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: Confidentiality Agreements
Confidentiality agreements protect more than your assets. Just as importantly, they protect your customers.
Some of you might recall a column I published last November that addressed how to keep contract customers out of your production area in order to protect your work. This week's column looks at the other side of the same coin -- employee confidentiality agreements. These are legal agreements that are intended to keep your employees from talking about who's placing orders, for what quantities and dollars, what's being produced and who the end-user might.
September 15, 2008

Off the Cuff: How to Charge for Rush Service
Charging for rush service is justifiable, but be sure to outline  policies upfront and inform your customers.
The issues of whether and what to charge for rush service are common in the decorated apparel industry and there are valid arguments on all sides. Most companies feel they’re entitled to some degree of additional compensation for going our of their way to accommodate a rush order, for bumping other customers a notch or two back in the production line and for having to deal with the potential hazards of doing something faster than necessary. Oh, and the more sanguine reason: you can, if you choose, stick it to ’em when they’re on the ropes.
August 29, 2008

How to Profit from the Tax Write-Off for Conventions and Trade Shows
Thanks to Uncle Sam, you can deduct certain trade show and conference expenses from your income tax filing. Learn what’s deductible — and what’s not.
Imagine an enjoyable — and educational — vacation with Uncle Sam picking up part of the tab. That's right, every decorated apparel business, the owner and employees of that business (even someone who is a shareholder/employee), can legitimately claim an income tax deduction for the expenses paid or incurred in attending trade shows, conventions and meetings.
August 18, 2008

Tax Breaks for Education — What Every Decorated Apparel Business Owner Needs to Know
Embroiderers, screen printers and promotional products distributors can profit from breaks in the tax code to educate their employees and themselves.
Finding, hiring, training and retaining “smart” workers have long been key factors in the success of small businesses, including decorated apparel companies. Lawmakers have also recognized the importance of a smarter workforce and created a number of educational and training-related tax breaks and incentives. Those tax benefits allow every commercial embroidery, screen printing and promotional products business, large or small, to offer training and education as a “fringe benefit.”
August 04, 2008

Economic Stimulus Package Offers Tax Break for Equipment Buying
Decorators interested in expanding their business or replacing old equipment can rejoice in the new round of government incentives designed to help small business owners.
Earlier this year, Congress passed, and the President signed, the Economic Stimulus Package of 2008, a $168 billion economic “rescue” package that included rebates for taxpayers and tax breaks for businesses. In addition to those tax rebates, the heart of the package, there also were tax breaks for businesses such as decorated apparel operations — breaks retroactive to the beginning of 2008!
July 21, 2008