In Search of Productivity: Big Bucks Not Enough

Tom Peters

The WIX Division of $4.75 billion Dana Corp. makes filters for everything from lawnmowers to locomotives. After managers from the division visited Japan, they initiated a continuous improvement program, intended to be a carbon copy of what they had observed. It became a monster. “[W]e started Americanizing our system, and just tried to make it as complicated as we possibly could,” the division general manager recently reported to TEI (Total Employee Involvement) Newsletter. The program flopped.

But the WIX managers persisted, finally achieving success. The secret of the revised system: “No supervisor sign-offs, no points assigned, no cash awards. When employees have an idea, they are authorized to implement it without checking with higher-ups. They can spend up to $100 without clearing it with anyone.” All the worker does is “write it down on a card, along with his or her name, the plant, department, and shift. He or she tells how many people worked on the project and gives their names on the back. They record the date of implementation.”

Dana believes in a simple system, fueled by “the satisfaction of becoming a self-manager.” Others, such as NUMMI (the GM-Toyota joint venture) and Harley-Davidson, also emphasize the inherent value of a self-managed improvement process. This is, more or less, the Japanese approach as well. Their vaunted suggestion systems include rewards (so does NUMMI’s), but they are insubstantial.

On the other hand, an executive at Sutter Health of Sacramento, who was forced to slash costs, chose another strategy. Having had little success with meticulously calculated budget reduction targets, he turned to a dramatic productivity sharing program. Employees get half the savings from successfully implemented ideas, as long as quality doesn’t sag. In just six months, $2 million in unexpected savings have been unearthed. Employees stand to pocket $1 million.

Sutter Health is not alone in the path it has taken. 3M, in several plants, also splits savings from productivity gains down the middle with workers. Under the banner of the Scanlon Plan (a gain-sharing method developed in the 1930s), Lincoln Electric, the half-billion dollar (revenue) maker of arc-welding machines, motors, et. al., has awarded bonuses that have averaged 95 percent of base pay over the last 48 years. And steelmaker Nucor’s weekly productivity bonuses yield $17,000 a year in extra pay for the average worker.

So which is it? Small awards and the joys of self-management? Or a carrot of 24-carat gold?

There is no simple answer. John McConnell, founder of steelmaker Worthington Industries, is another subscriber to the big-bucks bonus theory. But he doesn’t see the bonus as a motivator. Instead, he calls it just one part of the overall recognition process. All it amounts to, he insists, is a pat on the back for a job well done (worth more than $10,000 a year for the average line worker).

Is McConnell’s distinction between “motivator” and “recognition” a semantic nitpick? I think not.

Try to slap a big-bucks payoff scheme into the average firm as a quick-fix motivator, and chances are you’ll make things worse rather than better. If workers aren’t listened to, if supervisors breathe down every back, if training is spotty and policy manuals run to hundreds of pages of Mickey Mouse, then the huge potential incentive can become an added source of frustration: “Here’s a carrot, but you can’t get to it.”

However, if the organization is fully committed to self-management (i.e., continuous training, wide span of control, opportunities for individuals and teams to analyze and implement ideas), then a big-payoff incentive has a fine chance of success. It provides recognition for thoughtful people (workers) who have been allowed to behave as thoughtful (contributing) adults. Indeed, the high-stakes Lincoln and Nucor approaches, for example, are marked by an unstinting commitment to people—and the absence of stultifying bureaucracy.

My conclusion is paradoxical. While I am a fan of the big-bucks approach if done right, I am nonetheless wary of most efforts to implement it. The Dana example is helpful again. Its undoubted success key is tapping the employee’s intrinsic motivation (for doing the task well), as the psychologists call it, rather than the extrinsic (the frenzied scramble for the carrot/carat).

Achieving spirited self-management, then, is the objective. To get it, from a management standpoint, anything less than an abiding belief in the capability of the average worker will lead to unsatisfactory long-term results. For example, most half-baked improvement programs, with or without financial incentives result in some immediate gains. But, to quote a bank executive, it’s “what happens after we’ve done the easy and obvious stuff that counts.” For Sutter Health, for instance, the jury is still out on this score.

When the going gets tough, after relatively easy initial successes are tallied and the big dollar bonuses look as though they might shrivel next year, what then? Well, the Lincoln, et al., cases provide hard evidence that the size of awards need not diminish as time passes. But payoffs will only stay in the stratosphere if the firm is fully committed to constantly improving workers’ opportunities to improve themselves.

It nets out to hard work: “attitude first, bucks second.” There are no panaceas for the American manager in pursuit of a quick fix for the “motivation malaise” or “the productivity conundrum.”