lean practitioner and consultant, I need to be a salesman, selling the idea of
lean manufacturing and kaizen principles to potential customers. This part of
the job is not as fun as guiding my clients through their lean journeys. But it
isn’t difficult to sell the concept of lean; I simply explain how it
contributes to growth. Lean is a business strategy, and strategies usually give
you ways to improve your company financially and aid in its future growth.
Lean is a companywide approach to continuous improvement, and as time goes on,
increasing numbers of employees are involved in the process. Organizations that
truly embrace lean manufacturing and continue to fight through the battles of
cultural change find ways to return the favor to the people in the company who
made it happen. Operators, line leads, production supervisors, engineers and
managers represent about 90% of the people who do the hands-on work of lean
implementation. As the company begins to see the return on its lean investment,
there should be a way to trickle some of the profit back to the employees.
Although adding product lines and the processes to manufacture them contributes
to growth, giving back to your internal change agents is also critical. I’m
going to outline a variety of approaches for offering lean incentives and the
structure that should be in place to encourage this program.
of lean manufacturing can have a positive effect on an organization’s costs.
The rate of return differs from one company to the next because every approach
is unique. Some companies have seen savings of $50,000 to $1 million in the
first year of lean manufacturing and as great as $500,000 to $4 million after
five years. The smart ones put some of that savings back into the company and
in employees’ pockets in the form of bonuses.
As a company decision maker, you want to create an exciting energy in your lean
program. Part of this excitement is generated when you create goals that
everyone will strive to meet. When employees achieve these goals, you should
reward them financially. These goals are the key shop floor metrics outlined in
the company’s strategic purpose:
- Inventory or WIP
- Floor space use
- Throughput time
You gain success by improving these metrics. Management sets annual targets,
and the employees go after them. It is also important to find a balance between
cost, quality and delivery. Some companies use these three indicators as the
company metrics. But to operators, they really mean very little. I’m not
implying that operators do not understand the concepts, but these three drivers
are too far out of their range of responsibility. Even engineers may not know
what needs to be done to improve cost, quality and delivery.
My point here is that productivity, quality, inventory, floor space use and
throughput time have much more definable parameters. These five shop floor metrics
are directly connected to cost, quality and delivery, so you can make
incentives or bonuses contingent on meeting or exceeding the goals for each
To implement lean principles in manufacturing and assembly processes, you will
create kaizen teams and schedule multiple kaizen events. Because of the
incentive program, employees will be encouraged to participate in kaizen and
try to better themselves and their way of working. The kaizen teams will be
aggressive in their approach. Continuous improvement efforts will accelerate
because employees know that there is an incentive at the end. You can use these
goals as the catalyst to accelerate your lean journey.
Although lean manufacturing will become your new way of conducting business and
employees must be engaged, I would like to see a payback. If an organization
books a cost savings of $500,000 in the first year, then it should return some
of that to the people who made it happen. It starts with targets and goals, and
you must make sure to raise the bar a little higher every year.
an advocate of employee training. When meeting with clients during strategic
planning sessions, I schedule time to talk with the line operators and get
their opinions about the journey ahead. The most common topic that is raised
during this session is training-specifically, formal training for new
employees. Any good employee training program must be backed by what is called
a pay-for-skill program.
It’s true that financial incentives are not the only incentives needed.
Recognition and appreciation of employees’ lean contributions are also
important. The suggestion box, the kaizen newsletter, the communication boards,
participation in kaizen events, and kaizen event reports provide incentives on
a non-monetary level.
Beyond that, pay-for-skill programs provide financial incentives for workers to
learn new jobs in the company. It is, in essence, a career advancement program
for production workers to encourage cross-training on the production floor. For
the company, it helps encourage operators to become more flexible and skilled
so that the organization can adjust to differing seasonal demands and changes
in volume. For the worker, it outlines a clear path for advancement and growth
in the organization.
Each process, assembly line or work cell should have its own pay-for-skill
structure. Although some processes may be similar, there may be subtle
differences in the jobs and work in each process that warrant a custom program.
The cross-training matrix for each process is one of the guides in establishing
this type of program, but a lot of detail is involved.
The number of progression levels in a pay-for-skill program will vary and
depend on the process. As you develop your levels, I recommend using the
Number of Certifications
- Number of certifications
- Years of experience
- Kaizen and kaizen event participation
- Quality errors
Each pay-for-skill level
should contain a certain number of jobs that each operator must be certified
in. For instance, to fulfill this criterion, an operator might need to be
certified in three workstations. Becoming certified in only one workstation
does not satisfy the criterion. If an organization follows the rules for
new-employee training and cross-training, then the company knows that the
operator is experienced. Three workstations is a suggestion; I have seen some
companies require certification in five or seven. It’s up to the company and
the complexity of the manufacturing process.
Years of Experience
The experience criterion
should be similar to the timeline for becoming a certified operator after completing
the novice portion of the cross-training program. Because there is a time frame
during this phase of development (including the number of jobs required in the
level), there should be no question about the experience level of the worker.
The guidelines for experience are already part of the cross-training program.
Absenteeism, tardiness and
turnover problems can create major problems for a company. It is important to
develop a criterion for attendance in the pay-for-skill program, not only to
encourage people to come to work but also to provide an incentive for doing so.
This kind of incentive is sometimes difficult for management to swallow,
because they consider good attendance simply an aspect of holding a job. I once
worked for a company that had 55% turnover among production workers, and that
number did not include those who often missed work or showed up late.
Most organizations have defined guidelines for attendance, generally based on a
point system. For example, operators might be allowed 10 points every year, and as they miss
work, arrive late or call in sick, points are deducted. A missed day might cost
1 point. Showing up late could warrant a quarter-point deduction, and calling
in sick might be worth a half-point. If an employee exhausts all of his points
before the end of the year, he is given a verbal warning. The operator is
essentially on probation and cannot miss any more days; if he does, he receives
a written warning. Any infractions after this point result in termination.
Attendance point systems differ from one company to the next.
When you develop the attendance criteria in a pay-for-skill program, you should
consider tighter rules. To move to the next pay level, workers should maintain nearly perfect attendance, with some
exceptions. Simply staying within the provided points does not warrant
promotion. Missing work without advance notice or failing to explain an absence
is not acceptable, at least in a pay-for-skill program. Although people can
progress by giving advance notice, points are taken from their totals. Another
approach is to allow a reduction in points up to 20%, notice or not, and still
allow a worker to move up. The point is that you should create a structured
guideline for attendance so that the organization moves operators through the
pay-for-skill program when it is truly deserved.
Kaizen and Kaizen Event Participation
Kaizen involves everyone in
the company, and the organization should encourage active participation in the
continuous improvement initiatives. As the company develops its lean culture,
employees should be allowed to make improvements to their work areas as often
In 2006, I worked with a
new client, a small family-owned machine shop with gross revenues of about $1
million. The manufacturing floor was about 50,000 square feet, and the company
had been implementing 5S for about a year. On my second visit, I took a tour
with one of
the production supervisors. Computer numerical control (CNC) machines, lathes,
deburring stations and inspection areas had been combined into individual work
cells. Each cell did a variety of work while staying within a family of
products and similar processes.
The production supervisor managed cells 5 and 6.
We were walking through cell 5 and watching the action. I had a lot of
questions for him, because this cell was scheduled for another kaizen event to
help decrease setup times and organize the fixture and jig inventory. He was
discussing the flow of the cell when he stopped in his tracks and began to
stare down at a desk. This desk was used by the cell’s line lead, who gave the
machine operators their schedules and day-to-day tasks. (The production
supervisors managed the line leads.)
I became curious and asked the supervisor what had caught his eye. He pointed
to a small cardboard pen holder taped to the desk. The holder was clearly made
from a corrugated box that came from a supplier. This makeshift pen holder
contained three highlighter pens: green, yellow and red. The production
supervisor explained to me that the holder had not been there the preceding
day, and items like that stood out since the company had embraced 5S.
Basically, a new item had appeared on a desk that had everything clearly
labeled and identified.
We approached the line lead and asked her why she had made the box. She told us
that every morning she received the work orders from the office and it was
difficult to see which orders had to be worked on first. Some jobs could be
done much quicker than others, and some had longer delivery dates. The line
leads were empowered to distribute work as needed to ensure that all orders
were complete on time while minimizing wait times and imbalances between
After she received the work
orders, the line lead spent about 30 minutes each morning sorting through them
before handing them out to the line workers. The line workers then prepared
their work areas as needed. The purpose of the three highlighters? She used
them to color-code the work orders to quickly show their order of importance:
Green indicated rush or fast jobs, yellow identified orders with longer
completion dates, and red indicated the least urgent work orders of the day.
By making improvements to her area, the line
lead was practicing kaizen. It is this type of mentality that is needed. In
regard to the pay-for-skill progression, a company could document this kind of
small improvement throughout the plant and keep records of those operators or
other floor personnel making the changes. Each level in the program might
require a certain number of small implementations as part of the required
progression into a higher-paying level.
The company kaizen program encourages workers to offer improvement ideas by
using the suggestion form. Advancement to another level could simply require
production workers to submit a certain number of suggestions.
Probably the most important part of the kaizen and kaizen event participation
portion of the program is the number of kaizen events in which the operator has
participated. This part of the pay-for-skill program is somewhat difficult,
because scheduling the events and selecting the teams may differ from one year
to the next. If an organization conducts only five kaizen events in a given
year, the chances are good that some production workers may not get the
opportunity to be selected.
Ideally, a company should strive to have at least one kaizen event each month;
the reality is that the number of events could be lower. It depends on how
aggressively you are pursuing the lean journey. When you have achieved
consistency in scheduling kaizen events, then you can make it a requirement for
progression to the next level in the program.
Production workers are
responsible for quality and for the implementation of quality at the source. An
organization can easily track line errors, but it is wise to remember that
operators are human. They are faced with challenges every day that can make it
difficult for them to do a perfect job. However, if production workers
repeatedly make mistakes, the process needs to be analyzed further to reduce
I am a firm believer that the company must effectively design and set up its processes so that the production workers have all the
tools they need to be successful. Once the process is in their control, errors
should be minimized. If a production worker continues to make mistakes, it
should be tracked and reviewed. One of the requirements for advancement in
regard to quality might be the number of mistakes made in the process. The goal
here is not to point fingers at people but to encourage strong performance and
reward workers for meeting certain performance standards.
Table 1 shows an example of a pay-for-skill program. It outlines the
requirements for workers to advance to each level. As you can see, the
requirements become stricter and require more work and dedication from the
operator as advancement occurs. Table 2 shows the pay increase opportunities
that are available when an operator completes the requirements.
pay-for-skill program can be very successful for a company. It can also be a
headache and can create some animosity between workers. The point of this
program is to provide a clear career path for production workers, who are
highly valuable employees because they build the products that financially
support the organization. Companies usually provide career advancement
opportunities for managers and engineers, but little effort is given to
providing one for production workers. Consistent performers and lean change
agents should be rewarded, and a customized pay-for-skill program is a good
Providing Incentives for Good Ideas
companies that I have helped have taken their incentive programs to a higher
level. Although acknowledgment and praise are best in the long term, you can
add yet another monetary incentive program. As a lean company, you want to
continue to encourage production workers to come up with continuous improvement
ideas all the time. This is kaizen.
As I’ve mentioned, the suggestion form is a great way to garner fresh ideas
from the production floor, but there is another way to get workers to make
changes. These improvements may take some time, because they are implemented as
the days and weeks progress. If an operator sees an opportunity to make an
improvement to a process, implements the improvement, and it reaps a financial
savings or gain for the organization, you should award her with a check of some
For instance, suppose that a production worker sees a better way to package
products to reduce time and material. The recommendation should be reviewed by
management and engineers to see whether it is feasible from a product
specification perspective. After approval, the idea goes through an engineering
change request process, and then the new process change is initiated. After a
given period of time, the improvement can be measured to see whether it has
made a positive impact on productivity and material cost. You can amortize the
savings over a year to calculate its annual cost savings. If the improvement
saved the company, say, $20,000 annually, the employee might receive a check
In the beginning, this kind of program will be slow to encourage workers, but after the
first or second idea turns into a paycheck, more workers will be excited and
will begin their own improvement projects. These projects, of course, involve
other employees, but idea generation is the start. In addition, with a program
in place to encourage the behavior, more production workers will become engaged
in the process. Each company must establish guidelines for the program in
regard to annual savings, time frames for implementation and the amount of
money to be paid to the worker. This is another approach to soliciting
continuous improvement ideas from factory floor workers.
incentives in a lean journey are not the sole approach to thanking people for
becoming multi-skilled and contributing to continuous improvement efforts.
Because lean manufacturing is a business approach, it essentially is a job
requirement for working in a lean organization. But one of the reasons lean
implementations fail on the shop floor is that the company does not recognize
the contributions that can come from production workers.
Many organizations are taking major steps to reward their best production
workers and provide incentives for them to assist in implementing a lean
program. Because lean manufacturing is truly a growth creator, you have
numerous options to reward those who help you in your lean endeavors.
Editor's note: This article is excerpted from
the book Lessons from a Lean Consultant
, written by Chris
Ortiz and published by Prentice hall Professional, an imprint of Pearson
Education, April 2008, ISBN 9780131584631. For more information, visit www.informit.com
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