Callum Bentley: Speaking from a manager’s point-of-view, what are the major challenges you face when deciding how to reward employees?
Richard Lloyd: The biggest challenge I think of any factory manager or production manager is how to go out there and motivate anywhere from 100 to 200 or even 600 people like I have on one of our sites at the moment and I’ve always found that part of production management interesting; how do you light that fire inside someone and get them to achieve the targets that the business wants?
Throughout my career I’ve worked with a number of different businesses where we’ve
put in an incentive scheme based on quality. There have been situations where we’ve put in incentive schemes when we’ve been closing a factory trying to keep them working hard to the end, to where you’ve got a factory that is growing, do you put an incentive scheme in that will also encourage people to hit your production outputs?
We’re not reinventing the wheel, whether it is cigarettes, shampoo, wine or Marmite, it doesn’t really make much difference, its people interacting with machinery, and it’s all about how you motivate them.
CB: You’re a believer that rewards can actually do the opposite of what they are designed to achieve and demotivate employees instead of motivate. How so?
RL: Alfie Kohn wrote a book called “Punishable by Rewards” which has kind of become my bible in a sense. I think he articulates far better than I can, why it works and my personal belief that he echoes is that it (monetary rewards) might make a dent over a year or two, but after that it can begin to demotivate. I’ve seen this work first hand with a place that I worked where people spoke about the bonus system as if it was part of your base salary, as if it was expected. People would say “this pays out £100,000 a year”, and to me that’s not a motivator. It’s expected, and therefore it is not a present and it can only do one thing which is to demotivate.
I then had the lucky honour of being part of a business where we built a greenfield spec and someone in my management team asked if we were going to put some kind of bonus system in – to which I said no. I’ve only ever seen that as painful. And at the time, the unions were really pushing to have a bonus system and I almost entertained the idea. But it fell over for the very reason why I don’t believe in them. We got into such an argument about how to measure what you pay the bonus on and that is why I think it falls over so often. The quality of the reward is only ever going to be linked to the quality of the measurement and most FMCG (Fast Moving Consumer Goods) businesses will try measure, and probably reward, on the output. But the output is a factor of so many times that from the demand externally, the suppliers, you end up having a calculation where you strip out so much so you get to the bit that is solely impacted by the worker.
CB: You mentioned people beginning to simply “expect” rewards, as if they are entitled to them as opposed to earning them. How could management reverse this trend?
RL: I think the most important thing is to get into a sort of intrinsic motivation of someone. For me, it’s about people understanding why they are doing what they are doing. I don’t think you can treat a human being like a machine. A machine needs electricity to run, if you give a human being money, it might motivate for a month or so, but paying someone more and more money doesn’t mean they will do a better job, and I strongly believe the challenge of management is to find out a way that the employee feels the ownership about the business so they want to do the job well. I think the other bit of my belief is with a production site, I don’t want to go breaking records of production, I want consistency.
Do you want to know as a business that you are going to produce 50,000 units a day every day? For a production worker, you want to say “this is the standard way of doing your job and we want to get a repeatable process.” If you don’t incentivise someone, there is a chance that they are going to go above and beyond, when you maybe don’t want over and beyond. Instead you want people to follow a framework.
CB: How important is the role of employee contracts in highlighting what is expected of employees and ensuring they stay within this “framework”?
RL: The whole world is talking about the work/life balance, and I suppose in days gone by, you might have been able to buy that good will, but I don’t think you can these days. At our site we have a summer and a Christmas party where we fully pay for everything. We have a gym on site that is there for people to use. We have a restaurant that provides a fully cooked meal in the evening. People value, I think, these things, and the shift pattern that we operate here in the UK site is probably one of the biggest selling points in regards to the amount of downtime it gives people.
Of course the base salary has to be right to get people through the door, but people are looking for so much more. For me it is really interesting, there are some pay negotiations happening on my site at the moment, which are nearing completion and my management team here are looking like they are going to land a two-year deal where in year two there will be no monetary changes, instead we’re actually changing the hours of work, because people value that more than the monetary value. The guys will value more of that these days than, let’s say, an extra £500 in their pocket.
I suppose for me it’s coupled with what the employees out there are looking for these days, and from an internal management belief, if you reward people and say the target is to achieve 50,000 units a day, someone might not take a risk on something that might get them to 60,000 because they might not get rewarded for it. So rewards can actually, if you put a ceiling on them, which most of them do, hinder people doing something risky. And I know that’s in conflict to me saying that I want my employees to produce a repeatable performance day in day out, but I think in a business where we put incentive schemes on absence, on quality, and on productivity, I would say we fail to deliver the desired output each time. I’ve got my most successful site that has won Manufacturer of the Year Awards which has no reward system at all.
CB: Was there ever a financial reward system in place at Accolade Wines?
RL: Yes. At the old site there was a reward system on productivity. There was also a reward system in regards to overtime. The contract that we put in place here at Accolade Park is “an hour is an hour”. So whether you work a bank holiday Monday or whether you work a Monday night shift, everyone gets paid the same. Of course there’s a premium built into the base salary, but then you take away the incentive. Some people at the old site I truly believe had an unwritten incentive which was for people to get Saturday overtime, and the way that most people know that you can get Saturday overtime is by not achieving your production targets Monday to Friday. And therefore they know that they are in control of whether they need to come in for overtime.
“If you don’t incentivise someone, there is a chance that they are going to go above and beyond, when you maybe don’t want over and beyond. Instead you want people to follow a framework.”
So we worked very hard to ensure we had a package in terms of base pay. In terms of the s soft benefits around the facility I mentioned earlier, like the restaurant to gyms to family open days and parties that are seen as sufficient reward, we don’t need to go and top that up with some monetary benefit. We work incredibly hard on appreciation. A colleague can give a peer some recognition where we have vouchers to different supermarkets for say, £20. So we do have a recognition scheme there. The monetary value I believe is completely secondary. My managers hand them out and they all hand write a note within, which we all encourage. Therefore the person appreciates the recognition idea from the peer or manager, much more than the £20 pound voucher.
CB: Do you think there is one reward system which is ideally suited to every business? Or do reward systems have to be tailored to each business?
RL: It’s interesting. While I have a global responsibility, and I’m a firm believer that whilst I talk about the fact that we should have frameworks, locally you have to respect the cultural differences. Therefore the way that we do things in Australia is a lot different to how we do things here in the UK and to how we do it in the US. So I do agree with you, you can’t just manage with this blanket view. In some places where there is enough history and association with a reward system, you have to respect that, especially if it is actually working. I haven’t seen many where they are, but I do agree that you have to acknowledge where there are differences. If you have a smaller business, maybe a family-run business where you can get employees to have equity in the business and reward it through that, that is going to engender the right thought process, because you are truly owning it. I think
when you get to become a certain size that becomes a lot more difficult. You’re not going to have everyone as shareholders, although there are a few businesses which operate as employee owned.
CB: To finish up, do you honestly think there is a positive benefit to monetary rewards in the workplace?
RL: The only positive impact I can see is where an employee can get equity in the business. I think what I’m trying to talk about with the employees on the floor is about intrinsic motivation where I can get them to understand that most people want from their employers these days is security. We work very hard here to get people understanding the financial position of our business and where we are and what influences it. So I don’t think that a bonus system can do that. If you can get an employee who cares about their employment and enjoys their work, they will therefore understand what’s important, what isn’t and how they work at it. The only way I can see how you can do that via a bonus system is getting people to actually have their money in the business.