Compensation: Upping the Hourly Ante
"We've got the guys out there kicking butt right now," says Al Johnson of his eight-member work team at Davidson Plyforms, a $20-million plywood manufacturer in Grand Rapids. If Johnson's team exceeds the month's productivity benchmark, all members earn bonuses of 25¢ to $1 for every hour they worked.
The share in the company's success is a powerful incentive at Davidson. Twelve teams work toward benchmarks in productivity, quality, and profitability for bonuses ranging from 5¢ to $1.35 for every work hour. And they get a portion of division and company profits. Some hourly employees aren't on teams, but they still earn monthly bonuses pegged to the average bonus size of the 12 teams. "We try to show them that their support is critical for the other areas to achieve their goals," says vice-president of operations Travis Dunbar.
Dunbar says the company has "seen big increases in productivity" and that the program has triggered innovation. To streamline part of his team's process, for instance, one employee rebuilt his machinery. "And morale is a lot higher," Dunbar adds.
Well, not always. Johnson's team members did sulk last August when, owing to faulty equipment and absenteeism, they failed to meet productivity goals. The shirkers were pressured by their teammates, the machines were fine-tuned, and now the team is on target. But Dunbar acknowledges the potential for backlash.
Another kink: it's possible to qualify for productivity and quality bonuses even when the company isn't profitable. That's happened twice. Still, president John Walton maintains that "if the people down there are doing what we ask them to do, then it shouldn't affect them even if we don't make money."