Key Insights for Managers
Global supply chain factory workers are frequently paid low wages, often attributed to factories earning low margins. This article reveals, through a series of experiments conducted in an apparel factory in Thailand, that re-designing compensation schemes can improve factory profitability and worker productivity, satisfaction, and motivation. Authors Niklas Lollo and Dara O’Rourke found these win-win results occurred when the factory introduced a payment structure that increased the amount the factory paid for each completed item (piece-rate) as the worker’s team surpassed various productivity targets. This also decreased tardiness, reduced worker turnover, and improved quality. This study’s insights are based on a set of field experiments that examined various changes made to a factory’s compensation system on eight production lines over the course of two years.
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Geography: Thailand
Industry: Clothing