Wednesday, 18 June 2008

He Makes People Proud of Their Jobs - McCormick

In McCormick & Company, the employes[1] help to run the business

He Makes People Proud of Their Jobs

Laurie York Erskine

Condensed from Future {July, '50), copyright 1950 by United Stales Junior Chamber of Commerce, Akdar Bldg., Tulsa 3, Okla.

WILLOUGHBY M. McCORMICK started a spice and flavoring-extract business in Baltimore in 1899, and built it up from a one-room plant to a $3,500,000 company in 1928. To him, workers were simply a commodity. Disagreement with the boss meant dismissal. The only employe who dared talk back was his nephew, young Charles P. McCormick, who had begun as an office boy and had risen through all the departments. His uncle had fired him seven times, but had rehired him each time because "he had ideas."

McCormick & Company began losing money in 1932, and was in the red for that year. The company's troubles were deeper than just the depression. "The workers were dispirited," explains Charlie. "Their pay was low and they weren't sure of their jobs. We had a labor turnover of about 30 percent. The work involved processing and packing hundreds of items — spices, extracts, tea, coffee and insecticides — and the cost of training new workers ran high. Poor morale and obsolete methods made production slump. The sales force lost spirit and orders dwindled."

Uncle Willoughby met the crisis by wage cuts, until he had slashed pay 25 percent. Then one week-end he told Charlie to announce another wage cut of ten percent. Charlie protested vainly, but before he could announce the cut his uncle died of a heart attack.

At a hurried meeting of the board of directors Charlie was elected president, and at the age of 36 was burdened with the responsibility of putting the failing firm on its feet. His first act was to call the company's 500 employes together.

"We're close to the rocks," he told them, "but we can win out. Prices for raw materials are low; however, we've got to turn them into salable products at lower production expense. If you'll increase production we can cut costs, lower prices, and thus give our salesmen the stimulus they need to bring in orders. That means an all-out effort on your part, and you can't do it on poor pay and long hours. So we're raising your pay ten percent and reducing the work week from 48 hours to 44. From now on every worker is going to prosper exactly as the firm prospers."

This amazing proposal, made in 1932 when wage cuts and unemployment were sweeping the country, had a breath-taking effect. The astonished employes not only increased their output beyond Charlie's highest expectations but found ways to eliminate waste. In three months the company was out of the red and Charlie raised wages again.

But he knew that the company needed more than the stimulus of raises. "About one out of every ten persons is a creative thinker," he says, "and I decided to use whatever creative minds we had in the company."

He selected 17 young men who worked at such jobs as credit clerks, cost accountants and assistants to department heads, and told them that they were to be a junior board of directors. "No one of higher rank will be present at your meetings," he said. "Your job will be to create ideas to increase the company's success and make it a better place for our people to work. The books are open to you; ask anything about the company's affairs you want to. Any ideas you recommend unanimously will be placed before our board of directors."

The first thing the junior board did was to overhaul the company's packages. They designed handier spice tins with more attractive labels, and a new extract bottle with a broad base and indentations for the housewife's fingers. Next they set up a system for testing stenographers to put the most efficient girls in important posts. They introduced speedier and more accurate billing machines. They suggested a number of new products and by fresh promotion ideas stepped up the sale of old ones.

When the head of the city-order department reported that he could handle 40 percent more business with the same number of employes, the junior board came through with a sales campaign for a somewhat moribund line of foods and remedies for household pets. This gave the city-order department all it could handle and led to nation-wide sale of products that had long been in the doldrums.

The youthful directors changed their chairman every three months. Every six months they rated themselves. The top six became a membership committee empowered to replace the three lowest-scoring members with three other promising employes.

In its first five years the junior board turned in 2109 recommendations to the board of directors, of which only six were rejected. Elated by this success, Charlie called together the foremen, mechanics and supervisors, and invited them to set up a similar board.

At the first meeting of this nine-man factory board, one member produced figures to show that too many cans were carried in stock and became shopworn before they were needed; new purchasing schedules were adopted. Other proposals overhauled the handling of three important products in a way that doubled output with the same machines and man power. Installation of new tanks and bins made it possible to buy more raw materials in bulk and at lower cost; packing methods were standardized.

By giving an open hearing to every worker with a grievance, the factory board was soon accepted by the workers as their representative before the board of directors. This made it possible to solve labor problems in a spirit of cooperation.

Was an accident the fault of a careless employe, or was there company negligence? Hearings by the board so justly placed the blame that the workers developed new safety codes and the company new safeguards, to the satisfaction of all.

The factory board suggested a 15-minute rest period every two hours; the result was a nine percent boost in production. Recommendations for a 40-hour week and for wage increases, bonuses, health insurance and other benefits, made by the factory board, were adopted by the company.

The board's biggest achievement was a reorganization of production schedules to avoid periodic layoffs after Christmas and during the summer months, when sales of spices and extracts slow up. These slack seasons were used to produce year-round items such as teas and insecticides, leaving the schedule free for full production of spices and extracts during the seasons of greatest demand. As a result employes were sure of at least 48 weeks of work a year. Labor turnover dropped to four percent.

Charlie McCormick next formed a board of salesmen, and soon the three groups — junior board, factory and sales force — were working together, each sending representatives to the others' meetings and adding its knowledge to the development of the others' ideas. Through such relationships, in which everyone spoke his own mind regardless of position, the gap between labor and management vanished.

As news spread of the revolutionary ideas that brought McCormick's triumphantly through the depression, businessmen all over the country came to examine Charlie's system at work, and Charlie wrote a book explaining it. He called it Multiple Management. It went into five editions. It was also published in England, Spain and France.

Today some 500 companies use various forms of multiple management in the United States, Canada and England.

McCormick's is the largest firm of its kind in the United States, and has sales representatives in Europe and a branch in Mexico. Gross sales were 28 million dollars in 1949. Stockholders, who now include most of the company's employes, enjoy fatter dividends than ever before. But more important in Charlie's mind is the fact that anxiety and dissension have been replaced by opportunity and contentment.

Workers — there are 1200 of them now — have a paid vacation, and a yearly profit-sharing bonus that equals four to seven weeks' wages. A company-financed pension system, which applies to all ranks from janitor to president, provides a retirement income equal to about half basic pay, up to a maximum annual payment of $5000. A share of the profits is put into a trust fund that is paid to the employe whether he quits, retires or is fired.

The workers have demonstrated that they regard partnership as a two-way obligation. "Early in December 1945," says Charlie, "we announced there'd be a two weeks' Christmas holiday with pay. To my amazement our people turned out five weeks' production in the next three weeks." Since then the holiday has been an annual event, and production has never suffered.

Once-a month the company holds a meeting of all employes and tells them frankly the condition of their business. At a yearly meeting the company's financial report is read, and its details are illustrated with stacks of silver dollars which graphically show the firm's expenditures for materials, wages, etc., and the profits.

Charlie believes that multiple management holds the solution to the most urgent problems that confront labor and management. "If the employes of a business know its affairs, are given a democratic voice in running them, and are paid according to the profits that their ideas and efforts bring in, they will loyally put their minds to bear on making that business a success."

As Charlie sees it, the American wage earner wants to feel that he's more than just a number on the payroll. "Of course he wants security," says Charlie, "but he wants to earn it through his own efforts, working for the success of a business he's in. Let every employe feel that the firm he works for depends on his ideas and energy for its success or failure, and returns him his fair share of what he earns for it, and he won't want Government handouts.

"Workers who play a part in actually building the business which produces their living can never be convinced that the profit system is unsound, or that they can improve their lot through any form of socialism that takes their welfare out of their own control."

[1] Employee is the usual American English spelling, but employe is a Standard variant used especially by some corporate house organs and business publications.

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