Client

A domestic manufacturer with co-located distribution operation

Problem

The company had installed a gainsharing program in both the manufacturing and distribution functions of their unionized facility. While the machine-paced operations in manufacturing constrained much of the output; the shifting order profiles, product characteristics, layout differences, and multiple types of vehicles caused highly-variable improvement calculations for the teams in the distribution center. The gainsharing calculations, agreed to in advance with the union, became so wildly disparate over time that some team members earned nothing while others exceeded the maximum and ‘banked’ credit for future payouts.

Approach

The atmosphere was highly charged as management decided to ‘buy-out’ the gainsharing program and replace it with a robust and fair labor management program based on Lean process improvements, statistically valid goals, objective feedback and coaching, and a blend of individual and team pay-for-performance incentives. This decision was not easy to come by as the management sponsors of the gainsharing program, while receiving accolades for manufacturing improvements, had soured their relations with the union and were under extreme pressure from the owners.

Results

The change was difficult to overcome because the amount of assimilation the organization could absorb was near its limit. We experienced much resistance from the union stewards and weary sponsorship from operating management. Slowly, and steadily, the culture shifted to prioritize:

• Individual and team accountability
• Recognition of fair - and more important - equitable performance standards
• Investment and commitment by the company to the ongoing hard work necessary to sustain the program

The company saw both financial and organizational benefits, including:

• 17% reduction in labor costs via tighter time utilization, methods and fluid staff balancing
• Wholesale shift in attitude of the associates and union steward towards the company and management
• Normalization of equipment and layout differences
• Stronger buy-in and commitment to the new program as everyone had a stake in not only developing it, but naming it