- October 21, 2020
- Posted by: David Marshall
- Category: Innovation, Leadership, Productivity
A couple of weeks ago, I talked about how you can win your associates’ loyalty by involving them in the decision-making process when it comes to new technology and equipment.
Another way you can invest in your associates is to give them an opportunity to participate in the business. For example, at Robroy, I instituted a program that gave everyone the opportunity to participate in the profitability of the company.
That is, if the company met certain performance thresholds, as long as the company’s needs were met, the extra profitability would be distributed amongst the associates. Those who were ambitious did very well, those who were not left the company, because the ambitious ones believed they were being held back by the non-ambitious ones and persuaded them to move on.
It really helped them self-manage, because the ambitious associates would call out the ones who were being lazy or making bad parts. They realized laziness and uncaring attitudes were causing them to work harder to stay the same. So more than a few people were told “pull your own weight or get out,” and out they got.
We created a points system
To determine the size of people’s bonuses, we created a point system. Everyone was allocated a certain number of points depending on their position in the organization, and there were a minimum number of points for each position.
Each point had a value, which was determined by the operating profit of the company. If the operating profit was going up, then the point value was going up. If the operating profit went down, then the point value also went down. We would also reset the point value every year so people could recover from bad years.
To benefit from your points, the purpose was to increase their value, not dilute the value by issuing more points. So rather than awarding more points for meeting certain projections, which would dilute the total value of each point, we instead increased their value by meeting those projections.
For example, if you had 20 points and a bonus was worth $1,000, each point was worth $50. But if you were suddenly given 20 more points, the bonus would still be $1,000, it’s just that each point was now worth $25. So we never gave people more points just to give them points; it wouldn’t have done anything to help them.
This way, the point value rose and dropped based on how well the company was doing, not based on the number of points you had. This helped drive productivity because the more people you added, the more points you would have to allocate, which would dilute the value of the points.
People worked longer hours (with overtime, of course), and they made sure they stayed productive and reduced the number of errors and problems they made, so we wouldn’t have to hire more people to bail them out.
Either way, it wasn’t uncommon for a production associate to at the end of the year to get twice his monthly salary as a bonus.
How did it work for someone in the back office?
It actually worked the same way, because everyone contributed to the company’s success. If an order entry person isn’t entering an order in a timely fashion, it means warehouse, production, and shipping people will have to do double-time to get the order to the customer when they wanted it.
But that’s only to fix the problem, not do the work that brought the company value. Time spent fixing errors was time lost in making money.
I’ve talked about how the accounts payable department could create problems and eat into the profits if they were making mistakes on their invoicing.
At one point, 40 percent of all of our invoices had to be pulled because of some mistake or other — mistakes that were costing everyone else money. By eliminating these mistakes, it not only eliminated all the wastes and their costs, we were getting paid faster and in full.
(This is another reason why you want to measure everything. This is how we pinpointed the problems in the first place.)
Invest in education and training too
Finally, as part of our employment package, we also offered an education program where the company would pay for a person’s continuing education providing it was relevant to their function and they passed their classes.
We had a fair amount of participation in that program, around 10 percent of the staff, which is not uncommon.
I remember one guy who was a real success story in that program — we’ll call him Gabe.
When I started at Robroy, Gabe was working in operations as a helper. I don’t think he had a 5th-grade education at the time. He couldn’t read very well, work a terminal, or do certain operations.
We implemented our education program, and he started working hard to learn. He took some reading classes, finished his education, and got his GED. Then he went to every training course the company offered. And with help from people like Donna Waterstraat and Billie Traywick, he became very proficient with our operation system including how to use a computer.
Today, Gabe is the plant manager of one of the facilities.
I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own business, including developing their associates. If you would like more information, please visit my website and connect with me on Twitter, Facebook, or LinkedIn.
Photo credit: emirkransic (Pixabay, Creative Commons 0)