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Use metrics, incentives, and management skills to drive higher performance

Distribution Center Management Article Reprint

No matter how much you automate your distribution center, you will always need people to run the operation, says Bruce Ennis, a Lean Six Sigma master black belt who currently works for an international industrial distribution company. If you want to make improvements in the DC, you need to focus on optimizing those human processes.

"Equipment and machinery differ from one job to another, but people are generally the same," Ennis says. That means there are some tried-and-true ways DC managers can motivate employees to improve their performance.

According to Sean Whitehouse, senior manager for consulting firm Kurt Salmon and Associates, the key is to create a performance culture where all supervisors and managers are focused on ensuring standard conditions and coaching employees to help them improve their pace and methods.

How do you create a performance culture and improve those human processes? Ennis and Whitehouse offer DCM readers their advice on driving higher performance through analytics, metrics, incentives, and good management practices.

Walk a mile in someone else's shoes

Before you can even begin to drive those productivity improvements, you have to analyze your existing methods and procedures to make sure they are consistent across the DC. For example, if you don't have a consistent picking process, how can you expect all your pickers to perform to the same standards?

Start by getting out onto the DC floor and actually performing the jobs alongside your employees, Ennis recommends. When he was trying to improve picking performance at his own DC, Ennis says, he spent two days working as a picker, which led him to find the areas that needed improvement.

"This allowed me to experience the process in a way that was simply not possible sitting in my office or a boardroom," he says. "I'll use the challenge of picking accuracy as an example. A belief existed among our company's leadership that picking accuracy was poor simply because we did not have the right people for the job. After I became a picker for two days, I learned loud and clear that our process, not our people, was the root cause."

After all, you can't judge someone on how well they do their job if you haven't tried it yourself, adds Whitehouse. "How do you know what it's like to take cartons off a conveyor in the middle of summer in Georgia?" he asks. "You can say your employees should be able to do it in a certain time, but go out there and do it yourself for a couple of hours. That will give you a good sense of what the real pace of an average person should be."

How will employees measure up?

Once you've determined your current methods and procedures, it's time to find a way to optimize them. And, according to Ennis, that means metrics.

"There is a business adage that states 'you manage only what you measure,'" he says. "A job that lacks clearly defined measurements usually lacks clearly defined goals for its employees, and performance deteriorates."

Develop a measurement system that is empirical, to objectively tell you how employees are performing. "At the end of the day, you want to be able to talk to an employee and say, 'You performed at 100 percent,' or 'You performed at 90 percent,' as an accurate measurement of what they did," Whitehouse says.

That means each job must have accurate performance standards in place. When measuring picking performance, Ennis says, he developed a standard that took into account both the volume and accuracy of the work completed in a day.

"I began collecting and analyzing reams of data," he says. "I created a system where our company could fairly compare the accuracy and productivity of warehouse pickers in a fair and equitable manner."

Establish incentives to drive performance

But simply knowing how well employees should be performing against a standard isn't enough to actually boost productivity. You need to ensure employees actually perform well against the standard. How do you do that? Both Ennis and Whitehouse agree it's a matter of incentives.

Typically, there are two different incentives you can provide: monetary and non-monetary. A monetary incentive is simply a pay-for-performance program.

"It always seemed odd to me that at a corporate level, monetary incentives are commonplace, but on the ground floor, they're almost unheard of," Ennis says. "Wouldn't someone earning $20,000 or $30,000 a year be just as motivated by the opportunity to make extra cash as the executive earning a six-figure income?"

In his own DC, Ennis created a pay-for-performance system designed to benefit both the company and the employee. It gave every employee a chance to earn extra cash if they boosted their performance. The higher the performance, the larger the bonus. At the same time, Ennis was able to eliminate overtime, keeping senior management happy.

Of course, pay-for-performance plans can also be controversial, particularly in a union environment. That doesn't mean you have to abandon the idea of incentives. Whitehouse says you can also use non-monetary incentives.

"Yes, people want money, but there are also a lot of people who are motivated by things beyond that," he says. He recommends gift cards, T-shirts, and lanyards as examples of rewards that aren't part of a pay-for-performance plan.

Train your managers to be coaches

You can optimize your procedures, establish proper labor standards, and give employees the incentive to do well, but Whitehouse says you still won't see the improvements unless you give your front-line managers the training and tools they need to keep employees productive.

"Some employees will take off and perform well from day one. Others will need some help to get there," Whitehouse says. "It all comes down to your managers and supervisors on the floor. Give them the tools they need to support the employees and get their people to perform as well as possible in a standard environment."

Whitehouse recommends using a labor management system that has a coaching module. It keeps track of an employee's performance and allows that employee's direct supervisor to see if performance drops. Say, for example, an employee's pick rate drops two percentage points. The signal will flag that for a supervisor, who can then talk to the employee and find out why there has been a drop in performance.

However, Ennis warns that managers and supervisors must be trained never to use performance data in a punitive manner. Don't punish employees for sub-par performance; instead, use the data to identify the root cause of productivity drops and take the appropriate corrective action.

Contact: Bruce Ennis, ennisb@telusplanet.net; Sean Whitehouse, Kurt Salmon and Associates,

212-319-9450, swhite@kurtsalmon.com, www.kurtsalmon.com.

Note: This article was reprinted from the April 2009 issue of Distribution Center Management newsletter. Additional information on the newsletter and related materials is available at the publication website http://www.distribtiongroup.com

 (c) 2009 Alexander Communications Group, Inc. All rights reserved.