HQ (Head Quarter)
5000+ Employees, $204B+ Revenue
Ford Motor, General Motors, Honda
Have a well defined group compensation system in
place before implementation.
Pay system has to achieve behavioral changes that
impact bottom line business results.
Manage new pay system.
Include indirects in your compensation scheme.
Set non-monetary reward systems as well.
AIM IS TO IMPLEMENT
LEAN – COMPENSATION
IT’S OLD SYSTEM - THE PRODUCTIVITY BONUS
BASED ON GROUP LEVEL
Under toyota’s wage system, productivity bonuses
constitute half of a worker’s monthly salary, and although it
is called a “bonus” it is in reality part of the standard wages.
This bonus thus reflects an assessment of the worker’s
Toyota calculates the productivity of each section every
month, and this becomes the raw data for the bonuses.
The calculation are so complicated that even the managers
don’t understand these figures
This system was very effective in forcing each other group
to compete against other
An employee pay is depended on productivity of his section
CHANGING TO NEW PAY SYSTEM……..
Toyota changed its wage deal:
earlier the productivity bonus traditionally
accounted for 50% to 60% of total salary,
It reduced to 40% in 1990.
Again reduced to 20% in 1992.
As a result competition has begun to occur on
individual rather than group level.
HOW TOYOTA MOTIVATES ITS WORKERS
i. Agreed to guarantee lifetime employment for employees
ii. Developed a system of internal promotion
iii. Provides a pay scale based on three components of company
1. One bonus based on seniority - not job classification
2. Another bonus payment related to team’s performance
3. Additional bonus payment allocated to worker’s merit
4. Wage would increase from 85% to 115% from amount allocated
In return, Toyota employees are constantly committed to making
improvements rather than just responding to problem.
Good relationship and team work resulted in
increased efficiency and a higher level of
Many employees hung out after hours
about reorganizing and improving production
Of 860,000 ideas, 94% adopted
BY END OF 2006, TOYOTO WON ON GM BCOZ..
GM (General Motors) had:
Excessive wage costs for its unionized workers.
Pension crisis with salaried and unionized retirees.
Uncompetitive factories with low-quality products.
Lower compensation costs due to young work force.
A weak currency in Japan.
A lucky break from high oil prices in those years.
As a result:
COMPENSATION CAN FOLLOW….
•Incentives not too large.
•pay based on individual performance.
• reduce seniority pay
OUR SUGGESTEDSTRUCTURE TOPAY EMPLOYEES
Common to all types of jobs
Basic pay- depend on the class/grade where a employee
Should be based on:nature of work
Physical work involved.
Mental work involved.
Knowledge & technical skills involved.
Volume of Duties & responsibilities.
Nature & no of Task/activities contained.
Level of Skills to be exhibited in the work
Burden on employee & complexity of job to do it.
on par with other Similar org’s pay structure for same job.
On par with cost of living/money value in that area/country.
As per latest pay commissions/govt guidelines.