Management
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matters by John Darker AMBIM
Incentives in road transport (2)
LAST WEEK I referred briefly to the incentive scheme operated by Neptune World Wide Moving Inc. of New York. When the company's executive vice-president, Mr. Henry Kirschenbaum, described this at last year's Eastbourne conference of the British Association of Overseas Furniture Removers, I was much impressed, not least by the importance attached by the speaker to putting all incentive schemes into a correct context.
Even in the very different climate of America the most elaborate incentive schemes offering a host of material inducements do not last very long. There is a pronounced tendency for "fringe" benefits to be taken for granted and in the short or medium run to be absorbed into standard conditions of pay and service. Also—as the Prices and Incomes Board in its last months of life has conceded—there is the virtual certainty that a productivity scheme applying to part of the labour force will have a marked influence on those left out. If the total effect on the firm is not beneficial, sectional productivity may be dearly bought.
Although Mr. Kirschenbaum was at pains to emphasize that American terminology and the working environment differed from that in Britain, such common problems as declining profits, increasing competition from other transport modes, growing governmental regulation, public pressure for better service and the constant difficulty of attracting and keeping good employees were problems common to both countries.
The speaker noted that the meaning of the term "incentive" had changed with the increasing complexity of modern business. In dictionary terms an incentive was something which incited to action—it spurred or motivated. On top of the base pay paid to an employee for a particular job incentive payments (a) to get the job done faster, (b) at an odd time of day, (c) more carefully, or (d) as an inducement for extra physical or mental effort, had become normal practice.
But, said Mr. Kirschenbaum, "as one incentive after another was introduced and showed beneficial results for varying lengths of time employees—being human beings with normal reactions—became accustomed to them and took them for granted. The incentive came to be regarded as part of the normal working situation. Not only did the incentives lose their stimulating effects but attempts to withdraw them often lead to serious problems with employee morale. Consequently, many of yesterday's incentive programmes were showing up as standard items in today's labour union contracts and in, fringe packages which, in the United States, now equalled approximately 25 per cent of an employee's wages."
Labour productivity experts now viewed benefits and other incentives as part of a much larger picture. In their specialist jargon a man's attitude on the job was influenced by two distinct sets of conditions called "motivators" and "hygiene". Both were essential for productivity and employee satisfaction.
Among the motivators were factors tending to promote positive attitudes: achievement, recognition for achievement, responsibility for work, personal growth, and advancement.
In contrast, hygienic factors were unique in not improving job satisfaction but in helping to prevent a loss of job satisfaction. This group of factors included: (a) company policy and administration, (b) supervision, (c) relationships with fellow workers, (d) working conditions, (e) salary, (f) status and (g) job security.
"Basic principles" Mr. Kirschenbaum spelt out some basic principles. It was necessary to start with good pay, variety of work, opportunity for team play, opportunity for advancement, and a programme for effective management' worker communication. Firms must tell their workers of the company's successes, important jobs, what was happening and where the firm was going. "Everyone wants to feel he is on a winning team" It was also vital to support union contracts to the letter and spirit. "If you're tempted to make exceptions be careful. You'll find most often those exceptions, if they favour the company, come back to haunt you, and if they favour the employee, end up by being included in the next contract."
The speaker listed some of the benefits now part of the standard terms of employment at Neptune. These included 11 paid holidays each year, paid vacations ranging from 10 to 15 working days, depending upon the employee's length of service; two 15-minute coffee breaks per day; a schedule of paid days off for illness going up to a maximum of 35; and a number of insurance plans.
A group life insurance plan was paid for by the company after an employee had served for six months, the value of the policy varying with the employee's salary. There was a group hospitalization and surgical insurance plan effective after one month's employment After six months' service a major medical insurance plan was available paid for by the company and covering 80 per cent of applicable medical charges. For a small additional cost it could be broadened to cover the employee's dependants.
Over and above such "hygiene" items the company provided additional incentives such as a company car or car allowance, in given circumstances.
Employees at Neptune were encouraged to further their education. The company subsidized tuition cost based upon the employee's long-term contribution to the company and the relevance of the course of study to the employee's work and Neptune's business.
Payment of employment agency fees, while still an incentive, was on the way to becoming part of the "hygiene" package in the New York Metropolitan area where most companies paid agency fees on all jobs. A survey had shown that 80 per cent of all job candidates would not be interested in speaking with prospective employers unless the position was "fee-paid".
Mr. Kirschenbaum said Neptune had about equal numbers of salaried and contract over-the-road drivers. The salaried driver earned from $10,000 to $12,000 a year (£4,166 to £5,000). Contract drivers typically had an annual gross of $38,000 to $40,000 as their share out of which must be deducted their vehicle, fuel, labour and all other expenses. Nevertheless, the contract drivers' net income was much above that of salaried colleagues. A number of US firms used contract drivers exclusively because the incentive of being solely responsible for results provided a constant spur to do better. Proof of this was shown in the quality of contract drivers' work, their safety record and their productivity.
Neptune drivers introducing a prospective contract driver from outside received a $50 bonus and if the man was hired and worked for a year the finder received an additional $50.
Mr. Kirschenbaum stressed that driver response to incentive programmes could not be predicted with accuracy. For 12 years the company had used the "SOS" (Sights on Safety) stamp programme developed by the American Trucking Association but it had now been decided to withdraw from the scheme because it had lost its value as an incentive, becoming something of a negative influence on driver performance.
But other programmes of this kind were getting results. A Washington firm gave each driver a fund of 2,000 trading stamps at the beginning of the month_ If at the end of the month, no claims had been filed on jobs handled by the driver, he kept his 2,000 stamps. Not unnaturally, the fund of stamps decreased on an established formula for all claims attributed to the driver. (The speaker rightly pointed out that the question of ultimate responsibility for a customer claim could create more problems than the incentive programme could eliminate!) For office staff and "unorganized employees" Mr. Kirschenbaum counselled good wages, a comprehensive package of fringed benefits and an opportunity to share in profits. To attract people of above average ability, pay scales should be measured not only against competitors in the industry but also against wages paid by large companies in the area.
Neptune had operated a profit sharing scheme for eight years for all full-time, salaried employees not receiving a commission and not being union members. Assuming profitable operations, up to 15 per cent of an employee's annual salary went to an investment fund controlled by a committee of participating employees and managed by the investment department of a bank.
Divisional managers qualified for a percentage of the profits generated over a fixed amount through the successful management of their divisions. Salesmen at Neptune—who at one time earned points for finding prospects, making estimates and clinching deals—were now earning a good salary with a bonus on sales beyond established quotas.
In closing, Mr. Kirschenbaum said: "Employee contentment simply isn't for sale—it can't be—it's not a natural condition for people to be in . . . It would seem that the perpetual discontent of the human being is what enables him to survive and flourish."
Wages alone, in this American philosophy, must be supplemented by an everchanging variety of neon-lighted carrots to spur, excite and motivate employees' performance We may detest this attitude; viable alternatives will take some selling!