Cost savings and employee rewards

[TheTick]

Our employer is pushing for cost savings ideas. Our reward: "satisfaction".

I have heard of companies offering rewards to employees with cost saving ideas, some with lump some rewards, some proportional to realized savings.

Does anyone out there have a real-life example of any such programs?

"Great ideas need landing gear as well as wings."--C. D. Jackson

http://www.EsoxRepublic.com

 

[zdas04]

"Satisfaction" is the reward in suggestion-box systems that turn into fancy trash cans.

I retired from a major oil company that had a system for the last 15 years that did an ok job of rewarding exceptional performance. In that scheme, someone (most often your supervisor) recommended you for a portion of the maximum reward (max was $US 1,000, typical rewards were $300-600) for exceptional performance in cost savings, production improvement, safety performance, or (believe it or not) environmental performance. There were always some sour-grapes comments about "isn't he just doing his job?" or "I did better than than an didn't get anything, guess it's all about who saw you do something". But in the main it was a good program. To make it work every manager had a budget for the program and their performance on spending that budget was part of their annual performance review.

David Simpson, PE
MuleShoe Engineering

http://www.muleshoe-eng.com

 

[jmw]

I have been in companies where there is absolutely no incentive to employees to make suggestions. In fact any suggestion that they have a suggestions scheme met with blank looks.
Sad.
I knew one shop floor worker who knew how to do the job better but no one would listen. It was only once they had employed someone to look for improvements that they picked up on the change but only because the new engineer proposed it.
Go figure.
If you have a good idea, it is good because it confers some benefit to the employer. i.e. money. Why have a cap on the reward? if the idea would provide a cost benefit of several thousands of dollars I'd be damned if I'd give it in return for a $100. Why should anyone do that? If they paid me for that then no problem but most people who have the ideas are those who are intimately involved in the product/process or operation and it is often not their job.

 

[HamishMcTavish]

The company that I work for runs a suggestion scheme, see

http://www.devonportroyaldockyard.com/news/link/03_link.htm

and click on the 'catch up' link. Page 5 of the pdf file gives an illustration of employees being rewarded.

Not entirely sure if I agree with it applying to all our employees, e.g. I get paid by the company to have ideas, somehow I'm supposed to filter those ideas and if I think any can make me a few quid then submit them on the suggestion scheme? I think that doing a good job INCLUDES productivity improvements and cost saving ideas....

Regards, HM.

No more things should be presumed to exist than are absolutely necessary - William of Occam

 

[onlyadrafter]

Hello,

We had a suggestion scheme as well, now we haven't. A few people were rewarded with a percentage of the savings, (capped at a certain amount). I think it is a good idea, but as the other posts say, where do you distinguish between 'part of your job' and 'excellent suggestion'.

One example, and how true this is I don't know, we were told this by someone who gave us some training.

A airplane engine manufacturer had big problems with ice forming on the tip of the engine nose cone (for those of you working in this field, I apologise about the terminology). What they used to do was have a system of intricate pipework which fed some of the heat generated from the exhaust back to the front to heat the cone. Now one of the employees had an old sports car, which somehow had a similar problem on one of its parts (What I don't know), and how they had overcome this was to put a small rubber disc on the end, thus solving the problem. This method was suggested to the company, which worked and saved the company millions, from which a percantage was for the suggestor, the company had no capping value, and an agreement was achieved between employee and company.

Generally speaking, it is a good idea, because it makes people think about how they do their job, and not just doing it because thats the we we do it.



----------------------------------
Hope this helps.
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maybe only a drafter
but the best user at this company!

 

[jmw]

In countries like the US all ideas belong to the company, as i understand it. In the UK the 1977 Patent act means that all ideas belong to the inventor.(Inalienable). This doesn't except design engineers though it is usual that they do not get more than a nominal amount and case studies suggest they would be hard pressed to do any better from it. The short answer is that companies, within the legal framework, need to provide a clear definition of what is expected. Usually this means do what you are told the way you are told to do it and the way the job is described in the QA documentation.
Companies can be very adept at using your ideas and not rewarding. You might argue that if you give up your ideas you are securing your future. Wrong. You secure the companies future, not your own. I know people whose ideas gave a substantial benefit to the company and through the products to the clients. Their only reward was to be made redundant. There is no place in business for anything but cold hard business sense. Your ideas are your own. If they are valuable to your employees, check your legal position first then negotiate. Forget idealism.
Companies that recognise the value of idea need to create the environment in which ideas germinate and in which the creative minds are rewarded. If they don't, and if they don't reward ideas, why should they benefit. Those ideas that have value should be marketed at their value to someone who apreciates them. If the company has no intention of rewarding employees for their ideas, then keep quiet. This is business, not a charity. Ideas are currency. I have never quite understood some companies appraoch to money. If the idea is valuable it doesn't matter how much they pay to the creator because they are profioting and their clients are profiting. It's a no lose situation yet some compaines resent paying any money at all. Consequently they deprive themselves of the flow of ideas that can give them an edge in the market.

 

[HamishMcTavish]

Hi jmw,

I would modify your statement that 'all ideas belong to the inventor' in the UK because every employer I have worked for has added something in the terms and conditions that basically say that all intellectual property produced using their facilities during working hours belongs to them rather than myself. The trick would be to show (if it came to that) that I had not used company time or resources to develop the idea.

Also the idea may belong to the inventor but if they do not patent it before publication, then ownership would be difficult to prove.

You are correct when you say that most ideas are not rewarded (adequately) but consider that the Company tends to pay someone regardless of whether they produce the idea or not. You could view salary as a retainer and if you suggest something that allows the company to recoup that outlay then all the better! Mostly my ideas tend to be focussed on what makes my job easier so the incentive is always there to make them happen...

No more things should be presumed to exist than are absolutely necessary - William of Occam

 

[plasgears]

A small financial reward for good ideas is good incentive for stretching creative ideas, but some will argue that engineers are being paid for this anyway. Past history favors incentive programs, but management may be getting lazy or cynical.

 

[unclesyd]

Having worked for a company with such a program and being the recipient of several awards for achievements that were outside my area of responsibility I should appreciate such a program. The problem with this program was it was used mainly as reward to management, not the achiever. At the time I received my achievement awards my supervision also received a large reward for having such an outstanding individual working for him and getting the most out of him.

Here is an example of how the system worked.
“Here is your award in recognition of your personal contribution in salvaging (3) MK11A blocks which resulted in a cost avoidance of at least $250,000 each. These blocks were considered unusable (scrap) due to tube damage and internal tube blockage. Please accept the enclosed check which represents a gross award of $1,500 less the required deductions.
Your innovative approach to removing the tube blockage and repairing the damaged tubes was the major factor in recovering these blocks. You are to be commended for your enthusiastic and diligent work on this project which produced truly outstanding results.”

My boss received a gross award of $7,500. I found this out 12 years later after he retired when we were clearing out his files.
On several additional achievement awards I also found out that supervision received far more compensation than I received. By the time I received my last award the program had turned into a rewards program for nothing more than being a favorite of the boss. It got so far off track that someone at corporate caught on and kill the program completely.

 

[NanoMan]

I worked for a defense contractor that had a formalized program in which the award was based on the cost savings - capped at $10,000.

It was good and promoted people making suggestions about things outside of their areas of responsibility.

One downside is that some people turned in literally hundreds of suggestions in hopes of making some cash.

As one of the people who had to process the suggestions and write up specific reasons why they might be rejected, it got to be pretty annoying.

Overall, though, I think it's a good program.

 

[bubb375]

I agree with NanoMan. We have a program where suggestions can be submitted, and then a percentage of cost savings (if any) are provided to the submitter. There are two problems, every submittal made by and engineer is rejected because cost savings are considered part of our job already. The second problem is that engineering is overrun with suggestions that are impossible to implement.

I think I've seen 2 or 3 suggestions actually get implemented in the past few years.

Brian

 

[haggis]

I work for one of the Big Three and the suggestion scheme pays up to a max of $20,000. Pretty Good.

 

[ctopher]

I worked at one company where you get 10% of the cost savings. The company I work at now, has had for a few years now, whenever we had a suggestion..we turn it in and it goes into a box. The management reads them and incorporates the cost savings ideas. THose picked go into another box and are one a month picked by an employee at a company meeting for prizes. All of the names that save over 20K a year go into another box for once a year pick out of the box for a trip anywhere around the world. We were informed this year, all has stopped. They still accept suggestion, but no prizes.

 

[jmw]

Great scheme... suggestions please but no prizes! My goodness it must have cost them a fortune giving all those prizes out. Still, at least they will still have all those useful suggestions coming in. Tell me, did they just have a change of management? New broom? new ideas?

 

[ctopher]

Whole change of mngmt...pres down to manager. New everything, same company. Layed off non-performers, hired performers to replace them.

 

[jmw]

Non-performers out? Performers in? did you say?
Was the suggestion scheme with prizes a failure? was it losing the company money? Was it leading to staff upsets?
If they changed the whole management i would expect there to be a reason, falling orders, shrinking market, old product etc. and that the new-comers would address these critical issues.
A suggestions scheme, especially if it was working and let's facre it, 10% of cost savings to the employee sounds like they couldn't be losing money... no savings no payout. So was this really a key issue for them to address? Was it a productive move?
Was this the tail end of a whole range of modernisation moves or just some manager trying to make everything look exactly like it did at his old company? Applying the corporate rule book?
I hope that the other changes they made were more useful than this. Do let us know how many money saving suggestions they get after this.

 

[IRstuff]

My all-time favorite cost saving measure was instigated by our GM. He thought that copy machines sitting idle wasted too much electricity and had the timers set for 1 hr.

Naturally, every time you go to copy something, it's off and you wait 2 minutes for the thing to turn on. At $150/hr billing rates, that's $5 of waiting. Meanwhile it only costs about $0.05/hr to supply the machine with power.

Man, these upper management guys are really smart!

TTFN

 

[VuteqKY]

The company that I work for has a Kaizen program. We evaluate ideas based on criteria. How must will is save monetary, how much does it cost to implement, The impact on safety, quality and environment, effort of the kaizen originator, and Idea originality. The idea of course is not sudden large improvement, but continuous small improvements that have smaller cost savings and efficiency improvement. each employee must submit a minimum of 6 Kaizens a year. 25% of your bonuses are dependent on kaizen participation. Each kaizen is evaluated my a team of managers. A kaizen can be a minimum of 10 dollards up to 200.

 

[Comcokid]

I knew an engineer who worked for a company with cost-savings award system. He had several examples of what might be called "abuse" of the incentive.

Example - a new product might be introduced and produced at low volume initially. Naturally, a EPROM would be used for the stored program until the code stabilized and volumes increased. When volumes did increase, an engineer or manager would put in a cost-savings idea to change to a ROM, and would get a nice check as a result. The problem is that such a component progression in a product should be considered natural. The end result of the incentive program would be that engineers, managers, and others would deliberately design-in future cost reductions to get the bonus. The program induces the wrong behavoir!

 

[jmw]

Comco Kid,
I think you need a better example than that.

Any project development plan that doesn't include such steps as a matter of course would suggest such poor management that I doubt they'd have an investment scheme. In fact, they'd probably have gone bankrupt by now.

I would suggest that any well designed incentive scheme would exclude employees from awards for what is a normal expectation of their job and would exclude anything that is a natural progression in product development or improved manufacturing technique based on the changing scale of the operation.




JMW

http://www.ViscoAnalyser.com