It is one thing for a workforce to have a voice. It is another thing altogether for the senior management team to listen to what that voice is saying. Yeo Valley Family Farms’ Steven Welch along with Christopher Coles show how giving a workforce a voice can be the greatest staff reward.
Global economic impact
The argument over the merits or otherwise of financial incentives would appear to be as old as the concept of paid employment itself. The economic upheaval, instigated by the bonus-driven behaviour of a select few from the global banking fraternity would perhaps echo the sentiments expressed by Sandberg, the American baseball legend, “I didn’t play the game right because I saw a reward at the end of the tunnel.”
I will use this case study to argue that incentivised bonus payments, when built into the fabric of an overall remuneration package, fail to deliver the “expected” performance gains, and in fact act to work against the overall performance of the business. An alternative approach is suggested which I believe is far more effective.
Setting the scene
Yeo Valley has been an integral part of the U.K. dairy sector for more than 40 years. Based in England’s south west, this family owned business has 6 operational sites and an HQ based at the foot of the Mendip Hills. We employ 1600 people and add value with our organic brand and conventional own label yogurts, desserts, frozen, dairy and milk categories.
Yeo Valley remains true to its farming origins. We are proud of our organic brand, which is the biggest in the market. We are the 2nd largest independent dairy business in the U.K. We remain committed to sustainable British agriculture and manufacturing.
Incentivised bonus payments
In the dim and distant past, annual bonuses were paid to the operational management team at Yeo Valley. These bonuses were based on the successful attainment of a set of operational metrics, coupled to the skills, knowledge and attitude of the individual manager.
Although initially popular with the majority of managers, its effectiveness in incentivising the individual managers was virtually impossible to ascertain. Human nature will always act to colour our perceptions regarding the “fairness” by which rewards are administered.
The act of linking a proportion of an individual’s salary to their performance, which can be unduly influenced by external factors within the complex system that we recognise as work is, I believe, fraught with difficulty, and may act to polarise the views of the employees.
Furthermore, the inherent danger of favouritism, particularly if a degree of latitude is permitted when establishing the aggregated bonus, places unwelcome and unproductive pressure on the manager tasked with deciding the appropriate level of payment.
These factors can lead to overcompensation so as to offset the “unspoken” allegation of favouritism, leading to a shift in payment going to the other end of the continuum. The precarious nature of an incentive bonus system is thus laid bare, with neither the employer nor employee appearing to benefit from what should be an incentivising and productive process.
To quote Winston Churchill “We occasionally stumble over the truth but most of us pick ourselves up and hurry off as if nothing had happened.” The weakness of this approach was eventually recognised.
To this end, the bonus system at Yeo Valley was dropped after a few years. The lack of negative comment at the time perhaps underlined the general feeling of relief that a system that was difficult to administer had been laid to rest.
An alternative approach
It is my opinion, formulated over many years of working within an operational environment, where metrics and performance targets are an integral part of our daily life, that the greatest reward that can be received is recognition.
I am referring to the simple type of recognition that can lift an individual and stay with them for years, if not their entire career. The type of recognition that can take literally a few seconds to impart and yet last for decades. I am referring to the simple “well done” category of recognition and reward.
I am not suggesting for a moment that a complex business system will automatically improve if employees are congratulated for delivering against what is expected of them. I am referring specifically to the situations whereby they go above and beyond their leader’s expectations. I use the term “deserved recognition” to accurately describe my observation.
If a leader is too liberal with their praise, what I term as “recognition inflation” will occur and the effect is automatically devalued. No amount of quantitative easing will help this situation. Recognition should be given to all employees within the business and not reserved just for the leadership team. It is all about scale.
A manager may be able to coordinate a cross-functional project across part of an integrated supply chain. An example relates to the optimisation of the number of cases per pallet from site to internal dispatch facility to final customer.
Conversely, a small, iterative improvement suggested by a production operative may have less of the wow factor, but should still illicit praise from their leader. For example, a straightforward pipework modification which resulted in a reduction in wastage.
This simple act can perpetuate a regenerative feedback loop and create the illusive virtuous circle. This is similar to the ripple effect when a pebble is thrown into a pond. The effect of the goodwill generated can be disproportionate to the original act, as many employees are unofficial opinion shapers.
I believe that the title from Robert Rodin’s book Free, Perfect and Now, perfectly captures the core elements of deserved recognition. To this point, I have steadfastly rejected the proposition that there is a positive correlation between incentivised payments and performance enhancement, due to the inherent difficulties when linking metrics to targeted payments and hence inducing behavioural modifications.
This is intrinsically difficult. Our view of a particular culture is a hypothetical construct, existing only in our heads. The act of awarding praise is left to an individual. Attempts to measure the frequency, quality or effect would equate to an exercise in futility. To change a culture requires a fair degree of heavy lifting.
I believe that a core requirement for a leader is to manage conversations. The importance of deserved recognition in obtaining the best out of our employees needs to be explained and repeated at every appropriate opportunity.
This is important because it may not be a characteristic that comes naturally. As language shapes reality, it is essential that a consistent message is propagated in order to achieve the trickle-down effect. This takes time, as you may be changing the core beliefs of your own colleagues.
If you reflect on your own experience, it is obvious that we are hard-wired in relation to receiving praise. Conversely, I do not believe that we are hard-wired to give it. This is the contradiction that we have to work to improve.
Unlocking latent intellectual potential
However, an inducement to unlock the normally latent intellectual potential of the workforce, through the use of a “lottery” model Suggestion scheme is a different proposition. It is simple to administer, propagates a regenerative feedback loop and encourages engagement. This is our story…
During a meeting with the senior management team on a production site, the subject of identifying improvement opportunities on the site was raised. After a few minutes of discussion, it was decided to open the site suggestions box to see what suggestions had been made. Once the key was found, the box was opened for the first time in months.
To the disappointment of everyone involved, inside the box were no suggestions, but the rather sparse contents of an improvised rubbish bin.
Once the aggrieved noises had died down, the realisation dawned on the group that we shouldn’t really have expected anything else in the box as it was hidden away in a dark corner and nobody knew it was there.
At this point a discussion was held about giving monetary incentives for suggestions. Could the monetary value of an improvement be calculated and a reward calculated from this?
This line of thinking attracted a lot of debate and questions such as:
- “when do we count an improvement as exceptional and not part of a normal job role?”
- “what if two people have the same idea?”
- “what if the improvement doesn’t save us money but does prevent an accident?”
To make the system as simple as possible, it was decided to have a monthly raffle with a ticket issued for each reasonable suggestion. In this way, there would be an incentive to put forward an idea but the tricky task of assigning merit was avoided.
Over the next week, a plan was hatched to make the suggestions box more obvious.
- Time was set aside in the weekly SMT meeting to review the suggestions and an action log created to assign responsibility for making selected improvements happen.
- The location of the suggestion box was changed
- Corridor lighting was altered to make the suggestion box more visible.
- Posters were plastered on the surrounding walls, soliciting suggestions from the workforce.
- Articles were run on the company intranet and YVTV publicising the raffle
Over the next month, the suggestion box was full of ideas and opportunities. The suggestions were bought from the box to each weekly SMT meeting and discussed. The actions were agreed and a copy of the action log was put onto one of the site notice boards each month detailing agreed actions and explaining reasons why some suggestions were deemed impractical.
The SMT was happy to have opened up this communications channel with the workforce and was delighted with some of the ideas being put forward. After the initial fanfare, the next two months saw the amount of suggestions being made fall off until during one week only one suggestion was placed in the box.
This tail off was initially quite puzzling, we had publicised the scheme well, we had developed a fair reward system, we were publishing the results of the activities on a notice board. Why were we not getting the response back?
The eureka moment came when issuing the third raffle winner with his prize.
The winning suggestion had been examined at the SMT meeting and dismissed as too expensive to implement. This came as a surprise to him as he didn’t know about the action log on the notice board. Once he was made aware of the cost of his original proposal, he immediately came up with some cheaper ideas of how to get the same effect.
Over the next ten minutes we pressganged an engineer and a passing technical manager and worked out a very elegant way of getting the same result for no cost. The idea was implemented the very same day.
Afterwards, when the operator was handed his raffle prize, he said that whilst the voucher was nice to receive, his real prize was having someone listen to his ideas and being able to put them into practice.
While there was an official feedback to the person making the suggestion, it was generic and could take up to a month for feedback to be available. The information fed back was a
Once this realisation dawned on us, we realised that we must involve the operators much more in the implementation of their suggestions. summary of the conversation held in the SMT meeting with no further explanation. Putting a suggestion into the box must have felt like putting a suggestion into a black hole.
With no fanfare, we began to empty the suggestions box each morning and take the suggestions to the daily site performance meeting. The suggestions were discussed and immediately after the meeting, a suitable member of the SMT went to speak directly to the person who made the suggestion at their place of work.
As it can often be hard to describe an idea in writing, especially if English is not your first language, this interaction allows ideas to be appropriately communicated. Any initial obstacles can also be discussed and the suggestion improved or refined.
Importantly, if an improvement suggestion is considered impractical, the reasons why are properly explained and discussed in an adult to adult conversation which often leads to different solutions being discovered.
In the weeks following the change, the number of suggestions in the box began to rise steadily. Anecdotally, the quality of the initial suggestions was also seen to improve, and understanding of what was possible increased with some improvements adapted and taken up in different areas of the factory.
From our experience, we learned the value of real, rather than naïve, engagement in releasing the intrinsic motivation of the workforce. Now all we need to do is to get this happening without needing the box as a catalyst.