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LZR Electronics Implements a Broad-Base Incentive Compensation Solution

BACKGROUND

The electronics manufacturing industry has been challenged for years with decreasing margins, quality assurance problems and an overall high turnover rate. Several manufacturers outsourced their production to Asia leaving many U.S. manufacturing firms to deal with low moral among its home employees.

In addition, it is common for departments in a manufacturing firm to work independently and not to focus on the common good of the company. An example of this would be an assembly line manager working in a different time frame than the sales department.

CHALLENGES

Some of LZR's employee challenges were unique to the manufacturing industry, however, most of their challenges could be identified in businesses across many industries. These challenges were in the form of organizational needs :

  • To create a self-motivated, team-oriented environment,
  • To unify all the employees under a common mission,
  • To communicate corporate goals and overall performance results,
  • To establish a link between incentive rewards and employee performance; and
  • To consolidate the fragmented and inconsistent incentive compensation program.

SOLUTION

It was ultimately determined that there was a great need to gauge employee attitudes. An employee survey was taken to determine the motivating and de-motivating performance factors affecting the workforce. The outcome of this survey was used to help determine where the company needed to improve its services and support for all employees.

Simultaneously, executives focused on the company's aspirations and developed a calendar of corporate goals for the year.

The solution to LZR's challenges was to find a way to combine employee motivation factors and corporate objectives to create an incentive program that provided employees with a common set of objectives, and motivated them for maximum performance.

IMPLEMENTATION

Implementing a comprehensive incentive compensation plan for LZR proved to be a difficult task. After much trial and error, management concluded that there are 11 basic steps that must be followed in order to make the plan a success:

  1. From the company's org chart, set up groups and subgroups.
  2. Determine incentive factors.
  3. Assign incentive factors.
  4. Allocate the incentive factors to subgroup levels.
  5. Determine the compensation schedule for each group.
  6. Define performance criteria
  7. Select compensation sources.
  8. Allocate compensation sources.
  9. Test the plan.
  10. Fine tune the plan.
  11. Approve the plan.

After all 11 steps were completed, it was imperative that all aspects of the plan were communicated to LZR's employees to gain their acceptance. Both company-wide and departmental meetings were held to explain the goals, the performance measures and how rewards can be maximized.

RESULTS

At the end of the first quarter, it became evident that the plan was working. Employees were recognized and rewarded. Productivity improved and profitability increased. Employees began monitoring their productivity, focusing on efficiency and timelines and concentrating on achievement.

Gradually, groups were watching over and helping others. An overall change in workforce behavior had evolved from self-centered, to a team-based, family, oriented environment.

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