ECONOMIC VERSUS NONECONOMIC OPTIONS

Can You Motivate Your Workers?

A well-designed gainsharing plan will produce improvements in productivity and costs-of-quality of 17 percent to 22 percent annually.
By Woodniff Imberman, President
Imberman and DeForest, Inc.
SURVEY OF 427 MIDWESTERN COMPANIES WHAT TXEY ARE DOING TO MOTIVATE THEIR EMPLOYEES; PERCEIVED EFFECTTVENESS

ix years ago. Official Board Markets published our survey ("Are Low Profits Boxing You In?") of 427 Midwestern manufacturers (including 39 comigated box makers) in tlic five Great Lakes states of Illinois., Ohio, Michigan, Indiana, and Wisconsin. The report re\iewed six key reasons why some box makers were more profitable tlian others and what the less profitable ones could do to impro\'e dieir bottom lines. One ofdie key reasons tor low profitability among the 39 box makers was their inability to motivate their employees effectively. We revisited those 427 manufacturers recently, asking

PERCENT OF COMPANIES USING THIS METHOD PERCENT OF COMPANIES P6RCE[ViNG IT 3 EFFECTIVE

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preciseiy what efforts they were making to motivate their employees, which ones they found effective, and which ones were not (see accompanying table). The bottom line: While many independent box making executives understand the importance of motivating tlieir employees, others admit their efforts are not particularly effective. The result, tliey say, is often high turnover, less than sterling productivity, and occasional labor unrest.
Why Motivate Workers?-

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Most ot the executives we interviewed wanted better ways to motivate their workers. When I asked, "Motivate them fbr what?," I often received a vague answer: to work harder. Since people costs are about 65 percent of the typical box maker's operation, anytliing tliat can be done to get that 65 percent to use their brains for more productivity is critical for the converter's success. But how? Employee motivation techniques can be divided into two rough categories: noneconomic and economic. Behavioral scientists and personnel specialists have long argued about which is more effective, often without asking workers what they emselves felt. Hedging their bets, most executives now try both categories.
Noneconomic Motivators--

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Noneconomic techniques for motivating workers include practices like service award lunches, recognition symbols (Tshirts, hats with company logos), preferred parking places, good attendance awards, and catalog gift items for workers achieving tliis milestone or that. While noneconomic methods do build team spirit and provide workers with a sense that management cares, the survey indicated most box makers felt these efforts were of
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January 5. 2008 Official Board Markets

questionable effectiveness. There were iwo reasons wliy. First, in our permissive society, such tokens are now eoiisidered entitlements. Workers expeet them as their due and resent their absence. As such, these endtletiients pro\'ide little positive motivation. Beeause of" worker expectations, once started, these entitlements endure with a permanence matched only by governmem subsidies. Second, since entitlements are expected, employees now expect extra rewards for any "extra" efforts they cxeit lor extra productivity. Usually they are looking for something in their wallets. How do you provide that economic "extra" without having it turn into just .\nother entitlement? Most executives expect rewards tor their performance in the form of yearend boiiLises for better profitability, or higher earnings per share, or lofty stock prices, etc. Their payoffs come ill .1 mind boggling variet)' of forms -stock options and use of company jets in public corporations, phantom stock in pri\ate ones, and company cars with i;olden handshakes and parachutes all around. Some of tliese efforts are so, uli, iiuiovative that the Securities and Hxchange Commission has "nominated" some schemes for an "Enron Creative Accounting Award," which a Federal judge iiiighi give a desening recipient, along with 10 years in Leavenworth.

first line supervisors (up from the ranks with no training). But a mere handRil oi' blue collar workers have horizons long enough to equate what they d<i today with a year-end bonus, tt) say nothing of a 401(k) paid out 20 yearsfromnow on retirement. Sure, rarely does an employee at any level refuse a year-end bonus - it's free money. But when asked, few can tell you

why they received the amount they did, nor can they answer what specifically they have done to eam it. Effective MotivatorsEffective economic motivators are transparent, easy to understand, and short term - they match the horizons t)f the workers whose behavior they are Continued on pa^e 8

Executives realize their employees want to eam a buck and will respond if given the chance.
Many of these same executives have coiicluded what is good for the goose ts good for the gander, and have extended simpler programs downwards. Like them., they realize their employees want to earn a buck and will respond if given ihe ehanee. Profit sharing plans are common. So are discretionar\' year end bonuses. Unf(rtunately, the latter are often based on ill-detined or illusionar\' criteria. Are they ertective? Perhaps they are for a majority of mid-managers and a minoritj' of
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"So I'm talkin' to my box guy the other day and he says to me, 'I can do high quality, four-color graphics.' Then he says, 'Not only that, I can do it in one pass!' And then... get this... he says, 'Right On the board! Not a label.'

So I tell him, 'You got a customer!'"

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Official Board Markets Januaiy 5. 2008

Continued from pa^e 7

designed to affeet. Today, astute box making executives tell me that pay-for-perform a nee programs with short term reward horizons, like gainsharing, are the most effcetive ones. Today's gainsharing plaiis reward group effort and cooperation with management to achieve company goals of higher peiformance, t)'pically defined as quality, productivity, and safety, all of" which are under employee control. Their improved performance is quantified and given a dollar value, which is shared (hence the name) 50/50 with staffers. Thus, for every dollar paid out in employee bonuses, the company saves a like amount through higher productivity (more sq ft of boxes, adjusted for size and type, printed per hour worked mean lower per unit costs), better qualit\' (less waste at the BHS comigator means lower material costs), and better safc'ty (lower worker's comp premiums).

The bonuses earned by employees have to be earned and re-earned each gainsharing period, t\'pically monthly. Their short-term nature effectively ends any employee thought that the bonuses are entitlements. Sadly, many managers think workers will rise like cats to catnip in an effort to earn a gainshare bonus. Since the literature on gainsharing is widespread, many of these do-it-yourselfers try designing a plan themselves. Although there is also widespread literature on heart bypass surgery, few try tliat on In recent years, the printing and packaging industry has themselves, book in one hand and scalpel in the other. been swept up in the euplioria surrounding all things RFID. A well-designed gainsharing plan will produce improve- Now, the mood may be gradually becoming more subdued. ments in productivity and costs-of-qualit>' of 17 percent to 22 The first setbacks occurred in the U.S. and Germany wliere percent annually. Good ones incorporate a combination of data protection officers complained of customers being turned noneconomic and economic motivational tools. Employees into open books. A second criticism is undoubtedly to be respond to gainsharing's economic motivation - the oppor- found in the fact that cost-effective labels are neither within tunity fbr extra earnings. Just as important, they also respond reach nor market-ready. So experts have a far more sober out positively to communications: when they realize they are being look on this debate. The move to RFID labels could end up listened to, when their ideas arc co-opted, and when they are being used exclusively in manufacturers' and traders'" logistics told how their ideas are making an important contribution to chains. their employer. Data handling is pla\ang an increasingly important role, hi the form of labels and barcodes, the printing and packaging Today, packaging imports are growing fast. Surviving doindustry are provided with large quantities of customer data. mestic box makers now struggle with excess capacity, fighting This data and ultimately the print data are being put to use amongst themselves for the market that still exists - niches emin a variety of ways, ranging fi-om security' codes to what you phasizing noncommodity, short-run, quick nirn-.iround jobs. could call gimmicks. Only those box makers working to motivate their employees to work smarter will succeed.OBM As a general rule, security printing aims to provide protection against counterfeiting. The damage to goods (tliat safety' Imberman, president of Imberman and DeForest, Inc., measures on packaging are intended to prevent) runs into management consultants, Evanston, III., has written numerous articles in OBM on employee productivity, supen'isory training}, billions of dollars. Help is at hand in the form of a wide paland gainsharing. For his previous OBM articles or further in- ette of options extending from holograms to security thread. From among this wealth of possibilities, color ccxies and color formation, contact him at IMBandDEF@aol.com. combinations stand out, thanks to the millions of possible PACKAGE PRINTERS DELIGHT variations. Here in the U.S., expensive branded goods are advertised in dedicated combined marketing campaigns. To this end, the hi the Rill-up to drupa 2008, die world's printing and finisliiiig packaging finisher creates die printed product. A transparent experts agree that there are two major trends at workhighly film can be peeled off the product and positioned in front finished packaging materials and packaging as well as security of a specific area of the PC screen to try and solve an online printing. The print media fair (May 29 to June 11) promises puzzle. What's particularly attractive is that die branded goods to offer everything packaging designers' and printing service manufacturer, with the help of the packaging printer and the necessary print data/winning codes, can also run off" the cusproviders' hearts desire. The European packaging printers and finishers are pulling tomer mailings.OBM

out the stops. Gold and silver dominate, but other metallic efiects also catch the eye. Varnish, UV varnish, matt and gloss varnish, foil stamping, cold foil, rapid-drying inksall of these are finishing effects intended to entice customers into purchasing at the point of sale. Sheetfed offset packaging printing is regarded as the nio.st highly industrialized of the individual segments. The range of printable substrates is broad and covers corrugated board and boxboard in every imaginable thickness. With processing speeds of up to 18,000 sheets per hour, the setup measures are about to undergo furdier automation, resulting m increased cost effectiveness. Among the highly active packaging printers and designers, security experts are some of the hardest working. A search for the keyword RFID alone turns up patents, conferences, products, and articles. Many printing sen'ice providers have been relatively quick to establish their own companies that focus exclusively on the high tech field of security. Even within this narrow field, there are a host of diverse sub-sectors: RFID with special machinery' for producing the substrates and transponder labels, not to mention holograms of every variety, diffraction foils, lenticular effects, and other technologies.

Drupa Will Have Plenty to Offer

January 5, 2008 Official Board Markets

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