‘Stretch Abilities to the Max’ : Lower-Level Workers Get Bigger Share of Rewards

Work used to be “repetitive and unchallenging” for Cathryn Rybicki. As a General Motors financial analyst, she was paid well and liked the security. But the environment was “very structured” and many days her biggest challenge was filling out all of the forms that came her way.

So, when GM three years ago formed a 50-50 partnership with a Japanese robot maker, Fujitsu Fanuc Ltd., Rybicki jumped at the chance to trade in the security of GM for a challenge. Today, as assistant comptroller of the venture called GMF, the 33-year-old is making $10-million investment decisions and is a key player on a team that has built the Troy, Mich., company into a $200-million enterprise employing 550 people. Work, she says, is now fun, satisfying and “stretches my abilities to the max.”

Last year, the pay was more satisfying, too. Because GMF believes in great reward for great risk, nearly half of its employees have their pay linked to the company’s profitability. For her contribution to GMF’s first profit, Rybicki received a share in the winnings that boosted her salary by about a third.

Rybicki is an integral part of a fundamental change occurring in the workplace. Employees at all levels are being invited to expand their horizons and share in the running of America’s corporations.

More like owners than paid help, they are setting their own rules, schedules and pay standards, tackling assignments and solving problems that stretch their imaginations and keep their focus on the bottom line. In short, those who contribute to the company’s fortunes are beginning to share in them.

“We’re giving people a sandbox to come play in . . . and putting the money where the action is,” says Steven A. McNeil, a group general manager at Campbell Soup Co. “It’s a demonstration of our belief that the real home runs don’t come down from the top.”

Similarly, at Atlantic Richfield, chief executive Lodwrick Cook wants “everybody from the high-level manager . . . to people at the hourly level to feel like they’re participating in the decision-making. If people don’t feel like they own a piece of the action,” he says, “then they’re not going to act like entrepreneurs, they’re going to act like paid help.”

Enticing Carrots

Many of America’s small growth companies have been encouraging employee involvement and dangling enticing carrots in front of effective performers for years.

But at the typical large corporation, only a few top executives were thought capable of making the decisions that affect a multibillion-dollar company. To those managers alone have gone the incentives to soar to new heights. Everyone else, assumed to be grateful just to have a job, was melded into a regimented compensation and benefits package based on the one-for-all plan.

“The competitive strength of American firms,” Harvard Prof. D. Quinn Mills asserts in his recent book, “The New Competitors,” “has tended to be at the top--in the capabilities and hard work of top executives.

“In order to remain competitive,” he argues, “American firms are now challenged to strengthen the organization downward.”

Helping the Firm Excel

Enticing people with money is one way to do that. Instead of being paid for seniority and the position they occupy, employees increasingly are being offered more money to achieve objectives they help set or to help the company excel.

As an incentive for employees in General Electric’s small-business ventures to throw themselves enthusiastically into projects, GE holds out the promise of company stock--which it delivers only if the ventures get their products out on time and meet specific growth targets.

When Bankers Trust wanted to get out of consumer banking and into investment banking, it devised a new pay-raise system to help inspire employees to think of themselves as partners in the new deal instead of hired hands. Raises, once based on seniority, are now calculated on a complicated system that judges each employee on his contribution to the company’s profitability. As a result, several employees will earn more than the bank president this year. And Bankers Trust, a mediocre bank seven years ago, now boasts a higher profitability level than any big bank in the country.

Big Bonuses Given

And at the Equitable Life Assurance Society’s agribusiness operations in Atlanta, where employees once received annual merit raises of 10% at most and had little idea why, they now earn bonuses of 50% to 100% of their salaries and get a computer printout every month showing their contribution to the gross profit margin.

Convincing employees that they won’t be fired or demoted for speaking out or for tackling something that fails is sometimes as important as money, companies say, in encouraging employee involvement.

So it was that General Electric threw a big party last year and arranged for a glowing write-up in the in-house magazine--all in honor of a failure. “If GE is to continue to put distance between itself and the bunters of the business world,” Chairman John F. Welch Jr. explained in honoring a team that failed to develop a longer-lasting and more efficient light bulb that will sell, “it must take the big swing with increasing frequency. That may mean some strikeouts along the way. But the prospects of hitting a home run make the risks worthwhile.”

Losing Is Real Possibility

Others try to emulate not just the participation and rewards of a start-up, but the risks as well, on a theory espoused by Stanford senior lecturer Steven C. Brandt: “You can’t feel winning when there is no chance of losing.”

Losing big is a real possibility for the 40 Raychem employees hustling to give Raychem’s growth--and their pocketbooks--a shot in the arm. The 40 employees, deemed to be particularly important in influencing the company’s prospects, put up $10 million for a special issue of stock. They stand to lose millions unless the $700-million Menlo Park technology company reaches the $1-billion sales hurdle by 1988, averages an annual rate of return on its equity of at least 15% a year and improves its earnings by at least 20% a year.

Based on the recent value of a share of Raychem stock, they could either lose almost $4 million of their original investment or make a $44-million profit.

“This makes it a little easier for people to do some tough things,” says President Robert Halperin.

There are few negative remarks about participatory management to be heard in the corridors of companies trying it.

Measurable Improvement

GM Chairman Roger Smith claims he already sees measurable improvement in the quality of GM products because of greater worker involvement over the last two years. Campbell Soup cites a dramatic increase in product introductions. Equitable points to higher productivity. NCR, the computer and cash register company headquartered in Dayton, Ohio, cites greater resilience during a recession in its industry. And Kollmorgen, the maker of such technology products as submarine periscopes and printed circuit boards, claims its employees’ overall effectiveness has at least doubled.

“People like to play in a game, to play hard and to bet on the score of that game,” asserts Kollmorgen Chairman Robert Swiggett. When Kollmorgen broke itself into small teams in 1970 and turned over decision-making power to employees, its output per employee doubled and its on-time delivery rate rose to 90% from 60% within six months--all in the middle of a depression in its industry.

Employees, by and large, are even more effusive in their praise of the new system.

“Wonderful,” says Robert Wilkinson of the shift from Equitable division manager to subsidiary president. “As an employee in a large organization you’re never totally in control. There are all kinds of frustrations . . and you spend a lot of time moving papers from one side of the desk to another. Now, I control my day and worry about the direction of the company.”

Toll on the Family

“I’ll come by here on Saturday,” says George Puskar, president of the Equitable’s real estate company in Atlanta, “and I’ll look through the roster because we all have to sign in. And it is simply unbelievable to see the number of people working now.”

Some worry about the toll that extra responsibility might take. “High pressure and highly absorbing work is hard on a family,” notes Yale management professor Rosabeth Moss Kanter.

Rybicki concedes that the 12-hour-plus work days at GMF Robotics have changed her home life. Household chores she did herself are now done by paid help and her husband and child sometimes come in “second place” to her work, which is now “a very main focus in my life.”

Still, she says, “I wouldn’t go back (to her GM job) for any amount of money.”

Not everyone, of course, has taken to the new ways.

‘Creative Compensation’

“This notion of creative compensation is important to us because the guy with his mortgage on the line doesn’t go home at 6 o’clock,” says Michael Carpenter, a GE executive vice president. “But not everyone wants to hock the house and mortgage their family for $3 million.”

As Carpenter suggests, even in companies that are demanding more entrepreneurial behavior from all of their employees, some people simply aren’t as daring as others and don’t like the strain of taking their job home with them.

“Some of these people are running around with double diapers on trying to handle all this new risk,” says Robert Istnick, a partner at Hewitt Associates, a Lincolnshire, Ill., consulting firm. “These people, quite frankly, are paid adequately by a flat salary. It’s the guarantee that brings them to work every day, not the thrill of making sacrifices so they can get a chance at a long-term gain.”

That poses a challenge for employers: How to make both those who like to avoid risks and those who like to take them strive for excellence on the company’s behalf, satisfy their vastly different needs and do it all without further inflating the corporations’ labor costs.

Tailored Benefits

Increasingly, their solution is to replace the standard companywide pay and benefits plan with a multitude of new ones tailored to each of the companies’ businesses and to individual contributions to the companies’ fortunes.

So at Security Pacific Corp., for example, bankers’ wages are mostly straight salary with a modest bonus awarded for superior performance, an arrangement typical for their industry. But Security Pacific employees involved in financing new businesses get a chance to share in the wealth of the ventures they fund.

“The country is caught on the beginning of a wave of companies starting to do this,” says E. Webb Bassick IV, a partner at Hewitt Associates. “For many, it’s a matter of survival.”

This approach has the added advantage of stemming the drain of key employees to independent companies. Bankers Trust was losing its investment banking specialists to Wall Street, where they were getting a cut of each deal instead of the low bankers’ wages that Bankers Trust paid for the same work. The merchant bank now has different pay scales for its deal makers and more traditional bankers and has slowed the talent outflow to a trickle.

Question of Fairness

The downside is the fairness question this approach raises.

“If suddenly you incentivize an individual to take great risks and give him huge rewards,” says William Buster, an executive vice president at NCR, “then other people would say: ‘Hey, I contribute just as much.’ ”

Calling the creative pay issue “one of the toughest we’ve faced,” Buster says, “frankly, we don’t know how to do it.”

NCR isn’t alone. Of 42 companies recently polled by New York University’s Center for Entrepreneurial Studies, 75% said they don’t reward entrepreneurial behavior any differently. All thought they should, but didn’t because of resistance inside.

Other Types of Motivation

So, some companies turn their attention to other types of motivation, going to extraordinary lengths to recognize and reward excellence and inspire original thought.

When Daniel Dye, Security Pacific venture capitalist, tired of big city life in Los Angeles and the long commute between Santa Monica and Newport Beach, his boss gave him permission to work out of a country home in western Pennsylvania rather than lose him to another venture capital firm.

There is popcorn at 5 every night, beer fests on Fridays and hilarity on holidays for the employees in Edward Cheramy’s small-business development unit at the Los Angeles office of Price Waterhouse, the big public accounting firm. The maverick partner, who organized the team four years ago when life as a bean counter lost its challenge, showed up one New Year’s Eve in the garb of Baby New Year--diapers. And when the team exceeded Cheramy’s first-year prediction of attracting two new clients a week, there were T-shirts all around, boasting “CPSers did it 107 times.” The freewheeling atmosphere isn’t just for fun. Only four years old, the unit already has a staff of over 100 and nearly 400 steady clients.

Most Imagination

But the award for most imagination in the line of motivating employees surely goes to Raychem.

When its top executives became concerned that their growth was slowing and their work force complacent, they hired a fleet of helicopters to land at a Raychem meeting place, take the managers hostage and spirit them away to a beach at Big Sur.

There, they were confronted with huge banners declaring such things as “Innovation” and “$1.7 Billion,” their sales target for 1987. These weren’t just fluttering in the breeze. They were attached to the backs of real camels and elephants.

“We needed to really get people thinking about taking risks,” says Halperin, Raychem’s president. “I think we got their attention.”