How to Think Like an Owner and Drive Shop Success
Many moldmakers today call work their home away from home as economic conditions of late have forced many shops to downsize and therefore split more work amongst fewer employees. Imagine providing your employees with a workplace full of perks to make them feel at home in their second home: nap room, driving range and dog kennels. Coffee roasted and tea blended on the premises. A gym full of machines and weights. To top it all off, you open the books to your employees and split your profits amongst them.
Sound like a dream? Well, it’s time to wake up and smell the coffee—so to speak—because this open style of management actually exists and is flourishing at Yarde Metals, Inc. (Bristol, CT)—a supplier of a variety of metals like aluminum, stainless, carbon steel, brass and copper in a wide range of standard, odd, and hard-to-find sizes. According to Yarde Metals President Craig Yarde, his management with a heart management strategy was started after he realized his employees had a “very inflated” view of the company’s profits. “They thought after-tax earnings ranged between 10 and 40 percent, when in reality they were between 2 and 4 percent,” Yarde explains. “So I thought I might as well just open the books and show them.”
Forming a Team
Before Yarde moved forward with this program, he first hired a consultant, which he chose based on the consultant’s experience with converting companies to an Open Business Management (OBM) philosophy and who Yarde felt also understood his vision. With the consultant’s help, Yarde formed five teams within the company: a lead team, management team, measurement team, communication team and learning team. “We then took a cross-sectional slice of about 60 people out of the 200 employees we had at the time and placed them on these teams,” Yarde explains. “These associates were hand-picked based on several factors. Some were chosen based on their existing job responsibilities. Others were chosen for their willingness to express ideas, their ability to facilitate change and commitment to the company.”
Each of the four teams (ranging from 10 to 16 members) had two lead team members who were responsible for bringing back information from their team to the lead team, Yarde notes. The lead team would then review the information, maybe ask for more information and then ultimately vote on it. “The vote only passed when the whole team was convinced they agreed with it or could at least live with it,” Yarde explains. “It was not a ‘majority rules’ vote; it was an ‘all on board and fully committed vote.’ This allowed the lead team members to really get a sense they had a stake in what was being disseminated down. Thus, there was buy-in at the top—something necessary to make any program or change effective and successful.”
According to Yarde, the measurement team’s purpose was to analyze everyone’s jobs to determine how much they should make. “But, once we started doing that, we realized we’d be spending too much time trying to analyze every position, and certain jobs you can’t analyze,” he notes. “We struggled about how to handle that distribution of the profits. All of the teams were trying to figure out how to divide the pie. It was an interesting position to be in. Then our controller stepped in and explained that the company needed to make at least the first two percent of after-tax profits. If we didn’t do that, we wouldn’t be able to borrow all that we would need to ensure long-term success. Then, the next question was what do we do beyond the two percent? So, we struggled back and forth until it was decided that I’d rather pay everyone a higher level of salary and hourly wages and forget about commissions.
“Once we reached that decision, we did some further analysis and concluded things could get rough if we hit a recession,” Yarde continues. “So, we came up with a variable form that established everyone’s salaries, and after the company takes the first two percent, the profit sharing would be based on a sliding scale. Then the question arose of what to do with the balance, if there is anything left? How do we share that? So I came up with the idea to share that based upon our debt to equity. We had a lot of debt we had to pay off with some of that money so we didn’t become vulnerable to the upswings and downswings of the market. At that time, our debt to equity was about 3:1. For every dollar we had as an asset, we owed three dollars to the bank. So whatever was in the pool, we took one-third of it for the employees, and the two-thirds would go to pay down the debt. This compensation plan is the cornerstone to our whole organization.”
The communication team’s role was to identify weaknesses in corporate communication and remedy them through improving current methods and inventing new methods, including improvements to the company newsletter, organizing the bulletin boards and setting up a master huddle schedule for information to be disseminated down to all associates. They also were charged with communicating the critical numbers and accomplished this by setting up monitors throughout the organization that display the daily scorecard.
The members of the motivation team suggested rewards and programs that would motivate associates to get on board with the OBM Program. “The intent was for associates to be motivated by the accomplishment of reaching a goal and then knowing there is a reward for them when the goal is met,” Yarde notes. “They also worked on implementing an I–Power program that they developed that pays associates for recommending ideas that improve efficiency and save the company money—thus increasing the bottom line to be shared.”
Finally, the learning team was responsible for educating all Yarde associates on how to read the monthly financials.
Getting in the Game
Once the plan had been implemented, the company sat down for monthly department “huddles,” which allowed for a “bottoms-up/top-down” method of communication, Yarde says. And, the company produced a monthly video to be viewed in the huddle. “The videos review the critical numbers for the previous month and a creative way to communicate corporate messages, event information, etc.” Yarde states. “The huddle’s open forum offers associates the opportunity to ask questions and discuss ideas for improvement within their department or company-wide. The lead team would also filter huddle topics as a way of providing updates and answering questions filtered up from previous months. Supervisors also bring associate ideas/questions generated from their departmental huddles back to the lead team (or applicable team). Team members would sometimes visit huddles to present new programs or field questions. When ideas are generated ‘from the floor’ associates become part of the solution—which creates buy-in. Associate buy-in was—and is—essential to the success of this program.”
This buy-in has been challenging for Yarde. “Creating the trust element has been the biggest challenge,” he acknowledges. “Luckily, everyone trusts the ownership and management because it is what it is. The numbers are what they are. Everyone is on the same path, the same boat going down the river—trying to figure out how we can do things better.”
Yarde is more than pleased with the company’s management philosophy. “Obviously, the biggest benefit has been to the employees,” he affirms. “By treating everyone with respect, dignity, equality and compassion, we have really boosted morale. And there are no corporate perks, like special parking, private offices or executive lunch rooms. We have a WOW award that goes out on a quarterly basis for superior performance and community service. Those winners get the special parking and monetary compensation.
“The bar just keeps on rising with the quality of people we are bringing in,” Yarde adds. “We continue to divide the profits and we are attracting the best in the industry, which is really driving the company right now. Everyone is thinking like an owner, they have that philosophy now. They give us everything they have—they give it all. In turn, we create a great environment for them and give them dignity and respect.”
In turn, this new philosophy holds high expectations for employees. “This philosophy involves leveling your business and getting rid of the people who don’t treat you with respect,” Yarde notes. “We do have a seven to eight percent turnover. If you can’t make the grade you are gone. We don’t accept mediocrity here and pay them less; we don’t think that’s an effective way to do business. There is a lot of pressure here to continue to get better at what we are doing: quicker, faster, better (yet safer) so we can make more money. The employees who work hard don’t want someone not working as hard as they do to receive the same pay.”
Yarde recommends that anyone wishing to embrace a similar management philosophy seek professional assistance like he did. “Hire a consultant,” he urges. “There are people out there that can help you manage the process. Everyone is too busy doing their own jobs to take on that responsibility to drive this kind of change—you need someone to hold your feet to the fire to make sure it can happen. The big issue is deciding whether or not you want to share the finances the way we have. As a CEO, you deserve a return on your investment. You’ve tied all of your assets up and busted your hump—whether it’s a family company or something you started on your own. But, if you want to challenge everyone, tell everyone what you are going to take and then tell them what you are willing to share with them if they work hard enough. You should want all of your employees to think like owners.
“So, open your books,” he continues. “You have to engage the support from the people in your organization so they can work harder and faster. I think this business model will keep companies growing and more successful and foster great behavior. It is great to work with people who are engaged and enjoy going to work.”
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