Benchmark Request: Incentivizing Employees

NWHPEC members,

ATI is interested in hearing about any successes you have had in incentivizing employees:

ATI is exploring way to incentivize employees and would like your feedback on what is working and what has not worked.  Any tips or learnings that you can share would be appreciated.

To respond to this benchmark request, please add a comment to this post or email Tasha Williams at

Thank you!


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2 Responses

  1. Ben Johnson says:

    Here is Paul Akers’ answer from page 100 of his book “2 Second Lean”:

    “Question: Do you give your employees incentives to improve?

    Answer: In the beginning, we did and this was perhaps one of the biggest mistakes we made. We have since learned that Lean is our job. It is not something we do above and beyond our job. Continuous improvement is everyone’s first and foremost job every day of their life. The first incentive for making Lean improvements is that life keeps getting better when you are thinking Lean!

    When we gave monetary incentives, we felt that people were making the improvements because they wanted the $5.00 or $10.00 incentive for every improvement they made. When we took the incentive away and said, “This is your job. Your job depends on it…” people realized that we were serious about Lean. We hired them because we wanted to use their brains, not just their hands. This is a game changer because most people don’t feel like they’re appreciated for what they contribute intellectually to the job. They feel that we just want them to build widgets.

    We changed the paradigm and said, “Your value is in your mind.” When we did that, people got on board at an entirely different level. It is my humble opinion that paying people to do Lean is a mistake. Giving incentives takes the emphasis off of what the purpose of a company is. The purpose of a company is to improve the quality of the customer’s life. The purpose of a company is to deliver value at a very high level to the customer. The purpose of a company is to strip away the non-value added activity and deliver to the customer more value consistently day after day, month after month, year after year. When you do that, your
    stature increases in the eye of your customer, your customer keeps coming back for more and then you make more money. When you set the focus of each team member on making continuous improvements every day for the rest of their life, it changes the paradigm. It takes the focus off of them and puts it back on the customer. It frees team members to focus on collaborating with other team members to deliver more value to the customer.

    The second incentive for making Lean improvements is that they earn respect from the customer, their team members and from me. Every human being longs to be respected, but most people never get it.”

    I have to agree with Paul on this one. Our staff of about 300 has done thousands of improvements since we started using the “2 Second Lean” model 2 years ago. We offer no extra incentives besides recognition, respect and the personal satisfaction that comes with doing improvements. This is not to say small incentives, profit sharing, ESOP’s, etc… haven’t worked for other people but my perspective is that they are not necessary.

  2. Lam has struggled with this in the 3+ years I’ve been in my current position.

    Below are a list of things we’ve tried and the results:

    1) HOURLY MANUFACTURING FLOOR EMPLOYEES (Non-Exempt): We run 24/7 and the most difficult shift to keep filled is Back End Nights (5 pm – 5 am, every other Wednesday and every Thursday, Friday, and Saturday). Some of the incentivization we have used are as follows:
    A. Incentives:
    i. A shift differential (i.e. for BEN there are 3 differentials that kick in that add up to 15% increase in hourly rate);
    ii. Automatic overtime (based on Oregon law but all four shifts get this so I’m not really sure that it is an incentive that is shift specific (just manufacturing floor specific);
    iii. Nights get a paid half hour for lunch (day shifts do not);
    iv. Spot Awards/Gift Cards: we encourage our leads and supervisors to catch people doing things right. When they see someone going above and beyond we try to immediately recognize that effort. The amount is commensurate with the impact of the effort on our three annual goals/targets (which change each year and are communicated in January);
    v. For day shift the cafeteria has free oatmeal everyday.
    B. Impact:
    i. Each of these incentives worked initially due to the novelty. Some of the incentive petered out and became an expectation/entitlement. For example:
    a. The cafeteria although subsidized by Lam is run by a for profit external supplier. At one point Lam decided to stop the free oatmeal. There was a great uproar and it is back completely funded by Lam. As far as incentive goes I don’t see this being differentiator (i.e. no one is not going to quit Lam or be more productive) because of oatmeal).
    b. The shift differential was very successful until Oregon raised the minimum wage to $15/hour. Lam is currently assessing the impact of this and looking at adjusting our hourly rates.
    c. We are currently reviewing the process around spot awards and gift cards. We believe this will eventually have a good impact to productivity. The problem I found was that all leads and supes were not consistent. That is, someone under one supervisor would receive one of these awards for a certain activity and then someone under someone else would not. We don’t want to add administrative overhead to this as that would be anathema to the purpose of “instant” recognition. I am currently working on developing simple clear criteria and then a communication plan to ensure everyone is on the same page.
    d. Another note about shift differential is that when people move from nights to days it is a hard sell (because they lose the 15% differential and paid lunch time). So, I guess it is an effective incentive to keep people on nights but then if they want equal pay and move to days they leave the company.

    2) EXEMPT EMPLOYEES (including but not limited to supervisors, managers, engineers, manufacturing support (salaried)):
    A. Incentives:
    i. There is no sick leave. That is, when an exempt employee is sick they simply inform their manager. Granted there are limitations (e.g. if someone is sick two weeks in a row or longer the manager is supposed to recommend the various leave options). The reason this is an incentive is that ALL PTO is for vacation purposes.
    B. Impact:
    i. Our industry is very generous with PTO so this does not really make us any more competitive with respect to compensation in our industry. However, in the Portland area we don’t have much competition in our industry so I think this does reduce attrition for members of our workforce for whom PTO and leave options are a concern.

    A. Incentives:
    i. Restricted Stock: Managers are encouraged to allocate employees who are in the top 2 categories of performance restricted stock. NOTE: This option is available to all employees but the rules around it make it so most of the allocations are to higher level employees.
    ii. Bonus: Discretionary. These are payments awarded based on excellent performance. The pool increases for each level of employment. It is another pool of money with which a supervisor or manager can allocate funds to their employees.
    iii. Bonus: Non-discretionary. These are payments which everyone receives based on a combination of overall company performance and individual organization’s performance. Employees are informed of the “formula” for the bonus at the beginning of the year and apprised of performance to target on a quarterly basis. Bonuses are allocated twice per year.
    iv. Stock purchase program. Once an employee reaches their 6 month of employment they can elect to set aside up to 15% of their income (after taxes) to a stock purchase account. Once every six months these funds will be converted to company stock based on the lower stock price (of the beginning of the period and at the end of the period minus 15%).
    v. Milestone parties. These can be company-wide, site-wide, or individual groups. This can be for a target met (100% on time delivery over a period time) or celebration/holiday celebration.
    B. Impact:
    i. Of the 5 I believe that ii and iv above have the most impact. The other three have either become expectations/entitlements or simply make us competitive in our industry (i.e. they are not differentiators). When used correctly discretionary bonuses can make the difference between an employee staying or leaving the organization or the company. The stock purchase program is one of the main reasons I joined the company and I use it to the highest level (15%).

    I am not sure if this is the kind of stuff you were looking for but these are the top ten incentives I see. There are other non-monetary incentives. If you have any questions please feel free to ask.

    Happy New Year!

    Mark Bentcover, LAM Research