The situation:

Our client, one of Europe’s largest industrial enterprises, manufactures machines and performs maintenance and service work. The profit margin of maintenance projects can be high but profits depend largely on whether deadlines are met or not. If they are not met our client is forced pay costly penalties. Employees working on maintenance projects are paid a fixed monthly salary and they receive a bonus.

Our services:

tivona partners was asked to reengineer the service and maintenance department, the company’s most profitable division. Our team developed an incentive system that takes the most important parameters of maintenance projects into consideration: efficiency, competitiveness and aligning the interests of employees and the company. tivona partners selected the employees that will be eligible for the incentive system and integrated the system into the existing compensation scheme. Straightforward guidelines and individual contracts with employees ensure that administrative processes, largely IT supported, are kept to a minimum. Only three aspects will factor into the simple incentive system: project volume (in Euro), time (number of days) and potential accidents (number and severity). To ensure employee satisfaction, they will be paid shortly after project completion. The amount they will earn depends on the financial volume of the project, the time an employee spends on the project and it is tied to the project deadline. Yet, should a project is completed ahead of time but the quality of the work is poor (which typically leads to delays affecting the entire project) or employees provoke accidents (to delay the project’s completion) employee will earn less.

Benefits for the client:

Our client’s ability to compete on the market depends on two factors: the company must increase its efficiency and, at the same time, it must meet quality and safety standards. With the incentive system in place our client will pay employees more but efficiency levels will increase significantly. The incentive system will help to minimize costs as the duration of maintenance projects, and therefore also the time machines stand still, will shorten. Employees will meet the quality specifications because otherwise they will have to redo some of the work, which means the project will take longer to complete and they earn less. Wages will also be cut if quality defects cause delays and this discourages employees from trying to hide any defects. Safety is highly important and in case of an accident, depending on its severity and the cause of it, the management will also cut wages. Certain rules apply but it is at the discretion of the management to evaluate the influencing factors.

The company and its employees will have the same objective because

• Employee satisfaction increases due to new incentives.
• Employees profit from the achieved EBIT
• The incentive system is compatible with the existing compensation scheme because it supplements rather than replaces it.
• Even aggressively negotiated projects with a potentially narrow profit margin are attractive for employees because they can contribute to turning the project into a success by delivering outstanding results.
• The system is fair and each employee can contribute to the results.
• Employees who contribute indirectly to a project can also profit from the incentive system.

The system was implemented globally in two steps. The model was tested on a number of pilot projects and subsequently rolled out to all projects. tivona partners created a win-win situation for the client: maintenance projects will take shorter time to complete and, in case projects are completed successfully, employees receive attractive bonuses.