Problem: Threat of shutdown.
Company: Pace Industries Inc., Cast-Tech Division, in Monroe City, Mo. Manufacturer of die-cast aluminum parts. Employees: 312. Projected 1994 revenues: $25 million (Inc. estimate).
No one was saying anything explicit back in 1992, but everyone in Monroe City could sense the danger. Pace Industries, out of Fayetteville, Ark., had taken the die-casting plant over from its former owner, then in bankruptcy, and had invested a substantial sum in it. But the factory was losing a ton of money, and it was clear Pace wouldn't hold on forever.
When Andy Crowder took over as plant manager, in December 1992, he explained the situation to the employees and experimented with some quality-management techniques. Then he chanced on The Great Game of Business, by Jack Stack, and attended an SRC seminar. (See page 5.) Soon he was convening regular weekly meetings of his management staff, assigning them line-item budget responsibility (which they had never had), and walking them through the P&L (which they had never seen). He also made an offer. As plant manager, he was entitled to a bonus of 2% of the factory's gross profits. If the plant began making money, he'd be willing to divide that bonus up any way the other managers saw fit.
Game: You name it. Today games are everywhere at Pace, though some of what Pace people call "games" might go under a rubric like "team-based continuous improvement" elsewhere. One team came up with a system to cut costs by eliminating unnecessary paperwork. Another began a cardboard-recycling program, saving nearly $1,700 a month in hauling expenses. Two other games -- scrap reduction and inventory accuracy -- involve the whole plant: if workers meet a monthly goal, each gets a modest bonus. Scoreboards around the plant track their progress.
But the big game -- the Great Game of Business, Pace-style -- is to make money. The managers, you see, voted to take Crowder's 2% of gross profits and split it equally among every man and woman in the factory. The bonus is paid quarterly. Monthly meetings, complete with a copy of the P&L for every employee, bring everyone up-to-date on progress toward the quarterly payouts. The information keeps people focused on their common purpose. Workers testify that departments cooperate with one another -- they didn't in the past -- and that individuals volunteer ideas as never before. The game "makes them more aware of how everything they do affects the business," says Sam Kunce, a setup man.
Results: Scrap rates cut by 50% in just six months. Inventory accuracy (measuring the correspondence between physical inventory and what's recorded on the books) up from 54% to nearly 90%. Profits? Crowder declines to name a figure but calls them "healthy." The last quarterly payout: $183 per person.
Then there are the intangibles, mostly the fact that the plant is not out of business. "I feel secure in my position here and secure in this place," says Kunce.
* * *
Problem: Growth. Or maybe chaos.
Company: Marketing Services by Vectra Inc., in Columbus, Ohio. Marketing services, including printing and mailing. Employees: 125. Projected 1994 revenues: $21 million.
Founder Craig Taylor -- height six feet, 10 inches -- former captain of the Ohio State University basketball squad, is a fiercely competitive CEO. "Go hard or go home" reads the slogan he has pasted on Vectra's walls. But the hard-driving, fast-growth culture Taylor instilled in his company sometimes lacked order. Inventory control, for example, was a constant problem. "We just didn't have the systems in place to manage it," sighs Taylor's wife, Mimi, director of associate services.
Taylor had always tried to tell employees what was going on: "If you think everybody is on the same team, then you should share the information about why people have to do what they have to do to be successful."
His friends at other companies thought he was nuts. "I took a lot of heat from people," he says. But he plowed ahead, experimenting and reading and comparing notes with other game players, and in December 1992 he offered his employees a deal.
Game: Personal goals; company goals. Back then, Taylor had 54 employees, and he gave them a choice. They could have a 5% average wage hike and a chance at a $200,000 bonus pool. Or they could have no wage hike and play for a pool that was twice as big. The bonus would be pegged to four targets -- sales, operating expenses, inventory accuracy, and the current ratio, each one weighted according to its importance to the company. But employees wouldn't get anything unless they also hit a series of individual goals, agreed upon with company managers. The vote was 48 to 6. No raise. Bigger bonus pool.
Looking back on 1993, Taylor winces. The expense and current-ratio targets, tracked on the big company scoreboard and reviewed in regular weekly meetings, were too ambitious. "You had people being negative -- 'See, they're going to screw us." Desperate for at least a partial win, he pushed hard to meet the inventory-accuracy goal and the sales goal. ("If it moved, we took it.") When the results were in, Vectra employees had won on those goals and lost on the others, thereby gaining only half the bonus pool. Even so, most did better than if they had taken the raise.
This time around -- 1994 -- each department at Vectra elected a rep to decide on the game, with a new game slated to begin every six months. Individual goals were set in teams and reviewed by Vectra managers. (Press operators might commit to "no do-overs"; a human-resources staffer to developing a new training program.) Company goals for the first half of the year related to sales growth, inventory accuracy, return on assets (ROA), and customer satisfaction. If employees won, they stood to get a bonus of between 15% and 25% of salary.
Results: Vectra hit three of the four goals, missing only ROA. Employees won't be getting a full bonus, but they won't do too badly, either. As for Taylor, he's a pretty happy competitor. Sales are up, and the company is in the black.
