VARIABLE PAY: A CASE STUDY IN WAREHOUSE LOGISTICS

Abstract

The use of variable pay schemes has been identified as a means of rewarding employees in order to increase their motivation and productivity. However, experiences from post-transition economies show prevalent use of variable pay model in the sales sector. The reason behind that is insufficient interest by top management into other sectors, such as supply chain management. In addition, supply chain management and different types of distribution channels have not yet been recognized as the sources of competitive advantage. Furthermore, when compared to the sales sector, performance is hard to measure within the supply chains suggesting the need for more complex performance indicators. The main aim of this paper is to present the introduction of variable pay schemes in warehouse logistics leading to productivity improvement. In that context, a case study method is used to compare warehouse employees’ fixed and variable pay and their impact on employees’ performance. The results reveal significant differences in warehouse employees’ performance outputs after introducing variable pay schemes. The research is limited by the levels of technology used in the warehouse operations. Consequently, the lack of a precise classification of warehouse employees’ activities can be noted indicating the need to include subjective indicators in the analysis. Finally, performance management in post-transition economies is still rather delicate field with top management still being sceptical about the use of performance pay schemes. In that sense, the efforts should be made to develop efficient solutions to improve employee motivation and performance.

Key words: supply chain management, variable pay, warehouse logistics, Bosnia and Herzegovina