Bangladeshi garment factories profit by linking better pay for workers with productivity

Bangladeshi garment factories profit by linking better pay for workers with productivity

Life as a garment factory worker in developing countries remains tough, with low wages, poor working conditions and a lack of job prospects still the norm for many. But improving their lot is not simply ‘the right thing to do’. Striking the right balance between employee satisfaction and productivity stands to deliver significant benefits to workers and manufacturers alike.

Labour turnover can reach 12% in Bangladeshi export factories, according to ethical trade consultancy Impactt’s Nice Work report, creating a substantial knock-on effect on efficiency and quality. And although minimum wages in producer countries are rising, progress on pay and benefits has not been swift enough, as demonstrated by the recent two-week strike by 40,000 workers at a Chinese shoe factory complex in Dongguan.

“Fair pay, respect and the ability to support a family are major motivational forces for employees the world over,” says Impactt’s Director Rosey Hurst, speaking from Dhaka, Bangladesh. “We saw an opportunity to improve workers’ wages and working conditions by helping factory managers to make a direct link with increased productivity, staff retention and profit.”

Introducing Benefits for Business and Workers

Impactt established the Benefits for Business and Workers (BBW) programme in 2011, uniting brands and retailers – including Arcadia, Marks & Spencer, Ralph Lauren and Sainsbury’s – in a common bid to build a business case for social investment in the supply chain. Some £880,000 was invested in the programme over two years, with the UK’s Department for International Development (DfID) providing half of the funding. Following a successful trial with ten factories in Bangladesh and India, Impactt extended the scheme to a further 63 factories in 2012.

Collaborative, cost-effective training

Factories joining the BBW programme receive training in groups of six over a six-month period, learning together in one factory. They pay a fee of around £2,000 for the training, which takes the form of a comprehensive, ready-made curriculum covering productivity and quality, communications and fire safety. In addition to core topics such as balancing production flow, measuring capacity and building workers’ skills, factories are also encouraged to promote ‘zero defect operators’ and introduce ‘buddy systems’ to help give workers a voice.

“Managers from every area of the factory go to all the training sessions,” explains Hurst. “This is very valuable as it’s often the first time they’ve all sat together and shared their experiences. Co-creation is an important part of the process. We want factories to identify solutions for themselves.”

‘Re-humanising’ employees

Impactt also uses social psychology to ‘re-humanise’ employees in employers’ eyes and tackle entrenched attitudes towards workers, particularly female workers.

“The main drivers of workplace abuse are failure to acknowledge that a worker is human and the effects of ‘busyness’, which is very prevalent in garment factory environments,” says Hurst. “We help employers to re-examine their behaviour by using techniques such as storytelling and role play. For example, we ask supervisors to imagine a day in the life of a worker. This small shift in mindset can have a big impact – it helps managers to see things in a new light.”

Measuring progress

Impactt produces an evaluation of the principal issues affecting productivity by working with stakeholders on the ground to interview workers and managers. It then helps factories to set KPIs, collect data and track progress, with participants gradually gaining the skills and confidence to analyse the data for themselves. The company is also introducing an element of competition by trialling a web-based data capture system accessible to all participants.

Factories measure business indicators including efficiency, cut-to-ship ratioand absenteeism, while from a ‘human’ perspective, they track elements such as average take-home pay, hourly pay and labour turnover.

Analysing the results

Participating in the BBW programme helped 63 garment factories in Bangladesh and India to generate an additional £4.5m in 2012-13, while their 85,000 workers earned an extra £4m in wages. Overall, the programme has reached a total of 102,100 workers, 53% of them women.

Efficiency improved by 18% over two years in Bangladesh, where 45 of the factories were located. On average, participating factories saved £40,293 in 2012-13, a six-month ROI of 21. Absenteeism reduced by 34%, and worker turnover more than halved. Meanwhile, workers experienced an average take-home pay increase of nearly 8%, and the number of employees working more than 60 hours per week fell by 43%.

“It’s clear that the BBW working model helps to improve factory operations on many levels, and is sustainable,” says Caroline Haycock, Director of Ethical Trade and Corporate Responsibility at Debenhams, one of BBW’s latest supporters. “Participating factories speak with enthusiasm about their significant efficiency gains and workers are visibly proud of their achievements. When I visited the Debenhams suppliers who took part in India, they were able to demonstrate exactly how they’re applying what they’d learnt to improve productivity output and reduce costs.”

Tracie Walker, General Manager of Corporate Affairs and Sustainability at Kmart, agrees: “Through the BBW programme, many of our Bangladesh suppliers have improved efficiencies and their factory working environment – with incredible results. It’s very important that our suppliers remain focused on continuous improvement and BBW provides the know-how and the tools to achieve this.”

Taking stock and scaling up

“Above all, we’ve learnt that social psychology works, peer pressure drives performance, suppliers with good customer relationships perform better, and training must be cost-effective,” says Hurst. “However, there’s still a great deal of progress to be made. Bridging the gap between actual and living wages remains a challenge, as does encouraging factories to participate. We’re continually building new partnerships with brands, export and labour associations to extend our reach.”

Indeed, new supporters of the scheme include C&A, Primark, Walmart. Together with its expanded network, DfiD and partners on the ground, Impactt plans to reach another 200 factories in Bangladesh by 2015, expand the programme in India and launch it in Myanmar and China.

Hurst concludes: “Ultimately, the reason why the programme is so transferable is simply this: what we’re dealing with is human nature itself.”

This article was originally published on the 2degrees network site.