Sharing in Success

Dec. 21, 2004
Chamberlin Rubber Co. gives workers 75% of profits.

When Bill Lanigan, CEO of Chamberlin Rubber Co. since 1980, set his profit-sharing plan in motion last December, he had nothing to share. The Rochester-based company had just suffered two straight years of financial losses, the first-ever unprofitable years in its 135-year history. So, with the company's profit coffers empty, Lanigan promised to return to his employees, beginning in January, 75% of the profits, payable monthly as the company earned them. "When you lose enough money, you get the courage to try a bold and rash move," says Lanigan, whose family has owned the business since 1970. Nearly everyone told the 48-year-old Lanigan that he was nuts. But now Lanigan, who at one point had to be talked by his management team out of giving all of the company's profits to his employees, has the last laugh, along with his workforce. After losing $200,000 in the previous two fiscal years, Chamberlin's 25% share of the profits in the first eight months of this calendar year is nearly $130,000 and its 36 workers (everyone shares in the plan except for four people in outside sales) have divvied up profit bonuses of nearly $250,000. Employees initially were skeptical about the plan. The turning point came in February, when the workers' share of the profits reached $45,000. (Workers' bonuses are based on the ratio of their annual salary to the entire payroll.) "It is a totally different company now," says Lanigan, who reduced his share of the bonus by more than 50% to ensure that every employee receives a minimum of 1% of the profits. "Everyone is focused on using resources the best they can, not the way they always did things. Our cost of production is dropping, our profit margins are up, our inventory is down, our cash flow has improved, and our sales [which had dropped from $11 million to $7.5 million in the previous 10 years] are up" to over $8 million. In addition, the number of orders shipped late has dropped dramatically, as has the number of emergencies requiring overtime, says Lanigan. As a result, overtime costs have been reduced by as much as 95%. Another contributing factor: The sales staff now negotiates realistic deadlines with customers because production now delivers what it promises. Chamberlin's employees are quick to point out the ways in which the financial boost has changed the way they approach their jobs. "People are more conscientious about what they're doing," says Pete Terranova, a 20-year employee who runs the production system. "They are more careful about not wasting time, not wasting material. The atmosphere is more upbeat because they know they are going to share in the company success. This is probably the most enthused I have ever seen anybody. [The profit-sharing plan] has introduced a sense of urgency to getting work done and created a loyalty to the company and to the customer because you see the rewards on a monthly basis." "People now ask 'What can I do to help?' rather than just put in eight hours of work," adds Kathy Collins, a systems administrator for Chamberlin's computer network. "It's gotten us to think out of the box. You don't hear anyone saying 'It's not my responsibility' anymore." Lanigan says that he, too, has learned a lesson. "If the workers generate profits, they deserve to share in them. Human capital is the most powerful asset any company has . . . . I don't plan to leave that asset unattended again."

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