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HR Magazine - December 2000: Compensation Strategy Cooled Long, Hot Summers

By Patrick Mirza  12/1/2000
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HR Magazine, December 2000

Vol. 45, No. 12

Rhonda Hiatt’s interest in pay for performance first took hold in 1993, when she became HR manager of Insteel Wire Products Inc. in Mount Airy, N.C. She fueled that interest through reading, seminars and continual study while pursuing a degree in business management.

Five days a week Hiatt would go to work; some semesters she spent as many as three nights a week in class. All the while, she was planning, trying to figure out how to apply the business theory she was learning to the business reality at Insteel.

At times she proposed changes in pay and work structure for the Mount Airy plant, but her proposals fell on deaf ears. Rather than give up, Hiatt continued to develop her ideas.

In time, her efforts paid off. She finished her degree in 1997, but it wasn’t until the summer of 1999 that her plans came to fruition.

Temperatures on the Mount Airy plant floor vary with the seasons, says Hiatt. Summertime is the worst. The heat and humidity make the plant floor an uncomfortable place, driving up turnover.

Unfortunately, the heat merely exacerbated a larger problem for Insteel in the summer of 1999. Morale already was low, turnover high. Some employees left after only a few weeks on the job. Those who stuck around had little to show for it—they hadn’t seen a pay raise or even a cost of living increase in two years. Pay increases were hard to justify because salary surveys showed the company already was paying competitive rates.

Training also was an issue. Longtime employees sometimes failed to adequately train new workers. New employees didn’t always have a clear idea of what they needed to learn or why—or much incentive to develop their skills.

For example, one of the jobs at Insteel involves operating welding machinery. In 1999, welders earned up to $12 per hour; assistants, who needed the same skills so they could operate the machine in the welder’s absence, were hired at $8 per hour. If their skills increased, assistants could earn slight pay increases every month, but their salaries were capped at $10 per hour.

The situation in the Mount Airy plant came to a head in July, when a special brainstorming meeting was called by Rayford Gammons, director of operations for Mount Airy and its sister plant in Dayton, Texas. Managers from North Carolina and Texas met to discuss ways to improve conditions at both plants, which manufacture similar products.

After the meeting, Hiatt approached Gammons and once again proposed the changes she had been developing. This time, she received a more enthusiastic reception. Convinced that the time was right for change, Gammons gave 120 percent to the effort, says Hiatt.

Hiatt and Gammons—along with Bill Haymore, general manager at Mount Airy—then presented her plan to a group of managers from both plants. The group met approximately 10 times over the next few months, provided feedback and helped tweak Hiatt’s plan, which went into effect at both plants only a few months later in November.

In the end, Hiatt’s plan called for fundamental changes in work structure, pay and training.

For example, previously, welders operated a machine for an entire shift while being helped by two assistants. Now, all three employees are equals and take turns operating the machine. As a result, all three employees earn similar pay.

Hiatt’s plan also turned an existing training manual at the Mount Airy plant into the basis for a new training program. In the past, the manual, which spells out the skills employees must master, had been distributed solely to supervisors, who had to ensure that employees developed the requisite skills.

Under Hiatt’s plan, a revised manual is distributed to all employees, who are informed that learning specific skill sets will earn them more pay. Employees have between one and three months to move up to a new skill level. The result: Employees can earn more money, more quickly.

Those who want to earn even more can attain increased salary levels by maintaining specified efficiency levels on their equipment, or by taking courses to help them better train other employees. The optional levels, says Hiatt, reward those who want to move up but don’t penalize those who don’t. Some employees have used the new levels as springboards into management.

In 1999, turnover at the Mount Airy plant was 34.3 percent. As of this writing, turnover in 2000 was 20 percent. Comparing the summer months of June, July and August, turnover was cut nearly in half between 1999 and 2000.

Employee morale also has improved. An audit conducted six months after the program was initiated garnered positive employee feedback. "Probably morale wise, this is one of the best summers we’ve had," says Hiatt. "This is the first summer I’ve gone through that I haven’t heard ‘We need a pay raise—it’s hot out here.’"

The plan has been successful enough at Mount Airy and Dayton that it is being implemented at two other Insteel facilities.

Hiatt will continue improving the plan, and says that ensuring continued cross training will be a priority.

Hiatt learned some lessons from her experience. If she had it to do over again, "I would have done it sooner," she says. The program worked, she believes, because it is employee friendly and because all those involved pulled together.

What advice does she have for other HR professionals whose proposals have been rejected in the past? Plan ahead. And don’t just pitch an idea, she says—put a plan in writing.

Mostly, says Hiatt, don’t be afraid to try. "I think a lot of times you are afraid to try something because you are afraid it’s going to fail, and you don’t think about ‘What if it works?’ "

Patrick Mirza is managing editor of HR Magazine.

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