Variable Pay Post Implementation Considerations

Tuesday, August 24, 2010

Our driver variable pay plan has been operating for a few weeks now and we have had to make minor changes to two of the risk factors. We anticipated upfront and prepared our management for the possibility that adjustments might be necessary to work out any “bugs” in the plan's operations.

90% of all stops on time

We discovered that do to several recent weather related events; allowances had to be made for those days when storms passed through the metropolitan area. Traffic congestion on the major streets often forced our driver to look for alternative routes only to find that they too were heavily congested. Therefore, on those days when a severe storm is declared along the driver’s route, an extra 5 minutes plus or minus is allowed for the driver to make his stop. Unfortunately, it proved to be unreasonable to grant an allowance in units other than 5 minutes.

Customer satisfaction rating of “Satisfactory”

The vendor who conducts our customer satisfaction surveys takes a sample of the customers along each driver’s route. In order to be fair to the driver, the driver and his supervisor suggested that we blend the surveys together over a two-month basis. After reviewing the suggestion and making certain adjustments with the vendor, we were able to make this change.

To ensure that our variable pay plan was off to a good start and stayed on track, we have been monitoring it very closely. As we anticipated we had to make a few minor changes. Even during the first year of the plan, we can expect that other changes may be needed. We are taking the attitude that our plan is a design in process. Even if we had to abandon our design and start over, we will have learned a great deal about the design, development, and implementation processes.

Should we be forced to go back to the drawing board, we may want to “compensate” our driver for the missed opportunities on the variable pay plan. We might not make him whole, but we might look at some payment to offset the loss of potential from the plan. Since this effort was somewhat of an experiment, and since we are going to try a new design, we will want the full cooperation of the driver. Such offsets are only possible because we elected to hire below the going market rate, thus we have a small margin that can be used for a one-time lump sum offset.