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Hey Hey, and welcome to week 5 of 2020! I’m Marty and you’re here with Warehouse and Operations as a career! How’s everyone coming along with their 2020 plans & goals? I’m off to a pretty good start, I think. Everything’s written down and I’ve put dates alongside what I consider my stepping stones or those little objectives I’ll need to get to the bigger goals. I’ve already had to kick one of those dates on down the road a little, no real fault of my own but I’m waiting on some information I’ll need from another person so….And that’s ok, as we’ve learned adjustments are going to be needed occasionally. The important thing is that I stay on top of it. And you can bet I’ll keep hounding them until I have the requested information in hand! Anyway, onward through the fog. I’ve been asked about Activity Based Pay a couple of times and last week I had a conversation with an applicant, who by the way wanted nothing to do with it, so I wanted to talk about it today.
ABC pay or Activity Based Compensation plans are nothing new in the distribution and production markets but I’m seeing more and more and simpler programs being put together today. I’ve seen programs that uses the program to incentives employees to do even the smallest of tasks. One place pays you x amount to punch in and out every day correctly with no edits needed. If you have no tardies your paid x amount as well. You can make x amount for plugging in your equipment and completing a post shift report too. Then as an order selector your paid x amount for every case you select that shift. Wrapping your pallets as you’re suppose too earns you x amount. Adding all that together at the end of the week, especially if you’re a hustler and can select the cases, will add up to a nice weekly wage. The same program can be applied to forklift operators, pallet runners and even delivery and route drivers. Drivers would just have a mileage and maybe a by stop component added to the case formulas figured in for those positions. These programs work very well, we’re actually being paid for what we do. If I pull 300 more cases than my friend, I earn for pay for it. So, the more proficient selectors, fork drivers, runners and drivers are earning more than the employee still learning or maybe even just not hustling like they could. It’s great for us as employees and of course works for our company too. They may be able to accomplish the task with less headcount, paying out fewer benefits because of fewer associates. I mean, if they have 3 of us doing a third more than what the average is, then they don’t necessarily have to add another employee, right?
Now it seems some people want that hourly wage though. And there’s nothing wrong with that, but I do feel we’re holding ourselves back a bit. From my experiences, ABC pay is always over what a base wage will be figured too. And it only makes sense. I’ve rolled out activity programs several times. Those first few weeks payroll does go up because everyone is trying to be top earners. Oh, and we should probably mention that along with all the pros to these programs there can be some con’s. I know several places that have error kickers built into them. If we have say maybe 3 errors that’ll cost us like $30 as an example. Anyway, I strayed again, so everyone’s gonna try and be a top earner that first week but by Friday we’re going to settle into what we can physically do and do correctly! With a base wage, you may be working harder than me, pulling many more cases than I am but I’m making the same as you and the company is getting less productivity out of us. Their spending the same amount of money on us. But with ABC, there more than happy to pay for that additional productivity.
Another type of productivity compensation is the tiered hourly rates. Other words say we select 150 cases an hour or move 30 number of pallets an hour as a lift driver our hourly pay rate may be XX an hour. But if I’m selecting 160 cases an hour or grabbing 35 pallets an hour my hourly rate increases by a dollar. And if I’m selecting 180 cases an hour my base may increase by 2 or 3 additional dollars. These are just examples but you get the idea.
I understand why a lot of people are uncomfortable with ABC pay and I guess I can see how a tiered incentive pay plan can separate us into groups within our peers but hey, aren’t we in this for our families and ourselves? We’re in it for the long haul and our objective is to make or earn what we’re capable of. I heard one supervisor say that anyone that didn’t like an activity program must be lazy. I don’t see it that way. Some people just need that defined cushion. I need to work this many hours at a defined hourly rate to make this amount of money. And that’s perfectly fine in my book. But again, it’ll hold us back, and if an activity program is available, we can control our own wages by just working a little smarter and moving more freight. Notice I said working smarter and not harder. As we’ve learned from the testimonials of other guests, from professional order selectors and replenishment lift operators that’s joined us in previous episodes. They don’t consider themselves as harder workers. They just stay focused, don’t gossip or talk while in the aisles and make every move count to their advantage. The formulas are simple. From punch in to punch out we have to be moving a case or pallet. They all encouraged us to be back on our equipment when breaks and lunches are over. Tony explained to us that 5 minutes here and 10 minutes there adds up to a lot of lost cases at the end of the night. He increased his pay by over 10% simply by watching his breaks and lunches, being back in the aisles first not spending time talking about what he had for lunch with the others!
Some facilities even offer both conventional hourly pay plans and an activity plan, they’ll pay whichever is greater for us that pay period. Almost always the activity plan is paid out.
So back to the guy I was speaking with last week that wanted nothing to do with an activity pay program. This position was as an unloader. He was looking for a position that paid x dollars an hour. According to his resume and work history he’d been making a dollar less than that. When I asked him why he was asking, as a starting hourly wage, something higher than he had been earning his answer was because he should have been paid better at his last place of employment. Like I mentioned I was talking to him about an unloader position. It was about 16 minutes from his house, started early in the morning and they usually wrapped up by noon or 1 p.m. in the afternoon. I went over the job duties and the job description, all the equipment he’d be using and we talked about how 3 people from that crew had moved into other positions like pallet running and put a way lift operator, advancement was just waiting on motivated individuals. He was super excited until we started going over the compensation. I explained it paid x number of cents a case, and x number of cents for every finished pallet he stacked and that he would get x dollars for any exception loads that he had to rework or move around. He didn’t hesitate to stop me at that point and say no, that he wanted an hourly rate job. I shared what the crew had been earning or the averages for the last 3 weeks, which was substantially more than what he was asking for, and did the math with him, pay vs hours that they were working, which by the way was around 35 & 36 hours a week. Well, nothing doing. He was not interested. He was only going to work by the hour. He kept mentioning commission and that he wasn’t a salesman. I explained that by the piece was nothing like commission work. The cases and hours were guaranteed every week. That he would never make less than what he came into the office to earn. The only difference was that he could make more if he wanted too, that he could pretty much set his own wage. We divided their wages by the hours they worked so he could see an hourly wage. He was stuck on the word commission though. I was able to offer him a position as general labor, making what he had been making at his old job although it was like twice as far commute wise. Again, some people just need an hourly wage, and again theres nothing wrong with that.
ABC or activity-based pay, incentive tiers and piece pay can be good earnings, but it may not be for everybody. Yes, we have to work smarter to earn that extra pay, but hey, if I’m going in, I want to earn the most that I can!
So, like I mentioned earlier, here we are, its week 5 of 2020! We haven’t talked much about our plans and goals for the year yet, I’ll be diving in on those in a couple of weeks probably. I hope we all have them though and are working towards them. Mine are pretty much set and I’m doing a pretty good job with’em so far, I guess. If you wouldn’t mind sharing a little, shoot us an email to host@warehouseandoperationsasacareer.com, maybe I could get some ideas for myself or the other listeners out there! And start up a conversation on our twitter and Facebook feeds using @whseandops and share your productivity plans with the group! Oh, and if you have any pictures of your equipment share them on Instagram with the group, we’re under WAOC podcast there!
Until next week, put all that safety training to good use and share a safety thought with a friend!