Rewarding operational improvement: Target changes, not just numbers

Rewarding individual operators, and operations as a group, means recognizing them for their performance and acknowledging their contributions to their organization's goals.
By Michael W. Blanchard, CRE, PE, Life Cycle Engineering August 10, 2017

Rewarding individual operators, and operations as a group, means recognizing them for their performance and acknowledging their contributions to their organization’s goals. Group recognition typically is tied to lagging metrics, such as asset reliability. On the other hand, operator behavior usually is linked to leading metrics, such as percentage of inspections completed.

To understand how to shift the operating culture by rewarding the reliability-boosting behaviors, we first need to consider how to identify the appropriate key performance indicators (KPIs) and which behaviors positively affect them.

Asset reliability

The inherent reliability of an asset is established once custody has been turned over to operations. Plant operators then are tasked with running the production equipment safely and efficiently while also preserving reliability. Asset reliability can be tracked using asset utilization (AU) or overall equipment effectiveness (OEE) metrics.

Reporting of AU or OEE is usually done monthly or quarterly, making them lagging KPIs. However, if the window of measurement is minimized (i.e., each shift, daily), the KPI becomes leading. Regardless of the metric selected, plant operators must understand how their decisions and actions impact the KPI and the bottom line. Rewarding teams for achieving reliability goals sets the stage for sustainable performance.

It is KPIs and leadership that will support and manage a new proactive process. It also requires incorporating data-driven process management that not only measures results, but also emphasizes process measures (leading indicators, for example). People must be held accountable. Efforts to improve reliability should be recognized and results from the proactive approach should be rewarded.

Key performance indicatorsImage courtesy: CFE Media

Changing an organization’s culture is usually the biggest obstacle to sustaining asset reliability. Although changing from a reactive to proactive culture is difficult, it is achievable. It requires monitoring and rewarding operating discipline to established processes and policies. By changing daily behavior to proactive, organizations are essentially changing to a reliability-centered culture. When proactive behavior is reinforced and driven systematically, it becomes a way of life.

To help facilitate the change to proactive, organizations need to enforce discipline to process, and change KPIs and the recognition system to reward proactive tasks rather than “firefighting” tasks. So a “good job fixing the equipment so fast” comment needs to be replaced with “that proactive action prevented us from taking the line down for a week.”

A characteristic of a KPI is that it can be measured daily yet can have a significant impact on operations. KPIs provide a complement of leading and lagging indicators that effectively communicate the daily operations of a production plant.

Quarterly AU and financial reports are merely the scorecard for the KPI results. These metrics tend to be lagging KPIs. Since these are so closely related to the bottom line, they are good candidates for team goals. Dashboard tools can effectively communicate KPIs and progress toward goals.

Leading KPIs are performance measures that can be used to indicate potential issues so corrective actions can be taken. Leading KPIs are predictive in nature and tend to communicate change in the production environment. The goal is to use these leading metrics to help analyze expected operational and financial results. Some metrics over time will show little relevance but at least you can track to see if that changes. Leading indicators help you because they:

  • Correlate operational goals and trends with bottom-line performance
  • Provide additional information for decision making
  • Anticipate changes in plant conditions.

What are proactive behaviors?

In today’s production facilities, it’s not enough for operators to react and adapt to changes in their environment. Production plant operators need to engage in proactive behavior. When monitoring leading KPIs, operators need to plan ahead and prepare for potential threats and dangers in the future by taking the initiative today. To minimize the possibility of negative effects of proactive behavior, operators must consider both the rewards and possible costs of potential actions.

For example, when a daily OEE rate drops below a predetermined level and duration, the operator is challenged with the opportunity to do nothing or take action to revive the process. Utilizing experience, plant expertise, and process troubleshooting guidelines, the operator determines the options, and selects an action after conducting a cost-benefit analysis. If unsuccessful, the process is repeated until the daily OEE rate is back on target. This example demonstrates how a leading KPI is used to monitor operational performance and predict threats to the value stream so that actions can be performed to drive performance.

What proactive behaviors impact asset reliability?

There are many task and organization-focused behaviors that can be seen as proactive, however some have significant impact on asset reliability. Here are some examples of proactive behaviors listed in order from most significant to least:

  • Addressing behaviors and adverse conditions that threaten safety
  • Routinely applying root cause analysis (e.g., 5-why) in daily work
  • Identifying equipment in distress and taking actions to resolve
  • Gathering evidence for an upcoming root cause analyses
  • Reporting reliability near misses
  • Sharing risks to value stream with other operators
  • Submitting asset reliability improvement ideas
  • Performing routine equipment care
  • Using standard procedures and practices.

Reward proactive behavior

Rewarding operators for proactive behavior sets the stage for sustainable performance. When reinforcing, explain to the operator exactly what behaviors you value so that those behaviors will be repeated. The words and actions will have surprisingly great impact on operators and will spur them to greater productivity. Reinforce frequently so that employees are continuously motivated and enthusiastic. These guidelines can maximize the effectiveness of reinforcement.

  • Be specific
  • Reinforce immediately
  • Be sincere
  • Reinforce unpredictably
  • Reward incremental improvement
  • Give realistic reinforcement
  • Personalize the reinforcement.

Listen to operators, observe their behavior, become sensitive to their needs, and you will be able to personalize reinforcement for each individual. For example, some people love being acknowledged in public while others might appreciate a private thank-you. It doesn’t mean they don’t want the reinforcement, but it’s important to understand what is most meaningful to different people. Consider surveying several operators to determine what rewards they find most attractive. Recognition and approval are among the most powerful reinforcers. Consider using internal communication channels to acknowledge good performance, such as intranet, newsletters, bulletin boards, thank you notes and other forms of communication that can be good reinforcers as well.

Monetary incentives are also powerful reinforcers. Recommend the deserving operator for an award, bonus, or raise, linking increased money to improved performance. The size of the monetary reward should be proportionate to the performance. Operators should be rewarded based on the action or behavior’s impact to organizational goals.

To generate spread, a non-linear scaling of reward value can be applied. The lowest level award should be equivalent to “lunch for two” or maybe a tank of gas. The next level award should be approximately three times the value of the lowest level. The highest level award should be approximately nine times the value of the lowest level. Sticking with an increasing reward scales allows you the flexibility to match the reward to the behavior.  

Proactive operators are innovative problem solvers. They preserve asset reliability leading to increased productivity. Sustainability means making commitments. Establishing goals and working towards them can help empower the operator and reinforce the control they have over their area of influence. Sustainability of asset reliability requires that the right actions and behaviors are in place and are rewarded appropriately.

Michael Blanchard is a reliability engineering subject matter expert with Life Cycle Engineering (LCE).

By the Numbers:

Calculating OEE: The standard formula for calculating overall equipment effectiveness (OEE) is:

  • Availability X Performance X Quality
  • Availability is calculated as Run Time divided by Planned Production Time
  • Performance is calculated as Ideal Cycle Time X Total Count, divided by Run Time
  • Quality is calculated as Good Count divided by Total Count.