Scanlon February 2004 E-zine

Greetings!

We are pleased to bring you the first Scanlon Leadership Network E-zine. Each month we will bring you information on Network member companies to help you network and improve your Scanlon process. Our first E-Zine, features articles about SGS Tool Company and Thomson-Shore Inc. Both companies actively use the Scanlon Principles to create competitive advantage.

SGS Tool Makes Widespread Use of Scanlon Principles



A Scanlon member since 1998, the SGS Tool Company is the world's largest independently owned manufacturer of high performance solid carbide rotary cutting tools marketed in more than 60 countries. Its Gainsharing Plan - TEAM - Together Everyone Acquires More, its Associate Integrated Management program (AIM), a customized version of Hoshin, their Competency Management program and their Leadership Retreat are excellent examples of programs utilizing the Scanlon Principles. SGS made the transition from a profit sharing plan to their Gainsharing Plan in midyear 2003. A team comprised primarily of associates excluding management developed the Plan.

"They came up with the Plan on their own, with great advice from an outside consultant," said SGS President & COO Tom Haag. "It was very well designed so it was approved and implemented last summer, only six months after we began. There was a payout in the third quarter and an even larger one in the fourth quarter. This was a great start for this new plan. Most important, the measureables became important to everyone in the organization not just management. They include productivity, spending, scrap, customer complaints, service levels, etc. We used Hoshin for two or three years before we developed TEAM. All measurements are tied together, every department has its own measurements and every month they report on the results to management and everyone in their de- partment," said Haag. "We have also incorporated the measurements into ISO-9001:2000 which requires measurable progress. Hoshin laid the foundation for that certification because a lot of the work was already done."

Haag says that when customers and others outside the organization visit SGS they quickly recognize that everyone at the company has a grip on what is happening in the business on a very refined level - what the company goals are and how they measure against them. This includes all associates and management. SGS develops their leaders in a variety of ways. A basic requirement is that every leader must have 50 hours of training every year and it can include everything from Kaizen events to training conducted by outside sources.

"More than anything else we provide our leaders with opportunities to grow and if they take advan-tage of them they grow," said Tom. SGS' Associate Integrated Management (AIM) program is one of the key initiatives used to develop leaders. It is a modified version of a Hoshin plan that SGS customized to fit their organization and gave a personalized name.

The Leadership Retreat is another unique development program.

"Last year was our first experience with the Retreat," Tom said, "and it was quite eye opening. Managers gained some insight into the personality traits of others and their approaches to different situations. They also gained some insight about themselves. I learned some things about myself that apparently my wife already knew. Our people still talk about it a year later and that is a very good sign that it was successful." SGS is holding its second Leadership Retreat on February 18 at their headquarters in Munroe Falls, Ohio and Haag said they expect to go to "a deeper level of getting to know who we are, what our strengths are, how to improve our weaknesses and how we fit together as a team."

SGS is also sponsoring the 2004 Scanlon Coordinators' Conference and will play host to more than a dozen Coordinators from member companies. SGS presentations will include a descrip-tion of TEAM, AIM and the Competency Program. Coordinators will also take a tour of SGS head-quarters and a production plant.

Thomson-Shore Committee Energizing Employee Stock Ownership Program



The Thomson-Shore Employee Stock Ownership Program (ESOP) Communications Committee, now in its second year, is energizing company ownership among employees. The seven-person committee, comprised of a diagonal cross section of employees, is educating their employee/shareholder colleagues about the value and obligation of ownership. They tell them how the stock has performed in the past year, how well the company is doing, explain rules and changes regarding the ESOP, tax ramifications, etc. They do this with both old and new employees.

They do this in small group meetings like Lunch 'N Learn where they get together over pizza. They also post bulletins, hold quarterly meetings, design and put up posters, and cre-ate orientation games to help educate employees.

The committee members have had to learn a wide variety of things related to ESOP such as corporate governance, balance sheets, repurchase of stock, how the company stock is valued, how to conduct meetings, build marketing skills to enable them to communicate effectively and answer a wide variety of questions from employees.

"I am extremely pleased with how well they have taken on the task to educate themselves and are now taking on the responsibility of educating their fellow employee/owners," said President/CEO Myron Marsh. "They are using the Scanlon Principle of Identity and are telling us 'what day it is' at Thomson-Shore. I can see its benefits. When I attend meetings I don't have to explain how ownership works. Committee members step up to the plate and take charge."

Thomson-Shore began the transition to employee share ownership in 1994 when they began moving shares into an ESOP and by 1998 the company was owned by its employees. Employees are eligible for share ownership after one year with the company and are awarded shares based on a percentage of their earnings.

The normal size of the committee is nine members but it is currently operating with only seven members. The committee is currently being facilitated by Rich Savitski, Information Systems Programmer. Committee members select their own facilitator from among themselves and all serve three year terms on a staggered basis to ensure continuity. In business since 1972, Thomson-Shore, Inc. produces paperback and hardcover books for trade and religious publishers and university presses. Located in Dexter, Michigan on the outskirts of Ann Arbor, the company has more than 280 full time employees. The firm has been a member of the Scanlon Leadership Network for 15 years from 1979-1985 and from 1995 to the present.

As I See It - Mark Smallwood



Mark Smallwood, Machine Operator, SGS Tool Company, Munroe Falls, OH. Mark has been with SGS for four years and is part of the Associate Involvement Team (AIT), Associate Integrated Management (AIM), and was on the task force which formulated the new gainsharing program TEAM. The AIT works to promote the Scanlon philosophies as well as to facilitate change and stage the annual charity event to benefit the American Cancer Society's "Making Strides Against Breast Cancer" campaign.

AIM (not to be confused with the AIT) is the name for the SGS Hoshin Plan. Plant managers meet on a monthly basis with all associates to discuss goals such as maintaining low scrap rates and making sure associates receive a certain amount of training hours annually.

"These meetings keep associates abreast of what is going on in the company, or to use a Scanlon term 'What day is it?" said Mark. "It gives everyone an opportunity to be more directly involved in the decision making process and have more input in what is going on. It all comes down to serving customers and educating ourselves as associates. Scanlon helps us do this.

"When I came to the company in 2000 I didn't know what Scanlon was. I learned as I went along. My involvement snowballed after an event the company held to raise money for a local charity. I felt as a company it was very important what we do for our customers and in the community. I had so many suggestions that they said they wouldn't let me go.

"I attended my first Scanlon Conference this past year. It was an incredible event. I learned so much and met so many people who were focusing on the same common goals. Attending the Conference taught me that we're not alone. There are other companies who are trying the same processes that we are with our Scanlon Plan.

"I feel the Scanlon Philosophies come down to one basic premise: do what is right to all involved, your associates, the investors and the customers. Human beings need some sort of positive reinforcement. Scanlon programs provide this type of positive feedback that people need to see to know we're heading in the right direction. It reinforces things that people should already know but that are often forgotten in our society."

As I See It - Shawn O'Neil



Shawn O'Neil, Set-up A Associate, SGS Tool Company. Shawn has been with SGS for six years. Their Scanlon gain-sharing plan called TEAM (Together Everyone Acquires More) went into effect the third quarter of last year.

"Before that we had several individual Scanlon Plans but not one that tied everything together," said Shawn.

"TEAM is paid out quarterly. It is entirely based on our output. Things like service to the customer, scrap reduction, set-up efficiencies and run-time efficiencies; 25% of the payout is based on your building, 75% is based on the overall company. So our building can have a down time but if the company is doing well we can still get a gainsharing check. Safety gates are built in so the company does not lose money. When the company turns a decent profit the gate is opened and the company shares its profits with the associates.

"We hold monthly meetings where the Plant Manager goes over the numbers for the month, what payout we are looking at, where we need to be and what we need to do to get there. TEAM has really brought a lot of financial information into sight. Now I can say 'OK I ran 200 pieces of scrap today and that affected the company in this way'.

"TEAM really opens your eyes to what is going on in the company. It improves communications between management and associates and really makes the associates feel they have ownership in the company."