Incentives are double edged

Recently I had the dubious distinction of almost stopping Hyundai (car maker) assembly line. The reason was a critical part which is made in my factory turned out to be defective and in the process of tracing it whole lots of material had to be stopped.

During the process I was involved in a conversation with a line supervisor at the customer plant. They have an interesting scheme whereby the internal production team are treated like suppliers I.e the parts are invoiced from each line as if it were a supplier. This mechanism was introduced to create incentives for production management whereby every player in the game has the motivation to maximize production. In this scenario everyone wins the company gets max production and the employees get maximum benefit. This is a profit sharing agreement which has raised out of weakness on part of the company wherein it could not handle the huge workforce. So far so good, it looks beautiful but there is a huge downside to this system.

This initiative failed to bring in the controls required to maintain product quality. To begin with the accounting of rejection parts in itself turned faulty which led to loss of control in the quality aspect. In today's manufacturing world when quality has become a mandatory expectation this initiative would be disastrous and eventually lead to loss of market share. The reason why proper controls were not established is because it acted as a perk to people who wanted to take on this job. The top management of the company wanted to loosen the quality fencing in order to attract people to take up the job and one can be sure of what the consequences of that action would be.