Like any good game, the compensation scheme at Anaheim Custom Extruders Inc. is both simple and complex. William A. Czapar, founder and chief executive officer of the $2.5-million plastic-tubing manufacturer, has strung together a passel of incentives, each kicking in as a specific sales, profit, or productivity target is met. The idea behind it all is straightforward: The employees win when the company wins.
"Spend a buck to make two" is how Czapar likes to characterize it. Earlier this year, for example, Czapar took his top two managers out to dinner at a private club. He made sure their wives came along. Then Czapar made them all a promise: If the company's sales increased 30%, to $3.25 million, all of them could expect a one-week, all-expense-paid Caribbean cruise as a reward.
"My goal was to get the wives involved," says Czapar. "Then there's a little push from behind." The cruises will cost no more than $15,000, Czapar estimates, but the 30% increase in sales would yield an extra $50,000 in pretax, prebonus profits to the company.
The Anaheim compensation plan begins with sales estimates. Czapar has three categories: optimistic, pessimistic, and target. This year, the numbers are $3.25 million, $2.75 million, and $3 million. From those points, Czapar can determine his net pretax, prebonus profits, then set aside 28% as a bonus pool. All employees will be paid a bonus in direct proportion to their base salary.
To the annual bonus, which is paid according to whichever sales goal is achieved, and the cruise, which will be given only if the optimistic sales estimate is right, Czapar has added another twist. If the company hits its target sales forecast, $3 million this year, then key employees will receive a gift of stock in the private company equal to 10% of their base salary. If Anaheim reaches $3.25 million, then the stock grant will be equal to 20% of those salaries.
One theme that runs rampant throughout Czapar's approach to compensation is that all the employees in the company must have incentives. That is not to say all get the same, though. Workers on the shope floor get $15 or $25 bonuses and a six-pack of beer (soda for teetotalers) for achieving plantwide productivity goals.
"At the end of the shift, guys are standing around the foreman to see how they've done," Czapar says. "It's more than a lousy $4 for the beer. It's recognition that they have done a good job. What I have created is a series of games within a game. It's a fun game," he adds, "and by God, work ought to be fun."