040 Integrating Financial Incentives

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INTEGRATING FINANCIALINTEGRATING FINANCIALINCENTIVES WITH LEAN INCENTIVES WITH LEAN CONSTRUCTION & LABOUR CONSTRUCTION & LABOUR PRODUCTIVITYPRODUCTIVITY

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Financial Incentives In the past, threat has been used as a

motivating device in our society. Threat is used in authoritarian

societies today to achieve objectives. Is threat working in the workplace, in

order to increase productivity or reduce absenteeism?

Financial Incentives Management today, for many reasons,

gives rewards in order to motivate workers and increase productivity.

By the 70TH incentives had become an inherent part of the operating system of the construction industry.

Trades unions recognized the importance of incentives as a means of enhancing their members.

Financial Incentives They used it as a general expectation of

regular incentive bonus payments. As an essential part of an operative’s

earning. Financial incentives stimulate workers to

put more effort into their work. There are five theories of the role of

money in affecting the job behaviour of employees.

Financial Incentives These are:1. Money as a generalized conditioned re-

enforcer;2. Money as a conditioned incentive;3. Money as anxiety reducer;4. Money as a “hygiene factor”;5. Money as instrument for gaining desired

outcome.

Financial Incentives Theorists on motivation have generallyassumed that intrinsic motivations such as: Achievement; Responsibility; Competence; They are independent of extrinsic

motivation.

Financial Incentives

Extrinsic motivation are: high pay; promotion;good working relations; The cognitive evaluation theory

suggests that:

Financial Incentiveswhen extrinsic reward is used,

such as one used by organizations (bonus pay for performance improvement), the intrinsic rewards of the individual are reduced.

Financial Incentives Pay or other extrinsic rewards can be

effective motivators. However, they should be made contingent

as an individual’s performance. Another definition for the term incentive is

“something that inspires action”. In the construction industry it means the

attempts to increase production; have better performance;

Financial Incentives Those firms who use financial and non-

financial incentives side by side are those that produce the best results.

Motivation with pay increases, and promotion can often back fire, and decrease workers motivation.

FinancialRewards(High pay)

Conditionedre-in forcer Anxiety

reducerHygienefactor

An instrumentfor gaininga desired outcome

2Intrinsic

motivations

Motivationamong

workers

AchievementResponsibilityCompetence

1Extrinsic

motivation

promotiongood

workingrelations

when extrinsic reward isused, such as one used by

organizations (bonus pay forperformance improvement),the intrinsic rewards of the

individual are reduced.

Money Money

Financial IncentivesLabour productivity & Lean Construction

Motivating

Factors (7) D41-D46

Hygiene

Factors Factors D47-D55

Ability and Skill of worker

Job

Satisfaction Effort

Rewards

Project

Performance

Time Cost Quality Safety Customer

Satisfaction

Labour (6)Characteristics

D39. SubcontractingLabour

D40. Direct Labour

HighProductivity


Conditionedre-in forcer

Anxietyreducer

Hygienefactor


2Intrinsic

motivations

Motivationamong

workers


1Extrinsic

motivation

promotiongood

workingrelations




Money Money

Lean Construction Lean construction main objective is to

maximizes value and reduces waste. It applies specific techniques in an

innovative project delivery approach.It including:1. supply chain management, 2. Just-In-Time techniques.

Lean Construction

Just-In-Time(JIT)

Supply ChainManagement

(SCM)

LeanConstruction

maximizes valuereduceswaste

Based on LeanManufacturing, of the Toyota

Production system

High productivity

LAST PLANNERSYSTEM

Lean Construction As well as the open sharing of information

between all the parties involved in the production process.

Lean manufacturing is an outgrowth of the Toyota Production system.

Developed by Taichii Ohno in Toyota in the 1950s.

Lean Construction The term supply chain, includes, all the

activities that lead a high quality product. Customer satisfaction comes from a good

service or high quality product such as: materials information

Lean Construction funds People etc. Some researchers argue that the cost of a

product or service will increase of up to 10% percent because of poor supply chain design.

Lean ConstructionApplying Lean Thinking in construction Using experienced design teams The same design team working on

the design of the project from beginning to end.

Speed up the design process.

Lean Construction Use innovative approaches to speed

up the design process. Innovative ideas in design and

assembly. The use of pre-fabricated building

elements. Manufactured off site and pre-

assembled on site.

Lean Construction Supporting sub-contractors in

developing tools for improving processes.

In order to keep up with Lean construction It is important to follow the work of Construction Lean Improvement Programme (CLIP).

Lean Construction CLIP operates across the whole

construction supply chain, from raw materials processors to clients.

Lean thinking forces attention on how value is generated rather than how any one activity is managed.

An overall success.

Lean Construction

Just-In-Time(JIT)


(SCM)

Business FlowPull

Perfection

LeanConstruction



Production system

JIT onlyconsiders the

Resourcesrequired

Construction LeanImprovement Programme

(CLIP),(Supply chain)

High quality product with minimallead-time

Eliminating delays and disruptions

Motivating

Factors (7) D41-D46

Hygiene

Factors Factors D47-D55

Ability and Skill of worker

Job

Satisfaction Effort

Rewards

Project

Performance

Time Cost Quality Safety Customer

Satisfaction

Labour (6)Characteristics

D39. SubcontractingLabour

D40. Direct Labour

HighProductivity

Just-In-Time(JIT)


(SCM)

Business FlowPull

Perfection

LeanConstruction



Production system

JIT onlyconsiders the

Resourcesrequired

Construction LeanImprovement Programme

(CLIP),(Supply chain)

High quality product with minimallead-time

Eliminating delays and disruptions

Labour ProductivityA large proportion of the high cost

in construction work is as a result of excessive labour costs.

These costs can be reduced if productivity is increased by improving labour efficiency.

Labour Productivity The difficulties in managing

manpower on a large scale may result in productivity loss (Thomas and Jansma, 1985).

There are four main factors that affect labour productivity;

The duration of worker’s effort.

Labour Productivity The intensity of worker’s effort. The effectiveness of worker’s

effort combined with the technology used.

The efficiency of worker’s effort, which can be described as a measure of how much the worker is utilising his ability.

Labour Productivity Work on a complex project (e.g. such

as the construction of a major shopping centre) becomes more difficult as the project advances.

Off-site pre-fabrication units will reduce the number of labour hours required.

Labour ProductivityOther factors such as: the level of skill amongst the workers; the length of the workday; Innovative work practices can increase

productivity.

Labour Productivity Employment practice has an impact on the

cohesiveness amongst the workforce.Some of the Important contributors towardsLabour productivity are: a culture of cohesiveness common goal strong sense of a team working towards a common goal

Labour Productivity A culture of team working involving all

workers is to achieve a common goal. A common goal is to achieve KPIs. Labour productivity can also be improved

if operatives avoid conflict. Conflict can hamper the progress of work. Team working reduces conflict and will

greatly facilitate increased productivity.

Labour Productivity The importance of a directly or indirectly

employed workforce. The effect on the dynamics of productivity

is reiterated in several research work. The growth in the construction sector is

relatively stagnant. The job security can be very bad during

any recession for construction workforce.

Labour ProductivityLabour

Productivity

MinimizeRepeatWorks

changesmade to

the originalscope

Sitechanges(Impact)

varioustypes ofdisruptio

n

10-20% lossin

productivity.

LabourProductivity

Loss

Improving theknowledge andskill of workers

on sites,

Constructabilitydetailed review of:design drawings,

models,specifications,

construction processesetc

MinimizedDisruption

Constructability(to keep

changes tominimum)

MINIMIZE


Conditionedre-in forcer

Anxietyreducer

Hygienefactor


2Intrinsic

motivations

Motivationamong

workers


1Extrinsic

motivation

promotiongood

workingrelations




Money Money

Just-In-Time(JIT)


(SCM)

LeanConstruction



Production system

High productivity

LAST PLANNERSYSTEM

LabourProductivity

MinimizeRepeatWorks

changesmade to

the originalscope

Sitechanges(Impact)

varioustypes ofdisruptio

n

10-20% lossin

productivity.

LabourProductivity

Loss

Improving theknowledge andskill of workers

on sites,

Constructabilitydetailed review of:design drawings,

models,specifications,

construction processesetc

MinimizedDisruption

Constructability(to keep

changes tominimum)

MINIMIZE

040 Integrating Financial Incentives

Engineering

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