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The Profit-Promoting Daily Scorecard

Daily production scorecards educate manufacturing workers on the bottom line; cash prizes improve performance.

By Christopher Caggiano |  @ccaggiano   | 
 

Everyone at Rhino Foods knows how to build up the bottom line. And each day's work makes a difference

When Ted Castle was a hockey coach at the University of Vermont, he never had much trouble motivating his players. They wanted to win. But as Rhino Foods Inc., the Burlington, Vt., specialty-bakery-foods manufacturer he'd founded in 1981, started to expand, Castle discovered that motivating manufacturing line workers was entirely different. Or was it? What if he turned the business into a game, with rules, strategies, and a prizes? "Most people," he reasoned, "love a good game. It needn't be football or hockey. It could be checkers or chess or Ping-Pong."

Or a bakery? "How do you get people to care about spilling a rack of cheesecake? If everyone worked like me, it would be great. I want the employees to care about the business as much as I do." But, of course, it's not their company. That's where Rhino Foods' Game of Business comes in.

The key to winning games is knowing the enemy. "The opponent here is expenses. The home team is working to make good-quality products that we're able to sell." And if the business doesn't make money, Castle continues, "we're not going to be here." And he recognized that the game would fail unless everyone knew exactly how the company was doing. That meant opening the books.

"I'd been struggling with whether I should open the books to my employees even before we thought about the game," he says. "I was working with a consultant who put my concerns into perspective. He said, `Imagine you're playing touch football. You play for an hour or two and the whole time I'm sitting there with a book, keeping score. All of a sudden I blow the whistle, and I say, "OK, that's it. Everybody, go home." I close my book and walk away. How would that feel?' That convinced me."

Still, everyone had to learn how to win. "If you just throw the numbers at them, all they can do is get confused. We worked on it from scratch." Castle says the first lessons looked at a single day's sales. "We demonstrated how if we produced a pallet of Ben & Jerry's brownie batter, we could sell it for $1,586. I can still remember the number. I thought the guys would figure, 'Hey, Ted's getting really rich.' So we showed them where all that money went." From that $1,586 Castle subtracted the costs: materials, rent, insurance, labor, other expenses, and taxes. The net profit after taxes was $100. "I said, 'That's what we really made today, guys. That's not a whole lot.' They were amazed."

Castle distilled those lessons into the daily scorecards Rhino uses to keep everyone up-to-date on the game. When, at noon each day, he posts the previous day's results near the entrance to Rhino's production room, everyone checks "whether we've made or lost money on what we produced the day before." After all, it's not an academic exercise; there's a bonus check for each employee at the end of every four-week game that meets profitability guidelines. And when the results aren't all that pleasant? Employees do what they can to improve their performance. It's not fun to lose.

Because of the game and the way it's integrated into company procedures, Castle reports, employees are aware of how every decision affects the bottom line and their bonus checks. "So if someone says, 'I think we should have a three-day holiday at Christmas,' I say, 'If we do, that's going to cost the business $3,000 in salaries, with no production to offset it. Remember what it's going to cost us.' "

The game has succeeded where pep talks alone failed. Rhino has flourished since the first game, three years ago. Employment has nearly tripled to 58, while both revenues and profits have grown by 600%.

Sample scorecard:

* * *

RHINO FOODS' GAME OF BUSINESS

Daily Scorecard: Game Day #8

Days Remaining in This Month's Game Ñ 22(1)

COST OF GOODS PRODUCED: OPERATING EXPENSES:(10) BONUS CALCULATION

Total to Date Today 9/08(2)
PRODUCTION "SALES"(3) 16,000 100% 122,000 100%
DIRECT MANUFACTURING COSTS
* Raw Materials(4) 6,400 40% 48,500 40%
* Direct Mfg Wages(5)(incl payroll expense) 1,300 8% 9,100 7%
INDIRECT MANUFACTURING COSTS
* Indirect Mfg Wages(5) (incl payroll expenses) 900 6% 6,300 5%
Storage Fees(6) 60 0% 420 0%
* Leased Equipment(6) 250 2% 1,750 1%
* Repairs(7) 200 1% 1,400 1%
* Utilities(8) 350 2% 2,450 2%
* Other Mfg Overhead 360 2% 2,520 2%
TOTAL COST OF GOODS PRODUCED 9,820 61% 72,440 59%
GROSS MARGIN(9) 6,180 39% 49,560 41%
Admin, R&D, Sales & Marketing Wages 1,780 11% 12,460 10%
Payroll Expenses 128 1% 896 1%
Insurance 130 1% 910 1%
Interest(11) 250 2% 1,750 1%
Utilities 40 0% 280 0%
Rent 460 3% 3,220 3%
Telephone 70 0% 490 0%
Sales & Marketing Expenses 320 2% 2,240 2%
R&D Expenses 20 0% 140 0%
Insurance Benefits 189 1% 1,323 1%
Depreciation 730 5% 5,110 4%
Other 575 4% 4,025 3%
TOTAL OPERATING EXPENSES 4,692 29% 32,844 27%
Net Profit Before Taxes 1,488 16,716 14%
Less Taxes (40%) 595 6,686
Net Profit After Taxes 893 10,030 8% (12)
After-tax Profit Less 6% "Set Aside" 7,320 6%
Remaining Net Profit 2,710 2%
Game Bonus to Date (20% of above) 542
# of Employees / Individual Game Bonus 58 9 (13)

Ted Castle explains how to read a hypothetical scorecard:

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