What is good company culture, exactly?

Whenever I attend an industry show or conference, I hear of the overwhelming importance of company culture. Good culture is the foundation for continuous improvement and, really, any kind of positive change. Good culture creates great companies.

That’s great, but how do you define a good company culture, exactly? Is it about communication, or information systems, or giving people the right tools and equipment to do their jobs well? Like gumbo, it probably takes a mix of disparate ingredients to taste right.

One ingredient is, of course, the paycheck. It’s no secret that workers across the economy have grown frustrated with stagnant wage growth. The country has been stuck in a gradual recovery with all sorts of uncertainties—faltering economies in Europe and Asia, for instance.

After years of a painfully gradual economic recovery, it looks like the labor market is tightening up significantly in certain areas of the country. According to a recent report in The Wall Street Journal, factory wages in certain states have skyrocketed. Texas workers, for example, have enjoyed a 25 percent wage hike since 2011.

Of course, factory wages have grown only 4 percent nationally since 2011, a number that, according to the Journal, “lags behind the average increases for all private-sector workers.” (Note that this Labor Department statistic averages factory wages for jobs of various skill levels.) Still, the article goes on to state, “The bigger pay increases in certain industrial states are likely to spread to other parts of the country, especially as baby boomers start to retire.”

Some blame stagnant wages on automation. We’re automating our way out of jobs, the thinking goes. Automation plays a part, for sure, but machines alone don’t eliminate the difficult-to-predict variables of job shop manufacturing. Challenges may come from engineering or customer communication problems, but quite often they come from inconsistent demand. Customers don’t want to hold much inventory anymore, so they want shops to deliver parts only when needed, often on very short notice. Level-loading work centers can be extremely difficult or just downright impossible, not to mention impractical.

Such manufacturing operations can be extraordinarily complex, and no matter how automated they are, they need people to manage them. In one sense, automation should make each employee more valuable, not less. A fabricator can employ fewer people, but automation allows each individual to accomplish so much more.

Manufacturing consultant Alan Lund has an interesting take on all this. He’s principal at UHY Advisors (www.uhy-us.com) in Farmington Hills, Mich. When he visits a shop, he pays attention to basic organization: What’s being measured, and is everything up-to-date? Is the order process obvious? How’s 5S? Part flow? But before this, he looks at the cars in the plant’s parking lot. A parking lot full of clunkers may not be a good sign. Sure, some people like holding on to their cars, but more likely than not, they don’t have a choice.

He pays attention to the cars because of something he learned early on from one of his mentors, an extremely successful entrepreneur in various sectors. Every time this person launched a business, it turned into a success. How did he pull this off? As Lund recalled, besides being extremely charismatic, he had one guiding principle: “He wanted everybody in the company to be wealthy.”

This didn’t necessarily mean that he paid everyone royally for no good reason. But he made sure that he set up a company structure in which every employee, from the floor sweeper on up, had a chance to add more value to the bottom line.

Still, somebody has to sweep the floors. How much can a shop realistically pay a janitor? Lund responded with a hypothetical example. Say that janitor has swept floors and emptied trash for years, and during all that time he takes mental notes on workstation organization, routings, and more. He has ideas, and managers notice his interest, so he begins to participate in continuous improvement events. Before long he’s tracking parts, performing 5S audits, and managing kanbans. He’s still sweeping floors—somebody has to do it—but he’s also managing part flow and, hence, adding a lot more value. Because of that, he earns a larger paycheck.

Are healthy paychecks a result or a cause of success for a company? I’m guessing it’s a little bit of both. A shop that pays a little more will get better talent, but getting the talent is just half the battle. A company that pays a high starting salary still may be unsuccessful because it may lack the structure for success: organized work flow, labeled workstations, standardized work, efficient and effective communication channels.

Lund described one small job shop that implemented a remarkably simple capacity-control method. At every station employees installed red, yellow, and green lights. A green light means all systems go; the workstation is on time and can accept work. A yellow light notifies people that the workstation is still on time, but any unexpected work might throw it behind.

The red, obviously, notifies people that the work center is behind. If an upstream worker sees that signal, he starts another job that can be routed to green-light workstations downstream. Alternatively, workers can move downstream to free up the bottleneck. There’s no sense in producing more if any additional work would overwhelm downstream processes.

This idea didn’t come from management; it came from people on the front lines. Modern manufacturing workers offer so much more than the traditional job description. In fact, this may be what defines a “good” company culture. Regardless of the starting pay or the age and quality of its equipment and software, a company with a good culture probably gives everyone, from the janitor on up, the chance to offer more value—and rewards them for doing so.