Case Study;

 

Clay Polk, 28, is a supervisor on the second mail-room shift at Solar Press Inc., and today he is complaining to management. The tools needed to fix a jammed machine, he says, are always getting lost. Work stops while the crew chiefs look for them.

This, it is plain, is not your ordinary workplace complaint. Polk is the leader of a group of four other hourly workers, and together they have researched their grievance to within an inch of its life. They know how often the machines jam up, how long it takes to find the tools, and how much the unnecessary downtime costs the company. And they have a proposal: buy the 17 mailroom crew chiefs individual sets of tools. Hand-lettered wall charts compare the cost of the new tools with the costs of the current situation. If management will pay for the tools, Polk says, his group will come in before work to build toolboxes and a depot to keep them in. And oh, yes: crew chiefs will replace any tools they lose.

Management -- represented here by vice-president of finance and administration Joe Hudetz and mailing-department manager Chuck Ortinau -- is convinced. When the plan proposed by Polk's group goes into effect, the annual savings could come to $8,000.

Not much for a $27-million business? Maybe -- but then this group is only one of 16 "creativity circles" established throughout Solar Press since January 1987, and all of the 16 groups are busy coming up with ideas to save money or improve quality. The customer-service reps realized that job tickets were being written up in a dozen different ways, leading to recurrent production foul-ups, and are writing a manual to standardize procedures. A pressroom circle figured out how to save thousands of dollars in wasted paper by opening the rolls differently.

All this, oddly enough, is part of Joe Hudetz's plan -- a plan that began with wondering how he and his 10 brothers and sisters, owners of the company their father had started, could solve two problems.

The siblings' immediate concern was liquidity. Solar was highly profitable, but shares in the privately held company had no market.

For those active in the business -- there are six Hudetz brothers running the company -- the problem was managing Solar's explosive growth. As recently as 1980, the Naperville, Ill., company had about 30 employees and $2 million in sales. As business soared -- and as the number of full-time workers passed 200 -- Solar began losing its family-run culture. In the past, the Hudtezes had known all the employees, and had worked out of offices right on the shop floor. Now there were too many people, and communication between managers and workers was breaking down.

Joe Hudetz isn't the chief executive; that job belongs to younger brother Frank, who has been with the company longer. But it was Joe, a lawyer and CPA, who introduced ESOPs to the rest. By 1986 Solar had established its plan.

The advantages were apparent immediately. The ESOP borrowed $4 million and passed the loan through to the company, which retired an equivalent amount of long-term debt. Since principal and interest on ESOP loans are tax-deductible, Solar saved some $150,000 a year. It contributed that money to the ESOP, which began buying family members' shares and allocating them to employees' accounts. Solar found it could contribute 15% of payroll to the ESOP -- roughly triple what it had contributed to its old profit-sharing plan, and at no extra cost. At this rate, employees will own 25% of the business by 1996.

But Joe Hudetz had management on his mind as much as finance. "We wanted to reverse the trend toward top-down management," he says, "and get back to a group effort, the way it used to be." An ESOP alone, said the experts Hudetz consulted, wouldn't accomplish that goal. Employees had to be treated like owners, entrusted with information and responsibility; and they had to see some tangible results of their efforts now, not just at retirement.

Hudetz attacked on several fronts. He released the company's first-ever public financial report. He instituted a new gain-sharing system: 25% of all profits over a certain modest target would be distributed as "employee owner bonuses," typically adding several hundred dollars per quarter to veteran employees' paychecks. Most significantly, he established the creativity circles, thereby giving employees a chance to take control of their work lives.

To hear some employees tell it, all this was laid on a little thick. "I was skeptical," says Vince Adelman, a supervisor in the prepress department. "The idea was heavily sold and packaged; the leaders tried to elicit enthusiasm for it. I felt as if I were being manipulated." But, says Adelman, he became a reluctant convert. "What really convinced me was seeing that the system worked. For example, we had a problem with printing-plate rework. We gathered up data, charted it, and ended up reducing rework significantly."

From Hudetz's perspective, the ESOP and its accompanying changes have worked well as management tools: absenteeism and turnover are down, sales and profits up. "The company that we'll own 75% of will grow faster than the company we used to own 100% of," he predicts. But what impresses him most is the way employees now seem to be acting like owners, thinking about their jobs as well as performing them. "The American worker needs a shot in the arm to start being more competitive," he says, "and this gives it to them. They wake up in the morning saying, Hey, I'm somebody -- I own a piece of this place."