Rewarding Quality at Amalgamated Building Supplies

Introduction

Amalgamated Building Supplies (ABS) have come to the conclusion that a stronger focus is needed on customer satisfaction and quality in order to compete in a global market. In a TQM system, employees share the responsibility for quality, so are therefore a very important resource for meeting organisational goals. Correcting quality defects can be very expensive, as demonstrated by Toshiba who paid $2. 1 billion to settle a lawsuit over poor quality products (Coulter & Robbins, 2005 p. 502).

It is therefore very much in ABS interests to produce excellent quality products if they want to make a profit and compete in global markets, where quality is already a main concern.

ABS has decided to implement a reward and recognition system, which will help to motivate employees. There are a number of factors to take into account before such a system can be designed. Firstly, the company will have to decide how to measure quality improvements that will be rewarded and recognised. Secondly, the types of rewards will have to be considered to see which will motivate employees to improve quality the most.

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Thirdly, it will have to be decided if employees are going to be rewarded individually, or in teams. People who will reward quality will also be suggested, based on the impact it will have on company performance. Before rewards can be handed out, and employees are recognised, it is important to consider which measures the company will use to monitor quality improvements. For example, the Rockwell Collins Plant pursued a quality goal of a 30 per cent reduction in defects (G.

Hasek in Coulter & Robbins 2005 p. 503).

The implementation of  TQM

It is possible that ABS have decided to implement TQM due to their high level of defects, which was causing the company considerable losses. One method could be to reward or recognise employees when certain reductions in defects are achieved e. g. 5%, then 10%. Employees will naturally want to be rewarded as quickly as possible, so will be motivated to achieve these targets. Motivation can be measured by 'an individual's willingness to exert high levels of effort to reach organisational goals', which in this case are quality improvements.

However, not everyone is motivated with the same rewards, so it is therefore important to understand why employees are motivated (Coulter & Robbins, 2005 p. 392). This will help to decide which rewards will be the most beneficial to the company and employees, and therefore achieve the highest level of quality improvements. A pay for performance plan can be described as a "variable compensation system where employees are paid on the basis of some performance measure" (R. K Abbott in Coulter & Robbins 2005 p. 412). This could include piece rate or lump sum bonuses.

In the case of TQM, it may be more sensible to pay people bonuses when certain levels of reductions in defects are reached. However, these bonuses should only be paid out on the condition that a certain level of productivity is reached, to stop employees working very slowly to reach the targets. This is supported by a study that found 'pay for performance programs', with outcome based incentives, had a positive impact on customer satisfaction and profits (Banker, Lee, Potter, Srinivasan in Coulter and Robbins 2005 p413). This goes some way to supporting Frederick Taylor's findings, that people are motivated by money.

Maslow's hierarchy of needs can be used to predict the needs of employees in order to motivate them. The theory suggests that once employees are satisfied at one level of the hierarchy, that level will no longer motivate them, and they will only be motivated by moving to the next level. At ABS, the physiological needs of employees appear to be satisfied as the base wage they are earning will afford them food, shelter, warmth and the other basic needs.

Their safety needs will be met as the company is expecting to make a profit this year, so employees will feel safer about the state of the company and therefore their jobs. Their social needs will be met by working in teams to deliver TQM. They will be interacting more with each other, and will have more human and social contact as a result. The next level of the hierarchy concerns esteem needs, which comprise recognition, status and attention. According to the theory, employees will need to reach this next level in order to be motivated.

15 different product divisions

There are a number of ways in which employees could be recognised for their initiative regarding quality improvements, including 'recognition evenings' where they are asked to collect certificates and prizes for excellent ideas. This would particularly promote the idea of employees using their initiative and making suggestions. Employees making the products and providing the service are after all 'closest to the action' and are most likely to think of ways to improve things. A recent survey by S. Caudron indicated that recognition was one of the most important motivators for employees (S.Caudron in Coulter & Robbins 2005 p. 412), so perhaps some employees would benefit from this more than money. Another important consideration is to decide if quality should be recognised individually or collectively.

There are 15 different product divisions, which are likely to be interdependent. This means the different teams of employees rely on other teams for good ideas and quality products, in order to continue the quality chain. If targets are met e. g. 5% reduction in defects, each team could be rewarded a bonus, and the team with the least defects could perhaps receive recognition in the form of an award. This would encourage employees to help each other in order to receive the monetary bonus. It may even have a peer pressure effect, as any employees not pulling their weight would be singled out by the other hard working employees.

There are a number of people who could reward quality. The middle managers, who will be monitoring the results, will be able to see when employees have reached their targets, so will therefore be able to say whether a bonus should be issued. Personnel should also have access to this data, so people can be paid promptly as soon as the target is reached. The reinforcement theory suggests that rewarding behaviour immediately is likely to encourage its repetition (Coulter & Robbins 2005 p. 413), so employees will be motivated to continue achieving the quality targets.

The supervisors dealing directly with the lower level employees will know who has suggested particular ideas, and who is striving to produce the best quality. They will be also able to nominate employees for rewards, and maybe recognise individuals by telling them in person that they've done a good job. At Nichols Foods Ltd, monthly awards are presented to people who have been nominated by their peers for extraordinary effort (D. Drickhamer in Coulter & Robbins 2005 p. 412)This could work in the same way at ABS It is in everyone's interests, as those people have helped the other employees to achieve the target and receive a bonus.