While piecework payment systems can go far toward boosting productivity, too many CEOs have seen them lower quality at the same time. Does that mean piecework has to go?
Walter Riley, CEO of G.O.D. Inc., a Kearny, N.J., overnight express freight service, doesn't think so. Riley, whose business depends on speed, has kept his piecework program but has added incentives that specifically encourage quality.
Four years ago, Riley took his freight dock loaders off hourly wage scales and paid them for each shipment handled. Freight loss and breakage became epidemic. "All of a sudden, there were problems all over the place. This system just sped them up. The dock loaders thought, 'If there are mistakes, there are mistakes.' " So Riley changed the system: on top of the shipment rate, freight loaders get weekly bonuses of 25% of their total week's earnings if all shipments go through with no breakage, misloading, or short cartons. For a dock worker earning $600 per week, that means an additional $150. Some 85% of dock workers meet the weekly bonus requirements. Plus, dock loaders now double as critical quality checks throughout the whole freight-hauling operation, improving companywide productivity as well.