In December, 1991, I was hired as Controller of commercial bus builder ElDorado National in Salina. ElDorado, as I learned shortly after starting, was in rough shape. People were dissatisfied, working way too much overtime, wages were low (around eight dollars an hour). We were behind in our production schedule, and losing a lot of money.
I learned that one of the RV plants in Elkhart, Indiana had a bonus system for its employees. I went to take a look.
I flew to Elkhart, walked into the plant at two in the afternoon, and thought the place was closed. The plant was dark, and there were only a few people mulling around in the office. I learned that the workers started at 6 am and normally left around 1pm. They explained to me how the bonus worked: each of the plants gave their people ten percent of what they produced. They totaled up the production from all the units for the week, multiplied it by 10%, subtracted what they paid the workers, and paid the rest to them in a bonus. Workers were happy, well paid, and they could leave when they were done every day regardless of the time.
I checked the math at ElDorado, found out that ten percent labor was a lot better than we had ever done as far as I could tell, and introduced the plan to our workers. The first reaction was skepticism – why should we believe a new guy in this struggling company when he says we could work less and make more money. I told him the mostly Amish work force in Elkhart was making $33-$35k a year. They didn’t believe that, either.
I just started posting the numbers every week – how many units we built, total sales, 10% bonus target. For the first several months the labor we paid them including overtime was over the bonus target, so no bonus.
One day, about six months into the process, the welders came into my office and asked if they had to work Friday and Saturday. I said no, as long as their work was done for the week. They said they could get side jobs welding that paid as much or better than they make here. So, the 7-8 people in the weld shop stopped working Fridays and Saturdays.
The bonus didn’t pay, but the numbers I posted each week looked better. Not long after, the plywood guys were in my office asking the same thing. They stopped working Fridays and Saturdays as well. The weld and plywood shops were the first two stages of bus production, so as long as they worked ahead enough, it didn’t affect the rest of the plant who was still working Fridays and Saturdays.
Before long, three or four groups started taking three day weekends, then the plant payroll got low enough that the bonus started paying. Not a lot at first, maybe $30-50 a week, but something. Soon after, half the plant was leaving Thursday night and the other half was working Fridays and Saturdays, and civil war broke out in the plant. Those groups who were going home early were convinced that the others were sandbagging, and that if everyone would go home early, the bonuses would be much bigger.
Before long, no one was working Fridays or Saturdays. The bonuses were closer to $200 a week. People were happier.
Next, we needed to increase production from 20 to 25 buses a week. We asked the production people how many more people they needed. They asked who got the money if they didn’t add any more people – I said they did. This cycle continued, and they didn’t add any additional people until we were doing close to 30 units a week. The bonuses got big. The time off was cherished. The morale and dignity of the workforce was increased dramatically. Since many of us lived in the small town of Minneapolis, Kansas, I enjoyed getting the see workers’ kids getting new bikes. Or a little better car. Or a new truck. The company grew quickly, aided by a dedicated and motivated workforce.
In December, 2004, I was promoted to President of Champion Bus in Imlay City, Michigan. I tried to implement the same or similar plan. I failed for four years. During this time, I had grown the sales and complexity of the company, so I had a real problem in production.
I told the production managers to give me the worst area of the plant, and I would go see what I could do. They sent me to Interior Rears, where thirteen people were failing daily to put the interior panels on the inside of the rear of buses in time to meet production. Workers on both ends of the plant were angry and waiting on them. I worked with Fred Jacklett, the lead person in the area for a few days, watching people work, talking to them, and trying to figure out what their problems were. The first day, I watched a young man try to cut a piece of hard plastic with a pair of tin snips to cover the hoses running up the corners of the back of the bus. He spent hours, and was really frustrated. After a couple of days, I asked Fred if we had any flexible material that looked okay. He found some. I asked if we had a couple of pieces of J-rail. “For crying out loud,” he said, and grabbed the J-rail, quickly screwed one piece up the side of each corner, and bent the flexible material to fit inside the J-rail. Problem solved, in about five minutes.
Fred and I watched his workers for the next couple of weeks, performing the 10-15 tasks it takes to finish the interior rear of a bus, each time helping the workers find a simpler, quicker way to do it. Within three weeks, there were six people instead of thirteen, and they were no longer holding up production. We introduced a bonus plan, and soon they were all making an additional $4-5 an hour and no longer working overtime.
We repeated this process thirteen more times in all the areas of the plant over the next few months. Turnover disappeared, pay went up, people were much happier, the company grew quickly.
In my career, I’ve done this 4-5 times at various locations. Each time, it’s been an extremely rewarding experience. I’m often asked why it works. I believe it’s because if you give people the respect to have some control over their own destinies, in pursuit of a clear and common goal, great things will happen.
I feel like I’ve had the opportunity to improve the lives of some folks who really deserved it, and it’s been fun.
