How to boost efficiency through bonus pay

By: 
September 27, 1998

Imagine you start your work day at 6 a.m. When 2 p.m. rolls around, you aren't wrapping up your 8-hour work day--you're teeing off on the fifth hole of your favorite local golf course--and in a sense, getting paid to do it.

At Precision Plastics Inc., an injection molder based in Columbia City, IN, this scenario is reality. In an effort to help reduce Precision's high absentee and turnover rates and to create a better, more productive work environment, president/CEO Herb Tews presented the "30/40" plan to the company's board, which decided to enact the plan. Here's how it works: An employee works five 6-hour shifts per week for a 30-hour work week. Providing that the employee shows up every day and is never even 1 minute late, he or she receives a 10-hour bonus for the week. That's 40 hours' pay for 30 hours' work. Employees are productive at the machine 100 percent of the time, except for short breaks. However, if an employee misses a day of work or is late, he or she loses the 10-hour bonus.

About 150 employees in the production/manufacturing group and their foremen are under this plan at Precision's new Columbia City plant. Precision, a $30 million/year company that serves such industries as medical, electronics, and automotive with its 43 injection molding machines, plans to expand the idea to its other plant in Crawfordsville, IN if it proves to be productive and profitable.

Precision learned of this plan, which has been used by a few companies across the country, through Mid America Plastics Partners Inc. Precision wanted to bring down its absentee rate to about 3 or 4 percent (it had been at 15 percent), and the high turnover rate at least down to 20 percent. The idea surely got people's attention. In the week following the announcement of this plan to the media, 506 people applied for 20 openings, allowing Precision to raise its standards and be more selective in the hiring process.

"It's designed to attract a better level of long-term, dedicated employees with good work habits who want to improve themselves," Tews said. "It's about a balance of leisure, self improvement, and work time. The majority of the employees love it. Some people are thinking of taking a secondary school course now that they have more time."

Tews said that Precision is able to make this happen financially because in the end, it will reduce turnover. Precision spends $1500 training employees in their first 90 days, so cutting down on turnover reduces training expenses. Also, with people at the machine at all times (Precision works four 6-hour shifts around the clock), uptime is increased. Before the plan, uptime was at 70 percent. Precision now hopes to improve uptime to at least 85 percent. Tews says it will attract better people with better habits, which will ultimately improve the company. Believe it or not, Precision did not lower wages to make the plan happen, either. On the contrary, Tews says wages, as well as fringe benefits, have increased during the past year.

The one drawback to the plan is that some incumbent employees' hours were changed, creating the need for some lifestyle adjusting. Half of the employees can say they work daytime shifts (6 a.m. to 12 p.m. and 12 p.m. to 6 p.m.), but the other half must work through the night. Sally Gingery, the company's first woman foreman, works the 12 p.m. to 6 p.m. shift--a slight adjustment to her old schedule. She said the change of hours will take some getting used to, but it still allows her to be home with her family in the evenings. With the new hours, Gingery was able to accept the foreman job offer--previously only available in the graveyard shift. Before the plan opened up the new hours, she had to turn down the promotion because of her family.

"At first, a lot of people were skeptical about the plan, but now that it's in place, a lot of people like it," she says. "Employees are here only for 6 hours and then they get to go home to their families. It's great for attendance. It really cuts back on absenteeism." In the month since the plan's inception, she says there have only been minimal occurrences of absence and tardiness. In fact, after the first month, the absentee rate was at 2.5 percent--below Precision's goal of 3 or 4 percent.

The 30/40 plan is just part of a whole cultural redirection Precision is taking. Precision has always been a company that supports its employees who wish to further their education--it reimburses the cost of tuition to employees who receive above-average grades in career-related courses at an accredited educational institution.

Now the company has developed a new 24-hour learning center in its new Columbia City plant, complete with a Paulson Interactive Training Program on CD-ROM. Employees can earn raises and promotions by taking these voluntary computer courses on their own time. Furthermore, employees can earn small monetary rewards for exercising on the company's new walking trail that encircles the 10-acre facility.

"It goes back to the old saying, 'What makes a good day for the operator makes a good day for the company,'" Tews says. "We are appealing to the body, soul, and spirit -- the full dimension of our employees. And people need that. We think it will have a positive bottom line."

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