Development and implementation of a performance pay system

Project period: January 2016 - April 2016,
Germany, North Rhine-Westphalia
Consultants involved: 2

Initial situation

The company manufactures components for the aircraft industry as a supplier. It supplies well-known airline operators worldwide and is a development and manufacturing partner as well as a maintenance partner for aircraft manufacturers and airlines.

In connection with the process reorganisation and on the basis of a company agreement, a Performance pay had to be introduced for the employees.

In the past, the workplaces were grouped according to the ERA collective agreement.

Aim of the REFA councelling

The aim of the project is to introduce a performance pay component in the pay system within a maximum period of 5 months.

REFA approach

In the first step, the project was launched as an example in a pilot area.

Our consultants were available for project management and technical support in the development of the performance pay model .

The following model corresponds to REFA Consulting AG’s holistic approach to introducing a performance bonus system.

1st step

The following information had to be determined in the consulting project Remuneration/Performance pay :

Customer requirements:

• Recording the order volumes of the customers
• Precise delimitation of the product range to be subjected to the performance pay in production
• Documentation of the provision of materials, packaging and also supplies by the customer.

2nd step

The safe handling of the processes in the manufacturing area is essential for the development of a performance pay. In this respect, the following information has been prepared by REFA Consulting AG:

• Comprehensive process documentation
• Standards/work plans (working method)
• Overview of capacity provision (operating means and personnel)
• Overview of the organisational principles (individual workplaces, group workplaces)
• Representation of the control and influenceability of the processes
• Consideration of the individual manufacturing groups
• Representation of the manufacturing organisation in the groups.

3rd step

Subsequently, Keynumbers were created. Special attention was paid to the following considerations:

• The operational objectives must be incorporated.
• The keynumbers have to be derived under all circumstances.
• The database must be verifiable at all times.
• The recording processes have to be analysed.

4th step

In the last step, a bonus model could be introduced as a 1st proposal to be submitted to the management and the works council.  This bonus model determines the bonus amount and bonus progression based on known processes.

In order not to generate any unwanted cost burdens, a business model calculation/shadow accounting was prepared.

Results of this consulting project “Performance pay”

Development of a new performance pay system by REFA Consulting AG with the approval of the management and the works council. The estimated productivity increase in these manufacturing areas is 16%.