Performance Contingent Rewards and Productivity: A Summary of a Prototype Incentive Management System

Due to the high cost of human resources, the need to substantially reduce personnel costs without undermining the long-range quality and effectiveness of the work force continues to be a major Navy-wide concern. In an attempt to address this problem, a Performance Contingent Reward System (PCRS), an incentive management system that uses economic incentives to increase productivity, was tested on data entry processors at the Long Beach Naval Shipyard (LBNS) during 1977. The PCRS was designed according to theoretical axioms derived from an expectancy theory of work motivation. A system of work measurement and performance standards was developed, and a computer software package was redesigned to provide the data base for evaluating work performance and determining monetary rewards. Minor changes were made in the physical layout and work methods of the data entry operators and in some supervisory practices, and the task of coordinating the incentive program was assigned to the second level supervisor. Keystroke rate, the basic measure of productivity, has increased by 25 percent when compared with a preimplementation baseline. The chronic overtime condition has been eliminated and individual productive time has increased to 110 percent of expected. This combination of speed and efficiency has allowed for a 22 percent reduction in personnel (through normal attrition), resulting in significant cost savings to the organization.