I’ve lost track of how many times I’ve had the “I need a raise” discussion with an employee. Many are not all that well prepared, i.e. outlining recent contributions to the bottom line or the manner in which their efforts have moved the company forward and increased profitability. The approach is usually based on the fact they are working harder and the obvious result of hard work should be an increase in salary; it’s just that simple.
I have heard the pitch time and time again, “The company is making a ton of money and I think I deserve a raise.” Of course the connection isn’t necessarily based on fact, but on the premise that the employee is working harder than ever usually with less help and more responsibility. Like it or not, this is the newspaper world 2015, and while I understand the point, the approach simply doesn’t work in this changing financial climate.
Sometime ago I figured out that my multiple choice of responses just didn’t cut it with most employees when it came to raises: “Newspapers simply are not as profitable as they used to be,” or “We’re not doing as well as years ago, things have really been challenging in our industry,” or “It just isn’t going to happen right now, sorry” won’t develop the motivated, dedicated employee you need to take the company to the next step. These uncomfortable conversations left the employee frustrated, disappointed and unmotivated and left me looking for a better strategy.
I needed to find an answer to help employees who were the heart of the company while increasing bottom line profitability. Lucky for me the answer was there all along.
First, I looked at the whole concept of raises. I firmly believe money is a temporary motivator. In the past, when I gave someone a salary increase, they were upbeat for a short period. They put a bit more effort into their job, and perhaps even increased productivity for about two weeks. Then, things went right back to where they were before. Old habits redevelop, newfound enthusiasm wanes, and the motivation through money quickly fades into the sunset. I didn’t feel the two weeks of enthusiasm and small bump in productivity was really a fair return on investment.
I found a better plan: gainsharing, a program that ties financial gains directly to overall team performance. Gainsharing is truly a two-way street, reaping rewards for the team as well as the organization. Gainsharing gives the organization the ability to reward employees for performance above normal expectations, and ties this performance improvement directly to company profitability. It’s actually a simple concept, easy to implement and carry out.
I first introduced gainsharing while working for Lee Enterprises in Madison, Wis. Our press waste was higher than we felt acceptable and like many other newspapers didn’t have a lot of room in the budget for salary increases at that time. Looking for a way to motivate employees to improve performance and reduce waste, I implemented a gainsharing program in the pressroom that allowed financial rewards to employees while also dropping a respectable amount to the bottom line. It turned out to be successful in dropping waste from well north of 10 percent to 4 percent.
For this article, I’ve broken gainsharing down to three primary areas of production: platemaking, pressroom and distribution.
On one hand production is a major contributor to expense; it’s a necessary evil. On the other hand, this presents greater opportunity for returns through gainsharing than most other areas of your operation.
This is not to say that gainsharing should not be carried into other areas of the operation. In fact, I highly recommend it.
Errors create customer discontent and can destroy the trust we’ve built over time. Good employees know this and when they make errors get as upset as management. No one likes making mistakes, especially those that lose customers and the dollars they take with them. The solution, as I’ve detailed earlier in this article, is not giving employees a raise and expecting they work harder and focus more on detail, nor is it sitting down and reading them the riot act or writing them up until they’re even more unmotivated.
I firmly believe the answer to improving the operation is gainsharing. Creating an incentive plan in which employees can realize financial benefits directly through cost-saving measures they participate in and have direct control over.
Here, the focus should be on consumables. Hopefully you’ve had some measure of plate waste over the past year; if not, start recording waste immediately and develop an acceptable monthly number for plate waste as soon as possible. Let’s say your newspaper trashes 50 plates per month due to employees sending images before they’ve been properly prepared/checked. Perhaps they’ve missed rich-black type, low-res images, dragged a tile to the front that didn’t belong, or created one of many issues that cause us to have plates imaged that never makes it to press, or worse yet do. These 50 wasted plates, depending on cost per plate, could set you back upwards of $200, representing a loss of over $2,400 annually.
You will never eliminate all errors, even with the best gainsharing program and superior employees, but you can reduce the pain dramatically.
Start by meeting with the employees who send the files/make the plates. Show them waste and losses throughout the previous year, month by month. Present details on not only the financial impact on the bottom line, but also what lead to losses, i.e. what errors created waste and what can be done to minimize it. Chances are they will know more than you about how to correct the issues. Then roll out a plan that benefits both the employees and company. Don’t be shy about explaining to employees that both sides benefit— yes, even the company.
The basic premise is that for every penny saved through the efforts of employees half goes to employees with the other half going to the company. The obvious benefit is employees have the opportunity for a financial increase in hard times that would not otherwise occur, that is not in the form of a salary increase, but instead is directly within their control and tied directly to their performance. In addition, the company receives financial gains that would normally be lost without the additional cost of base salary increases.
Now, back to the plan. Let’s say that through employee efforts, we are able to reduce the monthly average waste from $200 (50 plates at $4 each) to $80. (20 plates); the net savings is $120 monthly. Gainsharing would put half—or $60—back into the companies pocket through reduced consumption (waste) and would award the remaining half—or $60—to the employees who drove the gains. Let’s say you have two employees outputting, each would receive $30 in that month for their efforts. If current waste is higher it opens the door for more profit on both sides. If the employee is able to drive down the waste lower, the award will be greater. Employees now have the opportunity to be in control of their own financial destiny through their own efforts.
These numbers are an example only, the reality of it is the higher current waste, the lower your employee count, cost of plates and volume, the opportunity may be much greater and you may find that your employees are capable of some surprising performance improvements.
Here’s where the dollars can add up quickly. Paper is one of the largest expenses in the newspaper industry. Every pound that goes to the recycler affects overall profitability.
Calculate waste percentages and associated dollars over the prior 12 month period (I’m confident we all have these numbers available).
There are several ways to determine your current waste percentages. Figure One shows one approach that provides percentage and subsequent dollars by job, week, and month, and also providing useful information on impressions, pounds, etc. Figure Two shows the first week in the period, followed by a summary of the four weeks rollup within that particular month.
Armed with this information, meet with your crews and decide on an acceptable waste percentage/goal. This is the level of waste that the gainsharing plan will be measured against.
In the five-month recap shown in Figure Three, you will note that waste for the period was 17 percent (based on several short runs). This example shows what “would be” if waste were reduced to 12 percent in the same period this year and what each of the four press employees would share for that month. If this doesn’t motivate your pressroom to step it up, nothing will.
Figure Four is a mock-up of year over year gainsharing dollars for a pressroom with four operators based on a goal of 15 percent waste. You’ll notice that in each month the crew achieved a percentage target of 15 percent or less and therefore was awarded half of total dollars. In months that the target is not achieved the payout would be zero.
Perhaps one of the most challenging areas to establish gainsharing may be distribution. Since consumables are generally limited, you have to be more creative in developing a program. Here, you’ll have to base the program on productivity measures and calculate gainsharing dollars on continuous improvement.
Hopefully you have a mechanism in place to track your average net preprint productivity per hour and have arrived at an average cost per thousand. While this can vary based on the type of insert, mechanical issues, etc., you should have the means to arrive at an average cost per thousand in your mailroom operation.
This gainsharing program actually does function more like a bonus plan than that in other areas, but that’s all right, it accomplishes the same goal: encouraging constant improvements in productivity within the control of your staff with shared gains depending on cost savings.
Simple implementation here: chart your cost per thousand for the prior year and arrive at a set point (goal) at which point the payout occurs.
Like other areas, distribution will be in control of its own destiny and have the ability to increase overall take-home pay while helping the company to cut costs.
The win/win of a functional gainsharing program surpasses the old model of base salary increases and has a place in all areas of our operations.
Now, for the downside of gainsharing programs. They have their maximum gain limit. For instance, if you set up the pressroom for a 4 percent waste goal in the pressroom as I did in Madison, when gains reach this point, often there can be no further improvement—it becomes physically impossible. There will always be some degree of waste, and productivity has its limits. When this happens, the gains dry up as do the payouts. Plan ahead, count on the success of your plan and know what you’re going to do to keep motivating employees beyond the point that the program reaches the ultimate goal. Go into a maintenance stage, develop a new program, encourage employee involvement in program development—whatever it takes to maintain the gains you’ve worked so hard for throughout the structured gainsharing journey.
Jerry Simpkins is the general manager at Hi-Desert Publishing in Yucca Valley, Calif. Contact him on LinkedIn.com or at firstname.lastname@example.org
Rules for a Pressroom Gainsharing Program (4 percent goal)
Program Payment Guidelines:
In order to receive any gains from the program, the waste percentage must be 4 percent or better for the month.
For each .5 percent increment below 4 percent, the program payment will increase accordingly.
There is no limit to how low the percentage can go. Each .5 percent reduction in waste increases the amount paid out to employees
Waste percentages will be posted for all to review weekly (as soon as numbers are tabulated).
Checks and Balances:
If there are three or more significant complaints from commercial customers, subscribers, intercompany customers or advertising customers monthly, the program will not be paid out for that month.
If there is a single rerun due to an error in the pressroom, not checking proofs properly, or error not caught within the scope of the pressperson’s responsibilities, the program for that month will not be paid out.
Any tampering with numbers/counters will terminate the program indefinitely.
Final approval and continuance of the plan will be at the discretion of management.