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Does performance-related pay motivate or disillusion drivers and does it fly in the face of European law? CM looks at some of the
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performance.related pay schemes have been getting a bad press lately. In the United States, where the concept was developed, the world's largest PRP scheme, covering 160,000 employees of the Federal Government in Washington was scrapped last month.
It collapsed amid accusations of corruption and inequity Similar schemes in this country, notably those at British Aerospace and in the Tax Office, have run into problems. However, if it is introduced with care, PRP can be a useful way of levering flexibility into the pay structure.
Recent events at North Yorkshire-based Prestons of Potto, where the company's attempt to introduce PRP via fuel economy and no-accident bonuses brought industrial action by drivers, indicates the suspicion that surrounds a concept which has been used extensively in the private sector for the past 10 years and which is now being introduced into the civil service.
Fears surrounding the use of PRP for drivers in the haulage industry are beginning to fade. The recession has seen off many fringe operators which used performance incentives to encourage drivers to overload vehicles and break hours and speed restrictions.
According to FTA figures, around 60% of operators now have some sort of driver incentive scheme in operation.
MEASURE
There are two common systems by which a driver's work can be assessed. A simple measure can be based on physical units, such as tonnes delivered, miles run and deliveries made. Alternatively standards can be set for driving and delivery times. Driving times tend to be a common factor to most schemes. Bonuses can be based on the relationship between actual and standard journey times.
However a different approach is taken at the Lane Group where drivers are given a set of targets to be met and accrue points toward an annual bonus.
"The targets were originally devised by the drivers themselves," says Diane Farrel, Lane's group communications manager. "A working party consisting of drivers and office staff identified what the core needs were for the company. These were linked through to the driver grading scheme."
The company also canvassed its clients to find out what they required.
Five basic targets were arrived at which the drivers were required to achieve: no accidents, uniforms to be worn, vehicles to be kept clean, correct deliveries, correct paperwork.
The company was keen to make sure the drivers' targets were realistic. Vague rulings on standards and unreachable targets are cited as the main stumbling blocks to successful PRP schemes.
GRADING
A year ago Lane introduced the scheme and integrated it into a grading system which had been running for six years. "We recognised that the grades were far too subjective and we wanted to get a lot more objectivity in to the system," says Farrel.
Drivers have to meet all the requirements on a regular basis to score points. The points are added up and if the score is within a certain band, the driver is paid a bonus once a year. The drivers are appraised annually and communication meetings are held once a month so that the drivers know how the company is performing. They are also seen daily on driver's debrief.
"We have very committed employees who know on a dayto-day basis how they are performing. Although it is quite informal, the standards are there and people know what they have to achieve," says Farrel. "We review the scheme every year with the drivers. We don't just say: 'There is the scheme—go away.' If there are any tweaks to be done, we want them to be involved. We don't ever want to impose anything. That way people are far more responsive. They have been positive about it because they have been involved from day one."
A more formal approach to PRP is taken at Christian Salvesen where a computer software program called Paragon is used to plan the working day for each driver. A worksheet is produced detailing the locations, the drops, the deliveries, the routes, the stores and t h e lilltimes for the day's work.
Drivers are given worksheets, which show an ideal performance level, before they leave the depot. During the day, they fill in the worksheets with what actually happened during the trip. The Paragon software takes into account volumes, meal breaks, road times and road speeds.
"We make sure the system does not require the drivers to break speed limits or drive unsafely, and that they do not drive in a way that hinders the reliability and quality of service to the customer," says Steve Thomas, Christian Salvesen's human resources manager. Taking all this into account, the Paragon system establishes the ideal time as 100%. The driver's bonus is then based on how he performs against this standard.
"Our experience shows that we are paying at levels of around 95% of this standard," says Thomas. "They don't achieve 100% and they never seem to be below 90%. The weekly bonus could move from nil, which is really unacceptable in terms of performance, to a maximum of around .£40 over basic wage." The system has been operating at the company for about four years.
DRAWBACK
One drawback with Paragon is that it is very labour intensive to run and requires a lot of double checking. Although Christian Salvesen is fairly happy with the system, in the longer term the company is looking at more effective and less labour intensive measures of performance. These could include phones in cabs for tracking and reassigning and the use of swipe cards with dedicated customers. "Within the next three to four years, we are looking toward measuring effectiveness of performance in these terms rather than with payments against performance related to Paragon," says Thomas.
Another approach to performance incentives is taken at P&O Distribution where, although detailed wage deals are thrashed out on a depot-by-depot basis, most of the company's branches are now running a system where new drivers are simply paid 25% of their truck's weekly earnings. This new system runs alongside the old, which applies to drivers employed before the change. "In essence we have two types of wage deal," explains operations director, Andy Packer. "The old one is primarily
a high upstanding rApP,IGTON wage and in general, a 55.hour a week guarantee, And then there will be a whole variety of different types of bonus systems. These can be linked to miles run or to standard speeds, which is a rather complicated way of earning a mileage bonus. There might also be an activity bonus, relating to the number of drops. They are all different and there's about a dozen of them. The bonus would represent between 15% and 20% of the driver's wage on average."
The new system is a product of the recession. For a long time, P&O had not recruited and then in 1992 the company decided to progressively introduce the 'pay as your truck earns' scheme for new recruits.
"We would not have taken on more people under the old wage deal, so the union's attitude was that we were creating new jobs What it has done is relate wages to the revenue we earn which has obvious advantages," explains Packer. The decision to limit the deal to new recruits was taken as a consideration to the existing workforce. "After 20 years on one system, you cannot expect a 60-year-old to go to another where the more the vehicle earns, the more he earns. That would not be fair."
The depots use a standard tariff system which is based on mileage bands.
The driver is not given any choice over what jobs he is allocated by the traffic office but he can improve his earnings by getting through more work.
AvjNirry HOSPITAL
VARIATION
On average there is a 20% weekly variation in his wage packet depending on the work he gets. The ideal situation for the driver would be if he could get ten 10-mile round trips in a day. "He would earn a fortune then," says Packer. "We have seen an improvement because the percentage of revenue that goes on wages is falling. The productivity of the new drivers has improved considerably over the ones on the old system."
The system encourages the drivers to finish a job as soon as possible in order to get back for the next one. But good driving practice is encouraged through perceptual driving courses updated regularly At TNT there is a basic pay structure and then various drivers benefit from bonus schemes. Collection and delivery drivers have a scheme based on the number of parcels they collect and deliver. Trunk drivers, bearing in mind they may have one bulk drop at the central sorting unit, get a bonus depending on mileage.
There are nearly as many different PRP schemes as there are companies running them. Whether they are in the spirit of EEC Directive 3820/85 or not (see box) isn't easy to prove but one thing is for sure: they are here to stay.
by Paul Newman