On Incentives and their Applications to Production

Increasing productivity while minimizing cost is a management goal that needs no elaboration. Using incentive systems to encourage production workers to achieve this goal is often an integral part of good management. In principle, a good incentive system should encourage individuals to do what is right by rewarding them for carrying out desirable actions. In reality, however, there are many practical considerations that have to be carefully thought out for an incentive system to be successful. This paper describes the motivation and rationale of an incentive scheme which was designed for and is currently under experimental implementation in a large petrochemical plant in the the People´s Republic of China for the purpose of conserving the consumption of cooling water Analysis of the incentive scheme, practical issues encountered in implementation, and preliminary experimental results are discussed.