ASSESSMENT OF PIECE RATE SYSTEM ON MOTIVATION AND EMPLOYEES PRODUCTIVITY: THE CASE OF FERRIC BELT METAL PROCESSING AND ENGINEERING FACTORY

Abstract

Ethiopian manufacturing labor productivity is one of the lowest in the world. The main reason for this is low employee motivation and discipline (FDRE Policy Studies Institute, 2020). One method mainly used to increase motivation and productivity of frontline workers is incentivizing them based on their performance. This study titled “assessment of piece rate system on motivation and employees productivity” focuses on the experience of Ferric-Belt metal engineering and processing factory, who implemented piece rate incentive system four years ago. Our main objective for conducting this research is to expand piece rate system as industrial labor productivity improvement tool across small and medium sized manufacturing enterprises. The company under study has four distinct production sections and they designed the system as group or individual bases, according to the nature of operation. The paper tries to study the impact of incentivizing employees over a four year period by gathering and analyzing qualitative and quantitative data which is collected from direct laborers and managers. Manager’s perception is recorded by conducting interviews while direct laborers are approached with questionnaires. The outcome of their insight is further validated quantitatively from four years of historical production data to get a clear picture on effectiveness of the system. Even if general employee productivity has shown great promise, there are identified lessons to be learnt from their experience. Finally, the study indicates general steps and expected challenges along the process of implementing of piece rate incentive system in another factory setting.