Is Poor Performance Acceptable in a Tight Labor Market?

It’s not your imagination.

Employees have more leverage in the job market than ever before, according to workplace experts. As University of Minnesota workplace researcher *Phyllis Moen notes, “This is the first time I’ve really seen the power shift to the employee.”  

A recent “Talent and Labor Study” from Modern Materials Handling shows how difficult hiring has become. The survey found that 81% of warehouses and DCs want to fill open positions within the next 12 months, with warehouse workers (for 61% of respondents), transportation and logistics managers (45%), and warehouse managers and supervisors (42%) as the largest need.

 Given these conditions, distribution center (DC) and warehouse managers may feel pressured to accept sub-par performance from their employees and new hires. But they don’t have to, according to Andy Paulson, senior director for customer success at TZA. 

Performance Anxiety in a Tight Labor Market 

 “People are scared to death to hold their team accountable,” Paulson says. 

That’s because managers worry if they hold their teams accountable to performance expectations, their employees, and workers will simply quit and find new jobs. What managers are missing though, is the impact on the overall culture of the DC that accepting below-average performance brings. Employees not held to standards — which should always be set and communicated as minimum expectations — show others that it is accepted and rewarded through continued employment, and they start performing poorly, creating a wave of acceptance of deficient performance that eventually leads to lower motivation and morale. This indifference quickly shows up on the bottom line as DCs miss shipping deadlines, experience more turnover, and lower service quality, to name a few negative impacts. 

But, according to Paulson, holding back from insisting on reliable performance is a choice, not a necessity. He says employees will stay and deliver superior results given consistent direction, clearly defined and fair performance expectations, recognition, and rewards. 

He suggests five simple steps to keep employees happy and performing at their best. 

Create Accountability 

Step one for better employee performance is providing consistent direction. That means laying out and documenting what’s required of employees—and losing the fear. Employees thrive when they have a firm understanding of what is expected of them and almost all will attempt to perform to those expectations. The few that do not are the small part of the workforce that requires turnover to keep the culture healthy. 

Documentation is crucial for creating accountability. Expectations around effort needed for the role, how workers use their time, the processes they use, and other minimum requirements should be spelled out and consistently communicated. 

Defining performance thresholds and KPIs gives managers and employers a common language to engage with employees that do not rely on perceptions or “gut feel.” Having clear expectations, through multi-determinant, engineered performance standards allows management to quickly and accurately determine who is performing and who is not. That, in turn, allows for effective coaching to improve performance. 

 Drive Employee Engagement 

After low pay, the top reasons employees leave jobs are lack of opportunities for advancement and feeling disrespected, according to the Pew Research Center. 

Paulson says managers should ask, “How can we use the data to drive better engagement and better conversations?” 

 To that end, coaching and general engagement skills are as important as any process or technology you might deploy to drive performance. Labor management technology can drive engagement, guiding conversations to areas needing improvement. It can also provide management with a real-time view of the good work being done, allowing for recognition and reward. This positive engagement results in higher levels of employee retention. 

Incentivize Performance 

 Many employers are fighting the labor crunch by raising wages. This approach has plusses in the short term but potentially many more minuses in the long term. Simply upping compensation across the board to keep team members happy might send the wrong message. And a blanket wage increase without accountability almost always spells disaster from a cost-per-unit standpoint. Though wage increases are necessary for today’s competitive market, it is essential to increase performance levels to offset the increase. 

 “One way to assure you get something back for your wage increase is to combine a blanket increase with a self-funding incentive pay program,” Paulson says.  

That strategy represents a win for both employees and the company, solving the problem of dissatisfaction with pay and boosting performance. “We can pay people more, but, at the same time, we’re getting higher levels of productivity,” Paulson says. “We’re tying those things together.” 

Develop Meaningful Standards 

 Paulson points out that many distribution operations lack accurate performance standards or, in some cases, don’t have any at all. “Having well-defined operating procedures and accurate performance standards is a requirement for any healthy operation,” Paulson says.
 As the culture of your operation takes on a larger and larger role in your ability to retain employees, the need for accurate standards supporting fair expectations will form the foundation of your relationship with your employees.  Accurate standards are also the foundation of fair management and a must in supporting any type of incentive pay program. 

Paulson says there are many approaches to developing performance standards, some more accurate than others.  These include data-driven, one-determinant standards based on historical data such as cartons per hour, engineered reasonable expectancies, and multi-determinant engineered standards. The most accurate standards — which are required to support an effective incentive plan — are multi-determinant engineered standards utilizing calculated travel speeds specific to an area and type of equipment. This provides fair and achievable work to employees and eases planning, making sure you right-size your workforce and become more consistent and predictable in your execution. 

Measure the Right Things 

With engineered labor standards in place, managers can measure the right things to ensure that employees are compensated and rewarded for outstanding performance. This, in turn, leads back to creating accountability through employee engagement. 

Connecting all these dots depends on having the right tools to collect and surface the data that matters. TZA’s ProTrack Labor Management System System can help. 

Labor management software provides the data and automation that allow your supervisors to define accountability and have more meaningful and engaging conversations. It also provides the basis for standards-based incentives, letting you manage resources in a way that drives performance, engagement, and retention in our tight labor market.  

Reference source *University of Minnesota workplace researcher Phyllis Moen

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