131c98
COLLEGE
Revised July 2000
Carris Companies1: Incentive Plan Program Challenges
June 25, 1998—The corporate office personnel sat quietly waiting to discuss the incentive
plan program— specifically, why they were not included in the program. As soon as William H.
(Bill) Carris (President and CEO) and Michael (Mike) Curran (Vice-President and COO) took
their seats, a buzz started with several people speaking at once. The following is taken from the
notes of that meeting with the office personnel:
1
Marilyn:
It has been a year since the incentive plans were rolled out to all the
manufacturing employees of Carris Companies (CC). There is no talk of when
corporate office personnel are going to get one.
Mike:
Corporate management is still not in agreement on the matter of how incentives
should be implemented here at the corporate office. At least Bill and I are not at
the point of thinking that we can have an incentive measure for the staff here. The
incentive compensation plan implemented at some plants involves a monthly
bonus based on production standards. In some areas of the company where proven
production measures existed and historic information was available, creating
targets for the incentive program was easy so we implemented them.
Bev:
Well, you say that we cannot be measured. And yet, the office personnel at plants
under the incentive program are getting incentive pay. I don’t think they can be
measured either.
Bill:
I agree that it’s not fair. The site managers made that decision.
Karen:
We here somewhat feel that we are held to a higher standard and yet regarded as
second-class citizens of the corporation.
Bill:
Production workers have always been the “low-men on the totem pole.” I think
the incentive program serves to address this—bringing them up. We may have
created some problems in moving too quickly to establish the incentive pay
program in some areas of the company. But the intention was never to create
inequity among people.
Mike:
I don’t think we could ever have found the best time to roll out the incentive
system because there will always be unknowns and controversy.
Carris Financial Corporation is the official name for the Carris Companies
Cecile G. Betit and Prof. Jay Rao of Babson College, prepared this case as a basis for class discussion rather than to
illustrate either effective or ineffective handling of an administrative situation. The authors would like to thank Bill
Carris (President and CEO), Mike Curran (Vice President and COO), Karin McGrath (Human Resources Director)
and Barbara Russell (Human Resources and Compensation Manager) for their invaluable assistance in access to
information and employees. Prof. Ivor Morgan, Babson College, provided insightful comments. Copyright © Cecile
G. Betit, Jay Rao.
Jeanene:
I am not sure but I think that the mill workers resent us because they think we
make more money than they do.
Mary:
I disagree. I don’t know about the other production units, but some mill workers
realize that they’d be actually taking a cut in pay if they worked up here. For
instance, a few people having difficulty in physically demanding jobs wanted to
take up jobs at the office here but they decided against making a move because
they’d make less money up here at entry level.
Pete:
I have heard that we could be replaced with younger people who would get paid
less. That is very demoralizing.
Bill:
You are all important for the company—equally important. The ultimate goal for
the incentive program is to reward efficiency with more money. Take a look at the
full benefits package for employees, the Employee Stock Ownership Plan (ESOP)
and profit sharing programs. The corporate office part of the incentive program
presents a pothole (an obstacle) on the road to creating an employee-ownership
culture. Every employee-owner is expected to share in the leadership
responsibilities of facing new demands and challenges during the change process.
Change is stressful. Many times it involves taking two steps forward and then one
step back because consequences were unforeseen.
From the beginning Mike had been not in favor of implementing short-term incentives at that
time. He had vehemently disagreed when Bill wanted them in place January 1, 1998. But having
worked with Bill for 20 years, Mike knew when Bill’s mind was set on proceeding. When it was
time to roll out the new program, Mike drew up the plans and measures for implementation using
historical production data. Now they were in this together.
Background
Henry Miller Carris founded Carris Reels Inc., a manufacturer of plywood reels, in 1951, in
Rutland, Vermont. His first exposure to manufacturing had been in managing a workshop for
disabled veterans in Irvington, New York. He later moved through several experiences with
wood manufacturing in Vermont, prior to starting Carris Reels in Rutland with two employees.
The company grew steadily and in 1980, his son, William H. (Bill) took over. Like his father,
Bill believed in the importance of the individual and in community service. Having worked in
many capacities in the company, he brought to his new role clearly defined strategies for growth
through start-ups, acquisitions and professional management.
In 1990, the CC was formed and by 2000, owned several subsidiaries. In addition to the reel
divisions, there were manufacturing divisions for high-end furniture, pallets, plastics, tubes, tin
and bolts (Exhibit 1). At the end of 1999, sales exceeded $120 million. Margins were comparable
with industry standards. The number of employees was 1143.
The CC avoided job titles and much of the status differentiation within the modern
corporation. Throughout most of its history, workers, supervisors and managers reflected a flat
organizational chart, though recent growth had required the addition of specialized
production/manufacturing management. Corporate executives located in Rutland, Vermont
traveled as needed, to the sites. No one, including Bill Carris and Mike Curran, had a personal
secretary; and everyone was on a first name basis. Calls were not screened. Doors were open.
2
There was no executive suite. Small offices held standard furniture, computer, file cabinets and
an extra chair. No visible symbols of power or rank distinguished executives from other
employee-owners. On the manufacturing floor, they were indistinguishable from other workers.
Bill Carris’ Philosophy and the Long Term Plan
For several years, Bill Carris looked for ways to bring employees into the business. He
recognized that the advantages provided by the federal tax structure made the ESOP a very
attractive vehicle for selling the CC to the employees. In December 1994, he shared his vision
for the transfer of ownership—at a cost significantly below market value—with employees in
The Long Term Plan. He explained to the employees that he wanted to increase the likelihood of
their success and would therefore sell the company over an extended period of time—10-15
years. In August 1995, he decided to give the discounted portion (the portion below market
value) of stock first—as a trust and confidence building measure.
Bill Carris saw his plan for selling the company as the culmination of his commitment to CC
employees and a way to give back to the community. Bill had considered himself to be
extremely fortunate because he had never had to worry about money. Over the years, material
goals had lost importance for him and he gained satisfaction from being a positive influence in
other people’s lives. Strong spiritual beliefs and commitment to equal opportunity, life, liberty,
the pursuit of happiness and the Golden Rule (do unto others as you would have them do unto
you) led him to work for change in the inequities and unfairness with which the society dealt its
cards. Further, he was convinced that the corporate winners of the coming decades would be
those companies that involved more people processing more information and making better
decisions faster to stay ahead of the market. This he shared in a memo sent to all CC employees,
in December 1994.2
The Long Term Plan (LTP) stated the CC’s mission: “To improve the quality of life for our
growing corporate community.” The planned transfer of ownership (over a 10-15 year period)
had a strategic aim to “teach employees the business” and to create a new style of corporate
governance—one that was characterized by community, trust and inclusiveness as a means of
achieving the corporate mission. Building community and applying entrepreneurial know-how to
increase profitability through improvements in quality and efficiency were seen as
complementary and basic to achieving that mission.3
In June 2000, Bill Carris was invited to New York to receive a Corporate Conscience Award
(CCA) for Employee Empowerment given by the Council on Economic Priorities (CEP). Please
see Exhibit 2.
In addition to the ESOP, Bill’s LTP outlined other compensation features:
(1) Pay range ratio within a Profit Center should not exceed 7½ : 1; the pay range companywide should not exceed 10 : 1.
(2) Base pay should be market competitive. In keeping with the reward philosophy, necessity
might require low-end pay to be higher than competitive wages, with the opposite being
true for the high-end employee-manager. Overall, base pay should stay at about the 75
2
3
Long Term Plan for the Carris Community of Companies, Dec. 1994, Bill Carris
The Effects of Socially Responsible Entrepreneurship in a Manufacturing Environment, 1998, Cecile G. Betit
3
percentile of the market range for any given job or skill, with the effectiveness of any
given employee to be functioning at the superior range.
(3) Profit sharing should ideally be a significant part of any pay system. The annual profit
sharing formula, predating movement to the ESOP, was designed to be an incentive for
good performance by each company’s workers as a group and as a full company wide
incentive. Thus, 15% of each company in the firm’s pre-tax profit was distributed as
employees’ profit sharing. Each company kept two-thirds and placed one-third into the
corporate pool. The total money was then divided by the hours worked by all CC
employees to determine a per employee universal distribution. Then each CC company
divided its two-thirds of the 15% pre-tax profit into two halves: 50% of it was shared
equally among all of its employees with the other 50% distribution based on employee
annual income. There were two significant features to this annual profit sharing program:
(1) All CC employees (employed for a full calendar year) participated; (2) The degree to
which the distribution was bottom loaded with its 50% equal share.
The LTP called for 50% of each plant’s profits to stay within the company to be used for
security, debt reduction, growth and stability; 25% was to be used as a buy-out option or
with the company having use of the money until the employee-owner left (ESOP). 10%
of each plant’s profits were given through the corporate foundation as donations or gifts
to non-profit organizations. Due to objections from employee-owners this percentage was
reduced to 7.5% of annual profits: pretax, pre-profit share and pre-ESOP distribution. In
early 1996, each site formed a charitable giving committee, comprised of employeeowner representatives, to oversee distribution to local non-profits.
By the end of 1995 the companies were 10% employee-owned as part of a long-term
succession plan that was to eventually combine employee-ownership with employee-governance.
As of December 1999, Carris employees owned 37.4% of the business. The starting wage was
$7.00 per hour with the goal to have every employee at $8.00 per hour at the end of 12 months.
Most production work was low skilled; educational requirements were minimal. The average
hourly wage was $9.04 with a benefit hourly rate of $3.44 (38.0%). In addition to the ESOP and
profit sharing, CC employees enjoyed very generous benefits. These included company paid:
insurance (health, short-term disability and life); 4% of wages contributed to the 401Kretirement plan; sick and vacation leave time. Office personnel (including R & D and corporate
office), truck drivers, supervisors and managers received long-term disability insurance.
Incentive Pay Program
Started in January 1998, the incentive pay program was the last piece of the compensation
program to be set in place. Bill’s views on incentives were expressed briefly in the LTP of 1994:
“Using pay as an incentive for performance is an extremely powerful tool to encourage
efficient and effective work by individuals. People respond strongly to the concept of
more products, more pay. It is capitalism at its most powerful and pure level – and it
works! If anything, this incentive can be too powerful, especially when quality and safety
become issues. As a result, it is probably best to use incentive pay in somewhat of a
watered-down version as opposed to straight piecework system. Piecework can become
too incentive intensive. Incentives should ideally be a significant part of any pay system;
4
they encourage productivity, and productivity is a key to profit. Balance would be a key
ingredient in applying any incentive scheme.”
Further, Bill strongly believed that individuals should have influence and control over their
pay. From its very inception Bill knew that the incentive program was going to be a bear. In a
November 4, 1996 memo, he had noted the potential for the incentive program to be a “snake pit
when it comes to fairness, implementation and administration.” He encouraged moving forward
on the incentive program because he believed that it could be the most effective and fairest
compensation system that could be developed. However he knew that simplicity and ease of
implementation were key to making it work. With Mike Curran designing the incentive
measures, Bill knew it could be done.
In January 1998, plants rolled out the incentive pay program in phases. It was based strictly
on productivity and how well a plant worked in a given month. Bill Carris’ view of the program
was: “it was not necessarily getting more product out the door but working smarter and
scheduling things better.” In January 2000, when California came into the incentive program, the
majority of manufacturing employees were on the incentive program; the exceptions were
Killington Wood Products (KWP), Carris-Ohio and the newly acquired Groggins Plastics
(Fincastle, VA). No incentive plan was in place for those working in the research and
development department, the truck garage, and the Corporate Office.
The original criterion established for the incentive was based on historical data with actual
1997 performance used as baseline. In contrast to the profit sharing program described above
which was calculated similarly throughout the company, the incentive was calculated differently
on a site by site basis with site manager and Mike Curran working together. Representative of
some of the 1997 measures used for monthly incentives, were the Bolt division (exhibit 3), the
Rutland Mill (exhibit 4), and Vermont Tubbs (exhibit 5). Those coming into the system after the
first phase, used measures more current than 1997. California and North Carolina wood products
were based on reaching, and then going forward from a predetermined goal—revenue level. The
site manager determined that production goal with Mike Curran. Those revenue goals were
comparable with, but not necessarily identical to, the goals of the other wood reel shops. A
similar comparable program was going forward in Ohio. It would join the incentive program
after reaching a minimum revenue goal. At KWP, the site manager, with Mike Curran, was
beginning to establish goals to put a program in place.
The Corporate Office
In addition to the corporate and senior management, the CC’s corporate headquarters
employed 38 employees (31 hourly and 7 salaried). They provided the affiliated companies with
centralized services and support.
The difficulty and perhaps, the ethical dilemma that had to be worked through was providing
the truck garage, research and development and corporate office personnel access to a similar
program as the various site office and production workers. Office workers at each site were
included primarily for inclusivity—not to exclude such a small number of people rather than
from a well-developed rationale for inclusion. In one sense, site-managers simply implemented
the “Golden Rule.” In another, office personnel at the sites were directly involved in the day to
day life of the products and were part of everyday production life and problems. In the corporate
offices, only the customer service people were that directly involved in production. The
5
difficulty was in developing formulae to include truck garage, research and development and
corporate office personnel into comparable incentive programs.
Division
Corporate Office
Research & Development
Task
Accounting
Taxes
Purchasing
Sales & Customer Service
Production
Information Systems
Personnel & Payroll Administration
Safety and Workers’ Compensation
Office manager
Administrative assistant, Receptionist, Courier
Interns
R&D
# Employed
11
1
2
5
2
4
4
2
1
3
3
13
Management appeared more skilled and ready to develop such measures for manufacturing.
The production incentive, which was plant based, had measures that were well understood from
practical and historical perspectives and they were tied to increasing profits. The kind of
information used in other industries to set performance goals for individuals working in
accounting, payroll, research and development, purchasing, information systems, etc. was just
beginning to become available and the measures were rather primitive. These seemed tied to
faster collections, tracking turn around time on follow-through on customer concerns. When the
incentive program was designed at the CC, such administrative measures did not seem to tie
directly to profitability as did production measures so these were not used in the same way
within the CC.
At the end of 1998, those in the excluded areas were vocal and unhappy, and a year later
resigned to the direct and indirect loss of income experienced due to their exclusion from the
incentive program. The direct loss of income was the potential cash monthly incentive. The
indirect loss included: corporate and individual FICA contributions; W-2’s calculations used at
the end of the year for the company’s 4% contribution to retirement; profit share distributions
based on wages; and the ESOP allocation proportion ceiling based on wages up to the annually
adjusted $30,000 set in 1995 and $32,120 at the end of 1998. The discontent was reflected in a
November, 1998 Survey that included Quality of Life at Work (Exhibit 7). Out of 948
employees, 658 responded (69.4%). Two areas that had satisfaction levels under 50% were the
Incentive Pay Plan and the Pay for the Job. Note: when the survey was conducted in late 1998,
only 59% the employees were participating in the incentive plan.
Mike Curran indicated at the end of 1999 that there was no effort being put forward to
develop an incentive program for the corporate office, R&D, and truck maintenance people. At
this time, the major efforts were achieving the desired ratios for labor costs and productivity
levels for improved profitability. Wages and working conditions were very good for these three
excluded groups, however—perhaps better than for those directly involved in production. In
contrast to the overall $9.04 average hourly pay, the average wage for corporate office hourly
personnel at the end of 1999 was $10.41. The average for hourly research and development at the
end of 1998 was $12.33 and for truck maintenance for the same period, the average was $11.62.
Bill Carris was still thinking about how the incentive could reach everyone. He had some
reservations as to the effectiveness of current implementation. He noted that there were some
6
management issues involved and employees were calling into question the effectiveness of the
plan. Theoretically, Bill thought it should work. The system needed to be effective and accurate.
Bill noted that he and Mike were in agreement on that aspect. The plan was designed to put more
money in the worker’s pocket and help the corporate labor rate. Was this being achieved or was
this incentive just satisfying Bill’s need? As the incentive plan continued, how could concerns be
addressed regarding maintaining the program as a true incentive rather than allowing it to slip
into entitlement? What was the relationship between the incentive and the performance of each
unit? The corporation probably would not see the real impact of the program until changes in the
metric incorporated individual and weekly incentive. As to the corporate office personnel, R&D
and truck maintenance workers, any incentive plan would need to look at efficiencies and cost
savings. How can they develop an incentive measure to link to their productivity?
7
Exhibit 1: Carris Companies Divisions
Plant
Reels, Rutland (Mill), VT
Reels, Statesville, NC
Reels, Enfield, CT
Reels, Madera, CA
Reels, Brookville, OH
Plastics, Rutland, VT
Plastics, Statesville, NC
Plastics, Fincastle, VA
Products
Plywood, Hardboard,
Wood / Metal Bound
Machining, Tube
winding, products from
waste wood
Nailed wood large cable
reels
Nailed wood / plywood
/ large metal reels
Nailed wood reels and
assembly of plywood
reels
Plastic Reels
Assembly, Santa Maria, CA
Assembly, Kingman AZ
Assembly, Phoenix, AZ
Assembly, Galien, MI
Bolts, Rutland, VT
Plastic Reels
Magnet wire reels, fine
wire spools and custom
molded products
Assembly
Assembly
Assembly
Assembly
Bolts
Tin, Rutland, VT
Recycling, New Carlisle, IN
Tin/Stamp metal
Recycling
Vermont Tubbs, Brandon, VT
Furniture
Killington Wood Products
(KWP), W. Rutland, VT
Hardwood pallets,
skids, hockey sticks
R & D, Rutland, VT
Research &
Development
Trucks Drivers, Rutland, VT
Driving
Truck Garage, Rutland, VT
Maintenance
Corporate Office, Rutland, VT
Administration
Comments
The first expansion brought the mill to its
present location.
Started in 1980, manufacturing in NC has
doubled its space since 1990.
Purchased 1986. Formerly Bridge Mfg. – a
family owned business with reputation for
quality; integrated manufacturing.
Purchased 1991. This expansion made CC a
truly national company.
Purchased 1997. Had fallen on hard times but
has a solid mid-west customer base. Now
updating and restructuring.
Purchased a small company in 1986 to start up
plastic line. More than 98% use recycled
materials.
Start-up 1990 in the CC’s first NC location.
Purchased by the CC in 1999 to expand plastic
capacity and know-how, to complement Carris
product line and to build customer base
For assembly of reels produced at CA plant
For assembly of reels produced at CA plant
For assembly of reels produced at CA plant
For assembly of reels produced in VT and CT.
Supplies reel related products to reel plants.
98% of its output is Consumed by other Carris
plants
Supplies reel related products to reel plants.
Founded in 1970 during the energy shortage
as assembly point to reels traveling
unassembled. Now this site is used for
recycling reels returned by customers.
Purchased in 1989. Founded in 1840 to make
snowshoes. Used its experiential knowledge to
make bent wood furniture. Today state of the
art facility with broad variety of lines using
ash, cherry and maple.
Founded 1966. Until 1990, owned with a
partner. State of the art scragg (small logs)
mill. Customer base -- New England and New
York.
Internal service division supplying the Carris
companies with engineering services, product
and process development and machining
services.
Incentive based on Driver’s safe driving
record. Incentive given yearly – fixed amount
($50 - $250)
Having its own fleet offers Carris companies
flexibility and timeliness in scheduling
deliveries.
Accounts receivable and payable, information
technologies, payroll, scheduling etc.
Employees
1998
1999
151
155
99
118
108
104
44
55
45
46
40
36
11
0
17
116
4
8
7
22
8
5
5
7
32
11
14
11
13
5
231
245
57
67
13
12
11
15
5
9
36
38
8
Exhibit 2: 14th Annual Corporate Conscience Awards
9
Exhibit 3: The Incentive Program at Carris Bolt, Rutland, VT
The Bolt division made steel tubes, drive pins, borings, rivets, screws and bolts that were used
in Carris’ reel products.
Reel Products
These products were used to hold and reinforce the reel sides. Carris’ plants consumed 98%
of the Bolt shop’s output. The shop had one supervisor and ten employees. Each employee had
one machine. The machines were highly flexible in terms of the variety of products they could
work on. Each worker was in charge of producing a product from beginning to end. The base for
incentives was the 1997-production level of 2850 pieces/hour/person, i.e., 2850 = 100%. An
incentive of 1% of pay was given for every percentage point above 100%. 4 See Exhibit 5 for the
Bolt’s division incentive performance in 1998 and 1999 respectively. Some of Bolt’s employees
commented on the incentive program:
4
5
Tag5:
The formula is working just fine. It had to be readjusted to account for the
varying machine speeds. The formula is not fool proof, it has drawbacks. If you
have a bad beginning of the month, it is almost impossible to pull it out and we
all work really hard to try to pull it out.
Cam:
Our supervisor really works with us to get a good start. Morale is really high
when we are on…
Ned:
In October and November, we were short of work, we did machine
maintenance, which really affected production. They made an adjustment. We
have real problems working out what we need to get done with maintenance and
keeping the program going. We are a small group and we have figured out how
to work together to keep production as high as we can keep it. Breakdowns and
maintenance will always be factors, I guess but the program here is about as
good as it gets anywhere from what I hear.
If someone earns $7.00 per hour, they received $0.07 for each hour worked including overtime
Names of those interviewed were changed to preserve anonymity.
10
Exhibit 4: The Incentive Program at Carris Reels, Rutland (Mill), VT
The Mill made plywood and hardboard reel products. These reels were used for packaging of
wire, cable, rope, tape and chain products. The reels came in different shapes, sizes and
strengths. The Mill consisted of 4 departments—plywood, masonite, brush blocks and printing.
Most products had to go through all the departments in batches. The incentive for the Mill was
based on Value Added Per Hour (VAPH). VAPH was the ratio of Value Added and Total Hours
Worked. Value Added was Sales minus Material Costs. The Total Hours Worked included the
direct labor and the indirect labor hours (maintenance, shipping, tubing, and inventory).
Historically, VAPH had been very consistent, year to year (1995 = $34.83; 1996 = $34.13; 1997
= $34.47). The 1997 VAPH of 34, less 1 (as a morale booster) was used as the base for incentive
calculations, i.e. 33 $/hr = 100%. An incentive of 1% of pay is given for every percentage point
above 100%. See Exhibit 5 for the Mill’s incentive performance in 1998 and 1999 respectively.
Some of the Mill’s employees commented on the incentive program:
Jane:
Incentive isn’t really what we expected. Sales affect it too much. It depends
what we make as to how it all works. There are too many people, too much
involved. We haven’t made much and if we had the formula might be changed.
Bolts formula for the incentive was changed so that they couldn’t reach it as
well as they had.
Mick:
We hear that plastics and bolts do great. The Mill does all right at some points
in the month but now we just don’t even have the work. Production percentage
is there but Masonite doesn’t have the orders. Those folk are moving through
the shop to where the orders are. Masonite will probably be phased out in favor
of the basket reel. Getting the first check was real nice.
Gus:
Look at the chart. We did well on day 15. But look at the month.
December
1999
Plywood Masonite
Day 15 Production
Performance
Value Added / Income
Brush
Brush Indirect
Block
Block
Hours
Machining Finishing
$2,006
Total
$112,359
$9,128
$36,873
$4,087
$1,623
$873
0
729
182
55
15
0
VAPH
$50.58
$22.46
$29.51
$58.20
$0.00
$33.66
Percentage
153.27
68.05
89.42
176.36
0.00
102.00
Hours Worked
Month's Production
Performance
Value Added / Income
Sig:
Print
$1,278,995 $175,713
$415,433
$43,456
310
$22,928
$85,629 $25,296
$9,666
$123,493
1291
$1,477,636
$597
$536,621
Hours Worked
10,367
2,431
988
193
16
VAPH
$40.07
$35.22
$25.60
$50.08
$37.31
4038
$29.76
18033
Percentage
121.43
106.74
77.59
151.77
113.07
90.17
Some people try to get 100% every day. Others just can’t do it. Speed is hard to
pick up. There is a lot of dissatisfaction. It seems the way the schedule is made,
that it works against the incentive. Other times, it seems like the goals are just
too high.
11
Exhibit 5: The Incentive Program at Vermont Tubbs, Brandon, VT
Vermont Tubbs was purchased in 1989. Founded in 1840 to make ash snowshoes, its name
was originally synonymous with the product. During the 1980’s, that venerable company sold its
snowshoe operation and used its bentwood expertise to make furniture. Under Carris ownership
the product line at Tubbs included all furniture items--beds, sofas, futons, tables, drawers. Each
product had a different process flow. Some of these products had dedicated workers. The others
tended to rotate based on demand. The incentive at Tubbs was based on Sales/hour/person (in
contrast to the pieces/hour/person for Bolts and the value added/hour at the Rutland Mill). The
1997 Tubbs’ standard of $37/hour/person was used as a benchmark, i.e., $37/hour/person =
100%. An incentive of 1% of pay was given for every percentage point above 100%. Please see
Exhibit 5 for the Tubbs’ division incentive performance in 1998 and 1999 respectively. Some of
the Tubbs’ employees commented on the incentive program:
Lem:
The incentive is too complicated. We’re supposed to pack $65,000 a day.
Cherry is worth more than ash. If we’re not shipping cherry, we can’t make the
percentage. We don’t make the orders; we just make the product.
Teed:
Attitude is low, why bust your butt. Whatever I put a front on will
ship…There’s a positive and a negative side. In some cases, people are working
for the incentive and in others, people are using it for finger pointing and
blaming. We’ve got too many glitches still to work out in the shop from the
move. In some instances, we just can’t get the quality we need. People are
working real hard but we can’t seem to get the systems or the morale that we
had in the old shop. We can’t work around it and we aren’t going anywhere
with it.
Mac:
We are producing more than we ever have. We’re not profitable. I like the way
the incentive plan is set up so I know how we are doing when I see the report on
the wall in the morning. I like the incentive money in my pocket. When I get it,
I know the company is making money and when I don’t get the check, I know it
isn’t. When we lose on the incentive, we are also losing on the profit share.
Ned:
The incentive is a real good thing. Hard to judge right now if it is working. We
seem to be getting results. We are all paying attention. We change things around
and have a good month and then we lapse. Morale is a real problem here. We
lost a lot when we hired so many people when we first expanded into this new
plant. We are now in a battle and don’t have the community that is talked about
in the LTP. We used to want to come to work. The incentive is helping but there
are lots of bugs here and we’re not being asked how to work them out like we
used to be. Some people on the floor just can’t relate to the incentive. They get
frustrated.
Sam:
Because we are not as profitable as we were, management is squeezing us. We
only hear the negative. We were real moneymakers before the move. The
incentive, if we can get it, will help morale a lot—from the money and the way
we see ourselves. We lost a lot of community with the move and it’ll take a lot
of incentive to give us back the old way we used to be able to work and get
along.
12
Exhibit 6: Performance for some representative firms in the Incentive Program in 1998 and 1999
Plant
Reels, Rutland (Mill), VT
Reels, Enfield (Bridge), CT
Plastics, Rutland, VT
Plastics, Statesville,NC
Assembly, Galien, MI
Bolts, Rutland, VT
Tin, Rutland, VT
Recycling, New Carlisle, IN
Tubbs, Brandon, VT
Total
4
5
Jan.
Feb.
Mar.
Apr.
May
Jun.
Jul.
Aug.
Sep.
Oct
Nov
Dec
Ave.4
Paid5
1998
98.1
107.4
103.9
101.3
104.3
94.5
96.9
96.7
101.5
98.2
96.7
91.2
99.2
101.7
1999
102.7
97.7
84.5
101.8
104.6
103.9
98.2
98.7
93.3
101.1
97.1
90.2
99.0
101.2
1998
106.8
101.0
112.7
104.1
105.8
104.5
102.3
112.1
107.5
102.2
105.2
103.6
105.7
105.7
1999
109.7
113.2
103.6
107.0
105.2
103.2
101.1
105.1
104.0
106.4
95.3
107.9
105.1
105.5
1998
102.8
98.4
111.2
120.8
99.3
98.7
102.8
99.0
101.1
102.3
106.3
102.3
105.7
106.0
1999
121.7
103.5
94.4
90.5
81.0
106.2
88.6
99.8
120.5
98.9
98.5
108.0
101.0
105.0
1998
82.0
107.5
79.1
116.9
84.0
88.6
91.3
95.5
98.7
117.0
98.0
98.0
100.5
104.5
1999
97.9
82.2
87.6
68.6
72.2
77.9
56.7
106.6
73.9
70.3
63.4
62.8
76.6
100.6
1998
96.0
104.3
90.9
90.7
82.5
89.6
95.0
95.0
90.0
88.8
87.6
82.7
90.7
100.3
1999
96.5
99.5
106.9
111.7
111.7
110.2
107.8
94.0
100.7
100.7
110.0
101.4
104.3
105.3
1998
94.7
115.0
106.8
116.5
112.3
100.6
101.7
105.0
99.0
98.8
107.0
106.6
105.1
106.6
1999
107.0
101.3
105.2
105.2
101.5
110.3
105.0
112.9
104.8
112.5
105.4
108.0
106.6
106.6
1998
108.3
100.6
106.4
80.7
65.5
112.2
96.3
107.9
112.5
74.0
110.4
97.8
97.7
104.8
1999
98.8
110.7
106.0
105.1
99.5
113.1
102.2
87.9
85.4
104.1
97.4
87.0
99.8
103.2
1998
103.0
114.2
87.7
89.7
110.9
111.4
110.0
110.0
108.0
109.8
96.6
107.9
104.3
106.5
1999
108.1
110.0
121.6
116.4
124.8
110.0
111.5
108.6
109.0
123.7
119.2
110.4
114.5
114.5
1998
92.9
95.2
101.8
94.8
102.1
95.0
98.0
101.4
100.0
100.2
101.1
99.8
98.5
100.5
1999
95.3
107.4
101.0
98.7
97.3
100.7
92.4
95.0
91.2
92.6
98.4
97.2
97.3
100.8
1998
97.8
101.1
103.9
100.1
102.1
97.3
99.0
102.7
102.2
99.6
100.6
97.7
100.3
102.5
1999
102.1
104.6
100.7
100.7
100.2
102.4
96.1
99.0
96.8
99.7
99.2
98.6
99.9
102.6
Average is the actual average of performance.
Paid = Actual amount paid out. Employees are never paid less than 100%.
13
Exhibit 7: Quality of Life at Work Survey Results, December 1998
Percentage of respondents with Very satisfied and satisfied on a 5 point scale
Ranking
Survey Item
%
1.
Job
90.0
2.
Health Benefits
86.8
3.
Overall Benefits Package
85.5
4.
Life Insurance
83.8
5.
Employee Stock Ownership Plan
83.5
6.
Company 4% Retirement Plan
83.0
7.
Vacation Leave
80.7
8.
401K Plan
79.7
9.
Disability Insurance
78.6
10.
Site Safety
77.0
11.
Profit Sharing
76.0
12.
Site/General Manager
75.6
13.
Transition to Employee-Ownership
75.3
14.
Plant/Production Manager
73.4
15.
Personal Leave
73.0
16.
Corporate Management (Rutland)
72.1
17.
Site Supervisors
71.5
18.
Sense of Community
69.8
19.
Sick Leave
64.2
20.
Overtime Opportunities
59.1
21.
Incentive Pay Plan
46.4
22.
Pay for the Job
42.3
14