Sunday, August 7, 2011

Shop floor insights – goals and incentives

Here is one subject on which I can't really recall much TOC specific wisdom. Dr. Goldratt did concur with the common saying "tell me how you'll measure me and I'll tell you how I'll act". This supports his claim that people are predictable. The other related content is this research summary clip that talks about the limited power of financial incentives. But they were looking at the impact of offering a too high incentive. I've found out how I react to a too low incentive. It killed my drive.

Let me give you the background. While shops may mark up their products 100% or more, most of this mark up is needed to cover fixed costs of operating stores in good locations, holding on to stock and paying for people to sell this stock. Shop operation is quite work intensive and since rent on good locations is high and inventory spending is high (when you buy stock for the entire season ahead of time) and both are relatively inflexible, it seems there is no choice but to limit workforce costs. Hence hourly pay at the shop floor is insultingly low. This is not singular to the chain I worked for, the pay I was given was pretty much the standard pay in this kind of job in Israel.

On top of that, to offer some incentive, you get paid 1% commision on all your sales as well as bonuses if you reach certain sale volumes.  Sounds good, doesn't it? Well, only until you do the math. There was no way the bonus would amount to anything substantial; the shop just did not have that kind of potential. So that went out of the window, at least for me.

The other thing that kept killing my motivation is the habit of the managers to set personal sales goals. It was a bad day, I had a couple of hundred NIS in sales and 2 hours to go when the manager comes in and hands me a piece of paper with my goal for the shift. The goal was 2,000 NIS. There were no customers in sight. Shocked I turned to her and she just said "you'll have to try harder and make it happen". OK, it was not her fault, she was stuck in the same messed up system as we were and she was also misled by her managers to act like that, taught that goals create motivation. Well, I guess my TOC understanding miss-served me there because it was clear to me that people buy what they want. Sales clerks have an impact, sure, but it is limited. I also thought no effort in the world can create a sale when there are no customers in the shop. I found out I was wrong when the manager tried to make me buy something to improve the registry.

Is that really what management wanted?
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