Pay-for-Value Worker Compensation Programs

A pragmatic way to cut labor costs is to increase the capacity of each worker to make the labor dollar worth more. In the informal, haphazard world of worker training, it is quite possible that a department of 10 workers might have a collective capacity of 40 -50 percent – maybe less. If the width and depth of each worker’s task mastery gap are revealed, the employer usually wants aggressive intervention to close the gaps (after the initial shock wears off).

Most area managers or supervisors cannot keep track of what their workers have mastered, or worse yet haven’t mastered, if the process of training is unstructured and undocumented. If the manager is new to the area, no memory would have had a chance to develop and records that reflect each work’s development are unavailable.

If no historical data exists to measure a worker’s development, what improvements can be made? Employee wage increases can be unwarranted and become just an implementation of a policy. Marginally trained workers end-up training marginally trained workers and the organization’s overall capacity and effectiveness spirals downward as labor costs are driven upward.

If the average departmental capacity peaks at 50%, it can mean that 50% of the wages paid in that department might be non-productive. Paying every worker a full wage with incremental increases, but not knowing what that wage buys, is counter-intuitive for business-minded managers. Unfortunately, these symptoms raise pressures to cut labor costs through layoffs or plant relocation, in lieu of a credible alternative.

Proactive Technologies’ structured on-the-job training program establishes a framework so each worker can be driven through each step of the human resource development process quickly, effectively and efficiently. Quality checkpoints are put in place to make sure each worker is reaching the capacity targets set. This framework, and implementation, does not require additional staff or equipment, nor does it require the organization to operate differently. This framework is built around what exists, integrating resources already available into a coherent worker development strategy.

The process to build the framework starts when Proactive Technologies performs a job/task analysis on a job classification – which can be done in as little as 2 weeks. Existing subject matter best practices, legacy knowledge and expertise, along with existing processes and compliance specifications, are collected and processed (meeting a requirement for ISO9001:2015/AS9100D and IATF16949) into complete tasks for mastery. The PROTECH^® system of managed human resource development software^©   automatically generates all of the tools of the human resource development process to set up for the client a structured on-the-job training program based on task-based best practices for all of the critical tasks of the job. Next, an inventory of the incumbent workers is taken to identify which of the tasks both the employee and their manager agree the worker has mastered. This leaves the non-mastered tasks representing the “gap” to be closed, which becomes the focus of structured on-the-job training and each worker’s personal path to job mastery.

More explicitly and simply, this approach follows the following procedure:

1. Job/Task Analyze Every Hourly Job Classification for the Critical Tasks;

2. Assess Incumbent Works to the Task List to Identify Each Worker’s Gap – Tasks Yet To Be Mastered;

3. Drive Incumbents and New-hires to “Full Job Mastery” – Documented Mastery of One Critical Task at a Time 

If this model is adopted, a “pay-for-value” policy can be implemented for new-hires to ensure the employer is paying the worker only for the capacity that can be derived at the level reached as the worker progresses. Each new-hire can be hired to a “base wage,” then “incentivized” to learn and master the remaining tasks of every duty of the job. An incremental wage increase can be given for every Job Duty (i.e. a grouping of tasks such as Administrative tasks, Operate Equipment tasks, Quality Control tasks) mastered. Once all of the duties for a job are mastered, the job is mastered and justification for that wage level documented with a  Certificate of Job Mastery™ Program portfolio. Wage increases beyond that can be made based purely on merit as it was intended, and employees can achieve additional Certificates of Job Mastery for every job classification assigned.

An easier, and proven successful, approach starts with a competitive base salary and awards wage increments for reaching 50% of job mastery – for which the trainee will receive a Certificate of Task Mastery™ Program portfolio – and another increment at reaching full job mastery to receive a Certificate of Job Mastery Program portfolio. This is easier to implement, and the monthly reports posted in the job area illustrate each worker’s progress so they can manage their personal development.

In models model an employer is paying a justified wage for each employee for the level of capacity they have reached. It is administered fairly with a structure in place for every employee to reach that level, eliminating the opportunity for bias to creep in and facilitating a process toward diversity in hiring, pay and promotion.  New-hires, incumbent and part-time or cross-trained workers are all driven to full job mastery, so any wage rate increase going forward is justifiable. Labor costs are reduced and aligned proportionally to capacity.

There are other measures of cost reduction to consider by implementing this process. The accelerated transfer of expertise™ system through structured on-the-job training reduces the time necessary to develop workers and therefore the costs. Increased worker capacity will make it unnecessary to hire automatically when new contracts are signed until any unused capacity is identified and developed. Reductions in scrap, rework and malperformance through better worker quality and quantity output lowers cost per units produced and/or services performed. Reduction in safety incidents due to a better quality workforce decreases costs and potential compliance and legal liability issues, as well. Significantly decreasing worker turnover and increased retention of needed skilled workers that your firm invested in is an important factor. Implementing a culture of continuous worker improvement offers returns that affect the overall operation in positive ways.

And as if that isn’t enough, capturing subject matter expert expertise before it has a chance to slip away, and using it to train each additional worker, offers a declining investment for each additional worker – something you will not find with classroom or online learning activities.

Unfortunately the Pay-for-Value worker development model may not stop the push for the “relocation to lower wage markets” option, but at least those deciding would have done so after the maximization of existing labor capacity efforts have been exhausted. Once the investment made to develop local workers is quantifiable, the value of the investment and the many returns on investment measurable, a clearer discussion can be facilitated to determine the total costs of repeating the effort in another location and if it makes business sense.

Contact Proactive Technologies, Inc.^® to learn more about the Pay-For-Value Worker Compensation Program and other of the many benefits of the PROTECH^© system of managed human resource development.