Home > Ownership Culture > Articles > Growing an Ownership Culture >

Understanding Your Critical Numbers

Cathy Ivancic

July 1996

"If we can streamline the process, we'll make more money in the long run." That's how Randy Dessner sees his part in improving the performance of his company. As an employee owner at Foldcraft Company, a manufacturer of seating in Kenyon, Minnesota, he understands how his critical numbers are connected to company performance.

Do You Know How You Can Improve Company Performance?

Randy, who works in the laminating department at Foldcraft, can answer that question in the blink of an eye. "We want to get the Dura-edge panel through the shop in four days," he explains. "If we can do that, then we limit the amount of overtime and get the product to the customer on time." The Dura-edge is a laminated panel that has been getting delayed as it moves through the shop.

A committee in Randy's department is charged with initiating the effort to move the Dura-edge more quickly through the shop. Like other committees at Foldcraft, the committee meets regularly for half-hour meetings twice a week to work on their problem. Randy's committee is in charge of defining the problem and moving the process forward.

However, that does not mean that the laminating department is responsible for the ultimate solution. In last week's meeting, the committee brought in some people from the next department. The group found that these panels had been regularly set aside until they had several to run at one time. The Dura-edge needs to move because it takes more processing than other panels. "Now," Randy explains,"they see that they've got to jump on them right away to get them out in four days."

Why Do They Care Whether It Goes Out in Four Days?

"Sure, some people still don't care or get mad when we try to do things differently. But we've got the responsibility of explaining to them that it (the reward) is there for the taking. All we have to do is make it happen," says Randy. The reward--at Foldcraft--comes in several forms. First, all employees share in the reward of increased value in their ESOP stock. Second, the firm has a bonus that is equal to 4% of the individual employee's annual income. Third, there is an additional gains bonus of 4% more which kicks in if the company as a whole can meet its plan for improvements. That means that if they can meet their improvements, everyone can double their bonus.

Randy and his co-workers know that they have a direct effect on the gains part of the bonus formula. When they move the Dura-edge to four days in the shop, they reduce overtime hours. Before moving to this "open-book" process, people did not know how overtime affected their company. Some employees were working as much as 60 hours a week. Now employees are trying to keep it to a 40-hour work week. The goal for the plant is to have 5% or less overtime across the board. Cutting overtime hours helps move everyone a little closer to getting the added part of the bonus and helps get the product to the customer on time.

How Do People Know Whether They Are on Target?

The "four days" target enables employees to watch a "critical number" on a daily basis. Weekly, they work on their specific problems in committee to improve the number. Once a month, there is a company meeting where they get the overall results compared to the plan. Here, people see how their work has affected the company's performance and ultimately their pocketbooks. That's where employee owners find out whether they are "making it or not making it."

Being part of an employee-owned company can bring employees together to work toward common goals. Sometimes the biggest problem is employees who don't understand what they can do to reach the common goals. When employees understand how their own performance numbers--critical numbers--connect to company performance, they can then use their creativity to improve the process.

When asked about the next steps for the Dura-edge committee, Randy Dessner replied, "Get it to three days!"

Cathy Ivancic is a consultant and co-owner at Workplace Development Inc. Since 1985, she has helped more than 100 ESOP companies enhance ESOP communications and develop an ownership culture. She is active in national organizations that promote shared ownership and has served on the NCEO's board of directors and as an officer of the Ohio chapter of the ESOP Association.She can be reached at civancic@workplacedevelopment.com.

Firm description and list of other columns in this series

^^Top of Page