What Does Kaizen Suggest About How to Incentivize People to Submit Ideas?

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I received a question from a healthcare leader who had read about the “idea card” format and method that Joe Swartz and I shared in our Healthcare Kaizen books.

I read your post about the Idea Card. Amazing! Have a follow up question. What does Kaizen suggest about how to incentivize people to submit ideas?

She's asking about the “Kaizen” style and approach to continuous improvement.

I'll share some of my reply along with some relevant excerpts from the book.

I replied:

Incentives aren't necessary when people are empowered to improve their own work. Providing better patient care, creating a less frustrating workplace, making work easier… that's incentive enough in healthcare. Incentive programs create unnecessary complication, run the risk of being seen as unfair, etc.

I added:

It's interesting to me that management stifles participation in improvement… and then assumes incentives are required. It's a common assumption, but it's exactly that — a bad assumption.

But that's definitely the long story short of it.


Listen to Mark read the post (subscribe to Lean Blog Audio)


From the book, The Executive Guide to Healthcare Kaizen, I'll share these excerpts (text is from manuscript as submitted to the publisher).

What do you think? Leave a comment to share your perspectives. If it were strictly to me, I wouldn't worry about financial rewards. I'd focus on a robust and creative recognition system. I wouldn't try to pay out some percentage of the cost savings for every idea. If an employee had a truly monumental idea with a huge financial impact, we could try to use any existing system that might be in place to provide financial bonuses in truly remarkable cases.

OK, now from the book, first off in a section that talks about the problems with classic “suggestion box” systems (which are in many ways different than a Kaizen approach):

Suggestion Bonuses Cause More Trouble Than They are Worth

One other common dysfunction is the tendency of suggestion systems to pay out some percentage of any cost savings to employees. While this sounds good in principle, studies have shown that organizations that have larger payouts for suggestions actually get fewer suggestions. It may seem counterintuitive, but suggestion payouts can hamper teamwork in a number of ways, including:

    1. If the suggestion system only pays the person who originally had the idea, there's little incentive to work with others or there can be conflict about whose idea it was.

    2. It can be incredibly time consuming to work to quantify the impact of a suggestion.

    3. There can be a lot of controversy about how much a suggestion is really worth especially if the payout is a percentage of the idea's value.

    4. People will tend to focus only on large “home run” ideas or those that have a clearly quantifiable cost savings.

    5. Payouts have often been based on merely having an idea as opposed to actually implementing anything that provided value or savings.

In the Kaizen approach, the ideal state would be to not pay staff for ideas, as we want to tap into people's natural intrinsic motivations. People feel pride when their ideas are listened to and when supervisors work together with them to drive change. In addition to just wanting to be heard, people are generally happy to make improvements that make their own work easier or provide better care for patients.

Franciscan does have some financial rewards, in addition to recognition that is given in different non-monetary ways. The rewards at Franciscan are small, based on the documented implementation of an idea. The rewards are inclusive of all people who worked on a Kaizen team, not just the person with the original idea.

Kaizen Systems and Incentives

Children's Medical Center Dallas and the other hospitals that developed this method with Mark typically did not give financial rewards or direct incentives to participate in Kaizen.

The recognition and reward for Kaizen, beyond making one's work easier or the good feeling that came from helping colleagues or improving patient care, came from the wall itself.

As you will see in the following examples, the names of people involved in the Kaizen were displayed on the wall. This gave people recognition amongst their peers, their managers, and senior leaders who visited the department to review the improvements that were made.

Recognition Can Mean More Than Money

Key Action 3: Sponsor a Recognition and Incentives Program

It is important to ensure that employees are recognized for completed Kaizens. For many people, getting public credit and recognition is more important than financial rewards. Simply putting Kaizen Reports on a bulletin board and thanking people in team meetings can create a lot of goodwill and pride in people's improvements. Senior leaders also need to provide the budget and support required for a financial reward system for employees, if one is desired. See Chapter 8 for a discussion of the pros and cons of using Kaizen participation as part of an annual performance review process.

Sustaining a Kaizen Program–Incentives and Rewards

During the second year of their program, Franciscan introduced an incentive ­system that nominally rewarded people with points for turning in completed Kaizen Reports. All Kaizen Reports are treated equally, as there is no ranking of ideas based on their size. Kaizens with large cost savings are treated the same as a Kaizen about moving the location of a stapler. They have no direct cash payouts for ideas, and they reward for the process of doing a Kaizen.

Franciscan provides staff with a small incentive of 200 “VIP Points” for each Kaizen that is completed and approved. VIP points can be used to purchase merchandise or gift cards. The points are given to each Kaizeneer listed on the Kaizen. The only qualifier for the incentive is that the Kaizen is documented and approved by the supervisor.

At Franciscan, the KPO also gives out rewards when teaching Kaizen or when presenting at a department meeting. They use rewards, like a $5 cafeteria or coffee shop gift card, Post-it note pads, or small writing notebooks, when staff document a Kaizen Report in the training session based on something they have done in the past but had not yet documented. These come after a short training session and are like Kaizen documenting parties.

At the start of their program, the incentive system cost a total of about a $1,000 per year. Four years into the program, the annual Kaizen costs for the incentive system are approaching $4,000. The human resources department picks up the costs for the overall incentive program, as it was implemented for other incentive purposes, such as thank you card incentives, recognition, and birthday wishes.

Park Nicollet Health Services gives their employees “Ovation Points” that can be used to purchase items. Jennifer Rudolph, former Kaizen Everyday Engagement Program (KEEP)[i] administrator & lead specialist, says the points “might pique someone's interest to take initiative and learn about Kaizen, but it's not really a big motivator to participate.” Park Nicollet gives small rewards for most ideas, but might reward $150 for a large idea that saved $10,000, says Rudolph. She adds that people aren't using the system just to get points. Rudolph says a points system is “nice to have,” but not a critical factor.[ii]

Pros and Cons of Financial Incentives

Purely monetary rewards can be a disincentive and tend to distort people's motivation for Kaizen.

Organizations in other industries have sometimes learned that financial incentives for Kaizen can backfire if the focus for people shifts from improvement to the reward itself. In some organizations, employees were known to submit ideas solely for the reward payout. In some of these cases, a reward was given for a mere suggestion, as opposed to something that was actually implemented. To help avoid these dysfunctions, keep these guidelines in mind for a rewards program:

  • Incentives should be relatively small.
  • Incentives should be based on the implementation of an idea.
  • Incentives can be paid for attempts at implementation that were ultimately not accepted as a change (following the PDSA approach).

Ultimately, your organization needs to decide the proper role of incentives and rewards based on your own culture. Some pros and cons of incentive payments are listed in Table 8.1.

ProCon
It's one form of recognitionFocus might turn to earning money rather than fixing the process
Can garner participation from some who would not participate otherwiseAdds another administrative layer to the Kaizen process
Might seem fair to share savings and benefit with staffCan be hard to gauge the benefits of certain ideas
 Some research shows that financial incentives hamper creativity

The Utah North Region of Intermountain Healthcare does not use official rewards or incentives for their idea program. Some units might give meal tickets or candy bars for ideas, but the primary recognition is given verbally in huddles and staff meetings.


That's the end of the excerpts. Again, what do you think?

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Mark Graban is an internationally-recognized consultant, author, and professional speaker who has worked in healthcare, manufacturing, and startups. His latest book is Measures of Success: React Less, Lead Better, Improve More. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. He also published the anthology Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also a Senior Advisor to the technology company KaiNexus.

6 Comments
  1. Hugh Alley says

    Hi Mark: I’m with you about generally not supporting financial incentives. The research findings in behavioural economics are pretty clear. Financial incentives tend to crowd out the intrinsic benefits of the behaviour, so that they become expected. It becomes another transaction, rather than a contribution to the work of the community in the workplace. One economist observed that if you offered to pay your grandmother for washing the dishes after Thanksgiving she would be offended, and if your grandmother offered to pay her grandchildren, very quickly they would only do it when paid, rather than it being a part of being in the family. In addition, there are lots of experiments that show that the impact of financial incentives declines as they become more routine.

    1. Mark Graban says

      Thanks for reading and for commenting, Hugh. That research on incentives is well summarized in Daniel Pink’s book “Drive.” I interviewed Dan here: https://www.leanblog.org/2010/12/podcast-107-daniel-h-pink-lean-and-drive/

  2. Kaitlyn Pepper says

    This article was an interesting read. I never thought twice about financial incentives being a problem until reading this, and now I have a completely new view. You made some good points about how financial incentives make the idea process more of a transaction instead of tapping into people’s natural intrinsic motivations. Validation is key and public recognition is a better incentive than financial rewards. Feeling recognized by coworkers and higher ups in the company for a Kaizen idea fills people with pride, while money gives a temporary happiness and that’s it.

    1. Mark Graban says

      Thanks for reading and for commenting, Kaitlyn. “Temporary happiness” is a good way of phrasing it. Until the reward becomes an expectation and then it might not bring much happiness at all. I don’t think people ever get tired of being recognized by leaders and peers.

  3. Kevin McMullan says

    Hi Mark, I have seen that small rewards, and recognition are successful in this area. I work in construction and have implemented a ‘lean card’ system in a couple of places. We have rewarded folks with coffee cards or similar, and recognised people at ‘toolbox’ meetings (big team meetings) on site. The recognition I believe is the prime motivator of improvement suggestions continuing to be done, and the coffee cards are just part of that. I have seen a system with larger rewards being used, such as drop saws and similar, but I didn’t see an increase of great ideas compared to the projects that give smaller rewards.
    The key to success in my opinion, is how well the management team support the initiative by talking positively about the improvement process to the team at toolbox meetings, and playing their part in implementing the great ideas that come from the team.

    1. Mark Graban says

      Hi Kevin – Thanks for reading and commenting. That’s another data point for the argument that small rewards are fine… like you said, big rewards might not have more of an effect. Leaders can provide recognition and thanks and that goes a long way.

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