Empowerment or Else

Almost ten years ago, a partner and I bought a small, troubled company in Cincinnati that made mailing tubes and composite cans—sturdy paper containers with metal ends. The product line had not changed in 20 years. Profits were marginal. Labor costs were out of control, job definitions were rigid, and union relations were poor. Today we make a new mix of highly differentiated, specially protected, environmentally responsible composite cans; our work force is flexible and deeply involved in our success; strict job descriptions are a thing of the past; we have not raised the contract wage for eight years; and our relations with the union are excellent. What’s more, the company is doing well in a demanding market and making a lot of money. How did we achieve this startling turnaround? Employee empowerment is one part of the answer. Profit sharing is another. But the kind of change we experienced doesn’t come simply from treating people well. People hate change. Change of any kind is a struggle with fear, anger, and uncertainty, a war against old habits, hidebound thinking, and entrenched interests. No company can change any faster than it can change the hearts and minds of its people, and the people who change fastest and best are the people who have no choice. The people who change fastest and best are those who have no choice. I had no choice because the company was close to failure, and I was overwhelmed and exhausted. At my wit’s end, I decided to share my problems and profits with my employees. And why did they have no choice? Because I gave them none. I forced empowerment and profit sharing on them pretty much against their will. Cin-Made was founded in 1902. Before we acquired it, the company was owned and run by a woman I’ll call Lucille, who had lived and breathed it for 25 years and knew it inside out. She turned down my first offer for the company almost a year before we finally closed the deal. Lucille micromanaged every detail of the business from billing to maintenance. No one made any decision, however small, without her consent. She’d do all the negotiating, production planning, and costing, for example, then go out to the line and give people their marching orders. Controlling every action in the company took time. Lucille worked 75- and 80-hour weeks, every evening, and most weekends. But if Lucille was an autocrat, she was a benevolent, maternal autocrat. She saw her employees as family. She threw costume parties for them. She loved listening to their personal problems, she kept track of their kids, and she showed them a good deal of loyalty. Among other things, she kept people on the payroll when she should have let them go. When she did fire people, she’d have second thoughts and hire them back again. She knew what was best for her people, and she made sure they got what they needed. Or at least that’s how Lucille saw the situation. She believed her employees loved her dearly. But they certainly didn’t love her when it came to contract time. Cin-Made was in a highly competitive market for many of its products, and prices were holding steady or actually declining while costs went up, especially labor costs. In 1981, Lucille signed a union contract providing for three consecutive years of across-the-board 9 % raises. So her labor costs rose 27 % while orders and income declined. As a result, the company had gone from profits of 1 % to 2 % on sales to no profits at all. She kept the company out of the red by drawing virtually no salary herself and by gradually letting her managers go. By taking on all that work herself, she held the company near the break-even point. In the second year of the contract, she went to the union and told them she was going broke. While the company had made small profits in the past, she said, Cin-Made was making nothing now. “Believe me,” she told them, “I can’t afford this contract.” But if the union would trust her and roll back the increases to 4 % or 5 % per year, the company might survive. The union had three responses: we don’t trust you; we don’t believe you; we aren’t giving anything up. Lucille took her case to the employees as a whole and lost by an overwhelming margin. No more than two or three members of her “family” took her side. It was a crushing experience. When my partner and I approached her with a second offer at the end of 1983, she was looking ahead to a new round of contract negotiations in September 1984 and honestly didn’t feel that she had the strength. It must have seemed hopeless. If she didn’t cut labor costs, the company would go under. But if she did cut labor costs, the union would go out on strike, and the company would go under nevertheless. To Lucille, my partner and I must have looked like white knights. I had operational experience in the paper industry, and my partner was good with people and an excellent salesman. Lucille figured that the two of us could rescue her company, save her family (however ungrateful), and keep her employed at the job she loved. We bought the company in April 1984. In the beginning, as agreed, Lucille was still in charge. Everybody on the floor asked Lucille what to do, and I followed her around trying to understand the products, trying to figure out how to cost them, trying to soak up Lucille’s knowledge of the business, all of which was in her head. I think she found me a slow learner and, in that, typically masculine. Lucille was a female chauvinist and proud of it. She believed in women. Her work force was 90 % female, and all her managers had been women until she was forced to let them go. No male manager had ever succeeded at Cin-Made. Heaven knows, I felt slow much of the time. But I struggled very hard during those first couple of months, and I began to penetrate company costs. I put together financials we could understand and some proper inventory and tracking systems. I discovered that the equipment was in much worse condition than I had believed. Mostly, however, I made mistakes. The company’s sole maintenance man for all its old, failing equipment told me he’d received a much better offer elsewhere. I guessed he was bluffing; we did nothing, and a few days later, he was gone. A second key man tried to hold me up for a $ 2-an-hour raise, and I agreed to give him half that much in the form of what we called a merit raise, which didn’t have to go through the union. “But you can’t tell anyone,” I said. “This has to be our secret.” Within minutes, he was out on the factory floor telling everyone I’d given him an extra $ 1 an hour and bragging that he had me over a barrel. I went on making mistakes. An engineer by training, I’d stand around with a stopwatch timing people’s every move. One day as I watched people at one of our antiquated, sluggish machines, I remarked to someone that it looked to me like work that a moron could do. By noon, the whole work force had heard that I thought they were mentally retarded. When I brought in some modern automated equipment to meet a large new order, employees hated it. For one thing, we had to create a new job description, something Cin-Made hadn’t seen in 20 years. For another, the new equipment ran much faster than the old, and people were afraid they might get hurt. In the old days, about the worst accident anyone ever had was cutting a finger on a sharp metal edge. Now people figured they could lose a hand, and lots of safety training didn’t seem to make them any happier. Employees saw me as a brash, young know-it-all making lots of changes and amazing blunders. All in all, I did not make myself popular. Employees saw me as a brash, young, arrogant know-it-all with poor people skills making lots of changes and amazing blunders. By and large, they were right. These were the people whose help I needed to turn the company around, and I was busily turning them into enemies. It was also at about this time that we lost our biggest customer. • • • Cin-Made was relatively cash rich when we bought it, but what with paying our debts (the purchase was essentially a leveraged buyout), losing orders, and dribbling away the last drops of employee goodwill, we were running out of cash in a big hurry despite taking no salaries ourselves. By midsummer, we were losing $ 30,000 a month. Over the short haul, there were only two things we could do in that situation—raise prices or cut expenses—and we decided to do both. Cin-Made’s product line was too big, and too many of our products were marginally profitable. My partner and I were already leaning toward a more specialized market niche—composite cans with special linings for chemical products—so we raised prices as much as 25 % on many other items. Many of our least profitable customers left; we even helped them find other suppliers. Better yet, we now made money on those who chose to stay. Next we turned to expenses. There were no managerial salaries to eliminate, because as yet there were no managers. We weren’t paying ourselves anything, and we had to pay Lucille for a couple of years to teach us. That left employee wages and benefits. As Lucille had realized, the company couldn’t survive with the wage-and-benefits package it had. Most of our competitors were nonunion and paid their workers much less than we did. Moreover, our work force was getting 5 to 6 weeks of vacation, 13 holidays, and a comprehensive health plan completely paid for by the company. Since Lucille’s three-year union contract expired in September that year, we went to the union and told them we were going to have to cut wages and benefits by 25 % . The union was apoplectic. They had seen two guys with lots of money buy this company, and they weren’t about to take a cut in pay. On the contrary, they wanted yet another raise and a long list of new benefits. We said, sure, we have some personal money, but this business has to survive on its own merits. We got nowhere. In September 1984, six months after we bought the company, the union went out on strike. The union had seen two guys with lots of money buy this company, and they weren’t about to take a cut in pay. Lucille, my partner, and I worked the factory, along with the office staff and a couple of workers who crossed the picket line. I discovered how decrepit and difficult the equipment really was. The job wasn’t so easy after all, and, even more surprising, I did it badly. They had a lot of fun with that on the picket line. Now there really was a moron running the machines. We negotiated day and night, and federal mediators flew in to help, but we remained miles apart. My partner and I agreed to a smaller wage cut—25 % was only our opening shot—but the union still adamantly demanded an increase. Then, as time passed, the strike began to weaken. The numbers we brought to the table gradually convinced the strike leaders that the company really was in trouble, and slowly they began to accept the fact that there was no reason for us to put any more of our money into Cin-Made unless the business could stand on its own two feet. More important still, the workers began to waver. This was not a rich work force. Lucille had paid them well, but they had little savings and no strike fund to speak of. Three or four more came back to work. A lot of the other workers began to worry that the company really would go under and they’d lose their jobs forever. Finally, the union gave in. They offered to continue the existing contract for another year. We said no. We sent them a carefully worded letter stating that unless they immediately accepted our last offer—a 12.5 % cut in wages and benefits, reduced vacation, fewer holidays—we would take the legal remedies available to us, including permanent replacement of the work force. We dressed it all up in flowery language, but the letter was very threatening. The state of the business made it vital that our employees accept lower wages and benefits, so vital that we were willing to use threats to get what we wanted. The company’s survival depended on it. For that matter, so did their jobs. The letter worked. The union committee met again and decided we meant what we were saying. They didn’t like us, but they’d seen enough to believe we’d make good on our threat. Moreover, our present employees were not going to find new jobs easily. They had little education, they were getting older, and they had very specific skills for which there was no other market. We were the only composite-can factory in Cincinnati. In the end, the committee told the members roughly this: “As much as you hate these two men, as much as you hate this situation, as much as you hate a pay cut, these guys are playing for keeps. It’s going to be very tough to find new jobs. So swallow your pride, go back to work, and then spend your free time looking for new jobs with people you don’t hate.” It was good advice, and they took it. We signed a new two-year contract, and our work force went back to their jobs with lower wages, fewer holidays, reduced benefits, and a maximum three weeks of vacation instead of six. As part of the bargain, we promised to restore 9 % of the 12.5 % wage cut by the end of the second year. It was a critical victory. The financial hemorrhage slowed, stopped, and eventually became a profit stream. I was able to hire some managers to run accounting and marketing and to help me operate the plant. We were able to proceed with the development of new products and gain essential market share in the new niches we had targeted. Still, the year that followed was miserable. By all the rules of the old labor-management game, we had won. But the biggest part of our victory prize was a factory full of angry, defeated employees determined to oppose innovation and grieve every tiny infraction of the letter of the contract. We had costs under control, and we had the worst imaginable labor climate—a financial victory and a human relations disaster. I had deliberately exploited their lack of economic choice to make them do a thing they didn’t want to do, and that was a very bitter pill for them to swallow. I saw it as necessary trauma. The workers saw it as unnecessary greed. By the rules of the game, we had won. But the victory prize was a factory full of angry employees. Grievances increased to about one a week, a few of them perfectly legitimate, most of them petty and pedantic. The workers stuck to their job descriptions like glue and opposed every suggestion that they be flexible. We often made mistakes about who was entitled to put in overtime, and they filed a grievance every time, demanding that we pay the people who should have worked but didn’t. I consistently apologized and did my best to learn the rules, but I just as consistently refused to pay for work not done. I engaged in petty behavior of my own. Lucille had always bought supper for people working overtime, but as the new contract didn’t specify dinner money, I cut off my nose to spite my face and denied the first request, roughly $ 4 each for four or five people. If I was going down, they were going down with me. Pretty soon we couldn’t get people to work overtime at all. The atmosphere was deeply adversarial. They played their game, I played my game, and none of us seemed smart enough to stop the game playing and get on with running the company. • • • As that year passed, I realized with increasing clarity that our victory was not making me a happy man or a successful business owner. In fact, the strike had taught me several valuable lessons, though I was slow to grasp them. For one thing, the workers’ jobs weren’t as easy as I’d thought. For another, the company really couldn’t get along without its employees and their special knowledge of the equipment, the products, and the customers. I began to understand that the contempt I’d felt for my workers was a piece of extremely poor judgment. Despite their bitterness, the employees could also see that we’d reached an impossible dead end. Although they suspected my motives and disliked my style, we both realized that to save the company, we had to work together. Like it or not, we had a marriage, and there was no good way to get a divorce. My employees and I had a marriage, and there was no good way for us to get a divorce. What the company needed was an atmosphere of teamwork and participation, whereas the atmosphere we had was adversarial and acrimonious. Acrimonious because we all had short tempers and big egos. Adversarial because management and labor have always been adversaries. Unions were created to be adversarial. Adversarial was what my training and experience as a manager had prepared me for. And yet life was too short. The strain on everyone, especially on me, was too great. I knew that the company would never succeed, perhaps not even survive, unless we all gave it the same total commitment. But the workers didn’t see Cin-Made as their company; they saw it as the owners’ company. That had to change. I didn’t want to be their worthy adversary; I wanted to be their worthy partner. As we ended the first year of the new contract and headed into the second, I began putting together a plan for change. I wanted to share this company with my employees. In the beginning, it was the pain I wanted to share as much as the profit. I wanted the workers to worry. Did any one of them ever spend a moment on a weekend wondering how the company was doing, asking herself if she’d made the right decisions the week before? Maybe I was unrealistic, but I wanted that level of involvement. After a bad start, I had begun to see that they knew more about the company and its operations than I or the new managers I’d hired. They were better qualified to plan production for the next day, the coming week, the month ahead. They had more immediate knowledge of materials, workload, and production problems. They were ideally placed to control costs and cut waste. But how could I give them some reason to care? I began holding monthly informational meetings called state-of-the-business talks to let them know how the company was doing. The only trouble was that the workers had no stake in the company. If they wanted more money or less work or another holiday, it didn’t come out of their pockets; it came out of mine. That led me to the idea of profit sharing. If they got part of the profits, then extra costs and expenses would come out of their pockets too. I bought some books and sent away for materials and studied corporate profit-sharing plans. I couldn’t find anything I liked. In the first place, all the plans I read about sounded manipulative. The rules were subject to change without notice. The profits shared were whatever management declared them to be. The plans were handouts, a form of charity. Not surprisingly, they completely failed to convey any sense of the cause-and-effect relationship between productivity and profits, between work and success. Another problem was the complexity of the rules. There were threshold limits; there were profits behind, above, and beyond the normal expected rate of return; and there were minimums and maximums and categories and schedules and language that struck me as pure bafflegab. Worst of all, the plans never paid out much money. And my idea was to pay out lots of money, enough to create a tangible connection between the way people worked and the profits they shared, enough to get everyone passionately involved in the effort to cut costs, increase sales, and make money. Profit sharing never seems to pay much money. My idea was to pay out lots. I wanted to do something radical. I wanted to divide employee income into fixed and variable components. I wanted to make profit sharing—the variable component—so big that it would serve as an incentive to keep wages—the fixed component—frozen. Over the years, the variable component would become a larger and larger percentage of income and work more and more effectively as an incentive. Over the years, consequently, we would lower the risk of doing business while at the same time offering bigger and bigger rewards to our employees. I did a bunch of calculations and decided it would work. I even believed it would be attractive, at least to the work force. As for my partner, my creditors, and my family, they would probably think I was crazy to offer so much. But what the hell, I thought. If this works, we’ll all be better off. If nothing else, I’ll sleep better at night from not feeling so damned lonely. My employees will share my profits, but they will also share my anxieties. My employees will share my profits, but they will also share my anxieties. I asked myself what was the most money I could share with my employees and still have enough for taxes, new equipment, R&D, and something for me and my partner. The answer was 30 % . Hourly workers would get equal shares of 15 % of before-tax profits, apportioned by hours worked (except overtime). Managers and office staff would divide another 15 % on the basis of performance appraisals. (The total has now risen to 35 % —18 % for workers, 17 % for managers—to accommodate a new 401(k) pension plan and some other refinements.) As we moved toward the middle of the contract’s second year, I decided to anticipate the union’s predictably unreasonable demands and negotiating strategies. I refused to go back to the old labor-management game of bribes, blackmail, strikes, and wage hikes. I was not going to give them a raise. Yet I was perfectly prepared to give them more money, provided that it be in shared profits. Wages were still 3 % below the prestrike level, and, given the adversarial atmosphere, I needed to take the bull by the horns. So in the late spring of 1986, before they’d had time to formulate their bargaining position, I called them together and announced that I wanted to extend the contract for a third year. We needed labor peace, I said, to continue work on our new products and strategies. There would be no raise. On the other hand, I would restore the final 3 % of the earlier wage cut by the end of the extended year. On top of that, I would give them something they hadn’t asked for: a share of the company’s profits. I would take 15 % of current-year profits and distribute them the following year, the year of the contract extension. Because of my monthly state-of-the-business talks, they already knew that the company was now earning a decent profit. I showed them exactly where we stood and made some projections they understood to be reasonable for the remaining three months of the fiscal year. To my surprise, they agreed. I think there were three reasons, and the profit sharing—untested and unfamiliar—was probably the least of them. More important was the restoration of that final 3 % , which they hadn’t expected to get without a fight. More important still was the bad economy. By 1985, my employees knew they didn’t have much choice. People at other companies were not getting raises either. And jobs were very scarce. Once again, severe economic conditions were serving the cause of change. But this has never troubled me. Within reason, I’m willing to use whatever will help me introduce systems that are fair and just and highly beneficial to the business, which means highly beneficial to employees, customers, and me. In this case, I wanted to get my employees involved. I wanted to establish a pattern of cause and effect by establishing a pattern of big wage increases, bigger than anything they’d ever seen, but only after the money had been earned. Profit sharing was only partly a matter of fairness. For me, an even more critical goal was to open my employees’ eyes to where wages came from, to the trade-offs they would have to make between benefits and profits. • • • Having won this first round, I took the opportunity to move the agenda ahead by making two constructive pronouncements that I’d been thinking about for months: I do not choose to own a company that has an adversarial relationship with its employees. Employee participation will play an essential role in management. To my surprise, the very act of making these two statements seemed to increase the level of adversarial behavior. First of all, my three managers felt they were paid to be worthy adversaries of the unions. It’s what they’d been trained for. It’s what made them good managers. Moreover, they were not used to participation in any form, certainly not in decision making. One of them devised at least a dozen ways of delaying and obstructing the flow of necessary numbers to the employees. As for profit sharing, another of my managers declared it to be a form of communism. They all saw both of my statements as clear threats to their positions. The workers were not much better. My managers believed that managers should manage and that hourly workers should do what they were told. The trouble was, most of the workers were perfectly happy with that arrangement. They wanted generous wages and benefits, of course, but they did not want to take responsibility for anything more than doing their own jobs the way they had always done them. Now I was stirring up the pot by telling everyone they had to change. It was bad enough forcing them to use new equipment, but I was also forcing them to change job descriptions, to change work habits, to think differently about themselves and the company. What my employees were telling me, in deeds and words, was, “We don’t want to change, and we’re much too old to change. Anyway, we don’t come to work to think.” I wouldn’t take no for an answer. Once I had made my two grand pronouncements, I was determined to press ahead and make them come true. It may seem contradictory to use confrontational, even coercive, methods to reduce adversarial relations and empower employees, but I believe it was what I had to do. My reasoning was simple. We would continue to be adversaries as long as we had opposing interests. We would continue to have opposing interests until we shared a common interest in the company’s success. We would share that common interest only when we shared both the profits and the responsibilities that go along with success. But which of us is ever eager to take on new responsibilities? Certainly not Lucille’s work force, not after years of security and obedience. They never dreamed how much responsibility I wanted to lay on their shoulders, but they disliked what little they had seen so far. Yet behavioral change begets attitudinal change, not the other way around. If you force people’s behavior to change, their attitude will change as well. And that new attitude will eventually drive even better and more spectacular results. A manager has to force change. My role was to make sure that people changed at a faster pace than they would ever have chosen for themselves. My role was to push the process of change and never be satisfied with results for more than a moment at a time. I pushed the process hard. I made people meet with me, then instead of telling them what to do, I asked them. They resisted. “How can we cut the waste on this run?” I’d say, or, “How are we going to allocate the overtime on this order?” “That’s not my job,” they’d say. “Why not?” I’d say. “Well, it just isn’t,” they’d say. “But I need your input,” I’d say. “How in the world can we have participative management if you won’t participate?” “I don’t know,” they’d say. “Because that’s not my job either. That’s your job.” And I’d lose my temper. In the beginning, I really did lose my temper every time I heard the words, “It’s not my job.” Later on, when I discovered my outbursts were having some effect, I started faking them a bit. Whenever anyone said, “It’s not my job,” I’d go berserk. Sometimes I didn’t know myself if I was really mad or simply playacting, but people had to understand that those were words they weren’t allowed to utter. I lost my temper every time I heard anyone say, “It’s not my job.” Gradually, I induced my managers to share more information with employees. I also got them to learn how to share power or to quit and let me replace them with managers who would. When I introduced profit sharing, I expanded my regular state-of-the-business meetings. I still showed them month-to-date sales, year-to-date sales, and monthly and year-to-date profits. Now I also began using those meetings to make profit projections and examine other numbers, such as scrap rates and materials prices and operation efficiencies. The information shared with employees grew more and more complex—and more and more “confidential.” I made it a practice to answer any and all questions about the company’s results. I told them the company’s books were open and that the union could come in and audit them any time it chose. I don’t see how a company can hope to make profit sharing credible if its workers cannot know what the profits are. Gradually, union relations improved. We realized early that we could not leave the union behind, so I sat down with the officers and told them I wanted to work with them for the benefit of everyone: workers, owners, customers, and most of all the company, which was all of us together. I promised them we were not out to get the union. They were skeptical but said they were willing to judge me by my actions. Gradually, I began giving my best people new responsibilities. For example, I expanded the duties of the union steward, a woman named Ocelia Williams, from sheet-metal cutting to inventory planning to materials ordering to head of the metals department, though it took some arm-twisting to get the man who thought he ran that shop to accept her authority. We also gave her a special training course in leadership and a lot of coaching in the art of negotiating with suppliers. (For her version of Cin-Made’s turnaround, see the insert, “Ocelia Williams.”) Ocelia Williams When I first came to Cin-Made, the place was like a circus. There was a ten-minute break every hour, and people walked off the line anytime at all to go to the ladies room or get a candy bar. It was pathetic. The trouble was, most of these people had never worked anyplace but Cin-Made. I came here from Georgia-Pacific. I’d seen a real factory with real work discipline, but most of the others never had. A lot of that was Lucille’s fault. She was a good woman, but she let her workers take advantage of her. Then Bob Frey and his partner bought the company and wanted to cut our pay by 25 % . I couldn’t believe he could want that big a cut when he knew what we were making. The low wage here was $ 6.48 in those days, a little over $ 13,000 a year. And he wanted us to give up a quarter of it. I was horrified. Worse yet, he made us do it. He sent us a letter telling us to come back to work or lose our jobs. What choice did we have? The following year was tough. We worked because we needed the jobs, not because we liked them, and certainly not because we liked who we were working for. Then when he introduced profit sharing, I was apprehensive again. So were the others. None of us thought we could trust him. But, again, what choice did we have? By then I was the union shop steward, and Bob and I were fighting like cats and dogs. I kept trying to get him to see that the employees were human beings, that they’d given up a lot, that they thought he was giving them the shaft by cutting vacations and holidays and making them pay a big piece of their own insurance. In my opinion, that was when he started to change. The strike had shown him there was a lot he didn’t know—how hard people worked, for example—but now he seemed to be learning. We told him what a bad listener he was, and he took a class on listening. It even helped, a little. That was also when he started giving us more information about the company in his state-of-the-business talks. I always asked a lot of questions, and I started to believe he was telling us the truth, not only the good news but also the bad. And that was when I started to change my mind as well, about Bob and about the company. I started to respect him, even to like him. In the second year of the profit sharing when there were no profits, for example, we knew it ahead of time. We knew it month by month from those meetings. That made a big difference, at least to me. Some of the others were still suspicious. The union president kept saying, “Profit sharing sucks!” and “Team building sucks!” She thought it was nonunion, our taking so much responsibility. That bothered me. I kept asking myself if I was truly union. But I couldn’t see how we were going to protect ourselves and keep our jobs if the company went under. And I couldn’t see how the company could work unless we all took our share of the responsibility. A lot of people thought those ideas were off the wall. Then, finally, the profit sharing started to give us quite a lot of money. And the union president took some classes and discovered that other companies have cut-off points in their plans. But we get 18 % from dollar one, and it goes on for as much money as the company makes. Even she came around. Now she’s a Frey supporter. So in the end, I like my job more than I ever used to. I do better work. I make more money. Yes, I suppose Bob Frey is getting rich on those same profits, but that’s life. He has more invested in this company than I do. And that’s fine. Gradually, hourly workers in general began to take on some of the work of problem solving and cost control. I pushed and prodded and required people to help solve problems related to their own jobs. Sometimes I felt like a fool, albeit a very pleased fool, when they came up with simple solutions to problems that had persistently stumped me and my managers. Always I pushed too hard, making progress but still making enemies. I pushed and prodded and required people to help solve problems related to their own jobs. Gradually, my worst managers left, especially after I started assessing performance and doling out raises on the basis of their ability to coach and work with hourly employees. I could be an abrasive boss at times. I had to have managers with a human touch. My key move was to hire a plant manager who had both technical genius and a willingness to become what I was not, an attentive and dedicated listener to the people who worked for him. Over time, he became the recognized leader of the movement toward empowerment on the factory floor. We began working on quality. One customer had returned a shipment of 40,000 cans because the metal ends were coming off. My new plant manager and eight hourly workers took a ten-week night school course in statistical process control (SPC) at the University of Cincinnati. They gathered data on the pressure it took to blow the ends off those cans, and, with some engineering help, the group worked out a solution to the problem. The plant manager began teaching SPC techniques to the rest of the work force, including many who needed help with basic math and found the whole notion threatening. I encouraged him to pressure them, to make them learn, like dragging someone along on a roller coaster because you know he’ll like it once he tries it. He took a slightly more humane approach. He coaxed them into volunteering to learn the math and the SPC techniques. He also told them they could stop any time they felt overwhelmed. But because he held their hands, and because they really cared about quality, within a year he had every one of them entering process statistics into the computer data bank and doing their own scrap and efficiency tracking. Gradually, the conflict and chaos I had spread around me began to lessen, especially as new managers took over and employees learned to take responsibility. No managers at all is hopelessly utopian. No human system is that perfect, but good systems don’t need much. We were taking big strides toward my goal of a few managers spending a little time doing a little coaching and giving a little advice. Gradually, the union committee took on much of what I would call labor force management: allocating overtime, scheduling layoffs, deciding when to take on temporary workers and when to let them go. Moreover, the company and the union now jointly administer a program of merit raises, with which we’ve rewarded about 75 % of employees for acquiring competencies above and beyond their basic skills. In addition, workers now interview all job candidates, including new managers. We hire no one without the approval of their future colleagues and subordinates. Gradually, too, we developed an employee committee to schedule operations. Cin-Made’s specialized product strategy makes it tremendously difficult to do centralized short- and long-term planning of labor, materials, equipment, production runs, packing, and delivery. With the help of one or two staff people from the front office, hourly workers now do all this planning. Often, but not always, a manager sits in to provide input, but the workers make all the decisions. I’m sure they rarely make exactly the right decisions, because in a business like ours it is not possible to anticipate every problem and change, but I’m equally sure that they make better decisions than I would make. For example, one area that we track and chart religiously is customer deliveries. At the moment, we have a 98 % on-time record. But when the committee does make bad decisions—and from time to time it must—I don’t necessarily know. That is the ultimate point of everything I’ve tried to do. Now a bad decision comes out of their pockets as well as mine. Now a bad decision comes out of their pockets as well as mine. Progress in all these areas was painful and painfully slow. Some employees have never entirely accepted the idea that they should share the company’s risks as well as its profits. But, of course, it is precisely the profit sharing that has turned the tide at Cin-Made in favor of shared responsibility. Three times each year, on September 30, December 20, and March 30, every hourly worker gets a check for his or her equal share of the pretax profits from the previous fiscal year, which ends on June 30. For the first four years, employee shares were modest, and we made limited headway. Averaged over a full work year, that first year’s individual share came to $ 0.58 for each standard hour worked. We had no profits at all the second year because we acquired and closed a small competitor and also bought and moved into a new building. In the third and fourth years, while we were still struggling with quality problems, a slow market, and a lack of strategic direction, employee shares came to $ 0.41 and $ 0.11 an hour, respectively. In 1989, we finally generated a comprehensive strategic focus for product development, marketing, and cost control, and in fiscal 1990, it began to pay off in earnest. Profit sharing that year came to $ 2.82 an hour on top of fixed wages. Over the last four years, the average profit-sharing bonus has been $ 2.62 an hour—a 36 % increment to income. The effect has been electrifying. Full-time employees now routinely monitor the work of temps to reduce waste and increase efficiency. Strict adherence to job descriptions is a thing of the past. Absenteeism has fallen to nearly nil. Productivity is up 30 % . Grievances are down to one or two a year. Except for merit raises, there has been no increase in fixed wages since 1984, yet our work force makes more money than comparable industrial workers. • • • In 1990, during our last contract negotiations, we ran into two hurdles that tested our progress. First, a group of hourly employees had decided that they wanted an across-the-board pay raise on top of profit sharing. The impulse was understandable. Their weekly pay checks hadn’t grown in six years, whereas day-to-day living expenses obviously had. At the same time, of course, they wanted to keep those three big checks each year. I was disappointed, but I walked them through the reasoning once more. To begin with, I said, you can’t have raises and profit sharing. Wages don’t come from shareholders or from an owner’s deep pockets. They come from the profits the company generates and from no other place. But profit is attached to risk. If you’ll take the same kind of risk I’m taking, if we’re all in this game together, then you can go on sharing 18 % of every pretax dollar we make. True, not every year will be as profitable as every other, but lately we’ve been doing pretty well. On the other hand, I said, for the first time, I’m willing to give you a raise if you really want it. But it’s got to be a choice: you can have a raise or you can have profit sharing. You can’t have both. If you choose the raise, I’ll match the best percentage increase your union can negotiate anywhere in the country with any employer. But I’ll keep the 18 % , or what’s left of it, because all the risk will be mine again. It was a calculated gamble. I didn’t want them to give up profit sharing, and I guessed they wouldn’t choose security over income. But if they did, so be it. I couldn’t push them forever. And higher wages for them would mean a lot more money for me. They decided to speak to the membership. After comparing the wages of union members in other companies with their own combined incomes, fixed and variable, the workers changed their minds. Some of them concluded that my easy acquiescence meant that I wanted to take away their profit sharing. They voted nearly unanimously to drop the request for a raise and insist on the continuation of the profit-sharing program. The second hurdle was vacation. They’d been stuck at three weeks since the strike in 1984, and now they wanted another week. Fine, I said. I don’t care if you want more vacation or more holidays or a dental plan. But there’s only one pot of money, and that’s profits. You can use your share any way you like. You can have them in cash or in vacations. You see, there’s nothing here to negotiate, I said. There are no concessions you can squeeze from me. Or, to put it the other way around, there are no concessions I won’t make. It’s your money. You can distribute it any way you please. There are no concessions you can squeeze from me. Or, to put it another way, there are no concessions I won’t make. They decided they would rather have the money, but I honestly didn’t care which way they voted. If they have finally grasped the concept, the details hardly matter. The process of change is an endless series of small battles. Someone must always force the action, yet empowerment is only possible when workers and managers are capable of taking the power offered them and using it aggressively and well. I have forced the action persistently and hard, but the people at Cin-Made have exceeded my expectations, and probably their own, in learning to take collective action, in setting and achieving hugely ambitious goals, in seizing empowerment with both hands and making themselves almost totally responsible for the company’s success. Today I discover to my surprise that whereas once I pushed them forward, now they are pushing me. The skirmishes ahead of us revolve around two issues. First, I am concerned about eventual ownership succession. To protect Cin-Made’s future and the employees’ jobs, I want to create an employee stock ownership plan that will allow them to buy the company. They’re not quite ready for this idea. In the long run, it will increase their income and security, but for the next few years, it could cost them a good deal of their profits. The second issue involves my more immediate future. My employees want me to reduce my role as president relatively quickly and turn over even more power to the people responsible for day-to-day operations. In this case, I’m the one who’s not quite ready. I still like my job. On the first issue, I push and they hold back. On the second, they press and I resist. Forcing change has begun to cut both ways.

Empowerment or Else

Partner Center