After you've read them, see if the words game and business don't have a little more in common than you thought.
Problem: Dissension in the ranks.
Company: Mid-States Technical Staffing Services Inc., in Davenport, Ia. (now a subsidiary of AccuStaff Inc.). Contract engineering services and computer-design work. Employees (excluding contract engineers): 31. Projected 1994 revenues: $6 million.
Company founder Steve Wilson had the problem every CEO dreads: factions. Mid-States Technical had grown fast, making the Inc. 500 list in 1991. Then it hit a slump, jeopardizing jobs and torpedoing morale. One group of employees remained loyal to Wilson. Another group got the idea that he was ripping Mid-States off. It would have been a neat trick, considering the books were open to anyone's inspection. But the renegades just figured that Wilson kept two sets, one for show and one for real -- and besides, nobody understood the financials, anyway. So resentment grew. "We almost self-destructed from within," acknowledges the CEO.
Finally Wilson bit the bullet and fired the disgruntled employees. But now he needed some way to prevent mistrust from spreading again. His solution: teach everyone to understand the income statement, line by line, and to take responsibility for budget items. Peg bonuses to earnings targets. Then Wilson added a little twist.
Game: Fill the buckets. Forget the calendar, he told employees: every time we hit $75,000 in net earnings, we'll pay a bonus. Wilson dubbed his system the Bucket Plan, figuring that hitting each $75,000 target was like filling up a bucket with profits. He added a couple of rules. The first buckets in a year pay less than later ones, so there's an incentive to keep filling them up. And if year-to-date sales are at least 25% above last year's whenever a bucket is filled, that bucket's bonus doubles. Wilson implemented his plan in 1993.
Light dawned slowly. "At first employees thought, 'Great, I don't have to wait till Christmas for my bonus,' " recalls sales manager David McCracken. "But when we paid out the second one, two months after the first, that's when they figured they had some control over it."
Control indeed. Now, says Wilson, employees watch weekly budget and income numbers like hawks, and move heaven and earth if they think they're falling behind plans or have a chance to fill an extra bucket. Salespeople -- paid a base salary and bonus, no commission -- help one another out instead of hoarding customers. Office workers, each of whom has responsibility for certain expense lines, find other departments eager to cooperate in cutting spending. So attentive are employees to the financials that a few of McCracken's salespeople have even devised a spreadsheet to predict when the next bucket will be filled.
Results: Wilson points to high morale and low turnover at Mid-States, but the numbers he likes best are these:
1992 1993 1994 (estimated)
Revenue growth 0% 40% 18%
Return on sales 6.7% 10.6% 11.3%
(after bonus)
* * *
Problem: Overexpansion.
Company: Share Systems Inc., in Somerville, Mass. Telephone fund-raising for nonprofits and political campaigns. Employees: 36 staff; 120 callers. Projected 1994 revenues: $5 million.
Last fall, Share Systems found itself in a pickle. Expecting sales to grow sharply, the company had boosted its payroll and had dangled the prospect of fat bonuses before its employees. Then a couple of key clients fell through, and Share found itself oozing red ink. "It was an unqualified disaster," recalls Evan Grossman, chief operating officer. "We came nowhere near our goals." By October, Share was $140,000 in the red.
Grossman thought he and the other managers could turn the business around in the fourth quarter, October through December, thereby salvaging the year. The key: boosting the number of hours spent calling on behalf of the company's existing clients. Like many service businesses, Share makes its money on billable hours; once the fixed costs are paid, margins on additional calls are high. But telephone fund-raising is high-stress work, so most employees are on the job less than full-time. Making them work longer hours isn't an option, either, if only because it would inevitably add to Share's already-substantial turnover rate.
Game: Hit the challenge targets. Grossman had begun to distribute Share's profit-and-loss statement (P&L) to employees, but there had been no time for financial training. So rather than tying a reward directly to profitability, he figured out the number of calling hours needed for a turnaround. Hit that target, he told employees, and you'll be rewarded -- extra vacation for part-timers, a cash bonus for full-timers. And, oh yes -- if the profit comes in at above $40,000 for the year, we'll divvy up 20% of the extra among everybody.
As the game began, scoreboards went up in the calling area: Hours called last night. Total hours called so far this month. Callers began staying an additional 15 minutes one day, a half-hour the next. They urged their colleagues to work extra, too. Managers watched calling-station utilization more closely -- making sure, for example, they had backups for callers who missed a shift. By November Grossman thought Share would be marginally profitable for the year. By December he could see the outcome was far better than he had expected.
Results: Share went from a $140,000 loss to a $70,000 profit -- a $210,000 turnaround in only three months. But it isn't just the profit, says Grossman. It's the fact that employees had fun: "People started saying, 'OK, so when's the next game?' " This year he has put in place a yearlong challenge with a bonus payable quarterly if the company is profitable. In the first quarter of 1994 Share made $90,000 on revenues of roughly $1 million -- and divided up some $28,000 in bonuses.
