Off the Cuff: Evaluating and Compensating Production Employees, Part IV

Critical to establishing wage ranges is knowing what your company’s production rates are and how well an employee performs relative to these statistics.
Feb 15, 2008

By Mark L.Venit, MBA

In "Evaluating and Compensating Production Employees, Part III," we described the benefits of conducting employee reviews for both the company and the individual as well as creating a numerical-grade system to provide you and your employee with an effective and easy mechanism for establishing and maintaining a proactive evaluation system.

Among the recommendations we gave were:
a.    you should conduct evaluations quarterly,
b.    you should spend no more than fifteen minutes on each review,
c.    and you should clearly explain to your employees that the three primary objectives of the review are:
        1.    to convey information,
        2.    facilitate communications between employer and employee,
        3.    and provide the employee a progress report that grades his performance and defines his current employment status.

The Cumulative Review
In addition, the review serves as an essential determinant in awarding or denying raises. For this important purpose, it needs to reflect the cumulative results of evaluations of your employee's production skill level, length of service, compliance with company policies and directives, some intangibles, and most importantly, overall performance, especially in terms of output, loyalty and commitment.

When you're conducting employee evaluations, you’ll recall from Part I that employees need answers to “The Seven Questions” that should be addressed during the review process, with No. 7 being “By what criteria will my performance be evaluated?”

The answer to this vital issue comes via establishment of a system of skill levels classifying each employee as a Level 1 Technician, a Level II Technician, etc. Creating your own system and defining what each level translates to in your company is the key to your assigning equitable and rational wage rates for production employees and alleviating such factors as favoritism, the boss’s mood and other non-skill-related variables from the decision-making process on raises.

Establish Standards
Critical to establishing wage ranges is knowing what your company’s production rates are and how well an employee performs relative to these statistics. This means recording productivity for a variety of orders, order size, complexities, number of colors of imprint/stitch counts, etc.

Monitor Performance
One you’ve ascertained production output ratios on a variety of items and for varying degrees of sophistication, it’ll be necessary to continually monitor these data on a proactive basis. Some companies keep production data on every order all the time, while others elect to monitor output performance on an occasional basis -- one week a month, a few weeks per a quarter, two months a year, etc.

Whatever you determine works best for your company is the data-generation system you’ll use to construct a compensation plan for your production employees, a bridge that connects wages to performance. Without this statistical information, your newly designated wage levels are the product of guesswork, not facts on productivity rates.

Employees need to know what’s expected of them, and conducting these measurements will in fact establish the baseline for what the norms are in your company. While production above standard rates doesn’t necessarily obligate you to reward better productivity (It’s a nice idea though), employees who perform below standards aren’t likely to see pay increases until they come up to speed. Literally.

By monitoring your own standards from time to time, you’ll also gain a valuable tool that enables you to identify specific trouble spots in your production process before they fester into holes that suck money away from your bottom line. You’ll also be able to determine where new investments in training and more efficient production are paying the dividends you hoped for.

In Part V, which will appear in the March 4, 2008, edition of the Impressions newsletter, we’ll look at creating specific skill levels for assessing employee performance, as well as establishing eligibility and qualification periods for developing your company’s criteria for awarding wage increases.
 
Mark L. Venit, MBA, is president of Apparel Graphics Institute Ltd., Ocean Pines, Md., which provides management and marketing consulting and proprietary research to apparel graphics companies throughout the Americas and Europe. He is also the chairman of ShopWorks Software LLC, a provider of industry-specific business software. Venit teaches pricing, strategic marketing, salesmanship and other business management topics at the Imprinted Sportswear Shows. You can reach him at markvenit@cs.com.

Click here to read "Evaluating and Compensating Production Employees, Part I"

Click here to read "Evaluating and Compensating Production Employees, Part II"

Click here to read "Evaluating and Compensating Production Employees, Part III"
 

Off the Cuff: Issues in Industry Specific Accounting – Part 2 of 2
In Part One, we looked at accounting philosophies and perspectives, different types of accountants, software considerations and general ledger issues. Now, let’s examine industry-specific aspects of constructing general ledger categories (or accounts). Doing so can give you more insight in terms of monitoring costs, performance levels, and, of course, understanding how key components determine your bottom line.
July 20, 2009

Off the Cuff: Issues in Industry Specific Accounting – Part 1
I have worked with more than 600 industry companies as a management consultant and been involved in the sale or merger of scores of companies. In that time, I have done many industry-specific business appraisals, and have met and worked with hundred of accountants. I can conclude there are two major types of accountants when it comes to counseling the owners of apparel decorating firms —  “mechanics” and “consultants.” Which type of accountant do you have?
July 06, 2009

Off the Cuff: How to Measure Key Barometers of Business Health — Part 2
In Part One, I focused on the seven key barometers of business health and marketing performance — cost of garments, production payroll, advertising, rent, telephone, utilities and professional development — and what each ratio tells me about a company’s financial performance and its management and marketing cultures.
June 22, 2009

Off the Cuff: How to Measure Key Barometers of Business Health — Part 1 of a Two-Part Series
One of the main reasons Impressions asks me to write an online column is simply what I do for a living; I’m a full-time management and marketing consultant in the apparel graphics industry. I’ve been at it 30 years and still look forward every day to plying my trade.
June 08, 2009

Off the Cuff: Avoid Errors with Order Acknowledgments
Based on my field observations in this industry, I estimate that more than 95% of embroiderers and screen printers don’t acknowledge or confirm orders — especially orders received by phone and where there’s no paper trail. The verb “acknowledge” here refers simply to the act of sending out a written confirmation of an order placed with the vendor who’s selling this order.
May 11, 2009