“Employee suggestion” schemes are an effective way of generating cost saving initiatives. In addition to the financial benefits, there is usually a positive impact on workplace morale. Encouraging and rewarding staff to put forward cost saving ideas is likely to result in many initiatives being identified, in part due to the number of personnel thinking about reducing costs. Sometimes ideas that appear inconsequential make a significant difference. Sainsbury’s saved over £60,000 after a member of staff suggested repackaging mangoes. The shop floor worker noticed that the supermarket sold greater volumes of fruit as a result of a “two for £2.50” promotion. The mangoes were supplied in boxes of five, which resulted in considerable wastage due to the odd number. Repackaging the fruit so that it was supplied in boxes of six resulted in considerably less waste. The “Tell Justin” ideas scheme has generated over 50,000 ideas to date since it’s inception in 2004.
1) Keep it simple
The most effective suggestion schemes are usually simple. Siemens Automation and Drives in Cheshire have a scheme called “Ideas Unlimited”. The site employs around 400 staff and generates over 4,000 suggestions per year, of which approximately 75% are implemented. Savings identified through the scheme are estimated to be in excess of £1m per annum. There are no paper forms to complete, with ideas submitted through an intranet application comprised of just four screens; (i) idea generation, (ii) evaluation, (iii) acceptance, (iv) rejection and implementation. All managers are invited to appraise initiatives, with a culture of driving efficiencies embedded in the organisation’s culture.
A straightforward employee suggestion programme could for example offer rewards of £50 (bronze), £100 (silver) or £200 (gold) for approved initiatives, with exceptions possibly made when remarkable cost savings are achieved. An alternative, more elaborate approach could be to offer employees a percentage of delivered savings. Whilst this sounds great in principle, it is often very difficult to quantify precise savings, leading to administrative effort in validating amounts saved, and the incentive due to the eligible employee.
2) Recognise and reward good ideas
Praise and recognition have an enduring impact on employee engagement. Some businesses have a monthly bulletin or intranet in which employees are given recognition for delivering successful cost saving initiatives. For example, Siemens Automation and Drives regularly publish a league table which reports savings by department. This generates healthy interdepartmental rivalry, together with conveying recognition for good ideas.
It is worth considering that rewards should ideally be commensurate with the level of saving delivered. Exceptional ideas should not only be acknowledged but rewarded accordingly. In 2017, Argos received bad press when an employee came up with an idea that allegedly saved the company £1.5m. Following Sainsbury’s takeover of Argos, the individual suggested that delivery drivers only refuel at Sainsbury’s petrol stations. The employee received a £10 gift card in way of a thank you!
3) Listen to your employees
A Gallup study in 2016 found that only 17% of workers strongly agree that their company has open communication throughout all levels of their company. Regular engagement with employees is likely to have a positive impact on overall participation. Encouraging, listening and acting upon feedback from staff will improve the likelihood of running a successful employee suggestion scheme.
4) Analyse results
Monitoring metrics such as: (Ii number of ideas submitted, (ii) number of ideas implemented, (iii) amount saved, and (iv) amount saved per full time equivalent (FTE) will provide useful data.
5) Other considerations
There are many operational challenges that need to be thought-out when rolling out an employee suggestion scheme. For example:
1. Should staff over a certain grade be eligible? (E.g. senior management and directors?)
2. Should employees be rewarded for savings identified within their designated area?
3. Who is responsible for approving initiatives, and what is the process?
4. Have tax implications of rewards been given due consideration?
5. How does the business ensure that employees are not focussing on identifying cost saving initiatives at the expense of their day-to-day role?
There are many points that require careful thought and deliberation when implementing an employee suggestion scheme, but the financial and staff morale benefits are usually worthwhile.