Incentive Programs Driving Productivity in Warehouses

June 1, 2006 ( - There is a link between employee incentives and productivity gains among warehouse workers, according to a recent survey.

According to a survey by ARC Advisory Group, when respondents were asked if they used incentive pay in the warehouse, 59.2% said no, and 40.8% said yes. The survey included responses from 201 logistics managers, ranging from warehouse manager to top executives.

Of those that did offer incentives, more than 63% of respondents achieved productivity gains of between 10% and 30% over a two-year period. Another 13% achieved productivity gains of over 30% in that time period. Incentives have also led to increased employee satisfaction, a key determinant in employee retention, the survey found.

The incentive programs that led to the greatest productivity gains include:

  • basing incentives on targets for individual employees
  • basing their targets on granular labor standards
  • linking the payment of productivity incentives to a requirement that employees maintain a predefined level of quality and safety.

In addition to increases in productivity, respondents said other benefits of incentive pay include:

  • employee satisfaction, 62.2%
  • the fact that some poor employees went elsewhere, 41.5%
  • decrease in employee turnover, 29.3%
  • fewer labor grievances, 2.4%

When asked why companies do not pursue incentive programs in the warehouse, respondents said:

  • performance data was not accurate, 55.5%
  • program would be unfair, 40.3%
  • clerical burden would be too high, 23.5%
  • payroll system could not handle it, 18.5%
  • they were exploring incentive pay, 14.3%
  • company is unionized, 7.6%
  • quality would decrease, 6.7%
  • fear of higher turnover, 4.2%

Monetary incentives are more favored (78%) than providing extra time off (12.2%).