The world knows about incentive tools since the Biblical days as a motif intertwined in many stories. In the story of Jacob, for example, who worked for Lavan the Aramaic for seven years in exchange for Rachel’s hand (and then another seven years, but we are not in favor of deceiving the workers). The potential benefits and successful implementation of a well-known and clear remuneration model first and foremost involves increasing productivity and improving efficiency. However, it is difficult to say that the remuneration model is a new or innovative tool. Still, it can indeed be implemented with innovative approached and to meet contemporary needs in the industrial world.
Implementing a reward model can cause difficulties and risks to arise. Sometimes the results do not stand the test of reality and do not achieve significant savings. Therefore, it is crucial to ensure proper assimilation, implementation of fundamental principles for success, and constant maintenance of the model with the help of various tools.
Model Simplicity- Based on Moore Management Consulting’s experience gained in characterizing and implementing dozens of reward models over the years, one of the critical principles for success is employee engagement and motivation. The primary work assumption in the theoretical analysis is that employee performance will converge to the maximum premium accordingly. This assumption, of course, depends on employees’ ability to understand and contain the model and change that occurs in their work environment. It is necessary to produce a simple model based on a few variables and easy to calculate. In our consulting work, we usually describe this principle with the statement ‘the worker can count the shekels accumulated during the day.’
Win-Win- The purpose of the existing remuneration model is to improve the performance of the business; the remuneration model has no right to exist without enhancing the profitability of the company. At the same time, it is necessary to make sure that the employees whom we wish to retain are not harmed and are even hired out of the implementation of the model. There are two possible scenarios-
Balance- Employee compensation for productivity alone can lead to impairment in quality, employee behavior, and more. All the important variables for successful production must be considered in the model. What are these variables, and how is it appropriate to view them? The most accurate answer is- on a case by case basis. A more fundamental answer is that the ‘core model’ performance should be maintained, meaning that the other variables should have less impact on the premium, and we usually treat them as multiples (reward or fine).
Optimal Environment- Productivity is not always dependent on employee performance and motivation. Most often, there is a high dependency on machine performance, work environment, non-productive hour policy, and other factors. Part of the management’s focus on a specific point (unit/production line/ group of workers) is to ensure that we provide an optimal workspace environment subject to support cost-benefit analysis. We must consider such things as the maintenance department’s commitment, availability, heating, and cooling according to the seasons and more.
Model Maintenance- The literature sometimes indicates the ineffectiveness of long-term financial incentives — we at Moore Management Consulting associate the failure to implement it incorrectly. Proper assimilation is based on many factors. Briefly summarize the additional options required to implement a remuneration model (and proper management of employees in general)- creating a promotion horizon, a sense of satisfaction in the job by increasing responsibility and authority, personal and attentive management, ongoing positive reinforcements, and more. However, it is important to emphasize a vital tool in extending the life of the reward model- the Buy Back Mechanism. This tool allows us to release the stagnation to which performance comes after the employees receive the maximum premium over time. The principle of the tool is based on raising the goals and the difficulty of being able to reach a maximum premium while providing a one-time monetary grant.
The remuneration model is an optimal and professional solution that can deliver impressive results and promote a company to its business goals. We at Moore Management Consulting believe that proper characterization and implementation are the keys to success.