June 27, 2014
At D&S Manufacturing, the books are open, employees know how to read them, and they use this information when dreaming up new ways to improve.
In December 2012, the people at D&S Manufacturing—No. 17 on this year’s FAB 40—increased their ownership stake in the Black River Falls, Wis., business. That’s when the fabricator’s employee stock ownership plan (ESOP) became the majority shareholder.
“Based on that, we have a new focus on creating a culture of employee ownership. Many of us here believe that culture is probably one of the most important strategic advantages we can have. People here are engaged and involved. They don’t just go through the motions.”
So said Michael Dougherty, company president and CEO. His father launched the ESOP when retiring; at that point the plan owned 30 percent of the business. When Dougherty and other family members sold stock in 2012, the ESOP became the majority owner.
Being a retirement plan, ESOPs don’t offer current employees immediate financial benefit, so the company offers incentive pay programs for meeting performance goals. Offering this alongside the ESOP retirement program, the fabricator provides short- and long-term financial incentives. When the company does well financially, so do employees—today and upon retirement.
Considering employees now are majority owners, the company has implemented open-book management and financial literacy through a process Dougherty calls “ownership thinking.”
“Everybody here has had training on business basics and how a company makes money,” he said. “We’ve spent a lot of time here training people to understand financial information.”
When employees see the books, they know what they’re looking at, and they see the connection between actions on the shop floor and line items on the balance sheet and cash flow statements. To launch such financial training, D&S worked with an outside consulting firm to develop the curriculum.
“Just sharing financial information isn’t always effective,” Dougherty said. “You have to give people the ability to have an impact on measures in their work areas that they can control. They can then start to see the correlation between their efforts and the improvement in the company’s improvement in the bottom line.”
So how do actions translate, exactly? Dougherty pointed to four key metrics where financial literacy has really helped the fabricator’s performance. First and most important is safety. Serious shop injuries can destroy lives and companies, so employees approach their day with safety in mind. Second, they see the consequences of not finishing everything per the schedule, on time, in order for downstream work centers to be able to do their jobs as planned. Third, they see the financial consequences of scrap and rework.
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