Gain-sharing at
Unlimited Services

By Fred Noer

At Unlimited Services as much importance is put on the quality of the employees'
lives as the quality of the wiring harnesses the company produces and the services
its customers receive.

 To enhance how well workers do on and off the job, gain-sharing is used to boost
the pay of all employees at the manufacturer in Oconto, a city of 4,800 in
northeastern Wisconsin 30 miles north of Green Bay. Since the motivational
concept was started four years ago, productivity at Unlimited Services has increased
30 percent.

During that time the company's annual sales have jumped from $6.6 million to
$10.5 million, an increase of 62 percent, according to Ray Sweeney, vice president
of operations. He noted the figure includes 20-percent growth each of the last two
years for the company, which began in 1982.

Team Leader Rose Porath is linked directly to customers to address
their needs. Above Rose is lending a hand in the assembly of a wire
harness.

"We've been pretty successful, and gain-sharing is a significant part of our
overall program," Sweeney said. "Teamwork on the floor has improved,
we have better customer service, and profitability has gone up.

Gain-sharing, which has a long history in industry, is a system that rewards
employees when productivity improves.

That may result from better quality, flow or processes, Sweeney pointed out.
"Then we take the savings and give some of it back to the employees who made
it happen," he said. "It also is based on more being done in fewer hours. If
people can get work done without hiring new people,  they share in the savings."

For example, if five new production employees were needed, that would cost
Unlimited Services approximately $100,000, figured on an annual compensation
rate of $20,000 per person. But, if the current employees can boost their output
so the company forgoes the additional hiring, they would receive $50,000. The
other $50,000 is kept by the company, according to the 50 percent sharing formula.

Gain-sharing at Unlimited Services is calculated by dividing the number of
hours required to produce wiring harnesses into the dollar value of the harnesses shipped.
The calculation is made daily. At the end of a month, cumulative figures are
determined, and the gain-sharing amount is paid to employees in their next check.

On time delivery of orders is important to the success of the Gain
Sharing Program. George Johnson of Shipping and Receiving
assures all components are sent on a timely basis.

All information about sales and hours-worked is posted for everyone to see.
"Companies must be open and willing to share information," Sweeney said.
"As managers, we tend to keep information to ourselves, but here we want
to make managers out of everyone. People have to be willing to set their
egos aside to let the company be successful."

Success at Unlimited Services has meant gain-sharing as high as $1.50 per hour
for all hours worked during the month. The full amount is paid; nothing is held
back. "Some companies have bonus pools where 50 percent is paid at first and
50 percent is paid later," Sweeney said. "There's some logic to that, but it may
not be the best way to do it. Paying it all at once creates more excitement, and
each month you start fresh."

Some companies have profit-sharing plans that feature monthly payments,
but most  plans pay annually. In that sense, Sweeney regards profit-sharing
more as "an arbitrary gift that the manager or president gives out," he said.
"It may not motivate people, and they come to see profit-sharing as an
entitlement. That can be dysfunctional when it comes to motivation."

Ultra Sonic Welding is an integral part of the wire harness
process. Christine Wiedemeier demonstrates Ultra Sonic Welding.

He contended that profit-sharing cannot be controlled by people on the floor.
"For example, they may have had the best month of the year in production, but
the company spent a lot of money on legal bills to acquire another company,
so no profit-sharing is paid,"  he said. "It's harder for employees to see how
they impact profit."

Except for the president and three vice presidents at Unlimited Services, all of
the 160 employees are included in gain-sharing. Whether people work in assembly,
accounting, purchasing, engineering or maintenance, they contribute to productivity
and therefore benefit when it increases. Also, all employees receive the same amount
regardless of how long they have worked at the company.

Besides gain-sharing, employees are paid a standard base rate, although some are
on salary. The compensation package also consists of health and life insurance,
401(k) plan, eye glasses coverage, 75 percent reimbursement for classes pertaining
to work and time off for holidays and vacations.

All wages and benefits are kept separate from gain-sharing, which is self-funded.
Similarly, gain-sharing does not affect the company's pricing structure. "We do not
want to be at risk of overpricing our products to cover gain-sharing," he said. "Pricing
is determined using a standard model. Gainshare is paid only when actual savings occur."

However, gain-sharing is affected by new equipment, since it sometimes increases
productivity. Gain-sharing is held stable for a year after the new equipment is operating.
The gain-sharing formulas, which can vary from company to company, may be
modified to compensate for the equipment.

Pear Charbonneau and June Harteau of the Terminating Department.

The gainshare at Unlimited Services was established in 1996. After compiling
productivity data from previous years, a benchmark was set, and the amounts of
gain-sharing payout were set based on a percentage above the benchmark. For
instance, at three percent improvement the amount is 10 cents per hour and four
percent is 15 cents,etc, but the payout is not limited or capped.

Two conditions were placed on the company's gain-sharing program:

 

If harnesses are not shipped on time, the extra money is not paid.
"We try to be reasonable in this area by having a two-percent leeway,
but the on-time element is one of the biggest problems in the wiring
harness industry," Sweeney said.

The second condition was that Gain-sharing is not paid if the company does
not make money. "We have a certain threshold for our shipments," Sweeney said.
"They have to be above the break-even point. If they're below that threshold,  we
don't pay gain-sharing."

Before gain-sharing was implemented, employees were oriented to the concept.
 

Presentations were given about how to understand the formulas and how to read
the sales and hours-worked charts. "We didn't want our employees to have any
surprises because we're all in this together. This is our company," he said.

Gain-sharing was begun in October 1996 on a three-month trial with fairly
easily attainable goals and small rewards.

"Employees were in shock," Sweeney said. "I remember them saying, 'We were
actually paid something extra!'  They had never heard of anything like it on the
shop floor."

A commitment was made to gain-sharing throughout 1997, and money was
paid 70 percent of the months. In 1998 the record improved to 10 of 12 months,
and last year employees were rewarded 100 percent of the months.

"It doesn't take long for employees to catch on to how to make gain-sharing,"
Sweeney said. "If they make gain-sharing at least half of the time, it's been a
success. The year following the start-up is when the real impact will be felt."

He explained that employees can boost productivity through what is called
"discretionary effort." It is based on the assumption most people are at least
60-75 percent productive by putting forth average effort. But they are capable
of more, Sweeney said, "if they are treated fairly and given adequate working
conditions, their effort will go up to 75-85 percent. We then try to tap into the
remaining 15 percent, which is called discretionary effort."

"But it does no good to be yelling and driving fear into employees to achieve
that," he said. "We believe people will put out their best effort if they are
internally motivated. Gain-sharing answers the question 'What's in it for me?'
and shows that we respect their extra effort.

 "We work in this business as adults. We give employees all the
information and expect them to get the work done." Sweeney said.

Sweeney emphasized the effectiveness of gain-sharing depends on the culture
of a particular company. A team environment is critical. "It works best in a
culture that supports people and listens to their ideas about how they can help
make the company better," he said. "We tell everybody, 'Go ahead and make
changes. Don't be afraid to make mistakes because you will learn from them.'
It has generated positive changes and increased gain-sharing."

Besides teams being in place, he stressed that managers must be enlightened.
Then they can inspire team members to do excellent work. "People will do
good jobs if they are given the right tools and opportunities to grow,"
Sweeney said. "If all process systems and teams are working, there's an
abundance of  potential ideas in most organizations.

"At least 85 percent of process problems are due to management," Sweeney said.
"Managers can be barriers to success. I see it in companies where people work
with their heads down and don't smile. They have low self-esteem, and they do
not feel good about themselves or the company."

Unlimited Services has teams and uses flow manufacturing. "People are very
empowered," he said. "Our company is focussed around people. We really
challenge people to take as much responsibility as they can and be a bigger
part of the company. Once they take on the responsibility, they learn that it's
kind of fun to be working together as a team and building their team skills."

He cited the 28 lead people as an example of empowerment. They order
more than 50 percent of the raw material. Team leaders also are linked directly to
customers to address their needs, particularly those related to production.
"Customers like to talk to someone on the floor," Sweeney said. "On the other
side, the team leaders feel a personal commitment to the customers to produce
and ship on time."

Besides Sweeney, direction is provided by Bill Kessenich, president; Mike
Williams, vice president; Cindy Hanner, vice president of sales; Randy
Schuettepelz, materials manager; and Joel Taff, quality control manager.

All of them are hoping to have sales of $12 million next year. A goal of
$20 million has been set for 3-4 years from now. Achieving that will be
aided by a 30,500-square-foot addition that will be completed in December.
The extra space, for production and offices, is the third addition to the
33,000 square-foot building, which is located on a 10-acre wooded site.

The company, which began in Williams' basement in Appleton, Wisconsin,
makes custom wiring harnesses for equipment in the heavy-truck, off-highway,
agriculture, construction, logging and truck-body industries. The firm also
manufactures products to address specific problems in a particular industry.

Sweeney is pleased with the customer mix at Unlimited Services.
"Gain-sharing actually has given us a better market focus," he said.
"We try not to be everything to everybody."

Gain-Sharing Advice…

If your company is considering gain-sharing, Ray Sweeney, vice
president of operations at Unlimited Services, suggests that several factors
should be evaluated. They are among the same points he made during a
presentation at the 1998 Wiring Harness Manufacturers Association trade show.

 

Sweeney also has consulted with companies about gain-sharing.
"We're happy to share with anybody," he said. "People have come through
our company, and we've showed them the gain-sharing program."

His recommendations are:

• Keep your goals reasonable and attainable.

• Pay small amounts for small gains.

• Include all employees in gain-sharing so they are working for the same goal.

• Pay everyone the same amount.

• Be aggressive about finding new business. Employees should not be
threatened with lay-off because they are more productive.

• Be committed to finding bottlenecks and flow problems.

• Communicate information to employees.

• Do not set up an elaborate system for employees to submit suggestions.
Keep it simple so ideas can be implemented quickly.

• Urge employees to fail quickly and frequently. Then, they will handle
tasks and procedures differently.

• Have management committed to gain-sharing and putting it in place.

• Don't monkey with the numbers.

• Don't set limits on the payouts.

• Have a formula for gain-sharing that is not driven by company profits.

• Your company must have total quality management and flow or lean
manufacturing systems.

• Establish a specific level for shipments. If it is not met, do not pay gain-sharing.

• Gain-sharing does not work in all industries.

• A real team environment is needed.

 To talk to Sweeney about gain-sharing, he may be contacted at
920-834-4418 or ray@us-wire-harness.com.