The Turnaround

To begin with, everyone -- managers, supervisors, administrative personnel, production workers -- has access to the company's monthly financial report, a weighty tome often running to 90 pages. In small group sessions, supervisors or department heads go over the figures, encouraging questions. In addition, there are the daily printouts from the cost-accounting department, detailing the progress of every job in each supervisor's area.

But perhaps the most extraordinary aspect of SRC's information flow involves its use of the income statement. Granted, every business concerns itself with the income statement at some point. Seldom, however, does a company do so as frequently, as intensely, or with as broad participation as SRC. "If you picture this organization," says Stack, "it's like a continuous Dow Jones ticker tape. For almost every single hour of every single day, there is a new number about the business crossing my desk. For us, the income statement is the same as the daily racing form is to a guy handicapping a race, or the same as the tape is to a guy betting on the market. I mean, it's addictive because it's fun, it's action."

The action begins every Tuesday morning, when some 25 managers and supervisors get together in a conference room near Stack's office. Everyone comes armed with a detailed, preprinted, projected income statement. The first column of figures lists the income and expense figures for the previous month. The next column gives the projections for the current month as they appeared in the budget at the start of the fiscal year. The following three columns are blank. Every week, one of the columns is filled in with adjusted projections, based on the reports given at the meeting.

Today, for example, quality supervisor Steve Shadwick notes a drop in the "average monthly deficiency rate" on General Motors diesel engines for the year to date -- from 26% to 9%. What this means, chimes in executive vice-president Mike Carrigan, is that the company has saved between three and four "equivalent men" in extra labor costs because fewer parts have to be reworked. Production scheduler Ron Maus reports unexpected problems with a spare-parts supplier. Engine disassembly supervisor Wendall Wade confesses that his department has gone $268 over budget on protective gloves. And so it goes.

In about 45 minutes, the morning's work is done. Stack, who has been recording the variances on a board in the front of the room, works the income statement down to a net operating income figure that is well above the 15% of net sales needed to trigger a bonus distribution for the quarter. Everyone appears pleased.

That same afternoon, the supervisors and managers carry the news to hourly workers all over the plant. In one lecture room, Wendall Wade stands before 17 engine disassemblers sitting expectantly around two long conference tables. Most are dressed in grease-stained T-shirts and jeans, and several wear caps embellished with the logos of brand-name beers, whiskeys, or chewing tobacco.

First, production manager Doug Rothert presents a brief review of the income statement, with heavy emphasis on the bonus distribution. Wade follows with a solemn soliloquy on the virtues of conserving protective gloves. Then comes 19-year-old Bobby Voelker, the department's safety representative, who reports that there have been nine recordable accidents and 14 days lost as a result. "We've got to do better than that," he says, adding self-consciously, "you've got to wear your safety glasses to and from lunch." Wade asks if there is anyone who does not understand the income statement. Two people raise their hands, and Wade offers to tutor them after work.

Meanwhile, in another room, general foreman Steve Choate is addressing the fuel-injection pump department. The pump has long been the most profitable item in SRC's product line, he is saying, but now it is threatened by aggressive domestic competition and cheap foreign imports. If the department could reduce the cost of remanufacturing the pump by 25%, SRC would still reign supreme for quality and price.

After the meeting, 30-year-old supervisor Tim McVeigh explains that the department has already begun shooting for this reduction. For the past month, a four-worker task force has been studying the possibilities and will eventually enlist the other pump assemblers in the effort. "You've got to get people involved," McVeigh says.

That is, indeed, a theme heard constantly around the plant. There are no spectators in the Great Game of Business, at least as it is played at SRC. Everybody is encouraged to get involved, to take responsibility. As for the top executives of the company, they work diligently, and often ingeniously, to keep raising the level of participation.

Consider, for example, how executive vice-president Mike Carrigan went about getting managers and supervisors, and ultimately employees, more involved in planning the company's future results. He selected operating expenses as the place to start. After working up his own projections in some 20 areas -- welding supplies, abrasive materials, hand tools, and so on -- he asked every manager and supervisor to take personal responsibility for one account, and to report back in a month as to whether his projections were realistic.

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