The Power of Rewards at Industry International
by
Charles Lamson
Industry International is a manufacturing firm with about twenty-five hundred employees in a number of plants. It is often touted as a monument to the power of financial reward systems. In an industry that has been battered by foreign competition for three decades. It has remained highly profitable in large part because its workers are 2 1/2 to 3 times as productive as those of its competitors. Their compensation is also three times the average salary for U.S. manufacturing employees. They are not unionized, have no paid vacations, and work 45-50 hours per week. Much of their income comes from a year-end cash bonus each year, after company taxes and dividends have been paid. The board of directors determines the size of the bonus pool, which is divided among the employees - based on their base salary and individual merit ratings from 1943 to 1994. The bonus percentage ranged from 55 percent to 104 percent. In 1994, it was 61 percent, meaning that an employee earning $30,000 base salary, and receiving a 100 percent merit rating would receive a bonus of $18,300. The bonus is kept secret from October until a meeting/celebration in December. When the meeting ends, the employees rush to their cars, bonus checks in hand, and tie up traffic for hours going to their favorite places of celebration.
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Most employees use the money to pay accumulated bills. In fact, many spend far in excess of their base salaries, and then put off paying bills and loans until the bonus checks come in. Some employees use the money for less mundane activities. One got his bonus in $100 bills. He spread them on the living room floor, and along with his wife, rolled around on them (among other activities) in celebration. Some made major purchases, like houses, cars and other luxury items. When asked why they spend the money as they do, three answers were commonly given; to live the good life so valued in the United States and to assert their autonomy. One said, "Spending bonus money is the one thing they [management] ain't telling me what and how to do." Workers also enjoyed the social status that money provides. Other employees commented, "As soon as they [friends and neighbors] find out you work there, they think you have money coming out of your ears, and they think I am the richest motherfucker in the world."  What they do not tell their envious neighbors is what they go through to get the bonus. Merit points are based on output quality, dependability and personal characteristics`. the first two can be quantified, leading employees to work like dogs until they are dangerously exhausted by long hours and difficult working conditions.
Things have changed for Industry International. The recession of the mid-1980s sucked. Many workers lost their homes and cars because they were relying on large bonuses to pay mortgages and loans. Workers attributed the decline to many things, but primarily, to management greed and incompetence.
Workers talk about resisting management. They fear that management will eliminate the bonus system, replacing it with a form of profit sharing that is not as lucrative for the workers. Many predict a massive walkout or work stoppage if that happens. Others consider unionizing the firm. Management has persuaded them that the bonus system relies on a nonunion shop. But, if the bonus system is eliminated, they have no reason not to unionize. Others predict that without the bonuses, employees would quit the company - still others predict plummeting productivity and quality. Others threaten physical violence against management and sabotage of the plant if they got rid of bonuses.
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