Author: Shannon Talbott

One hundred years ago, Rudolf Diesel patented the diesel engine, Wilhelm Röntger discovered the X-ray and the U.S. Congress enacted the first peacetime federal income tax. Politically and technologically, the world today is clearly a different place than it was a century ago. But change hasn’t been limited to politics and science. Just as the Millionaire multiplication machine of 1894 has evolved into the personal computer and Bill Clinton has replaced Grover Cleveland as president, corporations that have been around for at least 100 years have changed with the times. As these companies evolve, their HR departments play a vital role in managing this change and ensuring that the companies retain their competitive edge.

For many companies, heritage affects the composition of the work force.
Regardless of a company’s age, changes in the social, political and legal environment affect all aspects of business, including human resources. But in century-old companies, the effects from societal change are magnified. Not only have older companies been around to experience more evolution, but also many agree that company age-and the tradition that comes with it-has an effect on the work force and its composition.

At Santa Fe Pacific Corp., which celebrated its 125th birthday last year, company age translates into a family culture. “Our age brings with it a wealth of tradition and loyalty to the company,” says Carol Beerbaum, vice president of human resources at the Schaumburg, Illinois-based corporation. Loyalty is displayed through low turnover: The average service for Santa Fe’s 15,000-member work force is 20 years, and the average employee age is 45. “It’s part of the tradition of the rail company to have a longer average service,” says Beerbaum. “When we’ve been in business 125 years, it isn’t surprising that we’ve had more people who’ve been here 20 and 30 years. People tend to stay with the company.”

In addition to a high individual retention rate, Santa Fe hires generations of family members. “We have employees who had grandfathers, aunts and uncles who worked with the company,” Beerbaum says. She adds that she regularly hears stories about employees’ grandparents and parents who retired after 35 years with Santa Fe. “I often hear things like, ‘I’m one of five in my family who’ve worked for the railroad,’ or ‘My grandfather was Santa Fe’s first engineer.'”

Mert Hornbuckle sees the same trend at his organization, Deere & Co. “It isn’t uncommon for us to have third- and fourth-generation people in the corporation,” says Hornbuckle, director of compensation, benefits and employee development at Deere. “Also, a majority of our people started their careers with Deere; a large percentage of our work force is in their late 40s and has 22 to 24 years of experience with the company.”

Although Hornbuckle didn’t begin his career with Moline, Illinois-based Deere, he’s been with the corporation for approximately 20 years himself. And he says that an organization such as Deere, with a long heritage, must work extra hard to communicate change to its employees. “It’s clear that a company as old as Deere has a tremendous communications challenge,” he says. “Many of the company’s values become ingrained. If you start to shift those values, or business conditions demand that you modify them, the communications burden is much more substantial than in a fairly new corporation.”

Beerbaum agrees that sometimes Santa Fe’s family tradition has its drawbacks. She admits that when she implements some new policies, people remember how things were done in the past and are reluctant to deviate from the established practice. For the most part, however, she says that the company’s link to the past-and the experience Santa Fe has to build on-helps the HR department implement necessary policies and practices. Because the majority of employees have worked together for many years, Beerbaum says that there’s an intensified atmosphere of cooperation and cohesiveness. “Our people pride themselves on being able to react quickly to change,” she says. “It helps that we’re a really unified group and have a lot of experience behind us. We know what works and what doesn’t.”

Like Santa Fe and Deere, OshKosh B’Gosh, Inc. feels a link to its early years. This is especially true now, as the company nears its 100th birthday. When the company was founded in 1895, Frank Grove of Oshkosh, Wisconsin, aimed to produce high-quality, rugged work coveralls for the area’s farmers and railroad workers. His company, Grove Manufacturing, was renamed several times before adopting its current name in 1937.

For more than 70 years, OshKosh was known for its adult workwear. In the 1960s, however, the company experimented with marketing a miniature version of its full-size overalls. This trial was a success, and the company moved in a new direction.

Today, OshKosh still produces some adult workwear, but clothes for kids represent 95% of the company’s total sales. “Within a 10-year period, we went from a $20-million regional workwear company to a $315-million kidswear business with a workwear component,” says Donald Carlson, vice president of human resources for OshKosh. The business changes affected human resources drastically: “Before the change, the human resources department was basically a maintenance function because that’s all that was needed-hiring, maintaining the OSHA logs and that sort of thing,” Carlson says. Approximately five years ago, top management studied the company and its future and recognized the need for greater HR involvement in business activity. “As we became a more complex business in a more complex environment, we needed to add capabilities in the HR arena,” he adds.

One of the steps OshKosh took to make the change was hiring Carlson: He joined the company four years ago. Since that time, human resources has taken many steps forward. Today, instead of pushing paper, the HR professionals play an essential role in ensuring the success of the company. “We’re businesspeople who have some particular HR skills,” says Carlson of the current department. “We’re focused on helping the organization achieve its business objectives.”

Carlson says that the transformation has been gradual, but the long-term results are obvious. “When you’re involved in the process on a day-to-day basis, it’s difficult to measure,” he says. “If you want to really see the change, you have to step back and look at it long term. It’s similar to going up a mountain and putting a stick in a glacier. If you go back up a year later, you can see that the glacier has moved.”

Despite the slow rate of change, OshKosh’s history and sense of tradition can sometimes make it difficult. Carlson says that when HR began implementing such policies as teamwork and total quality, the department met some resistance. “Our habits were ingrained, and our culture was taken for granted,” he says. “We were dealing with an ingrown set of principles that had to be changed. All of us had grown up together and hadn’t thought much about how things were done in other apparel industries, much less what was going on in other types of industries such as automotives or electronics.” Despite this frustration, Carlson sees the company’s history as its most valuable asset. “We have a consumer franchise that’s based strongly on our history,” he says. “Our people are very proud of that.”

Some companies must break from the past to move into the future.
At such companies as Santa Fe, human resources departments find small ways to affect change. To combat its occasional reluctance to move into the future, Santa Fe’s HR department strives for a mixture of employees-some long term, some new to the company. “That mixture has helped on both ends,” Beerbaum says. “The new people bring in fresh ideas, and the established employees help with training and keeping traditions intact.”

At other companies, greater measures are necessary. Such was the case at the Chicago-based Tribune Co. Since the corporation’s beginnings with Joseph Medill’s Chicago Tribune in 1847, forwardthinking and a sense of adventure have been part of the company framework. In fact, the abolitionist Tribune played an important role in promoting Abraham Lincoln for president in 1860.

The sense of adventure that has prevailed throughout the company’s history led the Tribune to made some drastic modifications to its business identity. In response to societal change, the company has moved away from its position in traditional media and has reidentified itself as an information and entertainment company. Today, the Tribune has 29 business units ranging from the cornerstone Chicago Tribune to the television talk show Geraldo and an interactive service, Chicago Online. “We see ourselves as a growth company,” explains Sheryl Favia, manager of benefits and compensation at the Tribune. “We want to take content that’s created within the company and deliver it to our customers in whatever medium they’d like to receive it.”

The Tribune’s business response to technological and societal change led to a break from the past in HR. Instead of retaining its traditional role as a department focusing on labor relations, human resources did a turnaround. Two years ago, the Tribune formed a human resources service center at the corporate headquarters in Chicago to provide centralized HR functions to the business units nationwide. Although each unit has its own human resources staff onsite, the service center provides corporatewide counsel and helps to facilitate change. “We provide the business units with management development and training, labor-relations advice and counsel, and assistance with employment and EEO,” says Luis Lewin, director of human resources administration at the Tribune. Also, Lewin says that the service center manages a corporatewide job-posting program for managerial positions, so that anyone in the company who has the proper qualifications can apply for openings.

In addition to providing these extra services, the HR service center acts to standardize the company’s benefits and compensation programs. “In an environment in which most companies have started to outsource a lot of their benefits administration, we’ve made a conscious decision to insource,” Favia says. “We feel that our employees can get the best service from fellow Tribune employees who are familiar with the culture in which they work and can relate to the company’s values and long-term strategy.” Not only does the standardized process simplify administration and reduce cost through increased volume, it also reduces legal liability. “We feel that we’re better able to give consistent treatment to employees and avoid the potential pitfalls of each business unit interpreting policies its own way,” Favia adds.

Overall, Lewin says that the service center makes human resources better able to help the company move into the future. “For human resources to be successful, we need to stay flexible and progressive and look into upcoming growth,” he says. “It all comes down to managing change.” Bob Carr, a spokes-person for the organization, agrees: “It’s wonderful to have a 147-year heritage of serving a variety of customers and taking a leadership role in providing credible information, but Wall Street looks at us as a growth company. They don’t see us as a traditional operation.”

The Tribune isn’t the only established company making a huge effort to revamp business and human resources. The same is true of Alagasco, a natural-gas distributor based in Birmingham, Alabama. Ten years ago, the company had what top management now calls a “utility mindset,” which could be traced back to its roots as Montgomery Gaslite Co. in 1852. Dave Self, vice president of HR and administration at Alagasco, describes the previous corporate attitude as paternalistic, yet autocratic, in nature. “The company always knew what was best for employees,” he says. “It was a function of the age of the company and the nature of our business.”

Even though this mindset was part of the company’s history, it wasn’t something that management wanted to continue. “We had some new leadership in the company that recognized the fact that not only was our industry in the midst of change but the pace of that change was going to significantly increase in the years to come,” Self says. “If we were going to be successful in the future, it called for a radical transformation in our philosophy and in the ways we treated our people.”

Under the leadership of its new president, Mike Warren, Alagasco discarded its old HR policies in 1984. The company called it “killing dinosaurs.” As Self explains, “Heroes in our company were those who found the dinosaur and killed it.” And how does he define a dinosaur? “A dinosaur is the ancient way things were done around here,” Self says.

The transformation started at the top. Warren made himself available to the company’s employees, visiting all of their worksites and talking to them in small groups. He explained that he was determined to get rid of the utility mindset and change the company’s overriding philosophies. “We knew that we had to depend on empowering the employees who were closer to the customers,” Self says.

Employee feedback helps to keep HR up to date.
Many established companies, including Alagasco, rely on employee feedback to help them remain competitive. At Alagasco, one initiative is an employee-suggestion program. When Warren joined the company, he was determined to remain accessible to employees at all levels. He knew, however, that he would have limited time and wouldn’t be onsite at the employees’ worksites as often as he’d like. His solution was the “Hey, Mike” program, which he began in 1985. As an alternative to the traditional employee suggestion box, the company printed 5″ x 7″ cards and distributed them to all worksites. Each card had an introductory line that read, “Hey, Mike, have you ever thought about….” Still today, Warren and the company encourage all employees to respond. “Whenever employees have an idea, a suggestion or a complaint, they write out their comments and send the card to him,” Self says. The comments can be anonymous; however, if they are signed, Warren guarantees a personal response. “He either writes, calls or stops by the worksite the next time he’s in the area,” Self says.

Warren does more than simply read the cards-he considers each suggestion seriously. In fact, the program has resulted in changes that include company-car upgrades for lower-level management, no-smoking sections in company breakrooms and a variety of new training programs for employees. This consideration of employees’ feedback may be why interest in the program continues. In the first month of the “Hey, Mike” program, Warren received more than 100 responses from employees of all levels. Nine years later, he still gets approximately five suggestion cards per month. “Employees can see that we care about their expectations and needs,” Self says.

Alagasco also relies heavily on employee input to remain current in other aspects of business. For example, the company has conducted several quality-of-life focus groups to identify work/ family issues that need attention. As a result, the human resources department is looking into such initiatives as instituting alternative work schedules, redefining its sick and family-care leave policies and adopting alternative dispute-resolution programs.

Just two months ago, the company also created a diversity council to address diversity-specific issues. The council is made up of employees who represent the diversity of the company and are from all levels of the organization. Although the council has only 14 members, more than 50 employees volunteered to participate.

Self says that the council will meet in a working-lunch format approximately once every two months. Warren and Self both will attend every meeting, the first of which was held in July. “It’s more than a training program,” Self says. “We’re bringing diversity into the culture of the company. We’re using the council to help evaluate where we are as an organization with respect to diversity, and how we can improve day-to-day worklife.”

All of Alagasco’s progressive initiatives help to further eliminate the antiquated utility mindset. And despite drastic change, Alagasco’s employees are accepting. Under the new practices, their input is more highly respected, and they’re empowered to make a greater difference in the organization.

Santa Fe Pacific has similar efforts. To obtain the most honest and useful feedback from its employees, the company conducts frequent employee surveys. The surveys, which were started approximately two years ago, are designed to help HR determine employees’ concerns: what’s important to them, what areas can be improved and how Santa Fe can be more successful as a business. Following the first survey, the human resources department identified several areas that needed some attention, and these areas became priorities for change.

One area that was of specific concern was compensation and benefits. “Santa Fe had been through so much restructuring-we’d sold off businesses, we’ve downsized, we’ve made so many changes during the past five years-that people felt compensation hadn’t been looked at and wasn’t as equitable as it should’ve been,” says Beerbaum. Santa Fe responded to the employees’ concern by updating the compensation package. “All of our programs now are driven by Santa Fe’s success,” she says. “In compensation, we tied our incentive programs to Santa Fe’s business objectives.”

The result is a very different package than in the past. One difference is that all salaried employees at Santa Fe are on an incentive plan that’s tied to net revenue from operations. Beerbaum says that before the program, many Santa Fe employees didn’t think that they needed to understand these financial aspects of business. Now, the net revenue affects them personally, and they are more closely tied to the finances of the company. “Our people now understand what expenses go into the net revenue and how new customer orders help to drive the figure,” Beerbaum says. In addition, all salaried employees at Santa Fe now have share options. “Our people really follow the share prices of Santa Fe now; they know what drives that price,” says Beerbaum.

Santa Fe’s HR department also has looked at the employees’ other areas of concern, which included career opportunities and communications. Through what is called career listings, Santa Fe’s HR department publicizes all job openings on its electronic-mail system. “We list every single opening, to whom it reports, where the location is and what the job requirements are,” Beerbaum says. “We list every position, even if it’s a part of our union agreement or it’s something we’re recruiting for externally.” As part of career listings, the HR department also publicizes the number of promotions annually.

Although Santa Fe developed this system to enhance employees’ possibilities for advancement and improve communications about career opportunities, it serves another purpose as well. As the company has changed through the years, job requirements have been altered drastically. “Before, we would look for a switchman who would do nothing but manual labor,” Beerbaum explains. “Now, our switchmen require some background in math and electronics because everything is computerized.” The career listings offer HR an opportunity to distribute information regarding changes in job responsibilities. “We aren’t needing people who will do the jobs as they were done five or 10 years ago,” she says. “We need a higher level of education and a higher level of initiative and leadership for all of our positions.”

Most older companies agree that they must listen to employees to effectively manage change. Even the Tribune, when creating the HR service center, formed a panel of HR people from the business units to help establish the new set-up. “Before the changes took place, the company formed a steering committee of leaders from business units nationwide,” says Lewin, who was working at the Sun-Sentinel in Ft. Lauderdale, Florida, at the time and was selected to serve on the committee. “We talked through the changes with some of the management here. They needed input from those in the field.” As the Tribune’s HR service center continues to evolve, feedback from those in the business units remains essential to success. “Cooperation is the only thing that makes this system work,” he says. “Before we initiate anything in the service center, we get a lot of input from people in the field. We need their expertise.”

Age-old companies move into the future.
Just like all other corporations, century-old companies must anticipate change. Today, that includes preparing for rapidly advancing technology and the Information Superhighway. But because these particular businesses have a wealth of experience and years of history behind them, their movements differ slightly from their younger counterparts. At the Tribune, the company is moving full steam ahead by connecting their two foci-broadcasting and publishing-and expanding into new media such as online services and ChicagoLand Television News, a 24-hour cable news channel that utilizes the company’s newspaper staffers. Through the HR service center, the corporation is prepared to service new business units as they’re created. During the past two years, the center has proven itself effective. But Favia says that its success is due, in part, to the experience the company had to build on. “It was established by combining the best practices from throughout the company,” she says. “It was an extension of what already had been done.”

At OshKosh, adapting to new markets is already part of the company’s history. Just as the corporation changed its focus from workwear to kids’ clothing in the late 1960s, future change will be necessary for the company to remain competitive. Experience may make this transition easier. “We must realize that the world that treated us so well in the ’80s-when we had a niche to ourselves-has changed,” says Carlson. “We have to anticipate what the world of eight or 10 years from now will look like and what the customers are going to demand of us.” This affects HR: “To remain process focused, this organization will require even greater self-reliance and competency from people at all levels,” he adds.

And at Deere & Co., the corporation continues to diversify into new businesses including health care, insurance and credit. But as the markets change, the company’s tradition and history remain constant. Hornbuckle says that the connection between past and future is clear. The company began with one product-a plow to cut through the hard turf in Kansas-and three simple ideas: a desire to produce a quality product, a belief in customer service and the idea that employees are assets to the company. “John Deere built this company around some basic principles,” says Hornbuckle. “Today, if you were to sit down with our CEO and say, ‘What’s your vision?’ he’d come right back to quality, a customer focus and making sure our employees understand that they’re value-adders.”

At Johnsonville Foods, employees are talking about each other. But they aren’t gossiping near the watercooler or spreading rumors in the lunchroom. This talk is encouraged by management: It’s peer review.

More than a decade ago, as part of an improvement effort, Johnsonville Foods incorporated a team structure into its work environment. Within this framework, open communication and coworker feedback became vital to the functioning of the business. As employees learned to work together as part of high-performance teams, they began to incorporate the essentials of peer review into their day-to-day jobs.

Today, Johnsonville’s employee feedback isn’t informal, as it was in the 1980s. Instead, the Sheboygan, Wisconsin-based sausage manufacturer uses a structured peer-review process in practically all areas, including not only performance, development and dispute resolution, but also compensation.

Peer review’s move into the compensation arena began four years ago at Johnsonville, with the company’s approximately 400 hourly employees, or members. Tim Lenz, an employee in Johnsonville’s manufacturing facility, was one of many who were frustrated with the company’s hourly compensation strategy.

“There really wasn’t a system anymore,” says Lenz, who’s now assistant coordinator for Johnsonville’s Riverside, Wisconsin, plant. “When I came to the company in 1979, we had several wage scales for positions throughout the facility. These slowly deteriorated, and it had gotten to the point where no one knew how to get a raise.”

Leah Glaub, member services (equivalent to human resources in many companies) coordinator at Johnsonville, agrees that the company’s hourly compensation strategy wasn’t ideal: “We had a system in which the squeaky wheel got the oil,” Glaub says. “People would pick up different responsibilities, then go to their coaches and get salary increases. There wasn’t really an established system, and this caused frustration among people.”

A team of employees leads the design process.
Instead of simply complaining about the haphazard process, Lenz decided to do something about it. In 1990, he went to the vice president of manufacturing and proposed that a group of employees work together to rethink the hourly compensation system. The vice president not only approved Lenz’s suggestion, he also agreed to work with the team as needed throughout the design process.

Having obtained this support, Lenz hung a note on the plant bulletin board, inviting other employees to help him try to improve the hourly compensation system. He says that approximately 12 people signed up to help. After several introductory meetings, eight of these volunteers made the commitment to be members of the hourly compensation design team.

During one of the initial meetings, the team members decided that they needed some assistance from member services. “We invited a member of our company’s [HR] department to join the team, because we knew that those skills would be necessary, and knowledge about compensation would help us determine the right system for our company,” says Lenz. Because the team members had little or no expertise in the compensation area, this HR person (later replaced by Glaub) was able to conduct initial research for the team and gather useful data to assist them in the compensation system’s design.

As part of the research process, team members also conducted focus groups of employees at Johnsonville to determine their needs and expectations, benchmarked other companies to evaluate different types of compensation systems and talked with consultants to generate ideas.

Lenz says that one particularly helpful research project was a site visit and one-day seminar on skill-based pay sponsored by Aid Association for Lutherans, a fraternal benefits society in Appleton, Wisconsin. This seminar helped the team determine what type of compensation structure would work within Johnsonville’s culture, he says.

Cumulatively, this research led the team to develop four primary philosophies for Johnsonville:

1. Employees need to know exactly what they have to do to get a raise.
2. Employees should have responsibility for compensation. They should be able to request a pay increase when they feel they’re ready.
3. Employees should be involved in the review process.
4. Base pay should equal the average market rate based on traditional internal and external values.

Once these goals were articulated, the team set about to meet them. But this didn’t happen overnight. In fact, because the team met and discussed the project only once every two weeks on average, the final proposal wasn’t introduced until 1992. “If I were to do this again, I’d like to see the team move faster,” says Glaub. She adds that part of the problem was the team’s determination to introduce a flawless program: “Sometimes, you can’t just sit there and [try to] make something perfect. You just have to go try it out and then start tweaking it from there.”

The process was a long one, but the result was strong. After two years of work and cooperation, the team members presented management with a compensation system that directly responded to the four philosophies they had established for Johnsonville.

Lenz says that as a whole, the senior ranks approved of the team’s proposal. Because he had kept management updated along the way and because the vice president of manufacturing worked with the team off and on throughout the process, there weren’t any surprises during the final presentation. “A few were skeptical, but the majority were supportive,” Lenz says. Therefore, after presentations to employees and a vote by all members of the work force, the new compensation system was introduced.

Peers review performance to determine pay increases.
Overall, the compensation system is what Lenz describes as “pay-for-performance.” Although grounded in a traditional evaluation structure-a point factor-it’s also heavily reliant on a peer-review process.

The system centers around result blocks for each of approximately 80 positions. These blocks each comprise as many as 15 separate criteria, which highlight the key requirements for each job. Lenz says that most positions have two or three result blocks that are completed in progression, but some positions have as many as five. “Our belief is that you start out with the tasks that you must accomplish to do the basic parts of your job,” he says. “These make up the first result block. Once you know how to do these tasks, you progress to the skills you need to know to perform at a higher level. Finally, you go on to the results that you should be able to achieve because of the competencies that you have.”

Going along with this belief is a philosophy that people should be paid for what they do, and shouldn’t be restricted from learning and growing. Therefore, the company sets no limits on how quickly employees can move through their result blocks. “If someone is doing the job, we don’t want to hold them back,” Glaub explains. “We want to pay them what the job’s worth.” She adds, however, it takes employees months-and sometimes years-to work through most of the blocks: “If you have them set up right, people are going to be challenged and won’t test through them too quickly.”

When employees are ready to be evaluated on a result block, they must follow specific steps. On the bulletin board in each plant, there’s a form to initiate this compensation change process. When an employee feels prepared to “pass” an evaluation of all eight to 15 results, he or she fills out the form, which includes the employee’s name, title and team, as well as the result block to be evaluated. This completed, the employee passes the form on to his or her supervisor, or coach.

Together, the employee and supervisor select some of the employee’s peers who already have completed the result block being evaluated and also are in a position to see the employee’s work on a regular basis. These employees-plus the employee’s team leader and supervisor-become the peer-review team. Glaub says that usually this number comes to four or five, but “it depends on the job and how many people that person really interacts with day to day.”

For each result in the block, there is a different measurement-evaluations that range from written quizzes to timed demonstrations. “They’re supposed to be as objective as possible,” says Glaub. “We really are looking for proof of new competencies.” She admits, however, that some results-especially in the highest result blocks-need to be quite subjective in nature. “For example, I have payroll coordinators on my team,” she explains. “One of the things that they have on their last result block is that they must make meaningful contributions to project teams.” Understandably, “meaningful contributions” aren’t easily measured. Therefore, the peers reviewing the result block must analyze the employee’s past meeting participation and come to a consensus on whether he or she met the criterium.

Glaub says that for most supervisors, this peer-review process is refreshing. “They get a lot of input,” she says. This makes the performance review and salary decision easier: “The decision isn’t based only on their observations-it’s based on a number of different people’s observations. They feel more like facilitators and less like judges.”

But what do employees think about it? Lenz says that they like having more control over their salary increases. “We don’t have the good-old-boy system anymore,” he says. “People, for the most part, don’t mind honestly evaluating their peers, because that means that they will be evaluated fairly, too, when it comes time for their result-block test.”

Glaub says that if employees are uncomfortable participating in the peer review, she does what she can to make it easier for them. “If someone is having a tough time, we make them responsible for an area that’s easier to measure so that they don’t feel they’re getting into personal issues,” she says. But-in the end-peer review is required of everyone. “Since the 1980s, we’ve been a very team-oriented company,” Glaub says. “People are used to giving a lot of feedback and being involved. If it’s uncomfortable for some people, they have to get used to it if they want to work here. That’s just the way we operate.”

Monthly contract fulfillment determines individual bonus.
As the hourly team was completing its task, another team of approximately 35 employees began looking at Johnsonville’s bonus system. Working closely with Glaub and the member services department, the team developed a monthly companywide bonus system that also requires that employees talk openly with-and about-their peers.

According to this plan, Johnsonville employees follow designated steps to receive their bonuses. The process begins with all teams, salaried members and coaches writing six-month contracts, stating their six-month goals and the ways they plan to meet them. The goals must fall into the framework of four overriding company endstates: a noticeably better product, outstanding financial results, outstanding customer service and outstanding people.

In addition, the six-month contract contains professional-development goals. These ensure that each employee continually is challenging himself or herself to learn more and provide increasing value to his or her customers, says Gene Rech, southwest regional sales coach for Johnsonville. “If you aren’t at fair market value, you want to work on the skills that will get you there,” he says. “If you are already at fair market value, you should include actions that will move you further ahead.” Glaub says that these professional-development actions vary greatly from job to job and month to month, but examples might include reading a specific book or learning a new computer skill. “It’s any action that will help you to move your position forward,” she explains.

At the beginning of every month, each employee writes a contract that includes his or her actions that will help accomplish that month’s goals-and eventually, the six-month goals as well. “The whole purpose is to help people focus, prioritize and manage their time,” Glaub says. “The contracts really keep [employees] moving on long-term actions.”

To obtain feedback on this performance, individual employees select three internal customers-or people who will be affected by the employee’s work-as feedback providers each month. Through the company’s electronic bulletin board system, employees send their contracts to the three customers. At the end of the month, these customers respond through surveys that provide detailed information on employees’ performance.

Employees also post their contracts to a companywide bulletin board so anyone can read others’ monthly goals and actions and comment on them. “We realize that people have more than three customers each month,” Glaub says. “This allows for more feedback from others who may be interested. People do get comments on their contracts through this system.”

Glaub says that the company teams meet at the beginning of the month to review contracts and ensure that the employees’ goals are attainable. “It’s the team members’ role to say up front, ‘Hey, I don’t think you’re doing enough for your bonus this month,’ or ‘Hey, I think it would work out better if you focused on some different activities,’ ” she says.

At this same meeting, the team discusses the customer feedback from the previous month’s contracts. “If you do something for someone and the team thinks you could have done it better or differently, you’ll receive feedback that will help you improve your performance next time,” Glaub explains. Lenz adds: “If there was an honest effort and constant communication, then we use the attempt as a learning experience.” This isn’t always the case, however. “If you don’t complete a project, your team may not give you your whole bonus,” Glaub says.

This is an important aspect of the system. As it’s set up, bonuses-which are based on the company’s performance-are distributed monthly to teams as a whole. Each individual has a bonus target for the year, which Glaub says usually makes up 10% to 25% of an employee’s base pay. However, the monthly responsibility for dividing the bonus is left to the team members, who must decide collaboratively if the individual members have fulfilled their contracted obligations. “Sometimes, employees come in below target at the year’s end; sometimes they get 110% of their targeted bonus,” Glaub says. “The target is established so individuals can measure their performance against a pre-established dollar amount.”

Glaub says that in the event that contracts aren’t complete, the team usually knows before the month’s end. “Team members are supposed to come tell us halfway through the month if they’re having some difficulties or if something came up of higher priority,” Glaub says. “In those instances, the customers must say that it’s OK that the member didn’t finish the work [and fulfill the contract].” Usually, in these circumstances, Glaub says the employee will continue to work with the same customer the following month.

Lenz says that there have been cases in which team members didn’t receive the bonuses expected: “We’ve had team members who lost some of their dollars because they didn’t fulfill some of their contract obligations.” This is rare, however. Why? Not only is there a financial incentive to complete tasks, but the contract also encourages hard work. “You’re making a commitment when you write your contract, so you have to plan well and organize your time to get your work done,” Glaub says. “People don’t like to go to others and say, ‘I didn’t get finished.’ “

The peer-review process builds bonds between workers.
As Johnsonville enters its third year of peer review for compensation, everyone agrees that the benefits are evident. For management, the process alleviates some of the pressure caused by performance reviews and salary decisions. And for employees, it creates structure and needed challenge. “It can be stressful because the bar always is raised, and you can’t get into those comfort levels where you can just coast,” Lenz explains. “But, there’s always a lot expected of you, and your contributions are valued. Plus, everyone knows what needs to be done to get a salary increase.”

In addition, Rech says that there’s a better bond between employees as a result of the review process. “People know what’s being done throughout their areas. Everyone knows what others are working on, and each member is accountable to his or her peers.” Overall, says Rech, the peer-review structure improves employee communication regarding job descriptions, work flow, accountability and productivity. Or, in other words, peer review helps this sausage company create more than one type of link.