Motivation: Breaking old moulds through competition: Bosch has embarked on a radical programme of pay incentives

MANAGEMENT at Bosch, the world's leading automotive supplier and a manufacturer of household appliances and communications technology, has never considered itself radical, never mind revolutionary. Discreet and conservative would be the preferred epithets for this private company. But the tumultuous economic events of the past 18 months have turned a great many things in Germany on their heads.

Bosch, with DM34.4bn (pounds 14bn) sales in 1992, is owned by the charitable Robert Bosch foundation. The company has a long tradition of looking after its employees, paying well over the odds.

So one can imagine the shock when earlier this year, the company - battling against losses from the collapsed car market - told its German workers that they would not be getting the engineering sector's 3 per cent wage rise, due on 1 April. It said the increase was being offset against the substantial supplementary payments the company had made voluntarily.

Since then, countless other German companies desperate to cut costs have followed its example.

But it is in a new plant at Eisenach, in eastern Germany, well out of the headlines, that Bosch is encouraging a potentially more radical challenge to established German ways. It has gone competition-crazy.

Before most other German companies, Bosch began to introduce continuous improvement programmes and team operations in response to growing quality and cost threats from international competitors. But at the greenfield Eisenach factory, it has pushed such production programmes to an extreme that is virtually unknown in German industry.

For the director of the Eisenach plant, Reiner Leipold-Buttner, a vital ingredient of success is an extensive system of competitions and incentives. The plant, which began operating late last year, manufactures three components: windscreen wiper mechanisms; meters for regulating fuel-injection systems; and automatic braking system (ABS) sensors.

Each product line is formed into a separate 'mini-company' that is responsible for the entire process, including costs, quality and delivery schedules - from suppliers and to clients.

These mini-companies have between 60 and 80 employees each, divided into teams of 10 to 15. For successful teamwork, says Mr Leipold-Buttner, 'one must set goals that are easily understandable and graspable'. He adds: 'Grand targets such as a 20 per cent cost reduction mean nothing.' Furthermore, striving to attain these goals needs to be constantly encouraged and stimulated.

He has developed a competitive system of rewards and penalties that appears to be delivering impressive results, as well as firing up the workforce to such an extent that they cannot get enough of it.

Outside of the Eisenach pilot plant, however, the competition craze has provoked a rather more tight-lipped reaction. The trade unions are deeply sceptical. Visitors from the rest of the Bosch group come in droves, fascinated, and not a little perturbed.

The competitions offer several ways for workers to boost earnings above the engineering sector's fixed basic wage. First there is the team premium, which is gained by meeting certain production criteria, such as quantity and error reductions. Then there is a team bonus, which is organised in quarterly competitions around a given target theme, such as cleanliness or quality. Usually about a third of all the teams get this bonus each quarter.

Finally, there is an individual bonus, paid out once a year to one member of each team. The choice belongs to the team leader, and he or she has to justify this before the team members.

But there are also negative pressures underpinning the competitive process. If a team is responsible for delivering a single faulty part to a client, it is kicked out of the quarterly bonus competition.

However, any such team still has to make amends by finishing in the top 50 per cent of teams in that particular competition, or it loses its chance to try for the next quarterly bonus as well.

The Eisenach plant has set, as one of its main targets, the elimination of all faults in parts delivered to clients by 1995. When the windscreen-wiper mechanisms were still being produced in 1992 at one of Bosch's traditional plants in western Germany, there were 2,000 errors per million parts delivered to clients, according to the accepted method of calculating faults.

In 1993, the first full year of production of Eisenach, a target of 500 faults per million was set, and already 300 faults per million has been achieved. A target of zero has been been set for next year.

It is now the teams themselves that are asking for more competitions, says Mr Leipold-Buttner. They want to bring into the plant the penalty system that punishes delivering a faulty part to a client, so that each team is considered either the client or supplier of another team.

'Management is thinking about this idea, but it may be going a bit too far,' says Mr Leipold-Buttner.

Competitions have been organised within individual teams, however, to good effect.

When the Eisenach plant started production of air-mass meters for fuel-injection systems, which involve the delicate soldering of platinum wires with gold, it found there were an unacceptably high number of faults.

The team responsible for this work set up a competition, with the weekly results of individual members going up on the board and being discussed.

Having started with 24,000 errors per million, the team set a goal of halving this rate within six months.

In fact, it got down to 6,000 - well below the comparable error rate in western Germany.

'Between May and October we saved DM26,000,' says Karola Nicolai, one of the team leaders. 'People feel they have to make it work, and they do.'

(Photographs omitted)