New Incentive System

New Incentive System

Goodwill’s mission is transform lives through the power of work. Part of their core values is to help people reach their full potential through respect, integrity, excellence, and teamwork. To that end, the agency should develop the proper objectives and incentives to achieve this. Specifically, the pricer position at Goodwill is underutilized. The main reason for this is a lack of data. But, AMI changes this. Goodwill should view the pricer position as that of a buyer in a traditional retail setting.

Using the information AMI provides, a new incentive system should be considered. This new incentive system will align individual goals with organizational goals. It will challenge managers and pricers to use their utmost skill to solve problems. It will motivate employees to work harder and smarter. It will unlock the entrepreneurial spirit in everyone. As a result, Goodwill will have higher sales, better customer satisfaction, improved employee morale, and more money to fund their mission.

The key to this new incentive system is to make it based on the dollar value of items sold rather than the number of items made. In addition, if monthly sales exceed the stated plan, all employees at that store participate in profit sharing. Managers get 10% of the surplus. Pricers and Sorters get 10% of the surplus. The agency itself gets 80% of the surplus.

How can the items made metric be turned into a dollar value sold metric? Here’s the formula:

The average sell price for donated clothing is $5.20 per item
The average sell rate for donated clothing is 33.3%
The items made metric for clothing is 100 items per hour.

Clothing dollars per hour = 100 x $5.20 x 33.3 / 100 = $173.16

The average sell price for donated hardlines is $4.18 per item
The average sell rate for donated hardlines is 45.0%
The items made metric for hardlines is 90 items per hour.

Hardline dollars per hour = 90 x $4.18 x 45.0 / 100 = $169.29

It looks like $170/hour is a good starting plan for pricers. That is, for every hour a pricer works (aka Pricer Hour), Goodwill can expect $170 of sales. Additional metrics can be used to measure their overall performance, but the incentive part of the equation simply requires $170/hour of sales. While this is an individual goal, in order to receive any profit sharing, the entire store has to reach their monthly goal. This will encourage pricers to work together as a team rather than against each other.