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Freedom Beats China by Accident

September 27, 2009 By Dee Gardner Leave a Comment

Another anecdotal story about Owner thinking.

Running around, like chickens sans a head, two partners had started a company. They were spending 12-14 hours a day just to get a few orders out the door. They had a bunch of employees and One employee did nothing but try and keep track of the orders. And they were just barley scraping by making about $20,000 a month. If a customer had a problem, they didn’t get help and became a lost customer.

Step in the web guy/ savior / accidental implementer of Owner Thinking. The partners originally contacted him for just a little help with some simple functionality for customers to be able to submit requests for work to their website.

The Web Designer/programmer also did another thing that most technical people don’t do. He went to the company and worked in their facility for a few days to see what their processes were.
He presented them with a plan to be create a work flow system using the web. It took a couple of months but he built a system that would receive the request for an order. and then track it through the production process. He also created a queue to handle problems.
All of the production was done on a computer. A customer, from any where in the world, would send a picture that the to company to convert into a program that would be used by embroidery machines to stitch the picture onto fabric.

The second key to success and was the owners had been paying the employees per design to produce the artwork. This is a key to getting the employees to think like owners.
The employees realized the more work they did the more money they made. They also realized if the design came back, because of quality issues, they would have to fix it for free. Because of this they did things right the first time. They were thinking and acting just like the owner would. This coupled with the new work flow system ignited a firestorm of new business.

In just 6 short months they had gone from $20,000 a month to over $90,000. The owners were no long involved in the production and could focus on promoting their business. They had also reduced the amount of production employees by more than half. I think it was from 10 people to 4 people.

One of the other effects was that this company started being able to compete with China for orders. They were doing the work faster, better and at less of a cost to the customer.

How can this be? Because the employees were free to think like owners.

You pay an employee an hourly wage or a salary to create a slave. You give a person the freedom to create, innovate and control their own destiny you create a loyal patriot. A patriot that will work extremely hard for that freedom.

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Working less makes you more money

September 4, 2009 By Dee Gardner Leave a Comment

Results of their study were in and they couldn’t believe what they found.

My cousin is one of the owners for a company that copies legal documents.

They were looking for ways to try and make more profit. One of the ways was to figure out how much work their employees were doing and maybe get them to do some more work. They had been keeping track of who was doing what jobs and so they started researching what every employee did.

The were a little surprised by what they found.
The oldest, more loyal employee was doing the least amount of work. I was talking to my cousin and explained to him she had been there the longest and had figured out better than anyone how to look like a good employee without doing more work. He agreed.

It’s been a year since I had the conversation and so I gave him a call to see what had happened. He said that employee no longer worked there and he had a great crew now. They are being more productive. He believes some of the younger workers only work hard for a couple of years and start to slack off. He said his crew was a little more mature and he thinks they are working harder.

This also brings up a good point. Most of the time pay-for-performance isn’t something managers never understand. They all are thinking things are running smoothly and the company is profitable. Why do I need to fix something that isn’t broken.

And most people will go on with their lives.

This is the question are you willing to do what it takes to make the change?

I know I can help my cousin’s business $100,000 more in profit every year. Oh well his loss.

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Blood dripping from the knife

August 31, 2009 By Dee Gardner 1 Comment

With blood Dripping from the knife in his hand, and looking at the lifeless body on the table. The man came to a sad realization there were not going to be any more golden eggs.

Too often managers, like the man with the knife, kill the goose laying the golden eggs before they realize their greed.

Working in South Carolina I had an office that was running pretty smooth. There were about 35 employees and things were going pretty good. We even had the prospect of more work getting shipped our way. We had three Kodak high speed document scanners. They could scan, according to kodak, 120 pages a minute. In a perfect world maybe, but in truth we could only average about half that speed. Even with averaging half the speed the person scanning could make about $12 dollars an hour in the pay-per-performance strategy we had setup. It was okay but some of the people that were preparing the documents for scanning were making more more money. I believed it was a bit unfair to the scan operator because they were limited by the speed of the machine.
Kirk Kirpatrick, an other manager in the office, who was older and wiser than me had identified them as the bottle neck in our operation. He determined we needed to do everything we could to keep those running. This made me aware I needed my best most reliable people running those machines. I didn’t realize it at the time but I needed a way to make that the best job in the office.

Then it happened, one of the scan operators came in and told me he was quitting, he was working two jobs and he just wasn’t getting enough sleep. After he left the office, before it really hit me the impact it was going to have, the other two operators, Jim and Brad came in and wanted to talk. They told me they didn’t want me to hire a new scan operator. They figured they could run two machines at once. I was skeptical but I was willing to give it a try. I found out they knew he was going to quit, and may have even encouraged it.

What they realized was that if they could share the other scanner they could effectively get a 50% increase in pay up to $18 dollars an hour. This helped me solve two problems: First, I didn’t have to hire a new employee and. Second, this made the scanner operator job one of the highest paying in the office.

Jim and Brad also knew we were getting more work and another scanner in a couple of months and the would effectively get another raise to $24 dollars an hour where both of them could run two scanners all the time.

Another huge issue for site was deadlines. We were recieving about 75,000 documents a day and we had about a 7 hour window to get all those scanned. if you do the math average 60 documents per minute, per scanner you can get about 3600 an hour times 7 hours is 25200 per scanner times 3 scanners is 75600 documents scanned per day. we really didn’t have much time to spare.

Having Brad and Jim use two scanners had a few unforeseen positive effects. First, because Jim and Brad needed all the document counts of the bundles to be perfect to make the most amount of money, they quickly identified people that were counting poorly. I realized the more work that had to be rescanned because of poor counting decreased our efficiency and put us in greater jeopardy of missing our deadlines. So I realized that our counting accuracy needed to be watched like a hawk. We put rules in place for counting quality.
So as a result of focusing on the quality our office had the best record for not missing deadlines.
Because of our efficiency we were able to have the people start later in the morning. We originally began work at 3:00 AM. Because of our efficiency we soon moved the start time to 4:00 AM. Eventually when we got the fourth scanner we were able to push the start time back to 5:00 AM, even though our work load had increased to 125,000 documents a day.

We had discovered our golden goose and it was giving us a golden eggs pretty consistently. We had changed the thinking of the employees and now they were thinking and acting like owners. The scan operators were now consistently making $24 dollars an hour.

One day I got a call from boss with a concern. He said “I see you have a couple of guys that are making close to $25 dollars an hour.” “So What?” I asked. He said one of the most ridiculous things I have ever heard. “We can’t have employee making that kind of money.” He asked how they were doing it. I explained they were using two scanners instead of just one. He said “we need to make a new rate so if people start using two scanners the get a different rate.”

Knowing what had gotten us to this point I was angry with the greed I was hearing. My boss was standing there with his knife greedily ready to cut open the golden goose looking for more gold. Luckily for me I said to him “So we are going to punish our best people for having a good idea and working hard?” You paying the same thing you are paying everywhere else but getting better results. He realized what he was doing and put away the knife. I convinced the managers in other offices to follow my lead to do the same thing with two scanners per operator. Efficiency and quality increased through out the company.

I have several other stories that do not end so well. I had a friend who was working as a consultant for a small firm. The firm had setup a bonus structure so that consultants made more money by being efficient, working hard and making sure their clients were happy. Many of the top consultants quickly figured this out quickly and started working very hard. Many of them were making close to $200,000 a year. As a result of thinking like owners the company as a whole was out performing it’s competition. This attracted the attention of a larger company and they wanted to gain some of gold that this company was producing. So they acquired the smaller consulting firm. The first thing they did was changed all the compensation packages and took away the bonuses and incentives that motivated the consultants to think like owner. They had basically gotten out there knives and when hunting for gold. All the top performing most intelligent consultants stopped producing the gold. The immediately started looking for better opportunities, and with the reputation of their former company, there were all able to get jobs at other firms quickly. Within one year all the top consultants had left the company. The bigger firm’s management was probably standing around, holding their blood stained knives, wondering what happened to all the golden eggs, probably thinking that smaller company pulled a fast one.

Another story was a construction company Las Vegas Nevada, during the housing bubble of the mid nineties. One of the tasks they needed done was trash hauled away from sites. They were paying drivers by the load. However, they were getting behind and were looking for better ways to get the job done. They gave the drivers an insentive. They would pay them more if they filed a trailer and towed that behind their truck. The trailers held the same amount of stuff as the dump truck. One of the drivers caught the vision and started thinking like an owner. He had to work harder, but he figured out ways to be more efficient and pretty soon he was making lots more than any other driver. He was also moving more trash than any other driver. The company he was working for got out their knife looking for more gold. They changed the way they were paying the double drivers. The really efficient driver realize he was now getting penalized for doing all that extra work and stopped doing the extra work to load the trailer. They had killed their golden goose.

I am always looking for more stories like this. I have heard this is a common occurrence in sales departments. If you have a story like this. I look forward to hearing your story.

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You Ain't Play'n With My Money

August 25, 2009 By Dee Gardner 2 Comments

That’s what she said as she walked out the door. Never to return! She was one of the three that quit that first night.

We were already having trouble getting the work done every day. How were we going to get the work done? Deadlines were a joke. We were missing deadlines by 4 or 5 hours everyday and I was Getting to the office at 3AM was tough enough, but having to work 12 hours a day 6 days a week.

“Maybe this isn’t the best idea, ” I remember thinking.

it was December 1st 1996, in Philadelphia Pennsylvainia. I was asked to take over management the data entry side of an office run by Unibase Data Entry (later to be bought by Affiliated computer services). Unibase had a contract that helped a multinational package company key in bililng information of hand written air shipping documents. We were doing the final QC check before submitting the information back to the company.

I had arrived in the office to work with a very young manager who was 19 years old. She had been there over 6 months and things were just getting worse. The shift started around midnight. and should have been done by 8 or 9 in the morning. Even though the deadline was at 10am. All of the employees were paid about $8 an hour. The first thing I did when I arrived was call HR and have them put an ad in the local paper to let people know we were hiring. I also tried changing a schedules. I wanted to have the people come in at 2AM or 3AM. But with the metro trains in philly not running from midnight until 6AM only some of the employees could change their schedules.

One of the problems I also discovered was this was a second job for many and they had to leave between 8 and 9 to get to their other jobs. Some had children they had to get to get ready for school. So between 8 and 9 everyday I was losing most of my work force. I hired as many people as I could. I had been managing Data entry for a year now and luckly I was not tempted to hire people who could not pass the keying test that required you pass with 12,000 keystrokes per hour minimum. We got a few people hired and we were between 25 to 30 employees after two weeks.

I realized something more needed to be done and I knew what it was. Unibase had a long policy of pay-for-performance with data entry. I had used it on a couple small jobs in the previous year with great results. But it had only been a few keyers at a time. and never this consistent volume of work. We were processing between 40 to 50 thousand records each day. All of it had to be done. None could be held over to the next day. I always wanted to do that. However, because of the way the system worked it wasn’t worth trying to hold over work.

after two weeks of 12 hours a day the other manage left and I could concentrate on transitioning to pay-for-performance. I first talked to my boss. He was managing 15 other sites all doing the same thing. He was worried it would not work out and I would burn. He basically told me I was going down with the ship if this didn’t work. I needed some tracking software developed and he was willing do get that approved and written.
The first thing I set about doing was setting a rate for each document processed. I brought in Treats held contests to see who could get the most done in an hour. the documents were in bundles of 50. The most bundles anyone did during the contest hours was 22. 1100 documents an hour. That was fast. at that speed I should only need 50 man hours a night I was burning 150 to 200 man hours a night. It was costing me about $32,000 a month for payroll my salary included.
I think most of the employees knew something was going on and only did 11 to 12 batches an hour during the races. The reality was each employee was doing 200 to 250 an hour.

I needed to set a rate to figure out what neede to be done. I asked my boss what we could afford. He said we can pay them $.01 per document. One penny doesn’t sound like much. Remember everything counts in large amounts check out my story about gluing rocks. At the fast speed one person had shown me she would be making 11 dollars an hour. Which was fine by me. However, I’d worked with pricing a couple of other jobs, and from my own pay-for-performance experience, I knew people would get faster. I thought we should set the rate at $.005 or half a penny for the rate.

One of the rules never to be broken with motivational pay is you can never lower a rate. unless you are willing to replace your whole work force.

I wanted to get it in place by November 1st but not all the programming was done. But as things worked out it started officially December 1st. I did not do a very good job of explaining to the employees how this could benefit them. I heard a lot of “how can I make any money when I am only getting half a cent.”
Not having done work for a shipping company before I was not prepared for the increase in volume right before Christmas. It was not the best time to start a new program. The volume of work the two weeks before Christmas basically doubled.
I was constantly trying to hire new people, But wasn’t having much luck. But we were getting our work done everyday. I was still working 12 hours everyday all the way through Christmas and into the new year.

First week of the new year when our volume dipped a little. I noticed we were finally getting close to finishing all of our work by the 10 am deadline. By the end of January thing were running so smoothly most of the work was completed. by 8 am and only me and a couple of supervisors were there at 10am to clean up the work for the day. We were now down to 12 people working and most of them were not working 8 full hours.

I finally got the financial reports in the second week of February. I was amazed at what I saw. The payroll expense had dropped from $32,000 in November to just $16,000 in January. And in January we had more days and actually did about 10% more work. about 90,000 documents. This was a huge success. They rolled out the program to 15 other offices. I did get a promotion and they doubled my pay. The funny think I didn’t realize until after I left the company and I started figuring out how much profit I made them. With on the conservative side, It was over $1,000,000 that’s right a million dollars of profit a year. That savings went on every year for 8 years before the contract changed.

Philadelphia was one of the 4 big offices. and there were 4 reall small offices. But there were 15 offices. Lets just make the assumption they made on average an exta $9000 dollars a month extra profit X 15 offices is $105,000 a month x 12 is $1,260,000 a year.

At first the quality actually got better. However over time people started getting sloppy because they were going too fast. So a grading system was also implemented. A B C. Every thing they got paid was based on a grade. People with A grades got paid higher on every bit of work they did. B grades got them paid less. And if they were at the C grade for over two pay periods they were warned and if after two more pay periods they had not improved their grade they were terminated.

Another problem that Unibase/ACS never addressed the issue of competition between the employees. The competition between the employees with this type of Pay-for-Performance encourages employees to horde work so they get what they want. The problem is if some hoards too much work and the others leave and deadlines get missed. Or on days were there isn’t enough work to go around someone gets more than their fair share.

This same type of behavior was prevalent in the peach canning industry in California from 1910 to 1949. This was encompassed in a report done by Harvard that I read and reported on in a research project. But that is for another day.

Please leave your comments and let me know what you think.

Filed Under: Featured Posts, Innovation, Owner Thinking Tagged With: , , ,

My first experience with Pay for Performance

August 22, 2009 By Dee Gardner Leave a Comment

I want to show in this story that thinking like an owner helps people to work harder and think like an owner.

When I was about 14 I wanted to start making my own money and looked for things to do. My brother mike and I went around the neighbor hood and asked if we could mow lawns. I picked up a couple of jobs, but but nothing significant. We also handed out a little local weekly paper. Noen of this was making much money, but it was a little something.

About the time I was 15 a local guy hired me to work on Saturdays. He paid me minimum wage a the time witch was 3.15 an hour or something like that. Sometimes it was hard work, but most of the time I just had to look busy, because there wasn’t enough work to do. He picked me up and dropped me off. So I couldn’t just leave when the work was finished. I really hated the job, because I spent a lot of time wishing I was at home sleeping.

A couple of months before my 16th birthday I talked to one of my friends who was cleaning a butcher shop in a local grocery store. He was ready to take a new job. He wondered if I was interested in a job. It sounded good to me they were paying $6 an hour. And it only took one and half hours a day 6 days a week $54 dollars a week. The coolest thing about this job was they would pay me the $9 no matter how much time it took to do the job. If I hustled I could get done in an hour. So while the rest of my friends were working for minimum wage. I was making $9 an hour. The store didn’t make me clock-in so my start time was flexible. The other deal was that if I wanted a day off I had to find and train a replacement. I don’t think they realized it but the were making me think like an owner. I work this job for two and a half years. There was only one time durning that 2.5 years that I wanted to take a night off and I couldn’t.

It was a great job I learned how to work hard. I learned that having control over the situation made life more bearable. It also created a desire to have this type of flexibility in all jobs. I didn’t even realize I was owner thinking until later on in life when I looked back on the situation.

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