Increment formula - need your advice on how to give increment to production people

I am new in HR management.We have only 16 people in production. But they do different work. I need your advice on how to give increment to production people.

Dear Sugandha,

Whether the employees work in same department or in different department, what matters is whether their performance is measured scientifically or not. This is far more challenging. The second challenge is that whether you measure what deserves to be measured. Few important costs for the production department are:

a) Production cost

b) Work In Process cost

c) Inspection cost

d) Quality cost

Salary increments should be linked to management of these costs. For salary increment, you can fix the various performance slabs. Based on the score of individual, he/she should get the increment.

Nevertheless, as stated above, measuring above costs scientifically is not that easy. Mere checking whether the production target met or not, % of non-compliance etc are superfluous measures. If the increments are not based on the above costs then possibly the employees in production department may get salary increment but your organisation could loser. This is a pernicious trend.

I have written above post based on the understanding of the general production. However, your production department might have additional costs also. Therefore, unless end to end production process is studied no further comments can be given.

Thanks,

Dinesh Divekar

Thanks You Dinesh.
We measure the following KPI for production people-
a) Number of product
b) Time of production
c) Defects
Can you suggest any formula based on this.

Dear Sugandha,
I have mentioned the various costs in my previous post. You include these costs also. Secondly, what about the maintenance? Is this separate department or it is part of production department?
For Maintenance Department, the most important KPI is OEE. The second most important KPI is "Maintenance Cost against Total Sales".
In addition to production, you need to devise cost-based KPIs for all the department. I provide consulting services to establish comprehensive Performance Management System. I study deeply the system and process of every single department, identify the direct and indirect costs associated each department and assign the respect cost to the respective HOD. To know more about my services, you may click here.
Thanks,
Dinesh Divekar