Piecework: Promise and Peril
A brief discussion about how to structure piece-work shop labor in a way that works. April 29, 2012
Starting soon we will be selling doors to other shops. We recently laid off some of our guys of which we are calling back in to work. I have decided to no longer pay by the hour and to pay by the job instead. For door making, I want to pay by the SF of the door job. What would be a considerable amount per SF to pay someone for door making (in our shop/our tools)?
We pay $1.83 per BF for 4/4 maple select shorts. I calculate/price $2.75 per SF for material cost. Our standard square raised panel door we sell is at $11 per SF. Now $11-$2.75= $8.25. How much of this $8.25 could we pay a single door making worker? One other thing: the worker for door making, we used to pay him $14 an hour.
From contributor D:
The answer to your question is: If your overhead is at or near 8.25 per door, not much. The (non-cynical) answer lies in basing a reasonable wage/income on a reasonable rate of production, does it not? Your selling price will not fix the production rate or cost. The reverse is truer.
From contributor A:
There should be separate components for each door price. SF for material is ok but not for costing labor, it takes about the same time to build a 4 SF door as it does to build a 2 SF door. Buy an inexpensive kitchen timer, use it to time building a door from pulling lumber to ready for finish. Then do another and another and after a series of time trials you can average for each door type, size, and then you will know how much time it takes to build a door with your tools and set up. You will then know how much you can pay someone to build these doors for you. Combine that with the SF material cost, overhead, and profit and you should be close to an accurate price.
From contributor U:
I would be concerned about keeping the quality up when paying employees on a "per piece" system.
From contributor O:
A payment structure we are considering at our shop is $10 per hour plus $5 per item.
A four drawer base cabinet has 1tenitems:
Four drawer boxes.
Four drawer faces.
One cabinet box.
If you can process this whole cabinet in one day you earn $130 or $16.25 per hour. If it takes you two days then you earn $13 per hour. If you can do 1 1/2 per day you earn $28.75 per hour. The objective is to reward the people who are productive and lose the people who are just collecting a pay check. Paying a guy $25 an hour just because he's got some kind of pedigree is an absolute recipe for mediocrity. There is no reason to have any other kind of pay structure other than one where you keep what you kill.
Ninety percent of the veterans in this industry wouldn't touch this proposition with a ten foot pole but that is okay because only about ten percent of the people you could ever hire are worth it. Many, if not most, of the truly experienced people in this industry are all hat and no cattle. Many of these same guys could be real rock stars if you took the safety net away and rewarded them for their actual productivity rather than credentials.
From contributor S:
You should do well with this format. Truly productive people tend to do better with incentive structures like this. Your piece rate portion should reflect a unit cost and a SF cost. It is the same number of processes to build a small door as it is to build a large door so this should be the dominant part of the reward. An incremental part for square footage would account for any variations associated with size of door.
I wouldn't worry about the quality. Set the bar high and just be firm about your expectations. You could, for example, say that any door rejected for quality pays one half of the incentive. The company has to absorb the material and overhead for anything they reject so you both have skin in the game.
From contributor R:
I have always had a problem with "piece work". Quality becomes second to production. You as an employer have to keep your end up as well - keeping knives sharp, machines running well, supplying materials that are good.
From contributor U:
I would at least have one hourly worker on hand to help unload delivery trucks, clean, help load the delivery truck, and etc. You don't realize how much you need that kind of help until it's gone. You can't expect the "piece" workers to do it if they aren't getting paid for it.
From contributor L:
Selling or making by the square foot? There should be a per-door and a square foot number. Your material cost is too low based on the board foot price. Does each man make all of his own parts? Is there a fight for tool time? Tool maintenance, tooling changes, material quality that gets incorporated into the product, arch tops, applied molding, plywood panels, how well equipped are you? I could go on with the variables but you get the drift.