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Paving the Way to Profitability

February 27, 2000
Related Topics: Change Management, Managing Change, Featured Article
It took more than a couple of aspirins and a call to the doctor to dull the pain at Bayer Corp.'s Myerstown, Pennsylvania, production facility in 1994.

Within a period of only seven months prior to Bayer's acquisition, the plant had changed ownership three times and the workforce seemed to have dissolved as fast as the analgesic tablets rolling off production lines--down from 800 to only 360 workers in less than a year. That was a lot of change to absorb in a facility that had been steadily producing over-the-counter and prescription pharmaceuticals for more than half a century.

But there was more: employees were uncertain about what it would be like to work for Bayer, a German-owned company, and the plant manager post had been vacant for a while. Morale among workers plummeted, and job security became a running joke.

Line managers had worries of their own, not the least of which was ramping up to Bayer's expectations for a 24-hour-per-day, seven-day-per-week production schedule with an acquisition-weary workforce. Even more troubling was the fact that the plant was operating in the red and had been a drain on the bottom line for some time.

Managers realized that given competitive forces and the rate of change in their industry, they needed to streamline operations to have a more secure future in Bayer Corp.'s newly formed Consumer Care Division. But there was no plant manager at Myerstown from January 1995 until August 1996, so the functional department managers--including the HR manager--worked as a team to manage the plant through that trying time. They soon realized that employees needed to be involved at the heart of any turnaround.

"That's where HR came in and really spearheaded the effort," says John Danchisko, manager of human resources and organization development. With the help of Sibson & Co., a global management consulting firm, Danchisko's six-person HR team embarked on a present-state analysis, selecting 93 employees at random to participate in seven focus group meetings to get a clear indication of what was going on at the plant. Employees answered a number of open-ended questions, including "Why do people work here?" and "Why do people leave here?"

Next, HR compiled this information and invited employees who hadn't participated in the first focus groups to comment on the findings. Finally, HR logged in workers' input. Workers noted several positive workplace attributes, such as pay and benefits, in their feedback. However, they also brought up 30 issues that required attention--too many to respond to without more interpretation and analysis. This kind of involvement was new to employees. Before Bayer's acquisition, the management style at the facility was top-down rather than collaborative; and it was reactive instead of proactive.

Developing a roadmap for change.
Given the number of issues that needed to be addressed, John O'Neill, the recently installed plant manager, saw the wisdom of forming another crossfunctional employee team to gather data and make and recommend improvements to plant operations. This "Roadmap for Change" team was composed of employee volunteers from every level of the organization. Fifty employees volunteered for 18 team positions. Many of those who couldn't participate in the first round were able to help with subsequent initiatives.

The team met to review the previous focus groups' 30 issues at a three-day offsite marathon meeting and whittled the list down to five and then prioritized them. They were: 1) Define site goals/ strategy and communicate them in interactive employee conferences; 2) Develop a site communication process; 3) Develop hourly employee and supervisory role definitions and competency profiles; 4) Identify areas of perceived inconsistencies in site practices/policies and determine appropriate action; and 5) Develop a performance measurement process (performance scorecard system).

The team also developed a charter to help move these initiatives forward:

• Identify opportunities to involve the workforce in the roadmap process.

• Ensure that adequate resources are made available.

• Guide and monitor the work of the individual design teams.

• Conduct regular progress checks against the roadmap initiatives.

• Communicate roadmap progress to all employees.

The group knew they were on the right track, but there was still plenty of work ahead to put the initiatives into action. And there was significant opposition within the employee ranks.

Communication is job one.
Knowing that Myerstown employees were skeptical of new management programs because of past failures, plant manager O'Neill and the HR team addressed workers at an all-employee meeting about the first initiative--developing a site strategy and goals. In a subsequent meeting, he introduced all five initiatives and the following site strategy: "To be clearly recognized as Bayer Consumer Care's most effective site in the Northern Americas region in terms of safety, customer service, value-added manufacturing/packaging, and cost effectiveness."

Myerstown employees felt that communication was so important in getting and receiving information onsite performance, department projects, and rumors that they initiated the "Myerstown Information Exchange." This electronic newsletter is sent monthly to members of the site management team, who in turn discuss the information with those who report to them.

Getting everyone on the same page.
Not everyone was enthusiastic about the change process. One of the key points uncovered in the initial focus groups and subsequent team meetings was pessimism about starting a new "program." As one employee put it, "It would be nice if [managers] were really sincere in this, but we've all been through this before. I think this is going to be another flavor of the month."

Several employees enumerated the buzzwords and acronyms for programs that previous managers had tried long ago and that invariably fell by the wayside: WQC (work quality circles), JIT (just-in-time manufacturing), SPC (statistical process control), and team-based manufacturing. Indeed, employees had been barraged in the past with T-shirts and coffee mugs for other management programs.

Managers found it refreshing that employees would be so candid about these issues, and figured that engaging them in a dialogue about past failures and what needed to be done in the future would help everyone work together to make it happen because they'd all be on common ground.

"As an employee, I felt like the entire process was handled extremely well," says Rick Higley, a pharmaceutical operator who served on the Roadmap for Change team. "The thing I really appreciated about the process was that the managers listened to what everyone had to say, treated us as equals, and really valued our opinions."

Resistance to change can be overcome by acknowledging not only the business rationale for change but also the hopes, fears, and dreams of those affected, note the change-management experts at Sibson & Co. In the race to make change happen, organizational leaders often fail to tell the straight story to people who then write their best scripts. Progressive companies go to great lengths to involve people in a transformation that affects them, which sends critical messages about validation and involvement.

Paying for performance.
Though managers tend to get caught up with the bigger picture during a change-management process, foremost in most employees' minds is: "What's in it for me?" While it might seem like a straightforward concept, management efforts to bring about change often fail simply because workers see no payback for the extra effort that is inevitably required.

The HR team at Myerstown realized that it was important to tie company performance to individual and team performance, and so incorporated a program called "Productivity Plus" into the compensation strategy. The program established a scorecard of key performance measures such as right-first-time quality and cost management. Bayer's Productivity Plus program allows employees to earn as much as an additional 8 percent of their base pay in premiums for on-target or above-target performance.

This type of pay-for-performance program was a first for this Myerstown workforce. The idea was that if employees helped to exceed their goals--and the goal at the plant was to break even--for every $3 they made over breakeven, $2 would go back to Bayer, and $1 would go into the Productivity Plus program. No money was deducted from employees' base pay.

The first payout is scheduled for March 2000, based on 1999 results. "Even now, some people are skeptical," says Danchisko. "They say they'll believe it when they see it." At press time, Danchisko reported that the plant had met or exceeded four of the five goals they had set at the beginning of 1999.

At the end of the road, there are successes and outcomes.
Since the beginning of the Roadmap for Change process in 1997, HR and the entire Bayer workforce at Myerstown can boast many positive outcomes. For example, they dramatically improved their schedule attainment measure, which pertains to weekly on-time completion of production and packaging quotas. "Previously, we thought that in our industry, 53 percent wasn't so bad. Now we're routinely at 85 percent," Danchisko explains. "If we didn't get the involvement of the people, we would never have come up with the measures that they did."

And the plant's safety record (the Occupational Safety and Health Administration's total recordable incident rate) has improved. It was 2.74 in 1997. In 1998, it dropped to 1.68, and as of September 1999 it had dropped further to 1.22. At the end of August 1999, Myerstown ranked 27th out of Bayer's 45 domestic sites.

Employee satisfaction is also higher since the change effort. For the past two years, HR has surveyed employees and found that they are much more satisfied with the general work environment. In last year's survey, 68 percent of employees said they were either extremely or very satisfied in working at the Myerstown site. And in last year's survey, not a single employee was concerned about job security.

Last but not least, the plant is now making money. Although management's financial goal was just to break even in 1999, the plant was $2.5 million in the black by the end of 1999, as a result of schedule attainment, quality, and waste-reduction and efficiency improvements. "We've shown that we can do things more efficiently," says Danchisko, "and that goes directly to the bottom line."

"When we first started this, we didn't realize how big it would actually become for our site," he goes on to say. Initially, the goal was just to find out what worked well and what could be improved so that when future business opportunities presented themselves, the plant would be able to handle more production. But what has happened has been no less than a dramatic and wholesale culture change. "Here we are, a few years down the road and we're still heavily into this," Danchisko says. And this year, managers plan to go through the same process again to find out what other business areas they should improve. Now, both employees and managers are clear on strategy--and how to meet their goals.

The process has stood the test of time and hasn't fizzled out like other flavor-of-the-month programs. And it has more than achieved its financial goals.

In the end, the Myerstown site has become a model for other Bayer facilities to emulate. Instead of following, now this group is leading. And it looks like there's a clear road ahead.

Workforce, March 2000, Vol. 79, No. 3, pp. 66-70.

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