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How to Implement a Warehouse Incentive Program

A couple of weeks ago, we tackled how organizations are dealing with the war for increasingly scarce labor resources. With a national unemployment rate hovering around 4%, employer competition for labor is making staff turnover a critical issue.

How can you reduce your costs associated with competition for labor? A key way to mitigate your risk is, simply enough, to focus on employee retention.

It’s much more cost-effective in the long-run to focus on motivating and retaining your current workforce. You can increase employee retention by using incentives and incentive-based pay.

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Why Warehouse Incentive Pay Programs Work


Incentive pay programs have proven to be a popular option for improving warehouse productivity and retention by as much as 15-30 percent. Other incentive program benefits include:

  • Increased job satisfaction
  • Improved employee morale
  • Increased productivity
  • Reduced employee turnover
  • A healthier bottom line

 

Types of Incentive Pay: Individual and Team Incentives


Individual incentives have been found to be the most effective type of award in a distribution environment, as the employees control their own levels of performance and their potential reward.

Team and reflective incentives should be considered when individual performance cannot be measured. Reflective incentives reward one group for their contributions toward the performance of another group.

There are three types of incentive programs: monetary incentives, time off, and awards. We explain these in Winning the Warehouse Labor War post.

 

How to Implement a Warehouse Incentive Program


With those categories in mind, here are five steps you can follow to implement a successful warehouse incentive program.

 

Step 1: Understand the Need for Incentives

The first item to consider when implementing an incentive plan is to answer the basic questions of “Who, What, Why, Where, When, and How.” Understanding the responses to these questions will help align the behaviors you wish to reward as you develop the actual incentive program details.

 

Step 2: Involve Your Employees


It is important to understand the employee’s perspective and interest level when developing the framework for an incentive plan. Additional pay, paid time off, and rewards are the three most common types of incentives used. The use of employee surveys can help identify which type of incentive will encourage the highest performance level.

 

Step 3: Simple Is Best

When developing the framework for an incentive plan, the “KISS” principle (Keep it Simple) will be easily understood by employees and will result in a higher implementation success rate. Employees want to be able to calculate what they have earned. Incentive plans that are too complex will not be adopted by the organization and will not achieve the desired results that management expected.

 

Step 4: Include All Employees


Avoid segmenting out certain employee workgroups when developing the incentive plan. Incentive plans that focus on a small subset of the overall employee staff will lead to jealousy and resentment within the organization. Be creative with individual and team incentives and do not forget about your supervisors.

 

Step 5: Use Work Methods and Labor Standards


Just like every house needs a solid foundation, an incentive plan needs a solid foundation based on Preferred Work Methods and Engineered Labor Standards.

An employee observation program should be established to ensure each employee is reviewed on a frequent basis and confirm that each employee understands the method so they can be successful. Multivariable or discrete labor standards are recommended over single variable labor standards, such as lines or units per hour.

 

Conclusion: Warehouse Incentive Programs - Too Important to Ignore


Incentive plans are highly effective to motivate and reward desired behaviors. These programs are win-win for both the organization and individual employees.

The 5 tips above will help ensure your incentive program delivers intended labor productivity improvements and that your organization quickly adapts to, and delivers against, new guidelines.

For more tips on implementing an incentive program for your employees, check out our white paper 10 Tips for Successful Incentive Plans.

Download White Paper

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