September/October 1997
Scrap processors are increasingly using incentive programs to motivate and retain their employees and reward them for work well-done. Here’s a look at a few such programs and how to make them work.
By Kristina Rundquist
Kristina Rundquist is an associate editor of Scrap.
Once a year, Annaco Inc., an Akron-based scrap metal processor, treats its employees and their guests to a lavish dinner at a local club. Door prizes are awarded, and, among other niceties, all the women in attendance are given a bouquet of flowers.
But the highlight of the evening is the “reverse” raffle of cash prizes, so-called because the largest denominations are given last. Upon arrival, all employees are given a raffle ticket. At the end of the evening, numbers are called and cash prizes of $20, then $50, then $100, then $150 are given away. The final five or so employees are given the option to share the remaining money or take their chances on winning the whole pot. In the end, “nobody goes home without at least a $20 bill,” says Bob Toth, human resources manager.
Sandwiched between the crab puffs and the grand-prize drawing, employees are shown an ReMA safety video and given a reminder that on-the-job safety is job number one. Safety, after all, is the reason behind the dinner, Toth notes. The dinner, in short, is Annaco’s way of commending its employees on their safety record for the year.
This safety awards dinner is just one example of Annaco’s many employee incentive, or reward, programs. And it’s not the only scrap processing company that’s found such programs to be great tools for achieving a variety of goals. This review shows how a handful of recyclers are using incentives to benefit both their employees and their companies.
A Panoply of Incentives
More and more, scrap processing companies are turning to incentive programs to accomplish specific results. These results can include boosting morale, enhancing productivity and safety, recognizing personal milestones and accomplishments, reducing absenteeism, and keeping employees interested and committed to their jobs and the company.
Why all this fuss over what some say employees should be doing anyway?
For one, in today’s work force, job loyalty is on the downswing. The company man has gone the way of the martini lunch, and those who do remain loyal are often rewarded with layoffs, downsizing, and departmental restructuring. Also, competition is increasing globally and companies are having to work harder to keep skilled employees and attract qualified new-hires.
With a solid incentive plan in place, however, “you’ll start to see improvement with employee retention,” says Bob Nelson, author of 1,001 Ways to Reward Employees and 1,001 Ways to Energize Employees. “You won’t be losing them simply because they get an offer elsewhere that just pays more. And over time, you’ll even start to draw talent.”
Annaco is one scrap company that knows the value of incentive programs, and not just for retaining or attracting employees. Many of its incentives are related directly to the job, such as the safety program, in which the department that was accident-free during the prior month is treated to lunch. The company also has an attendance incentive plan in which employees in select departments who show up on time every day for a week earn an extra 25 cents an hour for every hour they worked that week. In addition, any employee who has perfect attendance for 30 days receives a credit for three hours of paid leave. Perfect attendance for a year gets an employee free uniforms for the following year. For each month of perfect attendance, employees also receive a similar number of raffle tickets for gift drawings at the firm’s Christmas party. Productivity rewards are also handed out at the party, and employees can trade in their attendance credits for cash or paid-vacation time.
Aside from these job-related incentives, Annaco has others that aren’t so easily identified as incentives but serve the purpose just the same. “Throughout the year,” Toth says, “we do many company-sponsored events that are incentives, but are masked. We provide free uniforms and personal protective equipment. We give food out for giving to United Way. We also give employees time off or T-shirts for participating in community activities. We do a lot of hats and T-shirts and tchotchkies.”
T-shirts are fine, you say, but what’s wrong with good old-fashioned cash?
Nothing, but some incentive providers are finding that money isn’t necessarily the most effective reward. “The top incentive as selected by employees chosen for a recent survey,” says Nelson, “was being told by their boss that they did a great job. Number two was a written form of thanks. But of those surveyed, 76 percent said they never got that. The two top incentives from the employee perspective are things any manager can do in 10 seconds, and yet they hardly ever do them.”
Toth agrees, maintaining that the best thing managers can do to motivate their employees is act as coaches, counselors, and cheerleaders. “We need to start with what motivates people,” he says. “Fear, punishment, and coercion—that doesn’t work anymore. It’s true that at times you can coerce someone into doing something, but that’s always short-lived.”
Some firms go out of their way not to offer cash incentives. In fact, many have found that cash rewards can become a slippery slope in that employees come to regard what was once an incentive as a right. “You’ve trained the employee to see cash as the only true form of thanks,” explains Toth. “Unless they get money for their contribution, then they don’t feel it was important.”
Nelson, too, is wary of using nothing but cash incentives. “If people are trained that doing a good job is equated with money, it skews things,” he says. “Money has no trophy value. If you take something with a symbolic value, there will be a built-in reminder. You’ll forget what you spent the cash on, but with a gift certificate for a nice dinner, you’ll go up in the esteem of your family. There’s a multiplier effect to that.”
Still, cash has its place, says Steve Brown, vice president of U.S. Zinc Corp. (Houston). “We’ve found that money is the major incentive,” he says, though he also acknowledges that a lot of recognition doesn’t hurt. “We feel we wouldn’t be successful without the two working together. As you get more involved in an incentive plan, people want the recognition for doing a good job.”
If you insist on using a cash-incentive plan, says Nelson, make sure you have some variety—provide an assortment of rewards and give the employee the chance to pick and choose. Merchandise, such as VCRs, is a good option for something that has the feel of a cash incentive but packs more of a wallop. “They may look at the VCR and see the retail value, but you only paid about 40 percent of cost. There’s a higher perceived value with nonmonetary items,” he maintains.
At Gachman Metals & Recycling Co. (Fort Worth, Texas), gift certificates for major appliances are raffled off each year. Winners are chosen from a pool consisting of departments that made it though the year without a lost-time accident. “They can apply that money to whichever store they like, but we try to advertise the incentive as an appliance,” says Arnie Gachman, president. “We try to get away from it being just dollars.” As he adds, “Hey, it’s the greatest thing in the world to win a TV if you can’t afford one.”
Gaining Through Gainsharing
Recent years have seen the growing popularity of gainsharing, a compensation bonus plan that offers a company’s entire work force an incentive to improve performance. Based on a formula comparing the value of a final good or service to the employee costs that went into it, a target cost is established. Say, for example, a company decides that employee costs should constitute no more than 25 percent of a product’s final value. When the actual costs are lower than the targeted costs, employees receive a reward.
U.S. Zinc uses gainsharing as one of its major incentive programs. “Through trial and error, we established a baseline of what it costs to produce a particular product,” Brown explains. “Let’s say we determine that a reasonable production cost is 10 cents a pound. For anything our employees produce under 10 cents, they get monetary credit. We don’t look at it as increasing production so much as increasing savings.”
Gachman Metals & Recycling also has a gainsharing plan, which Gachman credits with building teamwork and keeping employees attuned to how the company is performing. “My operations people know the numbers better than I do,” he says. “They know the profits and margins. We work as a team.”
In his company’s plan, Gachman says, each job is weighted according to the importance of the job to the overall operations. “If a person is involved in the control of a segment of the business, then they’ll get a bigger percentage of the profit,” he says, “so accounting isn’t getting the same as operations or production or sales. Their salaries will be commensurate, but their bonus expectations may not be.”
For companies looking to invigorate a sagging work force, asking for staff suggestions and rewarding the good ones by implementing them may be the answer. Known as the I-Power program, it depends on a regular supply of management and service suggestions from all staff.
According to Gloria Gault-Geary, an Arlington, Va.-based speaker, trainer, and consultant in matters of leadership training, customer service, and team building, “the I-Power program taps into the philosophy that most companies have but don’t use—that their people know how to make the company work at its best.”
In the program, organizations are divided into teams, each with a three-person leadership group in charge of evaluating suggestions. The most senior member can ultimately approve or reject a suggestion and can even give an employee or department approval on the spot to put a suggestion into practice. It’s then up to the employee or department to see that the suggestion is implemented, or opt out and decide that something else takes greater priority.
The I-Power program is particularly well-suited to blue-collar environments, says Gault-Geary, because “most of the time, blue-collar employees aren’t asked for their opinions and not treated with respect. This program says you have the ability to help us figure out and fix a problem.”
Making Incentives Work
As is evident, the reasons behind and structure of incentive programs are as varied as the incentives themselves. Many programs are basic enough so that, with a little teamwork, they can be implemented with relatively few complications. More complicated plans involving profit sharing and 401(k)s might require an outside financial or management consultant. Tax issues also crop up depending on the type of incentive and its dollar value. “If you give the employee a safety award, they don’t have to pay taxes on it up to $400,” Nelson says. “But if you give the same amount for production, then that would be taxable even if it wasn’t in the form of cash.”
Then, too, there are companies that will run an incentive program for your firm, right down to sending memos—complete with a warm and heartfelt message—to remind managers that Joe Smith is to be awarded his incentive prize that Friday. “Of course,” acknowledges Nelson, “the more they do, the more they charge.”
Regardless of an incentive plan’s structure or purpose, successful plans all have common elements. For starters, the program must be clearly defined and the goal precisely specified. Annaco, for example, gets a cross-section of managers in on the ground floor to determine exactly what they want to achieve with a given incentive program. As Toth explains, “First, you need to define your parameters: What is it you want to do? What is it that people really want? What can we give them? And how can we distribute that equally?”
When U.S. Zinc began to formulate one of its plans, says Brown, it spent close to a year developing a baseline from which to assess its needs. “We didn’t just jump in,” he says. “We looked at what we had done over several years and then let things develop for a year to see where we thought we should be.”
Once the program’s goal is clearly defined, make sure that employees not only understand the plan and the incentives, but also that the incentives will interest and motivate them. “Getting two gift certificates to McDonald’s for a year of perfect attendance is ridiculous,” says Toth. “You need to get together with your employees and ask what will motivate them.”
In looking at what motivates employees, many managers would be astonished at what they might find if they only took the time to ask, says Nelson. “At the next staff meeting, ask your people whether they feel valued and what it would take to make them feel that way,” he suggests. “If they don’t fall down dead from shock, their answers might just surprise you.”
Gachman agrees, pointing out that managers and owners “need to be thinking in terms of the person whose attention they’re trying to get. Tickets to a Dallas Cowboys game will be more motivating for some than opera tickets.” Citing an example closer to home, he says that in talking with some of his truck drivers, he learned that certain truck accessories would motivate them. “Our equipment is one of the things we’ve used over the years as incentives,” he says. “The fact that they’re driving an XYZ truck in certain colors and with a particular kind of radio motivates them.”
After settling on the best incentives for your employees, you “need to announce the program with a lot of fanfare and make it really public to your employees,” suggests Toth. “Track their progress, and here’s something that’s key—have a lot of winners.” Gachman seconds this philosophy, adding that plans shouldn’t be so complicated that employees can’t win. “It’s like teasing a child and never giving them the candy,” he says.
Equity is another key element to a successful plan, Gachman notes, stating that a program must be administered fairly if it’s to work in the long run. “Otherwise, it’ll do more harm than good.”
Oftentimes, if prizes are awarded on an individual basis, employees will hesitate to share new ideas. “What’s really going on then,” explains Nelson, “is you’re encouraging competition. No one will work together because if I help you, you might do better than I do and win the trip to Hawaii. Today, more competitive and innovative companies see that the system of overall reward works best, and if you’re clever you can make this team approach to recognition part of your company culture.”
To make sure everyone is working toward the same goal, Gachman Metals & Recycling divides its staff into teams that cross departmental boundaries. For instance, a sales manager and a truck driver may find themselves on the same team. This gives no one team an unfair advantage while reminding everyone that they’re working toward a common end.
Timeliness is still another essential to good incentive programs. Employees should see a direct link between their actions and the incentive plan’s benefits. That’s why a personal note of thanks can be such a valuable motivational tool, says Nelson. He cites the example of the president of a restaurant chain who sends a quick thank-you to employees who have done something exemplary. “He keeps a box of notecards by the phone and more days than not, he jots a couple of notes,” Nelson says. “It’s a little thing, and it won’t turn the company around, but it’s a symptom of something more important—for people to know they are valued and respected and trusted. For you it might take 10 seconds to say thanks, but to your employees it might be a milestone in their career.”
All the careful planning may be for naught, of course, if management isn’t fully committed to making the program work. “If you’re going to get up and announce at the top of your lungs that you’re going to have an incentive program, then you have to do it,” Toth advises. Fail to follow through and employees will lose interest as well.
That said, it doesn’t mean you have to see a failing plan through to the bitter end. For this reason, working closely with employees to gauge a plan’s effectiveness is essential. They’ll know before anyone whether or not it holds promise. If the answer is no, scrap it, says Toth. “There’s no shame if it doesn’t work.”
Recognizing that a program has lost its oomph goes a long way toward achieving an overall successful series of incentives. Some incentives can lose their luster after a scant 12 to 15 weeks, while others may have a year-long run, Nelson says, noting, “People expect them to last years, but that gets really stale.” When you start to notice that employees are no longer as interested or motivated in the plan, it’s time to stop, refresh, and start again. Vigilance is key. Says Brown, “You always have to be monitoring things to make sure the plan is effective.”
Patience is a virtue with incentive plans too. Depending on what changes you’re trying to implement, you shouldn’t expect results overnight. If morale needs boosting, chances are an incentive plan will give an immediate impact. More complex results, however, will require more time, and some changes may be barely noticeable at first. “It’s a gradual thing that creeps up,” Toth says. “You won’t see dramatic changes on the graph. You’re usually trying to change a behavior, and that doesn’t happen overnight.”
No matter how elaborate or simple your incentive plans are, remember that you won’t see results unless your employees feel they’re sharing in the process—and the rewards—and that they can make things happen. If you’re using an incentive plan to boost production 30 percent, says Toth, you have a problem that incentives alone won’t fix. But for lesser goals, they certainly have their place. “Are they a magic cure-all?” asks Toth. “No, but they sure are fun.” •
Scrap processors are increasingly using incentive programs to motivate and retain their employees and reward them for work well-done. Here's a look at a few such programs and how to make them work.