How My Company Learned to Run Itself

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Along the way, the problems began to change. In the early days they had generally involved things or systems -- faulty materials, for example, or poorly organized work flow. But now, more often than not, the bottlenecks were people. We had a brake-press operator, for instance, who was having trouble keeping up. One day I walked into the plant and found a shouting match going on between him and another employee, who had run out of things to do. We asked her to operate the machine for a while. After a little practice, she began processing the work a great deal faster than he could. Now when we get backed up on the brake press, we usually ask her to run it on overtime. In addition to the extra hours, she has since received a raise, which also increased her share of the quarterly bonus pool.

As the bonus system has evolved, so has the pay scale. I handle that myself, setting everyone's base wage, and the information is not public. In the beginning, I assumed employees would keep their wages secret. I was wrong. I've found that everybody knows about any change in wages within minutes. In deciding on wages, I simply try to be equitable. Every so often, I sit down and list employees in descending order according to their value to the company. The list is never posted, but people are aware of it. They know that when they become more efficient or learn a new skill, I'll adjust their pay. As a matter of policy, I don't lower anyone's wages, but employees who don't get raises wind up with smaller percentages of the overall bonus distribution. Clearly, there's an incentive for people to improve.

The system isn't for everybody, however. Some people, I've found, can't handle the responsibility, and others don't like the pressure. Last November, for example, we moved to a new plant and added some people in the process. I thought we might become overstaffed, but -- for reasons I still don't fully understand -- we lost three employees in three months. One guy came in one morning, left a half hour later, and never came back. Another fellow, a product tester, fell behind and stopped checking for quality; people were furious with him (returns eat into the bonus) and pressured him to leave. The third person became a prankster. Among other things, he set a pile of rags on fire with a welding torch. Why anybody would do that is beyond me. I fired him.

We now have a total of eight people working in production, and we're producing more goods more efficiently every month. Production people earn from $6.50 to $8.75 an hour before bonuses, which have lately averaged more than $1,115 a quarter. At the beginning of 1990, moreover, I decided to sweeten the pot. Instead of allocating 11% for direct labor, I've set the figure at 12%, thereby paving the way for even bigger bonuses down the road.

Meanwhile, the system is still evolving. Recently we've had to deal with the issue of tardiness, which upset several employees. One person's late arrival, they said, disrupted everyone else's schedule and ultimately reduced the bonus pie. Under the old rules, a tardy employee lost some wages but still received a full bonus at the end of the quarter. The others thought that wasn't fair. We batted the issue around for several months. How much lateness or absenteeism could employees tolerate? How punitive should they be? Finally, last winter, we agreed on new rules. Employees could be tardy -- defined as one minute late -- or absent without notice no more than five times a quarter. Beyond that, they would lose the entire quarterly bonus, which would be divvied up among the other workers. The new policy went into effect during the second quarter. In June, just as the quarter was coming to an end, two employees went over the limit.

A couple of people felt bad about this development. They thought the penalty was too harsh. The arguments got kind of nasty, so I called a meeting. Someone proposed that the offenders be paid half the bonus they would otherwise be entitled to. I suggested we put it to a vote of all the employees who were eligible for the bonus under the new policy. It was a secret ballot. They unanimously agreed to give the two employees half of their shares.

In the wake of that incident, the employees decided to revise the policy. A person can still lose the quarterly bonus by being late or absent without notice more than five times, but from now on that share will be rolled over into the next quarter's pool, which will then be divvied up by everyone according to the formula. We'll see how that works.

Looking back over the past three years, I can see how my role has changed along with everyone else's. I no longer spend much time pumping up the organization and helping people make decisions. I don't set employment policies, either -- the employees do. Yes, I sometimes serve as a kind of referee, but they come up with the options. We have a bookkeeper who handles the payroll and the day-to-day financial matters. My daughter Wendi does the purchasing and production scheduling.

And me? I concentrate on the issues involving the company's long-term direction. I'm also responsible for finding more business. At the moment, I'm negotiating to add some new product lines, and I feel under considerable pressure. There are eight people out in the plant, getting better at their jobs all the time. Before too long they will be able to produce more than we can ship. At that point, it will be important for us to have additional work.

So that's my problem right now. I have to admit, it's a good problem to have.

Jon W. Wehrenberg is the founder and president of Jamestown Advanced Products Inc., a metal-fabricating company headquartered in Jamestown, N.Y. n

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