CBA of Labor Efficiency Incentive Program

Cost-Benefit Analysis
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Caleb W

CBA of Labor Efficiency Incentive Program

What are on the + and - side for a cost-benefit analysis of a Labor Efficiency Incentive program?

I envision the program to be a $ savings sharing program where employees who increase their efficiency up to a certain point get a % of the savings. We will have a costs savings and an opportunity savings portion. How we come up with the total savings.

Does anyone have experience with this kind of implementation in the service industry that wouldn't mind me picking their brain?

  Tyrone Skogstrom
Management Consultant, Sweden
 

The Issue is About Measurement

First, the benefit arises when people behave in new ways. A cost/benefit calculation should never be conducted without a clear definition of how the process-or behavioral change will take place.
In other words there is a kind of two-step-analysis you need to do. First you need to find KPIs for that usually measurable change. See more.
Add a reliable calculation what the changes will make in money. Sometimes you can, sometimes you cannot. With a good and systematic screening of all possible improvements and their benefit values, you can decide what impact is reasonable to expect.
Probably the monetary benefit will be higher than what you can measure, and usually management needs to take a decision about: What total value? What process- and behavioral changes can be representative for this value? What of that can be measured? What can be communicated to employees and make sense connected to incentive programs? Keep the focus close to their daily activities.

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