A CEO explains how employees must have both incentives and training to make team-based management work correctly.
If you're thinking of jumping onto the team-based-management bandwagon, first take heed of the lesson many chief executives have learned the hard way: you must give your employees a solid incentive for making teams work and teach them the skills they'll need to earn those incentives.
Michael Dettmers, cofounder of Dettmers Industries, in Stuart, Fla., had enough foresight to do both. When he first decided to restructure his $3-million company, which makes seating and table products for private aircraft, Dettmers made an unusual proposal to employees: teams would be paid 25% of sales on the specific product they made, and they would distribute those revenues among their members as they saw fit. They would be responsible for hiring, scheduling, customer service, quality, and even their own cash flow. That first year, 1992, Dettmers tried the new system on just one team, promising employees that they wouldn't earn less than they had the previous year. As it turned out, average annual wages increased, from $32,000 to $45,000. "Once people began to see that if they worked more effectively as a team they would make more money, they had enthusiasm for working in this new way, and they made a commitment to learning," says Dettmers. The following year, four more teams were organized similarly.
Indeed, learning was critical to the new system's success. Dettmers, who has a background in organizational design, developed his own training program to teach employees effective communication, team-building skills, and business processes. Employees were required to attend 13 hours of training every quarter for a full year. "I was kind of skeptical about how things would work out," admits team leader Bill Platt. "But now I don't think this ever would have worked if we hadn't had that training."
Dettmers supplemented the training with team coaching. "I spent about 25% of my time walking the shop floor, facilitating meetings, helping resolve disputes," he recalls. He also made assessments of teams' weaknesses, often suggesting that a particular team repeat a training session. Team leaders were required to put in even more training time, attending three-hour courses at a local community college on hiring, time management, and cash flow.
The training and coaching have paid off. Hourly local wages in comparable industries are $11 to $12; Dettmers employees make $13 to $20. And cycle times are down, says Platt, whose divan team now makes a single product in 80 hours, compared with 140 three years ago. "The quicker we can put out a job, the more money we make," he says. "It gives you a sense of ownership." That thinking has benefited the company as well. While labor costs have remained steady, sales were up 50% last year, and the company's margins are at about 20% -- twice the industry standard.