Performance Systems Save a Turnaround

Q. What do you do when low morale impacts performance and success, and failure is not an option?

Client

A midsized medical device manufacturer attempting a product relaunch after a buyout. 

Challenges

New management had taken over after a disastrous product launch that resulted in the sale of the company. The company’s move to repackage and reprice their product, coupled with a heavily incented sales force, resulted in remarkable customer response and rapid sales growth. While manufacturing had plenty of capacity to meet the exploding demand, the distribution center’s performance threatened the company’s ability to deliver. 

Having endured a long history of bitter conflict with management over employee theft and a long period of slack, the workforce did not respond well to the sudden increase in activity. While order picking could be boosted with extra personnel, packing and shipping was tied to a fixed number of conveyored and computerized workstations. These stations became the bottleneck of the operation. 

In spite of working 24/7 under mandatory overtime, the company quickly grew an order backlog that continued to grow larger by the day. The threat was clear and management knew it. They were not in the position to fail. 

Investigation revealed that order packers were weary of continuous overtime and disgruntled over perceived mistrust and arbitrary management judgement. Moreover, they had wasteful variation in their standard work, spending time sorting through the order queue for various preferred order sizes that they felt “kept them out of trouble” by enhancing their perceived productivity.  

In spite of ample productivity and accuracy data, no actual metrics were applied to the packers’ work. Management was quick to explain why this was impossible. Because of extreme variation in order size, neither order nor unit counts could be fairly used to measure or compare how much work was accomplished.  

Solutions

We applied a regression analysis to packer performance data. It showed both the range of productivity between people, given any order size, and the range of activity speed. We conducted a series of group and individual communication meetings to address the core problem: there was no language to communicate work accomplishment on a regular basis. There were lessons learned from the data analysis, and we shared those lessons with the workforce as well. 

We worked with management to establish a standard for rating the productivity of packing work. Then, we used the local market to calibrate pay incentive for the top tier of performance. When a fair standard was established—one that the workforce perceived as fair—workers dropped their concern about looking for “better” orders to work on.   

Results

Top performers felt proud of their new-found recognition and compensation, and some average workers sought to join them. The “slow” working group, newly informed of their true status in the pecking order, worked to meet or exceed the minimum standard.  

Several employees who were heavily affected by past conflicts quit, while the remainder agreed that the new “performance language” was a big step forward in clarity and fairness. 

Within six weeks, the backlog and overtime were eliminated. The ongoing increase in workload was easily handled by the packing stations. The cost of operating the warehouse dropped, despite a pay bump. Furthermore, the productivity improvement allowed for a reduced headcount. Morale soared.