Carris Companies : Incentive Plan Program Challenges

Carris Companies[1]: Incentive Plan Program Challenges


June 25, 1998—The corporate office personnel sat quietly waiting to
discuss the incentive plan program— specifically, why they were not
included in the program. As soon as William H. (Bill) Carris (President and
CEO) and Michael (Mike) Curran (Vice-President and COO) took their seats, a
buzz started with several people speaking at once. The following is taken
from the notes of that meeting with the office personnel:

Marilyn: It has been a year since the incentive plans were rolled out to
all the manufacturing employees of Carris Companies (CC). There is
no talk of when corporate office personnel are going to get one.

Mike: Corporate management is still not in agreement on the matter of
how incentives should be implemented here at the corporate office.
At least Bill and I are not at the point of thinking that we can
have an incentive measure for the staff here. The incentive
compensation plan implemented at some plants involves a monthly
bonus based on production standards. In some areas of the company
where proven production measures existed and historic information
was available, creating targets for the incentive program was easy
so we implemented them.

Bev: Well, you say that we cannot be measured. And yet, the office
personnel at plants under the incentive program are getting
incentive pay. I don't think they can be measured either.

Bill: I agree that it's not fair. The site managers made that
decision.

Karen: We here somewhat feel that we are held to a higher standard and
yet regarded as second-class citizens of the corporation.

Bill: Production workers have always been the "low-men on the totem
pole." I think the incentive program serves to address
this—bringing them up. We may have created some problems in moving
too quickly to establish the incentive pay program in some areas
of the company. But the intention was never to create inequity
among people.

Mike: I don't think we could ever have found the best time to roll out
the incentive system because there will always be unknowns and
controversy.

Jeanene: I am not sure but I think that the mill workers resent us
because they think we make more money than they do.

Mary: I disagree. I don't know about the other production units, but
some mill workers realize that they'd be actually taking a cut in
pay if they worked up here. For instance, a few people having
difficulty in physically demanding jobs wanted to take up jobs at
the office here but they decided against making a move because
they'd make less money up here at entry level.

Pete: I have heard that we could be replaced with younger people who
would get paid less. That is very demoralizing.

Bill: You are all important for the company—equally important. The
ultimate goal for the incentive program is to reward efficiency
with more money. Take a look at the full benefits package for
employees, the Employee Stock Ownership Plan (ESOP) and profit
sharing programs. The corporate office part of the incentive
program presents a pothole (an obstacle) on the road to creating
an employee-ownership culture. Every employee-owner is expected to
share in the leadership responsibilities of facing new demands and
challenges during the change process. Change is stressful. Many
times it involves taking two steps forward and then one step back
because consequences were unforeseen.

From the beginning Mike had been not in favor of implementing short-term
incentives at that time. He had vehemently disagreed when Bill wanted them
in place January 1, 1998. But having worked with Bill for 20 years, Mike
knew when Bill's mind was set on proceeding. When it was time to roll out
the new program, Mike drew up the plans and measures for implementation
using historical production data. Now they were in this together.


Background


Henry Miller Carris founded Carris Reels Inc., a manufacturer of plywood
reels, in 1951, in Rutland, Vermont. His first exposure to manufacturing
had been in managing a workshop for disabled veterans in Irvington, New
York. He later moved through several experiences with wood manufacturing in
Vermont, prior to starting Carris Reels in Rutland with two employees.

The company grew steadily and in 1980, his son, William H. (Bill) took
over. Like his father, Bill believed in the importance of the individual
and in community service. Having worked in many capacities in the company,
he brought to his new role clearly defined strategies for growth through
start-ups, acquisitions and professional management.

In 1990, the CC was formed and by 2000, owned several subsidiaries. In
addition to the reel divisions, there were manufacturing divisions for high-
end furniture, pallets, plastics, tubes, tin and bolts (Exhibit 1). At the
end of 1999, sales exceeded $120 million. Margins were comparable with
industry standards. The number of employees was 1143.

The CC avoided job titles and much of the status differentiation within
the modern corporation. Throughout most of its history, workers,
supervisors and managers reflected a flat organizational chart, though
recent growth had required the addition of specialized
production/manufacturing management. Corporate executives located in
Rutland, Vermont traveled as needed, to the sites. No one, including Bill
Carris and Mike Curran, had a personal secretary; and everyone was on a
first name basis. Calls were not screened. Doors were open. There was no
executive suite. Small offices held standard furniture, computer, file
cabinets and

an extra chair. No visible symbols of power or rank distinguished
executives from other employee-owners. On the manufacturing floor, they
were indistinguishable from other workers.

Bill Carris' Philosophy and the Long Term Plan

For several years, Bill Carris looked for ways to bring employees into
the business. He recognized that the advantages provided by the federal tax
structure made the ESOP a very attractive vehicle for selling the CC to the
employees. In December 1994, he shared his vision for the transfer of
ownership—at a cost significantly below market value—with employees in The
Long Term Plan. He explained to the employees that he wanted to increase
the likelihood of their success and would therefore sell the company over
an extended period of time—10-15 years. In August 1995, he decided to give
the discounted portion (the portion below market value) of stock first—as a
trust and confidence building measure.

Bill Carris saw his plan for selling the company as the culmination of
his commitment to CC employees and a way to give back to the community.
Bill had considered himself to be extremely fortunate because he had never
had to worry about money. Over the years, material goals had lost
importance for him and he gained satisfaction from being a positive
influence in other people's lives. Strong spiritual beliefs and commitment
to equal opportunity, life, liberty, the pursuit of happiness and the
Golden Rule (do unto others as you would have them do unto you) led him to
work for change in the inequities and unfairness with which the society
dealt its cards. Further, he was convinced that the corporate winners of
the coming decades would be those companies that involved more people
processing more information and making better decisions faster to stay
ahead of the market. This he shared in a memo sent to all CC employees, in
December 1994.[2]

The Long Term Plan (LTP) stated the CC's mission: "To improve the quality
of life for our growing corporate community." The planned transfer of
ownership (over a 10-15 year period) had a strategic aim to "teach
employees the business" and to create a new style of corporate
governance—one that was characterized by community, trust and inclusiveness
as a means of achieving the corporate mission. Building community and
applying entrepreneurial know-how to increase profitability through
improvements in quality and efficiency were seen as complementary and basic
to achieving that mission.[3]

In June 2000, Bill Carris was invited to New York to receive a Corporate
Conscience Award (CCA) for Employee Empowerment given by the Council on
Economic Priorities (CEP). Please see Exhibit 2.

In addition to the ESOP, Bill's LTP outlined other compensation features:

1) Pay range ratio within a Profit Center should not exceed 7½ : 1; the
pay range company-wide should not exceed 10 : 1.

2) Base pay should be market competitive. In keeping with the reward
philosophy, necessity might require low-end pay to be higher than
competitive wages, with the opposite being true for the high-end
employee-manager. Overall, base pay should stay at about the 75
percentile of the market range for any given job or skill, with the
effectiveness of any given employee to be functioning at the superior
range.

3) Profit sharing should ideally be a significant part of any pay system.
The annual profit sharing formula, predating movement to the ESOP, was
designed to be an incentive for good performance by each company's
workers as a group and as a full company wide incentive. Thus, 15% of
each company in the firm's pre-tax profit was distributed as
employees' profit sharing. Each company kept two-thirds and placed one-
third into the corporate pool. The total money was then divided by the
hours worked by all CC employees to determine a per employee universal
distribution. Then each CC company divided its two-thirds of the 15%
pre-tax profit into two halves: 50% of it was shared equally among all
of its employees with the other 50% distribution based on employee
annual income. There were two significant features to this annual
profit sharing program: (1) All CC employees (employed for a full
calendar year) participated; (2) The degree to which the distribution
was bottom loaded with its 50% equal share.

The LTP called for 50% of each plant's profits to stay within the
company to be used for security, debt reduction, growth and stability;
25% was to be used as a buy-out option or with the company having use
of the money until the employee-owner left (ESOP). 10% of each plant's
profits were given through the corporate foundation as donations or
gifts to non-profit organizations. Due to objections from employee-
owners this percentage was reduced to 7.5% of annual profits: pretax,
pre-profit share and pre-ESOP distribution. In early 1996, each site
formed a charitable giving committee, comprised of employee-owner
representatives, to oversee distribution to local non-profits.

By the end of 1995 the companies were 10% employee-owned as part of a
long-term succession plan that was to eventually combine employee-ownership
with employee-governance. As of December 1999, Carris employees owned 37.4%
of the business. The starting wage was $7.00 per hour with the goal to
have every employee at $8.00 per hour at the end of 12 months. Most
production work was low skilled; educational requirements were minimal. The
average hourly wage was $9.04 with a benefit hourly rate of $3.44 (38.0%).
In addition to the ESOP and profit sharing, CC employees enjoyed very
generous benefits. These included company paid: insurance (health, short-
term disability and life); 4% of wages contributed to the 401K-retirement
plan; sick and vacation leave time. Office personnel (including R & D and
corporate office), truck drivers, supervisors and managers received long-
term disability insurance.

Incentive Pay Program


Started in January 1998, the incentive pay program was the last piece of
the compensation program to be set in place. Bill's views on incentives
were expressed briefly in the LTP of 1994:

"Using pay as an incentive for performance is an extremely powerful tool
to encourage efficient and effective work by individuals. People respond
strongly to the concept of more products, more pay. It is capitalism at
its most powerful and pure level – and it works! If anything, this
incentive can be too powerful, especially when quality and safety become
issues. As a result, it is probably best to use incentive pay in somewhat
of a watered-down version as opposed to straight piecework system.
Piecework can become too incentive intensive. Incentives should ideally
be a significant part of any pay system; they encourage productivity, and
productivity is a key to profit. Balance would be a key ingredient in
applying any incentive scheme."

Further, Bill strongly believed that individuals should have influence
and control over their pay. From its very inception Bill knew that the
incentive program was going to be a bear. In a November 4, 1996 memo, he
had noted the potential for the incentive program to be a "snake pit when
it comes to fairness, implementation and administration." He encouraged
moving forward on the incentive program because he believed that it could
be the most effective and fairest compensation system that could be
developed. However he knew that simplicity and ease of implementation were
key to making it work. With Mike Curran designing the incentive measures,
Bill knew it could be done.

In January 1998, plants rolled out the incentive pay program in phases.
It was based strictly on productivity and how well a plant worked in a
given month. Bill Carris' view of the program was: "it was not necessarily
getting more product out the door but working smarter and scheduling things
better." In January 2000, when California came into the incentive program,
the majority of manufacturing employees were on the incentive program; the
exceptions were Killington Wood Products (KWP), Carris-Ohio and the newly
acquired Groggins Plastics (Fincastle, VA). No incentive plan was in place
for those working in the research and development department, the truck
garage, and the Corporate Office.

The original criterion established for the incentive was based on
historical data with actual 1997 performance used as baseline. In contrast
to the profit sharing program described above which was calculated
similarly throughout the company, the incentive was calculated differently
on a site by site basis with site manager and Mike Curran working together.
Representative of some of the 1997 measures used for monthly incentives,
were the Bolt division (exhibit 3), the Rutland Mill (exhibit 4), and
Vermont Tubbs (exhibit 5). Those coming into the system after the first
phase, used measures more current than 1997. California and North Carolina
wood products were based on reaching, and then going forward from a
predetermined goal—revenue level. The site manager determined that
production goal with Mike Curran. Those revenue goals were comparable with,
but not necessarily identical to, the goals of the other wood reel shops. A
similar comparable program was going forward in Ohio. It would join the
incentive program after reaching a minimum revenue goal. At KWP, the site
manager, with Mike Curran, was beginning to establish goals to put a
program in place.


The Corporate Office


In addition to the corporate and senior management, the CC's corporate
headquarters employed 38 employees (31 hourly and 7 salaried). They
provided the affiliated companies with centralized services and support.


The difficulty and perhaps, the ethical dilemma that had to be worked
through was providing the truck garage, research and development and
corporate office personnel access to a similar program as the various site
office and production workers. Office workers at each site were included
primarily for inclusivity—not to exclude such a small number of people
rather than from a well-developed rationale for inclusion. In one sense,
site-managers simply implemented the "Golden Rule." In another, office
personnel at the sites were directly involved in the day to day life of the
products and were part of everyday production life and problems. In the
corporate offices, only the customer service people were that directly
involved in production. The difficulty was in developing formulae to
include truck garage, research and development and corporate office
personnel into comparable incentive programs.
"Division "Task "# "
" " "Employed "
"Corporate Office "Accounting "11 "
" "Taxes "1 "
" "Purchasing "2 "
" "Sales & Customer Service "5 "
" "Production "2 "
" "Information Systems "4 "
" "Personnel & Payroll "4 "
" "Administration " "
" "Safety and Workers' "2 "
" "Compensation " "
" "Office manager "1 "
" "Administrative assistant, "3 "
" "Receptionist, Courier " "
" "Interns "3 "
"Research & "R & D "13 "
"Development " " "


Management appeared more skilled and ready to develop such measures for
manufacturing. The production incentive, which was plant based, had
measures that were well understood from practical and historical
perspectives and they were tied to increasing profits. The kind of
information used in other industries to set performance goals for
individuals working in accounting, payroll, research and development,
purchasing, information systems, etc. was just beginning to become
available and the measures were rather primitive. These seemed tied to
faster collections, tracking turn around time on follow-through on customer
concerns. When the incentive program was designed at the CC, such
administrative measures did not seem to tie directly to profitability as
did production measures so these were not used in the same way within the
CC.

At the end of 1998, those in the excluded areas were vocal and unhappy,
and a year later resigned to the direct and indirect loss of income
experienced due to their exclusion from the incentive program. The direct
loss of income was the potential cash monthly incentive. The indirect loss
included: corporate and individual FICA contributions; W-2's calculations
used at the end of the year for the company's 4% contribution to
retirement; profit share distributions based on wages; and the ESOP
allocation proportion ceiling based on wages up to the annually adjusted
$30,000 set in 1995 and $32,120 at the end of 1998. The discontent was
reflected in a November, 1998 Survey that included Quality of Life at Work
(Exhibit 7). Out of 948 employees, 658 responded (69.4%). Two areas that
had satisfaction levels under 50% were the Incentive Pay Plan and the Pay
for the Job. Note: when the survey was conducted in late 1998, only 59% the
employees were participating in the incentive plan.

Mike Curran indicated at the end of 1999 that there was no effort being
put forward to develop an incentive program for the corporate office, R&D,
and truck maintenance people. At this time, the major efforts were
achieving the desired ratios for labor costs and productivity levels for
improved profitability. Wages and working conditions were very good for
these three excluded groups, however—perhaps better than for those directly
involved in production. In contrast to the overall $9.04 average hourly
pay, the average wage for corporate office hourly personnel at the end of
1999 was $10.41. The average for hourly research and development at the end
of 1998 was $12.33 and for truck maintenance for the same period, the
average was $11.62.

Bill Carris was still thinking about how the incentive could reach
everyone. He had some reservations as to the effectiveness of current
implementation. He noted that there were some management issues involved
and employees were calling into question the effectiveness of the plan.
Theoretically, Bill thought it should work. The system needed to be
effective and accurate. Bill noted that he and Mike were in agreement on
that aspect. The plan was designed to put more money in the worker's pocket
and help the corporate labor rate. Was this being achieved or was this
incentive just satisfying Bill's need? As the incentive plan continued, how
could concerns be addressed regarding maintaining the program as a true
incentive rather than allowing it to slip into entitlement? What was the
relationship between the incentive and the performance of each unit? The
corporation probably would not see the real impact of the program until
changes in the metric incorporated individual and weekly incentive. As to
the corporate office personnel, R&D and truck maintenance workers, any
incentive plan would need to look at efficiencies and cost savings. How can
they develop an incentive measure to link to their productivity?

Exhibit 1: Carris Companies Divisions


"Plant "Products "Comments "Employees"
" " " "1998"1999"
"Reels, Rutland "Plywood, "The first expansion brought"151 "155 "
"(Mill), VT "Hardboard, "the mill to its present " " "
" "Wood / Metal "location. " " "
" "Bound " " " "
"Reels, Statesville,"Machining, "Started in 1980, "99 "118 "
"NC "Tube winding, "manufacturing in NC has " " "
" "products from "doubled its space since " " "
" "waste wood "1990. " " "
"Reels, Enfield, CT "Nailed wood "Purchased 1986. Formerly "108 "104 "
" "large cable "Bridge Mfg. – a family " " "
" "reels "owned business with " " "
" " "reputation for quality; " " "
" " "integrated manufacturing. " " "
"Reels, Madera, CA "Nailed wood / "Purchased 1991. This "44 "55 "
" "plywood / "expansion made CC a truly " " "
" "large metal "national company. " " "
" "reels " " " "
"Reels, Brookville, "Nailed wood "Purchased 1997. Had fallen "45 "46 "
"OH "reels and "on hard times but has a " " "
" "assembly of "solid mid-west customer " " "
" "plywood reels "base. Now updating and " " "
" " "restructuring. " " "
"Plastics, Rutland, "Plastic Reels "Purchased a small company "40 "36 "
"VT " "in 1986 to start up plastic" " "
" " "line. More than 98% use " " "
" " "recycled materials. " " "
"Plastics, "Plastic Reels "Start-up 1990 in the CC's "11 "17 "
"Statesville, NC " "first NC location. " " "
"Plastics, "Magnet wire "Purchased by the CC in 1999"0 "116 "
"Fincastle, VA "reels, fine "to expand plastic capacity " " "
" "wire spools "and know-how, to complement" " "
" "and custom "Carris product line and to " " "
" "molded "build customer base " " "
" "products " " " "
"Assembly, Santa "Assembly "For assembly of reels "4 "5 "
"Maria, CA " "produced at CA plant " " "
"Assembly, Kingman "Assembly "For assembly of reels "8 "5 "
"AZ " "produced at CA plant " " "
"Assembly, Phoenix, "Assembly "For assembly of reels "7 "7 "
"AZ " "produced at CA plant " " "
"Assembly, Galien, "Assembly "For assembly of reels "22 "32 "
"MI " "produced in VT and CT. " " "
"Bolts, Rutland, VT "Bolts "Supplies reel related "8 "11 "
" " "products to reel plants. " " "
" " "98% of its output is " " "
" " "Consumed by other Carris " " "
" " "plants " " "
"Tin, Rutland, VT "Tin/Stamp "Supplies reel related "14 "13 "
" "metal "products to reel plants. " " "
"Recycling, New "Recycling "Founded in 1970 during the "11 "5 "
"Carlisle, IN " "energy shortage as assembly" " "
" " "point to reels traveling " " "
" " "unassembled. Now this site " " "
" " "is used for recycling reels" " "
" " "returned by customers. " " "
"Vermont Tubbs, "Furniture "Purchased in 1989. Founded "231 "245 "
"Brandon, VT " "in 1840 to make snowshoes. " " "
" " "Used its experiential " " "
" " "knowledge to make bent wood" " "
" " "furniture. Today state of " " "
" " "the art facility with broad" " "
" " "variety of lines using ash," " "
" " "cherry and maple. " " "
"Killington Wood "Hardwood "Founded 1966. Until 1990, "57 "67 "
"Products (KWP), W. "pallets, "owned with a partner. State" " "
"Rutland, VT "skids, hockey "of the art scragg (small " " "
" "sticks "logs) mill. Customer base " " "
" " "-- New England and New " " "
" " "York. " " "
"R & D, Rutland, VT "Research & "Internal service division "13 "12 "
" "Development "supplying the Carris " " "
" " "companies with engineering " " "
" " "services, product and " " "
" " "process development and " " "
" " "machining services. " " "
"Trucks Drivers, "Driving "Incentive based on Driver's"11 "15 "
"Rutland, VT " "safe driving record. " " "
" " "Incentive given yearly – " " "
" " "fixed amount ($50 - $250) " " "
"Truck Garage, "Maintenance "Having its own fleet offers"5 "9 "
"Rutland, VT " "Carris companies " " "
" " "flexibility and timeliness " " "
" " "in scheduling deliveries. " " "
"Corporate Office, "Administration"Accounts receivable and "36 "38 "
"Rutland, VT " "payable, information " " "
" " "technologies, payroll, " " "
" " "scheduling etc. " " "




Exhibit 2: 14th Annual Corporate Conscience Awards






Exhibit 3: The Incentive Program at Carris Bolt, Rutland, VT


The Bolt division made steel tubes, drive pins, borings, rivets, screws
and bolts that were used in Carris' reel products.



Reel Products

These products were used to hold and reinforce the reel sides. Carris'
plants consumed 98% of the Bolt shop's output. The shop had one supervisor
and ten employees. Each employee had one machine. The machines were highly
flexible in terms of the variety of products they could work on. Each
worker was in charge of producing a product from beginning to end. The base
for incentives was the 1997-production level of 2850 pieces/hour/person,
i.e., 2850 = 100%. An incentive of 1% of pay was given for every percentage
point above 100%.[4] See Exhibit 5 for the Bolt's division incentive
performance in 1998 and 1999 respectively. Some of Bolt's employees
commented on the incentive program:

Tag[5]: The formula is working just fine. It had to be readjusted to
account for the varying machine speeds. The formula is not fool
proof, it has drawbacks. If you have a bad beginning of the
month, it is almost impossible to pull it out and we all work
really hard to try to pull it out.

Cam: Our supervisor really works with us to get a good start. Morale
is really high when we are on…

Ned: In October and November, we were short of work, we did machine
maintenance, which really affected production. They made an
adjustment. We have real problems working out what we need to
get done with maintenance and keeping the program going. We are
a small group and we have figured out how to work together to
keep production as high as we can keep it. Breakdowns and
maintenance will always be factors, I guess but the program here
is about as good as it gets anywhere from what I hear.



Exhibit 4: The Incentive Program at Carris Reels, Rutland (Mill), VT

The Mill made plywood and hardboard reel products. These reels were used
for packaging of wire, cable, rope, tape and chain products. The reels came
in different shapes, sizes and strengths. The Mill consisted of 4
departments—plywood, masonite, brush blocks and printing. Most products had
to go through all the departments in batches. The incentive for the Mill
was based on Value Added Per Hour (VAPH). VAPH was the ratio of Value Added
and Total Hours Worked. Value Added was Sales minus Material Costs. The
Total Hours Worked included the direct labor and the indirect labor hours
(maintenance, shipping, tubing, and inventory). Historically, VAPH had been
very consistent, year to year (1995 = $34.83; 1996 = $34.13; 1997 =
$34.47). The 1997 VAPH of 34, less 1 (as a morale booster) was used as the
base for incentive calculations, i.e. 33 $/hr = 100%. An incentive of 1% of
pay is given for every percentage point above 100%. See Exhibit 5 for the
Mill's incentive performance in 1998 and 1999 respectively. Some of the
Mill's employees commented on the incentive program:

Jane: Incentive isn't really what we expected. Sales affect it too
much. It depends what we make as to how it all works. There are
too many people, too much involved. We haven't made much and if
we had the formula might be changed. Bolts formula for the
incentive was changed so that they couldn't reach it as well as
they had.

Mick: We hear that plastics and bolts do great. The Mill does all
right at some points in the month but now we just don't even
have the work. Production percentage is there but Masonite
doesn't have the orders. Those folk are moving through the shop
to where the orders are. Masonite will probably be phased out in
favor of the basket reel. Getting the first check was real nice.



Gus: Look at the chart. We did well on day 15. But look at the month.

"Decembe" "Plywo"Mason"Prin"Brush"Brush"Indi"Total"
"r " "od "ite "t "Block"Block"rect" "
"1999 " " " " "Machi"Finis"Hour" "
" " " " " "ning "hing "s " "
"Day 15 "Production "$112,"$9,12" "$2,00" " "$123,"
"Perform" "359 "8 " "6 " " "493 "
"ance " " " " " " " " "
" "Value Added "$36,8"$4,08"$1,6"$873 "0 " "$43,4"
" "/ Income "73 "7 "23 " " " "56 "
" "Hours Worked"729 "182 "55 "15 "0 "310 "1291 "
" "VAPH "$50.5"$22.4"$29."$58.2"$0.00" "$33.6"
" " "8 "6 "51 "0 " " "6 "
" "Percentage "153.2"68.05"89.4"176.3"0.00 " "102.0"
" " "7 " "2 "6 " " "0 "
"Month's"Production "$1,27"$175," "$22,9" " "$1,47"
" " "8,995"713 " "28 " " "7,636"
"Perform" " " " " " " " "
"ance " " " " " " " " "
" "Value Added "$415,"$85,6"$25,"$9,66"$597 " "$536,"
" "/ Income "433 "29 "296 "6 " " "621 "
" "Hours Worked"10,36"2,431"988 "193 "16 "4038"18033"
" " "7 " " " " " " "
" "VAPH "$40.0"$35.2"$25."$50.0"$37.3" "$29.7"
" " "7 "2 "60 "8 "1 " "6 "
" "Percentage "121.4"106.7"77.5"151.7"113.0" "90.17"
" " "3 "4 "9 "7 "7 " " "


Sig: Some people try to get 100% every day. Others just can't do it.
Speed is hard to pick up. There is a lot of dissatisfaction. It
seems the way the schedule is made, that it works against the
incentive. Other times, it seems like the goals are just too
high.

Exhibit 5: The Incentive Program at Vermont Tubbs, Brandon, VT

Vermont Tubbs was purchased in 1989. Founded in 1840 to make ash
snowshoes, its name was originally synonymous with the product. During the
1980's, that venerable company sold its snowshoe operation and used its
bentwood expertise to make furniture. Under Carris ownership the product
line at Tubbs included all furniture items--beds, sofas, futons, tables,
drawers. Each product had a different process flow. Some of these products
had dedicated workers. The others tended to rotate based on demand. The
incentive at Tubbs was based on Sales/hour/person (in contrast to the
pieces/hour/person for Bolts and the value added/hour at the Rutland Mill).
The 1997 Tubbs' standard of $37/hour/person was used as a benchmark, i.e.,
$37/hour/person = 100%. An incentive of 1% of pay was given for every
percentage point above 100%. Please see Exhibit 5 for the Tubbs' division
incentive performance in 1998 and 1999 respectively. Some of the Tubbs'
employees commented on the incentive program:

Lem: The incentive is too complicated. We're supposed to pack
$65,000 a day. Cherry is worth more than ash. If we're not
shipping cherry, we can't make the percentage. We don't make the
orders; we just make the product.

Teed: Attitude is low, why bust your butt. Whatever I put a front on
will ship…There's a positive and a negative side. In some cases,
people are working for the incentive and in others, people are
using it for finger pointing and blaming. We've got too many
glitches still to work out in the shop from the move. In some
instances, we just can't get the quality we need. People are
working real hard but we can't seem to get the systems or the
morale that we had in the old shop. We can't work around it and
we aren't going anywhere with it.

Mac: We are producing more than we ever have. We're not profitable.
I like the way the incentive plan is set up so I know how we are
doing when I see the report on the wall in the morning. I like
the incentive money in my pocket. When I get it, I know the
company is making money and when I don't get the check, I know
it isn't. When we lose on the incentive, we are also losing on
the profit share.

Ned: The incentive is a real good thing. Hard to judge right now if
it is working. We seem to be getting results. We are all paying
attention. We change things around and have a good month and
then we lapse. Morale is a real problem here. We lost a lot when
we hired so many people when we first expanded into this new
plant. We are now in a battle and don't have the community that
is talked about in the LTP. We used to want to come to work. The
incentive is helping but there are lots of bugs here and we're
not being asked how to work them out like we used to be. Some
people on the floor just can't relate to the incentive. They get
frustrated.

Sam: Because we are not as profitable as we were, management is
squeezing us. We only hear the negative. We were real
moneymakers before the move. The incentive, if we can get it,
will help morale a lot—from the money and the way we see
ourselves. We lost a lot of community with the move and it'll
take a lot of incentive to give us back the old way we used to
be able to work and get along.

Exhibit 6: Performance for some representative firms in the Incentive
Program in 1998 and 1999

"Plant " "Jan. "
"1. "Job "90.0 "
"2. "Health Benefits "86.8 "
"3. "Overall Benefits Package "85.5 "
"4. "Life Insurance "83.8 "
"5. "Employee Stock Ownership Plan "83.5 "
"6. "Company 4% Retirement Plan "83.0 "
"7. "Vacation Leave "80.7 "
"8. "401K Plan "79.7 "
"9. "Disability Insurance "78.6 "
"10. "Site Safety "77.0 "
"11. "Profit Sharing "76.0 "
"12. "Site/General Manager "75.6 "
"13. "Transition to "75.3 "
" "Employee-Ownership " "
"14. "Plant/Production Manager "73.4 "
"15. "Personal Leave "73.0 "
"16. "Corporate Management (Rutland) "72.1 "
"17. "Site Supervisors "71.5 "
"18. "Sense of Community "69.8 "
"19. "Sick Leave "64.2 "
"20. "Overtime Opportunities "59.1 "
"21. "Incentive Pay Plan "46.4 "
"22. "Pay for the Job "42.3 "

-----------------------
[1] Carris Financial Corporation is the official name for the Carris
Companies
[2] Long Term Plan for the Carris Community of Companies, Dec. 1994, Bill
Carris
[3] The Effects of Socially Responsible Entrepreneurship in a Manufacturing
Environment, 1998, Cecile G. Betit
[4] If someone earns $7.00 per hour, they received $0.07 for each hour
worked including overtime
[5] Names of those interviewed were changed to preserve anonymity.