Seeking truth in reporting helps manufacturing improve

Manufacturing plant bonuses and incentive programs can result in inaccurate data if they are not structured and enforced properly. Three methods for focusing on the right targets are highlighted.
By Bob Argyle, Leading2Lean November 9, 2016

When a team is focused on the right objectives, there will be no room for slight-of-hand accounting, diminished opportunities to fudge the numbers, and less desire to only report good data. Courtesy: Leading2LeanBonus plans and incentives have been placed under a microscope since news broke of the Wells Fargo employees who "secretly opened unauthorized accounts to hit sales targets and receive bonuses," according to Richard Cordray, director of the Consumer Financial Protection Bureau.

More than two million fraudulent accounts were created and 5,300 employees lost their jobs because of the fraudulent scheme. It is not uncommon for acts similar to this to take place in many manufacturing facilities. While the extent and severity may not compare to what occurred at Wells Fargo, but manufacturing plant bonuses and incentive programs could also implicate employees if they aren’t structured and enforced properly.

There are clever ways of justifying and calculating metrics in order to meet bonus numbers, reach key performance indicators, or goals. In many cases, it’s about hitting some designated number for the plant to be considered world-class. For instance, a plant can appear to have operational availability (OA) at 90% or above. However, when accurate information is entered, the OA may actually be closer to 50-60%. With this in mind, how effective would it be to get clever about what should or shouldn’t be included in that percentage?

For example, if a machine is taken out of production for scheduled preventative maintenance (PM), that time frame needs to be considered downtime. Since downtime counts against the plant’s OA goals, preventive maintenance time is often not properly accounted for.

The same tracking philosophy often occurs when production lines are stopped for required employee training or meetings. Failure to track start up times can be considered an example of manipulating the system, all in the quest for meeting the goal to secure any employee incentives tied to that goal.

Plants don’t often use theoretical capacity for production goals. Instead, goals are set at what has been done already to make sure the production throughput, or overall equipment effectiveness (OEE) number, is achieved.

In an effort to drive continuous improvement through transparency, a plant’s dirty laundry should be exposed. Plants should acknowledge the reality or the truth of the situation. Unfortunately, many bonus plans conflict with this approach, leaving plants reluctant to expose the truth.

Instead of creative environments where good people are justifying the wrong behavior like Wells Fargo, here are three methods to focus on the right targets:

1. Focus on a rate of improvement

In order to be world-class, teams need to stop focusing on hitting a number. Rewards should be given to production lines that continually identify and eliminate problems. Employees should be empowered to research ways to increase production on their individual plant lines. Cooperation is needed to encourage teams to find solutions versus just identifying problems. When everyone focuses on improvements, the entire plant wins.

2. Keep bonus plans focused on problem solving

The greatest motivator of all may be discovered when people feel like they are making a difference and their work matters. When this kind of environment is present, bonus or incentive plans become less important. It might be time to restructure an incentive plan, or realign the company’s motivations and instill a stronger culture of transparency, if incentive plans tempt employees to cover up an issue.

Transparency creates accountability within a company. Everyone-from managers to co-workers-knows whether each employee is doing their job or not. Transparency also allows for more commendations, too. When an employee excels, it is visible to their managers and peers. Real-time technology that allows for continual visibility and transparency can be a key component in creating this kind of environment.

3. Embrace truth in your reporting

When acknowledging the truth of the situation is truly celebrated as part of company culture, reporting will be more accurate. This makes the information more reliable for decision-making. With accurate data plant managers, technicians, and line workers will be able to make decisions quicker, solve problems more efficiently, and even justify capital purchases for the plant. Ultimately, the company becomes much more effective.

Companies should embrace the good, the bad, and the ugly in their reporting. By seeing the ugly, the most important problems to solve can be solved.

When a team is focused on the right objectives, there will be no room for slight-of-hand accounting, diminished opportunities to fudge the numbers, and less desire to only report good data. Despite how painful it may seem at first, establishing a company culture of honesty and accuracy helps the plant and employees see accelerated improvement and success.

Bob Argyle is the chief customer officer for Leading2Lean, a Nevada-based manufacturing tech solution provider. Leading2Lean is a CFE Media content partner.