Increasing Your Bottom Line By Empowering Employees
When meeting with other growers and retailers, I often get the opportunity to discuss ideas about labor management and compare notes and philosophies on how to get the most out of our number-one expense and number-one asset — our employees. I am fascinated to hear the different methods that are used and their results, whether they are positive or negative.
At some point, every conversation leads to the question, “How much do you pay your people?” I often enjoy shocking others by replying, “We like to let the employees decide what they earn.” This is typically greeted with looks of disbelief and probably thoughts of “What union did this guy come from?”
I try not to let them wonder too long by jumping right in and beginning a dialogue about knowing input costs associated with labor. I am always curious to see how many other growers tackle this. Almost everyone’s answer is, “We have a pretty good idea of what our input costs are.” Then after a pause, the answer will usually transform into “We have someone working on figuring out our input costs for us.”
One of the ideals that has contributed significantly to our success is not only understanding our input costs including labor, but also making sure this knowledge is shared throughout all levels of the company as a means of empowering our employees. Almost every labor study that I have ever read cites employee empowerment and knowledge as the most important factors to overall employee success This has become one of the definitive tools for motivating and empowering our staff. Here are some of the methods we have incorporated into our business.
Being a young plant supplier, the work we do is very detailed and involves a sizeable workforce. We have 130 year-round employees and peak out around 300 late winter/early spring. Our production staff makes up approximately 65 percent of that number (80 and 200 respectively). Much of our production is done in similar fashion to factories by using up to six automated production lines for sticking and transplanting in addition to shipping product via two automated packing lines.
Applying the empowerment principal to general labor consists of making as many of the jobs’ pay based on output as possible. This is done by paying piecework bonuses in addition to the base wage of each employee. We use a computerized system of time and labor tracking, which involves employees scanning their time badges into one of several created job codes such as “sticking” or “transplanting” then matching it to a cost center where the cost will be attributed. These created cost centers consist of plant generas, finished plant containers or department general overheads. This may sound somewhat complicated, but for the employee, it is just a matter of scanning two color-coded barcodes followed by their badge at one of nine different time clock terminals throughout our two facilities. Our supervisors also can facilitate this for employees using PDAs. Everything from harvesting to producing to moving to shipping product all pay bonuses based on quantity completed.
Units produced are credited to employees by means of the barcode labels of the employee’s badge number that are affixed to the production units, or total counts of units completed for teams of employees in the case of team jobs like moving and shipping that are posted into our computer database. These are followed by strict quality control measures performed by our supervision staff so employees do not sacrifice quality for quantity. Consequences for less than acceptable quantity will result in the units being discredited to the employee or team output totals.
Each week, all of the time recorded on our time clocks is imported into our production database containing the numbers recorded to produce the employee bonus amounts for payroll. Understanding our input costs helps us set the bonus rates. When employees produce more, their inputs per unit decrease. Paying an incentive bonus should continue to increase output enough to offset extra input cost and keep the cost per unit decreasing. Paying too much bonus can offset this; therefore, it is important to have a formula set up to calculate the bonuses. This may sound like an extensive process just to track how many flats are stuck or how many trays shipped. And yes, we have extra personnel involved in working and maintaining the system. There also are considerable costs for both the hardware and software involved and the initial time associated with getting the system up and running.
We have a very motivated staff that understands the cost of their own labor when producing our products. Employees understand they can be in charge of how much they make based on their productivity.
Employee evaluations are quantitative, based on employee analysis reports that show each employee’s cost per units produced and compares it to the rest of the production crew. This simplifies evaluations and pay increases in addition to keeping them consistent throughout the staff.
It is a great tool for soliciting top-notch employees. Instead of running ads or putting out the search for labor, we generally are overrun with people who have heard that the environment in our company is: “The harder I work, the more I can make.”
We have the ability to set minimum requirements that filter out employees who are not able to produce within a specific time frame. Expectations are specific and supervisors do not have to let poor performance drag out for long periods.
All of the productivity that is recorded and costs associated enable departments to more accurately forecast future labor needs and more accurately weigh out the costs of automation.
When giving tours of our facility and talking to customers, almost everyone is impressed by the labor tracking system and its usefulness. But after seeing our system, the majority of what I have heard is, “We just cannot afford to pay our employees bonuses for their work.” My reply is, “We cannot afford to NOT pay out bonuses!”
By looking at our organizational chart, many people might say we are “top heavy.” We have managers for all of our departments along with managers in charge of each product line. All managers have the added responsibility of having assigned budgets for their departments or areas of responsibility. Although considered a basic concept for most businesses, many in the greenhouse industry do not use department budgets. Having this in place has allowed our managers to be completely integrated into understanding our bottom line. Although the accountability for each of the budgets is extremely high and requires extra work from each manager, the reward comes by way of a yearly manager team bonus that is based on various measured elements that make up the overall company profit. When the company succeeds the team succeeds and vice versa.
It has been amazing to watch managers work together to tackle various input costs and look at streamlining our processes. By doing this they know it will have a direct impact on their earnings in direct proportion to the company’s success. As a company we need this because we have come to know that the bigger we get, the more decisions have to involve more than just myself and the owners as we cannot possibly have all the information that is needed to make critical business decisions.
For All Employees
In addition to the bonus incentives offered around our production and shipping departments, we also have an attendance incentive for our employees. All hourly and salaried employees receive a quarterly bonus based on a percentage of their gross pay for that quarter. When I first started with the company, I had a hard time understanding why people would get a bonus for showing up to work. It did not take long for me to figure out the value behind doing this. Once again, it is an opportunity for employees to be empowered by being in charge of a portion of their earnings. They can get firsthand knowledge of the effects of absenteeism on company profitability by seeing it affect their own personal profitability.
Through these various methods, Four Star has managed to keep all of its employees tied into understanding how the business succeeds. At the same time, we have been able to empower each employee to have personal success along with the company. The model is working well and as we continue to grow we strive to find even more ways in which we can all experience success together.