Introduction
In the bustling industrial landscape of Bangladesh, where the hum of machinery forms the backdrop to the aspirations of countless workers, a significant movement is gaining momentum. Factory workers in Bangladesh are demanding a higher fair minimum wages. While the call for an increase in wages is justified, given the inflation and other economic factors, it is crucial to recognise that fair compensation goes beyond a mere numbers game.
In this blog, we explore the symbiotic relationship between fair wages and efficiency, arguing for a holistic approach that incorporates regular wage adjustments, efficiency-linked bonuses, and a culture of healthy competition.
A Sustainable Solution : Beyond Periodic Wage Hikes
To come to any solution,getting the basics right is a prerequisite. A major section of the industry has not been able to successfully implement a system that can Measure, Manage & Maximise.
Further the industry has not been very successful in fully capitalising on Work Study, Method and Time Study, Process Engineering & Re-engineering, Standardisation, Lean Concepts., which has held back the industry from reaching a paradigm setting productivity & efficiency growth.
It is therefore the right time for the industry to prioritise setting a scientific approach to set the best methods and optimize manufacturing costs, focus highly on becoming efficient and productive, which opens up an ocean of opportunities to improve and further scale to new heights.
There are solutions by experienced consultancy firms, GSD and Pro SMV being the market leaders, that can enhance the efficiency and productivity of the factory to a different level altogether.
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Performance Linked Incentives: The Catalyst for Change
Once the industry has the right infrastructure to measure, manage and maximise, numerous policies can be rolled out to create a positive ecosystem inside the factory, including the incentive policy.
Incentives play a pivotal role in motivating workers to enhance their efficiency and productivity. By introducing efficiency-linked bonuses, workers are not only compensated for their time but also for their commitment to optimizing their work.
To establish quick trust and reinforce the connection between effort and reward, it is essential to adopt a weekly/fortnightly incentive distribution system. Unlike traditional bonus structures, which might take months to materialise, weekly/fortnightly incentives provide immediate reinforcement for hard work. This quick turnaround helps build trust among workers, demonstrating that their efforts are recognized and appreciated regularly.
Group & Individual Incentives
To further enhance the efficiency-linked bonus system, it is crucial to set incentives both for groups as well as for high performing individuals within the group. This approach fosters healthy competition within the workforce, encouraging employees to collaborate and support each other while striving for individual excellence.
By setting group targets, workers are not only accountable to themselves but also to their peers, creating a sense of collective responsibility. Structuring or grading of the incentives, based on the average efficiency of the factory is another prerequisite of the efficiency-linked bonus policy. The factory needs to ensure that it sets realistic targets (for incentives) which is achievable and in the end, enhances the overall efficiency of the factory.
Quality Linked Incentives
While efficiency is the key driving factor to any incentive system, integrating this further with quality performance and attendance can lead organisations towards zero defects while maintaining higher efficiencies. Furthermore, quality is of major importance to the customers, hence, incentivising quality would further lower the defects rate, foster the culture for right first time and increases the needle time as well as customer satisfaction.
Incentives can be linked to DHUs , for example, workers with less than 2% DHU can be given incentives, which would at the end of the day save rework, and increase the needle & productive time. Further,for critical operations, the parameters and structuring can be changed, keeping in mind the complexity of the operation, thus providing a just method to measure performance.
Jump Start Bonus In Sri Lanka
Another food for thought is to structure an innovative incentive system which can raise the efficiency in a relatively short period of time. One such approach that we have implemented in a factory is a 'Jump Start Bonus' system, which was conditional only to the individual efficiency of the workforce. The factory had an average efficiency of 55% and it was communicated that the workers would be given a jump start bonus if they managed an individual efficiency of 60%. Within two months, a remarkable 80% of the workforce achieved more than 60% efficiency.
The success of the Jump Start Bonus model lies in its simplicity and effectiveness. Setting realistic efficiency targets that are challenging yet attainable on an individual level ensures that workers are motivated to strive for improvement. This approach not only fosters a sense of achievement but also creates a culture of healthy competition within the workforce.
Win-Win Scenario
We have witnessed that the return on investments in incentives is quite positive for the factory, mostly around 4-5 times the investment, thus creating a win-win scenario for the organisation and the workers. Further, we firmly believe that incentives are not only for the operators but for all the other stakeholders involved in the production process.
Supervisors, Mechanics, IEs, and Production Executives among others should also be brought under the umbrella of incentives to further make the incentive process more inclusive. For example, the KPIs (Key Performance Indicators) of a Supervisor can be the performance of lines, DHUs, efficiency, absenteeism, overtime, and WIP, which can be used to create structure for supervisory incentives.
Similarly for mechanics, average fixing time, average waiting time, and average downtime due to machine problems, among others can be considered as the KPIs of Mechanics.
However, to measure group or individual efficiency, quality or the KPIs and further strategise a plan to increase the overall efficiency of the factory, individual performance tracking is a prerequisite. It is, as mentioned above, crucial for the factory to get their basics right, as efficiency is the game changer.
If the factory lacks the technology & the applications to measure & monitor the standard time, workforce efficiency, and quality of the product, the incentives linked bonuses cannot be executed. Hence, it is high time the garment manufacturing industries invest in data-driven technology to enhance the efficiency, productivity and culture of the organisation.
Conclusion: A Holistic Approach to Fair Compensation
In conclusion, though the demand of factory workers in Bangladesh for a fair minimum wage is justified, it is imperative to recognize that fair compensation extends beyond numerical figures. By advocating for a holistic approach that combines regular wage adjustments, getting the basics in the factory right, along with efficiency-linked bonuses, we can empower workers to not only demand fair wages but also actively contribute to the success and growth of the businesses they are a part of.
Efficiency-linked bonuses, exemplified by the success of the Jump Start Bonus model, have the potential to revolutionise the way we view compensation in the industrial sector. But setting the basics right, efficiency improvement is the gamer changer.
By setting realistic targets, distributing incentives weekly/fortnightly, and fostering healthy competition, we can create an environment where workers are not just employees but active contributors to the success of their workplaces.
It is pertinent to note that any incentive scheme is not successful unless more than 60% of the workforce avails the incentive. Hence, in the pursuit of fair wages, let us not forget the importance of efficiency, productivity, and the collective responsibility we share in building a sustainable and equitable future for all.
