Paul Akers Q&A On Incentives & Rewards for Kaizen
It's time for another reader question – this time, it was a question that came in via Twitter. It was right on point with things I was talking to Paul Akers about in our recent podcast (audio and video).
The question was whether Paul and his company FastCap use incentives or rewards to employees in exchange for their improvement ideas.
Paul's response, where he talks about the pros and (mainly) cons of this approach (with my summary below):
The key points of Paul's response for those who have YouTube blocked at work:
- Paul encourages all employees to call themselves “process engineers” because they all work to improve their processes every day.
- When Paul was “naive” (his word) and before he understood what motivated people, he thought you had to pay people for their ideas ($5 or $10).
- Paul started wondering if people were making improvements just for the money or because it was the right thing to do. He thought the rewards really distorted the motivation for kaizen (to make your work easier and ultimately “make the world a better place.”
- Paul quit giving direct incentives, keeping in mind he pays them well to begin with (including benefits and retirement).
- Stopping the incentives took away a lot of “stress and hassle” from Paul and his people and they have “a much happier culture” adding “it had been a nightmare to manage” the incentives.
- Paul says it's “a joy” to be a part of a kaizen culture because it's not that hard to manage.
When I've help set up kaizen programs in hospitals, we've never done payments or incentives. The focus has been on making your work easier and providing better patient care. That's personally rewarding to people and it's good for the organization.
I agree with Paul's thought that you should pay people well enough that they aren't preoccupied with money (then they can focus on kaizen)… keeping that in “a prudent balance” as Paul says.
When I worked at GM in the mid 1990s, there was a very traditional suggestion box program, with a bonus paid out based on a percentage of the value of the idea. This creates many dysfunctions, including:
- People fight for credit over ideas (especially if just one or two people are going to get rewarded).
- Management has an incentive to downplay the value of an idea, which causes fights and disagreements with people.
- The larger the incentive, the more people are motivated just for that prize and they tend to not focus on the small improvements that are so powerful in the kaizen approach to improvement.
In our upcoming book Healthcare Kaizen, my co-author Joe Swartz and I touch on the topic of rewards.
I share data and examples from organizations, like the lab at Children's Medical Center Dallas (journal article about their lean culture), where there were not direct incentives for kaizen (although it was a factor in one's annual performance review… but performance reviews are different discussion altogether). I know for a fact that you don't need incentives and rewards for kaizen.
At Joe's organization, they do use incentives, but they are small amounts given for the implementation of an idea (not just having the idea). The few dollars' worth of points aren't the primary focus, it's just one form of recognition that fits into all of the other ways they give recognition to people (ranging from bulletin boards to all hands' meetings to an annual awards ceremony). These small recognitions haven't interfered with the development of a kaizen culture and having thousands of small improvements each year.
What are your thoughts and experiences about the use of rewards and incentives? Is it a “necessary evil” in some organizations or cultures? What have you found that works or doesn't work?
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I feel that the idea of not using incentives and letting “make the process easier for you to use” be its own reward only works IF the company itself and the operators care about one another. If the management genuinely shows little interest in the employees and there is a significant rift, then the employees almost have to be “bribed” with rewards to make things better.
I was part of a company that had an awful culture like this and I essentially had to separate myself from management because the way they approached the floor operators was in stark contrast to my mission. I tried to preach the concept of mutual understanding and “caring about the process to make it easier on you” which is very difficult to do in the middle of the organizational chart.
I think a temporary fix for creating change in a poisoned culture is the incentive plan, but to eradicate the problem is to overhaul the culture and not use such incentives. In short, I agree with Paul and Mark.
You raise a great point, Chad. If you are having to pay incentives to get employees to participate (“bribing them” was a term that I think Dr. Deming used), then you aren’t getting to the root cause of the problem.
And managers who think the employees are the root cause are basically beyond help, it seems.
I think the book “Drive” by Daniel Pink really brings out how people are really motivated when they themselves are given the opportunity to improve how they do their work.
Much better than money with all the hassle that entails
Yes, I really like the book Drive and I often reference back to Dan Pink when discussing this topic.
My podcast with him: http://leanblog.org/107
A motivated work force typically doesn’t need incentives to perform. The culture of the organization is the biggest obstacle to productivity. I’m sure everyone recalls Zapp! The Lightning of Empowerment. The premise is still valid today. Your policies, procedures along with the interpersonal skills of management will either “Zapp or “Sapp” the motivation and loyalty of the workforce. As an example some companies downgrade reviews if an employee doesn’t have a curtain number of suggestion per year (SAPP). If you have to force suggestions or pay for them something is out of sync.
One of the most insightful pieces I have ever read about ‘bribing’ and appraisal in general is the chapter on performance in Peter Scholtes’ Leaders handbook. It shows a very clear view on why appraisal by carrots doesn’t work and drives unwanted behavior. In the end it all comes down to one major pillar of Lean; respect for people. Unfortunately in most large organisations the respect/trust is severely lacking. In my experience trying any Lean initiative is doomed for failure or only small short term gains if the respect part is not actively practiced.
Great insights on motivation for employee ideas. At our hospital we’ve been surprised at how well our teams have accepted and ran with the concept of small, but significant ideas of how to improve the care we provide to our patients.
During our 4-5 year Lean journey we’ve chosen not to incentivize employees with a monetary gift in favor of verbal or written recognition to that employee.
In my recent research on how best to celebrate and recognize employees when they’ve implemented an idea, all of the scholarly writings indicate employees connect with smaller, non-monetary recognition instead of the huge prizes that some companies use.
Whether it’s a closer parking stall, having a family member come to hear the recognition, or a simple handwritten note, all of these inexpensive ideas have proven effective in generating additional ideas at our facility. Here’s a link to inexpensive recognition ideas that I found to be very useful:
Thanks again for your insights.