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Case Study (Incentives): Inventory Management
Submitted by Leslie Allan on May 6th, 2014
In an earlier blog post on post-training incentives, I adopted a case study approach to show how one company used external motivators to help encourage managers to apply the lessons from a harassment prevention training course. In this blog post, I want to use the same approach to illustrate how an organization in a dissimilar industry and rolling out a very different kind of training program utilized external incentives to boost the success of their training program.
In this scenario, a consumer electronics manufacturer implemented a new inventory management system. The new system involved a hardware upgrade to the company’s servers and the installation of new inventory management software. The training department invited production planning department and warehouse employees to a demonstration of the new system. The demonstration included some hands on exercises. Over a period of six weeks, the software vendor delivered the training competently to a little over 70% of the eligible employees.
After some initial stumbles with integrating the new system, the company introduced some new procedures, reorganized roles and set clear objectives for the performance of the new system. In spite of these improvements, some supervisors and front-line employees continued to resist using the new software.
The firm’s CEO discussed incentives with the management team and decided to focus management rewards on the achievement of the two key company inventory management objectives. These were:
- reduce average monthly total inventory value by 30% by end of year
- improve delivery to commit by 20% by end of year
The CEO realized that achieving these objectives would require the close cooperation of the production planning and warehouse managers at the highest level. So, the CEO decided to add these two objectives to each of these managers’ goals. These goals were then assessed as part of their annual performance appraisal.
The CEO also emphasized to the two managers that achieving these two goals would improve their chances of promotion. By focusing on these end-of-year results, the two managers became motivated to work on the underlying systems, processes and relationships that would be needed to yield the desired outcomes.
Achieving the above two company targets requires the enthusiasm of front-line employees working within each of the two departments. To focus employee efforts, the two managers set about to agree some intermediate goals with front-line employees. After some discussion, managers and employees agreed the following two objectives:
- 90% of inventory items entered in system by end of March
- reduce inventory data errors to 5% by end of June
The two people in the organization primarily responsible for meeting these targets are the Data Entry Officer and the Systems Manager. The cooperation of their peers is also essential. The managers of the two departments now track progress towards these two targets and produce a monthly chart. This chart is displayed in the main meeting room and is discussed as a permanent agenda item at each monthly department meeting. Where progress is maintained, the managers personally thank all department staff for their contribution and reserve special thanks for the Data Entry Officer and Systems Manager.
Achievement of the targets was also written into the performance evaluation criteria for these two roles. Whenever the targets are reached, a salary increment (above the inflation rate) is guaranteed. At the end of the year, when the good news arrived that the department objectives were attained, the two department managers organized a combined lunch feast at the employees’ favorite restaurant.
What incentives does your organization have in place to motivate employees to use their new skills on the job? Which incentives work best for you? Please share your ideas below.
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