Like employees at many companies, those at Pro-Terra Environmental Contracting Co. for years knew a simple fact: If the 11-year-old company did well each year, they could expect a bonus at Christmas.
Company President Joe Lorenz says the policy was something very nice Pro-Terra did for its employees, but it was never tied to anything throughout the year.
About two years ago, that changed when the Southeast Columbus company’s management team devised a new system. Pro-Terra would implement a profit-sharing plan and an incentive program. All employees would know what drives the company to success, as well as what their share of the results would be.
Inspired by Jack Stack and his book, “The Great Game of Business,” Lorenz calls the incentive program the Pro-Terra Value Game.
He’s seeing the winnings. In an industry in which turnover averages in the 55 to 60 percent range, Pro-Terra has averaged 20 percent in the last three years.
Because he keeps employees longer, he’s able to grow his own management and promote from within. Of his eight foremen, all but one started as laborers with the company and moved up.
In addition, he’s got real-life examples of employees working toward the company’s values.
“This is the way we keep reminding ourselves: This is what we’re all about,” Lorenz says.
Make the rules
The first step, Lorenz says, was to create an incentive for all employees to cut waste, reduce inefficiency, stop equipment abuse, reduce accidents, be as productive as possible, satisfy clients and conduct safe work. By sharing the earnings of the company, he could reinforce the idea that all employees are partners.
All 54 full- and part-time employees are eligible for profit sharing, which is based on a formula using the company’s gross margin performance for the entire fiscal year. Twice a year, they receive half of the projected year-end results.
“If we hit our numbers, they should be able to move at about 5 percent of their base pay,” he says regarding the bonus. He’s also added a longevity bonus, which kicks in after the first full year of service.
The timing of the payouts, he says, he learned along the way: In his industry, companies generally don’t make money until the second half of the year due to cash flow. So employees at Pro-Terra, which has revenues in the $7 million to $9 million range, receive their payouts in October and January.
“We’re feeling a lot more comfortable with the numbers because it’s just too early to tell in July,” he says, referring to the original payout schedule of July, October and January.
The goal, he says, was to make the program easy to execute but significant enough to be worthwhile to the employees.
Another step, Lorenz says, was to determine what, exactly, were the values at Pro-Terra in order to provide some direction for employees to understand and work toward the company’s goals.
Company leadership pulled together and brainstormed 65 values, narrowing the field to eight. A short time later, Lorenz decided he needed an acronym to tie the values together.
PIE SLICE has become the name for the list: professionalism, integrity, enjoyment, safety, leadership, innovation, create value, and energy.
Even in the hiring process, Lorenz discusses the PIE SLICE concept, asking job candidates to explain how they’ve exhibited those values in previous situations.
“Very early on they’re talking about these things,” Lorenz says.
Bonuses are also directly tied to the company’s performance. For example, if the receivables are collected late, the date of the bonus payouts will be delayed. If the safety performance rating falls, the bonus payment will be reduced an important factor considering the company’s task of providing environmental cleanup and solutions for underground and above-ground storage tanks and landfills and projects of industrial, commercial and engineering firms.
Share the winnings
Lorenz knew he had to communicate the new program to employees, a task he accomplishes through an open book management style of letting them know how the company makes money, the gross margin and the costs of projects and overhead, for example.
Every two months, he sends a newsletter to employees, and he holds all-hands meetings on a quarterly basis on Friday afternoons.
Following the “Great Game of Business” theme, Lorenz includes a competition at the quarterly meetings. He randomly selects six employees to be judges for the game, in which other employees give 10 to 15 examples of situations where their co-workers exhibited the PIE SLICE values.
A recent example: Brian Boyd, a project manager, was nominated by foreman Randy Anschutz, a 10-year employee, for his professionalism, energy and creation of value on a $1 million contract that a new team of employees had to finish for a previous crew which left when a company division was sold.
“It was a big challenge for us to finish out that job, and they did a good job accepting it,” Lorenz says.
Winners and their nominators receive gift certificates for dinner at Damon’s.
“It’s really not the money, it’s just the recognition in front of their peers,” Lorenz says of the game, noting the process gets them more interested than other companies’ traditional recognition banquets, which employees find excuses to miss.
He estimates that 5 percent of the company’s overhead costs go toward employee incentive programs.
Lorenz finds employees use the Pro-Terra Value Game, which they call PVG, to encourage each other.
“It’s an easy way for them to kid about cost savings,” he says. “They say, ‘Hey, you’re getting into my PVG by tearing into that transmission.’
“It’s an incentive to work together. We win together; we lose together.”
Joan Slattery Wall (email@example.com) is associate editor of SBN Columbus.