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Jury Pakhomov
"Business" No. 193 (458), October 2006

Machine tool Jackpot

This story was told by the head and co-owner of a rapidly developing industrial company which is now a leader of the Russian market in its niche. When the system of personnel motivation and labor productivity growth at the enterprise came to a deadlock, the situation was saved by an unexpected decision. Under certain conditions it may come useful to other companies.

The first thing the founders planned to achieve after the production process was started and the sales began was to attract wholesalers by the reasonable prices and faultless quality of their products. The core of the business was made by a small shop equipped with modern imported equipment operated by four-worker teams; each of them received stable wages for the shifts worked. At the first stage of the company development the workers easily reached the required quality standards. The output volume was below the production capacity, but the shop products had both presentable appearance and high consumer qualities — it was not a shame to sell them. Contacts with wholesalers were established, the demand for the products grew.

Steering the ship

Soon the management had to solve a new problem: to boost the activity and to ouster competitors from the market by increasing the output and sales volumes. Prior to expanding the production facilities it was decided to squeeze out the maximum of the already existing ones. And, consequently, to bring the labor productivity to the highest possible level. For that a new component was added to the former system of payment: a bonus for overfulfilment of the quota (the latter was set in advance to be not too high). To ensure the output growth would not result in a decrease in quality of the products, penalties for faulty work were introduced.

The results of these measures would become clearer if one takes into account some technological features of the given production process. An automatic machine used at the enterprise does practically everything itself. The operator is left with only manual packing of the products, elimination of malfunctions and the most important task — constant adjustment of the equipment. This was the key problem. The automatic device is managed with the help of several dozens of buttons. The workers wishing to get the bonus were faced with a very difficult problem: they were to push the right combination of the buttons to ensure high efficiency of the automatic device and the required quality of the products. The principal difficulty was that there was no single "correct" combination of parameters. Here it is possible to draw an analogy with an ancient sailing ship. The art of sailing such a vessel consists in constant "groping" for such an arrangement of all its numerous rudders and sails that, using the varying force and direction of wind, the ship should move in the necessary direction at the highest possible speed. The same was true of the automatic device: it reached an optimum operating mode when all of its modified parameters were fine-tuned in view of such conditions as the weather, temperature inside the shop, quality of water, differences in the properties of raw material, etc. One should note that the raw material used by the automatic device at any chosen moment was not the same as that used three hours back. And if the operator managed to achieve an optimum operating mode at seven AM, by ten o'clock it was necessary to adjust the automatic device in view of the changes having occurred.

While productivity was not of great importance, the operators learned to manage the quality of the products by manipulating some three to five buttons. They had a very vague idea what the other buttons were for. All that changed abruptly when bonuses were introduced. In search of the necessary combinations workers began to experiment with the operating modes of the machine tools. The teams began to actively share information on the adjustments and ways to achieve this or that effect or to accelerate this or that operation. As a result the operators acquired profound knowledge of the work of the equipment, becoming more independent in elimination of malfunctions. And, which is most important, they became interested in what they did. The work that had been simple, but monotonous and boring, was suddenly filled with a new meaning. And the people came to life.

Brilliant idea

Soon enough the productivity allowing to maintain the required quality grew by 20-30 % and reached a stable level. A month passed, then another, and still another... And the enthusiasm came to naught. A certain balance was reached between the efforts made and the remuneration received. What had been new, became habitual. The interest decreased. Fluctuations of productivity were registered, mostly towards its decrease.

In the meantime the market situation became more and more favorable, the enterprise being flooded with the orders from wholesalers. A new idea was necessary to boost up productivity. But what could be done? How was it possible to pump up new energy in the people? It was then the director general thought of it — a jackpot! A jackpot not in a casino, but at a plant! The system of labor remuneration acquired a new element — the "record" daily productivity, the team reaching it to receive a special bonus — jackpot. On the first day of the month the bonus for the first shift was 200 roubles, or 50 rubles for each of the workers.

If the team did not win the bonus, the chance to earn it passed on to the following shift. At that the jackpot grew by another 200 rubles. That for the third shift became another 200 rubles more ... As the work was organized in four shifts, each team working 15 shifts a month, by the end of each month the jackpot could reach 12 thousand rubles. The necessary record was set at a level which, working the best they could, the teams were able to reach not more often than three-four times a month, provided all the circumstances were most favorable.

On the wave of the experiment

What was the situation in which the workers found themselves? They saw an opportunity to earn extra money right now, during one shift. It is very difficult. But if they do not win the jackpot today, tomorrow it may well be taken by another team. That means they have to give all the best from the first minutes of the shift. This really spurred them up! "After the very first victories, — said our source, sharing his observations, — people become proud of what they do. They want to confirm the results achieved. To prove that their victory was not accidental, that they really are the best. The other teams, having failed to win, get a no less sharp desire to prove that it is they who are actually the best".

After the system of the jackpot was introduced, a new wave of experiments followed. The workers began to chase the chief engineer for the optimum modes, devoting even more time to studying technological gimmicks. The necessary breaks became minimal, the speed of independent elimination of typical malfunctions becoming fantastic. The people not only searched for new decisions in the art of managing automatic devices, but also experimented with different forms of sharing knowledge and kinds of labor organization. They began to daily give all the best. Passions raged around routine daily work — the very same passions that drive the fans at a sports stadium or players in the casino. The shop productivity quickly grew by another 20 %, and its fluctuations decreased from 20-30 % to 5-10 %.

Being constantly improved, the jackpot remuneration system has been effectively employed at the enterprise for already more than eight months.

Not so long ago the company managed to invite a western engineer. It was the person famous for being the best specialist in the world in the automatic machines of the given type, having been one of their designers. The culmination of his visit came when the engineer was taken to the shop and asked to adjust one of the working machine tools to set it to a more productive mode. Having observed the operator at work, the engineer threw up his hands, recognizing defeat: "It is impossible! I shall not even try it!"

Instead of an epilogue

For the readers tempted to attempt something similar at their enterprise we would like to note a number of important conditions:

1) The results of the work of the competing parties (for example, competing teams) should be measurable and indisputable for each of them.

2) The average size of the jackpot should be appreciable for the contenders (competitive motives and professional ambitions serve as a good "fuel" for this system of payment, but it is "started" all the same by the desire to earn money).

3) The company's business should be stable, profitable, ensuring uninterrupted money inflows that allow to guarantee monthly allocation of a bonus fund necessary to pay the jackpot.

4) The effect of mobilization of efforts of the competing parties should exceed the losses from the decrease of mutual aid when the teams are taken to different "corners of the boxing ring".