fails. Encouragement from the top down is required to motivate improvement. To install any of the foregoing work-measurement systems, it is necessary to hire an experienced industrial engineer or bring in an outside consulting group. Both require considerable investment, but the experience of others shows that the pay-off possibilities are very high. :

The above chapters are excerpted from the book Fenvessy on Fulfillment: The Catalog Executive’s Guide, by Stanley J. Fenvessy, published by Catalog Age Publishing Corporation, Stamford, CT, 1988. Specific names, addresses, and contact information mentioned in the text were accurate at the time of publication, but may no longer be so.