When last year's fourth-quarter results were published, Joe Arhin knew there would be a change in top management. This was the seventh successive losing quarter for the company. Prior to this, the company had not lost money since 1975.
The new management team that came in 6 months ago immediately introduced a host of changes. One of them
was the productivity bonus. The idea was quite simple. If a division, department or unit had an increase in
productivity, the managers in the area all got to share in the cost savings. In Joe's case the management estimated
that it should cost about Ghlt37,000 /month to run the unit. This estimate included salaries, supplies, utility cost,
The new management also sponsored a series of seminars for both managers and workers. The purpose of the seminars was to acquaint the personnel with ways in which productivity could be increased. Some of the specific ideas included quality circles, inventory control and work layout. Joe attended all five seminars. Many of the ideas that were presented had direct application to Joe's department and he was determined to use them.
Joe estimated that a 20 percent increase in productivity could be achieved through increase in quality, better work layout and performance. Under the new productivity plan, if Joe could save 20 percent of the monthly cost of operating the unit, his Gh₵7,400 would go into a special fund. At the end of the year, the total value of the fund would be divided between the company and Joe on a 3: 1 basis. Joe estimated that he could save the company at least Gh¢60,000 each year.
He began by focusing attention on work layout. By re-arranging the work flow and physically changing the
location of some desks and machines, Joe hoped to reduce the work time and increase the output. He also held
a meeting of his people and set up a quality and productivity improvement committee. The purpose of the
committee was to make recommendations for changes that would improve quality, reduce the reject rate and
cost as well as increase the work output.