"I was a little bit surprised at how many ways I found to increase company profit with just 2% of it coming my way. As a result I'm a firm believer that if you share some of the profitability with the people who are making the company profitable, you're going to get that little extra something.
"So when I started my company, it was put-up-or-shut-up time. I disagreed with some companies that paid people below market wages and then hoped the difference would be made up with profit-sharing money. There are certain things that workers have no control over. Why should they suffer because the economy is bad? Or because upper management made some bad strategic decisions three years ago?
"It's not a bad trade-off to give somebody else in the company 17% when I'm getting 83%. When I worked for other people, their attitude was, 'Hey, look, there will be years when I lose money; that's my money I'm losing. There will be years when I make money; that's going to be all my money, too. Employees aren't at risk. Why should they get any profitability?' I would say you do it because it motivates the hell out of people, and it helps you have no money-losing years."
A bonus pool of 17% of Com-Corp's pretax profits is distributed to employees and managers based on a prorated hourly wage. (Salaries are converted into hourly wages.) So, for every hundred dollars an employee or manager earns, he or she may receive $5, or $50 during a banner year, in profit-sharing money.
The system is not geared for instant gratification. Employees must work at Com-Corp for a year before they become eligible for bonuses, and checks are distributed at the end of the quarter following the performance period, so a new employee must wait at least 18 months before seeing a profit-sharing check -- if there's one at all.
Com-Corp has never lost money, although in 1994 profits were so paltry that no profit-sharing checks were issued. However, during boom times in the mid-1980s, Com-Corp's line workers were rolling in bonuses of $10,000 and more. Says Roberto Cotto, a line supervisor who five years ago was receiving annual bonuses of $15,000, "We understood when we were getting those big checks that we couldn't count on them every year. Even without the bonus checks, I still get paid better-than-average wages."
A companywide meeting is held once a quarter to review the company's financial performance and to talk about what's ahead.
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Over the past few years Strazzanti has made the management of Com-Corp even more democratic. Strategic planning, a duty even the most uninvolved company owners usually reserve for themselves, is shared among 14 full-timers. Strazzanti paid a consulting company $100,000 to teach Com-Corp managers how to conduct long-term strategic planning. The company is sailing along without him. During 1994, when sales dipped from $13 million to $10 million and profits nearly evaporated as a major contract wound down, Strazzanti rarely showed his face at the office. His contribution to the annual plan amounted to this directive: "Diversify the customer base and improve the company's return on investment."
Strazzanti's dedication to designing a workplace that treats workers and managers fairly has rewarded him in a way that would make most company owners green with envy, allowing him to live the life of an absentee owner. He volunteers in his community and spends plenty of time with his family. And on an unusually balmy Tuesday late last year, he wasn't to be found in the corner office, sweating the numbers. Instead, John Strazzanti, very much at home on his 80-acre horse farm, was checking over his newest acquisition -- a prize broodmare.
THE BIG BOOK OF CHECKS AND BALANCES
For five years John Strazzanti carried Com-Corp's complex employee-centered operating plan around in his head. But in 1985, when a growth spurt brought on a raft of new employees, the plan had to be written down. So Strazzanti summed it all up in The Policy and Procedure Manual, or, as they call it at Com-Corp, The P&P.
The two-inch-thick tome functions as a corporate constitution, detailing everyone's rights and responsibilities. It has helped the company avoid the demoralizing, costly struggles that often derail open-book-management efforts.
Unlike the more despotic manuals that often govern major corporations, The P&P contains guidelines that are voted upon by employees, who are free also to nominate new rules for inclusion. It also prevents Strazzanti from stepping on managers' toes, since it details the management's responsibilities. By the same token, managers don't enjoy a high level of autonomy, because their duties are so strictly prescribed by The P&P. Says David Wright, the company's chief financial officer, who has worked at Com-Corp since the beginning, "Traditional managers find it difficult to work within the guidelines because it prevents them from playing the blame games and using the empire-building tactics they rely on in conventionally managed companies."
To prevent managers from paying lip service to The P&P, the paper trail created by their work -- performance appraisals, say, or purchasing records -- is policed by an internal corporate auditor. And to contain spending, managers are charged with maximizing the company's return on investment in exchange for a chance to share in the profits.
Similarly, employees are prevented from plundering Strazzanti's investment because their decisions on compensation rates must be driven by the economic law "Marketplace determines worth." Although employees wield a lot of power at Com-Corp, the open-book arrangement has its costs. About 15% of workers find the demands for employee participation onerous and leave within the first three months.
The final check on the Com-Corp system is an exhaustive grievance procedure. If an employee feels that a grievance has not been adequately addressed by a supervisor, another manager, the human-resources director, or the Human Resources Assistance Committee, he or she can file an anonymous complaint with Strazzanti in the "Screw-up Box." Strazzanti receives about half a dozen complaints a year and believes the procedure helps keep the system from becoming corrupt.
Predictably, Strazzanti's lawyers begged him not to publish The P&P for fear that employees would construe it as legally binding. Instead, Strazzanti, a self-confessed "Trekkie," prefaced The P&P with a disclaimer borrowed from his favorite TV series. It states, "Rules agreed to by all parties are the guidelines we use to achieve justice. However, we must remember that as long as rules are absolute, there can be no justice." n
