The following article appears in the journal JOM, 50 (3) (1998), pp. 48, 49. JOM is a publication of The Minerals, Metals & Materials Society

How to Make Your New Plant More Productive: The Human Resources Factor

Researching, building, equipping, and manning a new plant are time-consuming activities. Although most machine-tool companies purchase the latest equipment in order to make their new plants highly productive, few install leading edge human-relations practices, thus overlooking opportunities for long term productivity and profitability growth.

When researching possible sites, companies pay close attention to the right location, labor availability cost and skills, union concentration, government incentives, local taxes, state hiring and training support, infrastructure, and transportation facilities. New-site teams compare economic models and pick the best. However, most companies transfer their traditional culture and policies to their new sites, with the exception of companies escaping from a union to right-to-work states. These cultures feature old fashioned personnel practices that produce, at best, average employee performance and average profitability. Why not implement innovative human-resource policies and practices for above-average results?

When General Motors wanted to build a low-priced car profitably, it created an entirely new subsidiary—Saturn Corporation. Saturn's management made vast changes in General Motors' traditional personnel practices, which enabled Saturn to run a high-performance work-site without the usual adversarial relationship with its union (the United Automobile Workers) or its employees. Many executives are so accustomed to the current culture within their existing facilities that they do not question if it hampers or advances their company's goals. Few have the resources of General Motors to shift to a high-performance work environment at a new facility without short-term, outside assistance. As a result, they repeat the practices of the old plant, and get the same old results. To aid management in this area, three human-relations programs that companies can use in their new plants are outlined here.

Broadly put, human resources within a new facility can be organized in one of three types:

• Traditional
• Reasonably sophisticated
• Cutting-edge

These programs are drawn from the experiences of many companies across the United States; a sample of new plants is given in Table I. Each program creates a qualitatively different environment with varying levels of productivity growth. Obviously, companies need not incorporate all of the features of any of these broad categories; they may choose only some details that fit their own particular situation. For example, many reasonably progressive companies incorporate pay-for-skills programs rather than pay raises based on seniority. Management uses pay-for-skill programs as economic motivators for individual employees to become more proficient. This develops flexible workers who can readily move from job to job, thus keeping the head-count down. Other progressive management techniques use pay-for-performance programs to reward the entire work-force for boosting productivity and quality.

Table I. Machine-Tool Companies Building New Plants
Company	Location	Jobs Created
Wright-K Technology	Huntsville, Alabama	100
Mitsui Components	Casa Grande, Arizona	120
3-D Systems	Grand Junction, Colorado	100
Greenwald Industries	Chester, Connecticut	145
Meta-Kote Corporation	Cedar Falls, Iowa	100
Shape Corporation	Grand Haven, Michigan	400
BRS Products	Hudson County, New Jersey	500
Stanley Works	Fernly, Nevada	100
Unit Parts	Edmond, Oklahoma	3,000
Johnson Crushers International	Eugene, Oregon	100
Innovative Carbide	Irwin, Pennsylvania	103
Chicago Pneumatic	Rock Hill, South Carolina	350
TK-Taito	San Antonio, Texas	150
Husky Injection Molding Systems	Milton, Vermont	240

The traditional plant has hourly employees hired by management and salaried supervision. There is a large supervisory staff resulting in a costly indirect financial burden. There is only cursory on-the-job training and no involvement of new employees' families in their orientation, resulting in slow progress in achieving targeted productivity/quality goals. Job descriptions are similar to those in the old facility, and extensive personnel policies are written by management. There is a standard disciplinary policy: three strikes, written warning, and termination. There is no grievance procedure; management is sole judge and jury of employee actions. Although there is somewhat effective downward communication, little effort is made in upward communication. Productivity generally increases 2-3 percent annually.

By comparison, a fairly sophisticated plant has hourly associates and salaried supervisors (no time clocks). There is a medium supervisory staff that imposes a fairly expensive cost burden. Management hires new associates, who receive a reasonable level of on-the-job training before production starts, allowing them to reach initial productivity goals fairly soon. In addition, associates' families are involved in the orientation in a minor way.

Management writes initial, brief personnel policies, which are revised as needed (six months out) with some input from associates. Jobs and job descriptions vary somewhat from those in the old facility due solely to equipment changes. Gain-sharing, or some other pay-for-performance program, begins soon after production. Productivity generally increases 4-9 percent annually. Corrective-action policies are incorporated using discipline without fault; as a last step, a final contract outlining needed behavior from an individual can be outlined. Associates are involved in a nonunion grievance procedure in an advisory role. There is excellent downward communication, including periodic state-of-the-business addresses, a modest newsletter, and an excellent bulletin board program. There is reasonable upward communication.

The third type of program, a cutting-edge plant, has an all-salaried work-force (no time clocks) organized into self-directed work teams. There is a minimum supervisory staff with a light cost burden. Initially, management hires the team members; however, after extensive training (six months), team members conduct peer-group hiring for their own groups, subject to discrimination laws. Intensive on-the-job training of new team members before production starts allows members to reach ambitious production goals quickly. In addition to heavy family involvement in orientation, there is also heavy indoctrination in plant operations, business, and industry topics affecting the company's business. This follows the notion that if employees are expected to think like managers, they must have the same basic, nonconfidential information.

Team members decide personnel policies (subject to discrimination laws) and determine pay raises (pay-for-knowledge) within their teams based on a preset policy or budget. There is a pay-for-performance plan such as gain-sharing. Jobs and job descriptions vary greatly from old facilities, and thought is given to designing nonrepetitive jobs that allow an employee to work smarter, rather than harder. Productivity generally increases 14-21 percent annually.

Instead of discipline policies at these plants, corrective-action policies are implemented and transferred to the self-directed teams, subject to management review for discrimination. There is excellent and intensive downward and upward communication emphasizing plant-floor problem solving and industry topics affecting the business.

Based on the author's consulting experience, these human-resource practices are not new. Scott Paper designed innovative nonunion grievance procedures using peer group panels; Signode (now part of Illinois Tool Works) empowered its employees to make policy decisions about lay-off, recall, and bumping procedures. Employees at Kay Manufacturing Company (Calumet City, Illinois) are involved in the design of effective pay-for-skills and gain-sharing programs, which replaced piecework and a typical, seniority based compensation system. Cutting edge human-resource practices were also developed for new plants of General Electric, Rockwell, TRW, Federal Mogul, Kraft Foods, Xerox, and Colgate Palmolive as well as a host of smaller companies.

In each of these cases, management took an active interest in using cutting-edge human-resource policies to produce topflight employee morale and high productivity. When management spends the money to add a new facility with the most modern equipment, it should also make a small investment in innovative human-resource policies. When done properly, the payoff is enormous.

For more information, contact W. Imberman, Imberman and DeForest, 1740 Ridge Avenue, Evanston, Illinois 60201; (847) 733-0071; fax (847) 733-0074.