Incentives and productivity: Work groups vs. production lines

Project Firms and Large firms

The fan sector is an important source of employment in the region around Gujrat in the Punjab province of Pakistan. Moreover, it is representative of other light engineering sectors in Pakistan. Exporting has developed as an important market for fans produced in Pakistan, with the largest markets being in the Middle East and Bangladesh. However, competition with Chinese firms is a threat to the Pakistani fan sector, and the largest firms are focused on increasing productivity in order to remain competitive.

We will work with one of the largest producers of fans on issues related to productivity. The project will focus on the organization of production in the factory and the role of incentives in worker performance. The factory presently uses a batch production method, with separate teams of workers building different components. Producers of a similar size in China use assembly lines rather than batch production. The assembly lines result in lower levels of in‐process inventories.

With less in‐process inventory, there is less damage to components and less need for re‐working. Two factors constrain the ability of the manufacturer to switch from batch to assembly lines. First, assembly line production is less tolerant of absenteeism than batch production, and the factory experiences high levels of absenteeism. Second, workers resist changes in production techniques which are proposed by management. Management has agreed to pilot various incentive schemes to attempt to change some of these worker habits.

First, we will test whether short‐term financial incentives can be used to decrease absenteeism. Individual and/or group incentives will be provided to a sample of 8 – 9 production teams. Second, management has agreed to transition several teams from batch to assembly lines. We will use a combination of surveys, experimental games, and production data to gain an understanding of the nature of worker responses to these shifts in production. In this, we will make use of some planned expansions in the factory’s equipment and workforce, which include additional capital and the hiring (for the first time) of female production workers for the winding of fan motors. Previous attempts at shifting the winding workshop from team/batch processes to a moving assembly line met with failure, mainly due to lack of buy‐in by the ustaad and problems with irregular attendance and frequent breaks taken by workers.

This will be done in stages: first, with attendance incentives implemented among existing workers using existing batch techniques, secondly moving one team of existing workers on to an assembly line, and finally introducing female workers on an assembly line. Between each stage, we will allow a period of time to elapse in order to observe the responses to one team of existing winding workers to the changes in incentives, using the other winding teams as a control group. In addition to administrative and observational data collected on the workers’ and teams’ performance, additional information will be collected regarding workers’ backgrounds and attitudes (especially team orientation, cooperation, and flexibility) using a combination of a survey instrument and responses in ultimatum and public goods games. These will help us to understand both intra-team interactions and worker‐level characteristics correlated with successful transitions between production techniques.