What Every CEO Wants to Know about Gainsharing

What Every CEO Wants to Know about Gainsharing and Other Motivational Tools! Tim Gase President Peerless Saw Co.

What is Gainsharing? By definition: Gain: to develop an increase, to secure as profit Sharing: to divide and parcel out Combined, you have: A process to develop an increase and its benefit is divided amongst those who helped achieve it.

Why do it? What’s in it for me or the Company? - increased productivity - improved customer service - attract and retain employees - increased profits - better employee involvement - improved safety - reduced scrap - improved teamwork - better attitude - better morale - increased sales - Great support for other manufacturing improvement projects such as lean manufacturing, team building, JIT, cellular manufacturing, etc.

Can it work in My Business? How do I know? • Is there commitment from the top on down? If you don’t believe in it, no one else will either. – If there is the commitment I think it can work in most organizations • Must make sure it is a fit for your organization. – – – • • Is there an opportunity to reduce costs? how much of your costs are fixed? Is there an opportunity to grow your sales? do you have capacity? are you in a mature market? Look at more than one Gainsharing consultant – and check references. Use the Internet to learn as much as you can Talk to others who have succeeded with a Gainsharing Program and those who have not – find out why they have succeeded or failed

What are the keys to having a successful Gainsharing Program? • Commitment from you and all of your direct reports • You as the owner should lead the meetings from the start • The financial goals set in the beginning must be obtainable and realistic – The potential pay out if you hit target levels should be in the $200 range if possible • Must include everyone in the organization in the payouts, including yourself • everyone must feel the gain and know what you have to get out each week! • Make it important – If the meetings are on Tuesday at 2: 40 pm make no exceptions! • Everyone knows it is serious then • Set the program up so that payouts are immediately after the successful month • Instant gratification

What are the keys to having a successful Gainsharing Program? • Make sure it is in a separate check run • Always recognize the improvements that are made no matter how small they seem • It is not the single large improvement that makes the success it is the accumulation of all the little successes that makes the difference • Knowing what your key cost drivers are and attacking them the hardest – Continual small improvements to decrease these areas make the biggest impact – for us it was people costs and raw material • Always keep an open mind • Keeping it simple • How many dollars do we need to ship each week to hit the numbers? • And where do the costs need to be?

Things to be careful of! • Not shipping $ before you consider due dates • Understanding how product mixes might change the numbers • Making sure inventory changes are considered carefully • Don’t change the numbers after you start – Don’t show more info than you need to • If you put capital equipment that will reduce your costs – should that be included? • Is your business seasonal – how to address this • If your business is large capital projects – maybe quarterly is a better way to go

Gainsharing Highlights Week Ending April 10 th Safety Keep your safety glasses on in the shop!!! Numbers for the week Shipping week was OK – but built WIP and FG All other costs about normal – Good week for low shipments What went Right? Delivery good improvement but needs to continue - 41% to 32% Ground a bunch of stock inventory – hopefully means fewer rushes #3 Grinder nearing completion Cooling Press in HT rebuilt and no longer leaking Gerling rep in last week to debug auto tensioner Jo. Customer – very happy with our delivery performance for March New Controller starts Monday – Rick Barie Problems and How can we Improve? Shipping error switching orders for 2 Canadian Customers Wrong counts/bad counts – need to pay attention to detail Jo. Customer order shipped without Temper Blue Late orders in house went up

Gainsharing Highlights Week Ending April 10 th Plans for This Week and Next? Want to see #3 Grinder running this week Loading up this Weekend for Over. Time – mandatory weekend Lots of Jo. Customer big diameter saws due this week must keep steady flow of big stuff to the Grinders!!!! Jo. Anne Customer calling about their late orders Keep flow through the Hammer Room Selling the Fabrivision Machine Sales News! Huge carbide tip month – Best ever Putting together new pricing for carbide tips – big price increases Last week was very strong in orders Steve – plans for sales trip thru the South with Paul Customer as part of Saw Filers Mtg GLCS – looking to send employee to Peerless Big quote for Jo. Customer is looking promising – 300 30” blades Carbide shipments – if we don’t have and is supposed to ship to us – change 2 day to 3 day Any other Pending Issues or Opportunities. PSA unit to generate nitrogen is being repaired

Other Questions? • How much time does it take to get a program in place? – I would say 6 months or less • How much time do you spend on GS each week? a. Controller cranks the numbers each week – 2 hrs b. Mgt GS meeting each week 1 -1/2 hours This is like a production/ sales meeting c. Employee meeting 20 to 25 minutes each week • How many months before first payout? – It was about 2 months but was very small – In the first year we had 3 payouts, 5 in year 2 – Largest monthly payout $19, 000 for approx. 50 employees

Other Questions? • Do you have to have weekly meetings? – Probably not but I think it will impact the success of your program • Could you put something like this in place w/o outside help? – I think it would be very difficult – Having outside support keeps making you accountable for making it work – They have the experience to know the pitfalls and what makes it work • What happens when the economy is as it is now and there is little you can do to be successful? – Keep the meetings going and prepare yourself for when things do pick back up. New ideas can develop to find areas where new business might be. • How is Gainsharing different than a Profit Sharing program? – If profit sharing is paid out on a regular monthly basis there is probably little difference. If it is paid out in a lump sum at the end of a year there is a big difference.