Perfect Partners An innovative agreement of cooperation with its union catalyzed ISP Corp.'s new-found success. ByTim Stevens ISP Corp., Calvert City, Ky. At a Glance
Web-Exclusive Best PracticesByTim Stevens Benchmarking contact: Frank Stevens, site general manager, [email protected], 270/395-1212 Working Partnership Agreement To overcome the adversarial relationship management with the union, the two parties signed a working partnership agreement, separate from the union contract, that details the nature of cooperation between the two parties. Called a High Performance Work Organization (HPWO), the partnering agreement was created by union leadership of the International Association of Machinists and Aerospace Workers. The HPWO establishes a format for developing a culture of trust, respect, ownership, communication and cooperation for locals and their company's management. Specifically it details how the parties will make the many decisions required for overall planning, strategy and daily operation of the plant's vital functions. Categories include staffing, asset and resource deployment, communications, continuous improvement, definition of quality, application of new technology, training and business planning. Gain Sharing ISP Corp. has an effective gain-sharing program with a few interesting twists. First the name of the program, ISP, matches the company name: Improvement equals Savings equals Payout. Unlike a profit-sharing program, it only pays when there are improvements, doing so on a quarterly basis. The key measures are manufacturing conversion costs (excluding raw material costs, taxes, insurance -- any costs the plant operators cannot affect) and first-pass yield (FPY) on six key products. Conversion costs must be lower than a two-year average. The difference in conversion costs from the average, multiplied by pounds produced in the quarter, generates the bulk of money in the kitty for disbursement. Performance in customer service and safety/environmental areas contribute as well. For instance if customer complaints are lower in the quarter, add $2,700 (an average calculated cost based on rejected material and cost of resources to investigate and resolve the complaint, reviewed annually) for each complaint not received. If a customer makes a repeat complaint, deduct $2,700. Spills and releases add or detract from the total to the tune of $5,000 per each compared with a baseline. Savings are split between company and employees based on a factor applied to the total of monies from the conversion cost, customer complaints and spills/releases accumulations. The multiplication factor is based on a combination of first-pass quality and production level of high-demand products (those where everything produced can be sold.) set up in a matrix of FPY and production compared to plan. For instance if FPY on key products is 97.5%, and high-demand product is produced at 20% over plan, employees get half of the money in the kitty. Right-on plan production of high demand products, with FPY of 95% on key products, employees get just 20%. ISP suggests this multiplier concept is unique. Every employee, management or labor, shares equally, though payout can be affected by hours worked in the quarter. Also, 25% of the total gain in a quarter is put into a reserve before calculation of payout to provide a safeguard for the plan against any quarter with lower than expected performance. Total gain sharing in 2000, the program's first year was $770 per employee. In 2001 this climbed to $1,430. In the first two quarters of 2002, employees have gained about $800 each. Valued Customer Program Designed to align resources against its best customers, ISP corporate has initiated its Valued Customer Program to guide the actions of sales, marketing, customer service and manufacturing efforts. Each customer is ranked based on a formula combining growth and profit potential using an A-through-D structure, as follows:
- Plant size: 75 acres developed (140 total acres)
- Start-up date: 1956
- Special Achievements
- Winner of University of Louisville 2002 award honoring cooperative labor-management relations.
- In 1998 actual cost savings and increased profits of team-based continuous improvement totaled $1.43 million. In 2001 that climbed to $5.83 million.
- high growth and profit potential, high impact, valuable partners, multinational.
- Very important core business, large volume, high profit, limited growth potential.
- Low volume, good profit, limited growth potential.
- All others, candidates for alternate distribution.