Can Pay-for-Performance Increase Equipment ROI?

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On the surface, pay-for-performance programs seem to offer a straightforward way to boost output and other performance metrics. After all, nobody is going to pass up an opportunity to make more money, right?

After years of pay-for-performance experiments in a wide range of industries, the answer has come back: it depends. Some companies claim to have seen improvements, while others insist that performance incentives not only have no impact, but can actually undermine company harmony by fostering a climate of cutthroat competition.

Whether they’re for or against pay-for-performance schemes, however, most companies do share at least one thing in common: they often lack concrete metrics for defining rewards, and therefore often have difficulty determining whether productivity has, in fact, increased.

Outside of manufacturing, where output is relatively straightforward, many companies struggle to find basic measures of productivity that reliably reflect changes in employee performance. This is where maintenance software systems come in.

Output at the employee level can be difficult to ascertain, but the performance of a company’s assets is relatively easy to track with the right tools.  Since asset performance is linked closely to overall company performance, it can serve as a solid baseline for measuring improvement, and create a work environment in which it is the shared responsibility of all employees to take good care of equipment, report problems early, and evaluate the performance of maintenance personnel.

A recent article in IndustryWeek tackles the pay-for-performance debate (also referred to as P4P in the article) with a series of questions that managers should ask when considering such a program. A closer look at a few of these key questions reveals the specific ways in which maintenance software could be used to address them:

+ “Have you been on the continuous improvement journey for at least five years?”

If the answer is yes, and maintenance software has been used during that span to track asset performance, then there will be a wealth of data that can be used to establish performance metrics.

At the most basic level, companies who use maintenance software solutions are able to easily track overall asset cost, which is a strong indication of whether, and to what extent, these assets are being used correctly by employees. Using overall asset cost as a baseline, employees can be incentivized to take better care of equipment while using it, report problems early, and alert management to equipment misuse or neglect by other employees.

If a continuous improvement initiative is not in place, implementing a maintenance software system is an excellent way to lay a foundation for one. In that case, performance incentives, as we have noted elsewhere, can be a great way to ensure that the implementation of the software itself is successful.

+ “P4P programs are just that. Leadership must make the linkage clear between shop-floor results and corporate productivity improvements.”

Addressing this challenge is, again, a function of data tracking. Without solid data, it will be difficult, if not impossible, to not only measure employee performance, but to determine which performance measure is even worth incentivizing in the first place.

For this reason, it is imperative that companies monitor their operations closely with systems that offer full reporting functionality. With detailed insight into operations, managers can home in on the performance metrics that will deliver the best results, rather than tying incentives to ill-defined, overly broad measures.

Once performance metrics have been defined, it is simply a matter of tracking them over time and designing an incentive program accordingly. As performance improves, other metrics can be easily added to improve additional areas of a company’s operations.

+ “Are you prepared to meticulously track the metrics so that you can report with confidence at the monthly, quarterly and annual employee update meetings and be completely understood?”

At the risk of sounding redundant, the key here is, yet again, strong data tracking. It should be clear at this point that incentive programs, at least from the perspective of IndustryWeek, need to be clearly defined and easy to track and report on.

There’s no better way to undermine the success of an incentive program than to confuse employees. If it isn’t clear what the performance objectives are, and why they matter, it doesn’t matter how good the incentives are—employees are likely to lose interest.

Ultimately, there are no one-size-fits-all solutions answers when it comes to performance incentives. But with the right tools, companies give themselves a lot more options and opportunities to create something that works.

hr, CMMS ROI and Best Practices, employee incentives, pay-for-performance, Productivity, bonuses, employee performance, incentives, p4p, human capital

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