In April 1980, Bill Ryan felt he had nowhere to turn. Granted, his trucking company's revenues had doubled every year since he had founded it five years before. But now he was facing disaster with the recession creeping in on his customers, mostly paper mills and grocery distributors near his Green Bay, Wis., headquarters.
Cash had become a serious problem: Ryan could barely keep up with the payments on the equipment he had bought the previous year, when business was expanding. He was facing stiff maintenance expenses on his truck fleet, catching up after the long, harsh Wisconsin winter. And, as usual, sales were slow in the spring.
"I knew that something had to give," says Ryan. "If it didn't, I knew I'd have to lay off a lot of people -- or lose the company."
Labor was Ryan Transfer's highest fixed cost and, in view of the situation, Ryan decided there was no way he could continue to pay a fixed wage. He initiated a sharing plan. The company's employees, managers and CEO included, would divvy up a flat 40% of gross sales, rather than receiving regular salaries or hourly wages.
"It was though," says Ryan, his voice edged with concern. "We pretty much had our backs to the wall and everybody knew it. We didn't know if we'd survive another month or two. People were nervous, but they accepted it because they knew times were tought. If it hadn't been that way, the plan would have been very difficult to sell. At that time, the plan helped me avoid layoffs.Without it, I don't think I'd have the company."
Revenue sharing didn't just save the company. Ryan believes it actually helped the company grow from $1 million that year to $4.2 million in 1984.
"If an employee is on a fixed wage, he loses touch with reality," explains Ryan, a wiry 45-year-old. "He doesn't know if the company is going through good times or bad." To further get the message across, Ryan puts the revenue each driver generates on his weekly check stub. "If the company has a good week, Kaboom! . . . he knows it. In the long run, that's good for the company.
"The beauty of this fluctuating payroll is that we can go with the waves," Ryan says. "If we do a better job, and we can justify better rates, our people automatically get a pay raise. Whatever business we do, the people share in what we get. I can't guarantee a guy $13 an hour if a shipper will pay the equivalent of $8. I can't soak the shipper for that. What I can do is channel the business so our people can work for the shippers."
After their first year on the job, drivers are eligible to move from hourly wages to the revenue-sharing plan, which currently includes 20 drivers. Another 25 drivers -- part-timers and those with less than a year's seniority -- are paid by the hour. The 45 drivers are paid from the 40% slice of revenues, with revenue-sharing drivers dividing up the balance after the hourly wages are paid.
Drivers in the revenue group generally make more than the wage earners, although a revenue-sharing driver's effective rate can fluctuate from a low of about $8 an hour during a slow week to a high of about $11 during a very busy one.
When Ryan initiated the sharing plan, he, with an administrative assistant, was the management. Today, there are 10 people in management and administration, in a separate revenue-sharing group, dividing up 10% of revenues. Ryan pays himself 1% to 2% from that 10% pool, depending on company performance.
There is one exception to the revenue-sharing plan: long hauls, which are lowermargin deals. "Because fuel costs are so high on a long trip, I can't afford to pay the drivers the same percentage of the sale, so I pay them by the mile. They would make out a lot better if I paid them a percentage, so some of them don't understand that, but they've accepted it."
The sort of revenue-sharing plan that Ryan instituted has found support in an unexpected quarter: academia. Massachusetts Institute of Technology economist Martin L. Weitzman has recommended a type of sharing system at the company level as a cure for inflation and unemployment in the larger economy.
Whatever its global implications, the idea seems to be working for Ryan. "Now that we've been on this system, I don't think people would want to change back," he says. "When things are dry, they know some checks will be smaller. But when it rains, they do well."
The pay system, however, may now be undergoing its greatest test. Ryan has had to cut back from operating in six states to working within a 200-mile radius of Green Bay while he copes with insurance premiums that have jumped dramatically and sales that may drop as low as $2.5 million this year. "I'm convinced," he says, "that if we got tied down to a wage system, we'd probably go out of business, and what good would that do employees?"