The computer revolution means that companies are

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1 Connor Formed Metal Products OwnershIp andparticipation work far better together than either do alone. Corey Rosen The computer revolution means that companies are now able to -indeed they must - make more decisions about more things more quickly. The old hierarchical structure in which problems are passed up to a limited number of managers to make decisions, who then pass down solutions to the employees who implement them, cannot cope with these demands. Management either makes too few decisions, or poorly informed ones. So non-management people simply must be more involved. For many companies, this has meant giving employees the least amount of additional information and authority the company can get away with and still cope. Perhaps employees will be asked for their ideas on product quality or process control, but not engineering/ design, work flow, plant layout, or broad corporate issues. Nor are employees typically given information on how their actions relate to the overall corporate picture - that, after all, is still a management concern. But that is not enough anymore. As computers replace more and more mundane work, knowledge, not capital or labor, is the critical business resource. This shift is reshaping the traditional roles of management and labor; instead of a company of employees and bosses, successful organizations must become what John Case has called a "company of business people," where employees focus not simply on the requirements of their own jobs, but on how their individual performance relates to the overall success of the organization. l They know the "score" of the business game, and they have the training, opportunities, and incentives to figure out ways to help their team win. At Connor Formed Metal Products, a manufacturer of metal stampings, springs, and wire forms, it is the explicit corporate objective to become a company of business people. Connor works toward that goal in a variety of ways. First, its employees really are business people - they own 42 percent of the company (see p. 10 for how and why Connor's employees became owners). They have a very personal and substantial financial stake in the company. Atypical employee with the plan for its full seven years has stock worth over $52,000. Second, the company shares detailed financial information with its people and goes to great lengths to make sure they understand it. Finally, and most distinctively, the company has designed a computerized shop floor information system to provide all employees with on-line, up-to-date information on every job they work on. Employees check manufacturing, quality, and delivery information, monitor their own productivity, add notes and comments for future reference, and, if they are having problems or 9

2 10 have ideas about how to do a job better, they can put jobs on "shop hold." Not only do employees have broad access to and control over information, but they actively participate in designing the software. Connor is taking the "management" out of management information systems and transforming the concept into "employee information systems" by providing employees a system they can help design to meet their own needs. Step One: Transforming Technology Run by the same family four generations, Connor traces its modern incarnation to 1947 when Joseph and Henry Sloss, owners of what was then a hardware business, bought a small spring manufacturer in San Francisco. In the 1960s they sold the hardware business to focus on manufacturing, opening divisions in San Jose, Los Angeles, and Portland, Oregon. By the mid-1980s, the Sloss brothers were ready to retire and turn their business over to Joseph's son, Bob Sloss. The 200 employee, four-division company that Bob Sloss inherited was a conservative, low-technology, very profitable manufacturer. But Sloss realized growing foreign competition and rapid advances in technology would require major changes if the company were to remain successful. Foreign competitors could underbid the small job shops that dominated the industry, and customers were increasingly demanding superior quality that was difficult to deliver with old technology. So starting in 1984, Connor began a major capital investment program. Anew facility was opened in Dallas. Over the next nine years the company bought over $15 million in new equipment, an extraordinary sum for a firm whose sales are now at $25 million. Fifteen engineers were added to the staff; before there had been none. In the past, engineering was something the customers were supposed to do; now Connor could help

3 design products for customers. Employees began using SPC to monitor the quality of their work, and the company brought in several mainframe computer systems to automate the paperwork. These investments succeeded in attracting new customers, companies like Hewlett-Packard, Honeywell, and Motorola that were drawn to Connor's new quality image. As sales grew from $8 million in 1982 to over $17 million in 1988, the company began turning away work from more "commercial," less engineering, and quality-oriented accounts. Connor's business had always been regional, but it was now attracting customers nationwide because of its ability to consistently deliver defect-free products. But higher sales and better technology did not automatically produce better bottom line results. For that, Sloss came to realize, the way people used the technology was critical. The old system in which a few managers did all the analyses and made all the decisions worked fine in an environment of relatively stable and unsophisticated technology with little foreign competition. In the 1990s, Connor needed more of an edge than good machinery, SPC, and some smart managers - anybody could buy these. Connor could distinguish itself, Sloss figured, by tapping into the ideas and information all its people had. Then all those 400 jobs moving through the shop each month could benefit from the vast amount of cumulative knowledge and experience of each person working on them. Step Two: Getting People Involved Part of this process had actually started in the early 1980s when Connor included all employees in a new quarterly cash bonus program. The company went further in 1986, adding an Employee Stock Ownership Plan (ESOP). The plan provided a means to purchase shares from Joseph and Henry Sloss in a tax-advantaged manner, but it also provided employees with a reason to be interested in the fortunes of the company. Sloss thought that just sharing profits and making employees owners might, in itself, yield important results, but not a great deal happened in the first few years. Employees now had a reason to be interested, but they needed a structure by which they could translate that motivation into opportunities to share information and ideas about how to do things better. Just getting employees to work harder on the same routines yields marginal improvement in operations; getting them to identify ways to do things better or faster yields major gains. Under the management structure that characterized Connor when the ESOP was set up, however, those opportunities could be hard to find. So Sloss began experimenting with a series of employee involvement programs. Among the innovations were: 1. Employees from each division began meeting regularly to review plans for improvement, coordinate programs, and exchange ideas, although each division is independent. Division managers and salespeople meet several times per year, while other groups including quality, customer service, and employees from several manufacturing departments have also come together for such meetings. 2. Within the divisions, cross-functional teams were established, generally forming at the start of a new project for the purpose of designing quality into the manufacturing process. The teams can include sales, engineering, administrative, quality, manufacturing, and supplier representatives. 3. When customers visit Connor they don't just meet with sales people, but with the engineers and manufacturing employees responsible for making their products. Engineers and tool designers regularly visit customers at the start of new projects, while skilled setup people, quality technicians, and even teams of machine operators will occasionally visit customers to learn more about their needs. 4. Teams of employees have been taught SPC and Pareto-based ranking skills to score their performance and help identify weaknesses. Some plants have created scoreboards for safety, quality, delivery, productivity, and other key performance indicators. 5. Non-management employees have the chance to meet potential new hires with whom they will work and to provide input to management on their selection. 6. Five four-to-six person permanent inter-divisional teams were established in 1992 to evaluate interplant sales, ISO 9000, engineering projects, worldclass customers, and international markets. Team members are available in each plant for feedback to and from all employees. 7. Various programs in each plant - "lunch with the boss," "management input groups," and department When customers visit Connor they don't just meet with sales people, but with the engineers and manufacturing employees responsiblefor making their products. 11

4 Connor uses computers to empower employees to share day-to-day! nuts-and-bolts information. 12 meetings - provide opportunities for exchanging information that might otherwise get missed. In Los Angeles, for example, monthly department meetings cover results, safety, and a "time out" for talking about any employee concerns. To help make all of this work, the company provides extensive training. For example, in Portland, "Connor University Northwest" started in Instructors from Oregon's community colleges teach two two-hour classes per week in shop math, blueprint reading, measuring instruments, SPC, problem solving, team skills, and understanding financial statements. Employees in San Jose, Los Angeles, and Dallas have participated in communication and conflict resolution training; while in San Jose and Los Angeles, the company has begun supervisory and team training based on Zapp!2 At the same time, Connor provides extensive information about the company's performance through its newsletter. Each issue updates monthly and year-to-date sales, expenses, profits, and cash-flow in detail. Unfamiliar financial terms and concepts are identified and explained in the newsletter and the results and trends are discussed frankly and openly. The employee-owners also receive stockholders' annual reports, detailed statements of their personal Connor stock holdings, and reports on the investments and performance of the ESOP fund generally. To help employees understand all this financial data, Connor sends them to the "Accounting Game," a nationally recognized program that teaches non-financial people how to read income statements and balance sheets. Finally, Bob Sloss conducts several employee meetings every year in each division to explain the company's performance and financial plans and to answer questions. Step Three: Employee Information Systems All of these initiatives would put Connor at the forefront of employee involvement, but they would not make the company unique. Lots of companies have cross-functional and ad-hoc teams. Most ESOP companies share some financial information. And just about everyone is at least thinking about extensive additions to their training programs. What separates Connor is the way it uses computers to empower employees to share day-to-day, nuts-and-bolts information. Back in 1989, Connor hired Michael Quarrey, an experienced programmer who had worked as a researcher at the National Center for Employee Ownership, a non-profit information organization in Oakland,

5 CA. While there, Quarrey had studied the relationship between employee ownership and corporate performance (see box). He was convinced that computer technology held the key to liberating organizations from their traditional information strait jackets. "In the past," Quarrey said, "only management had access to the kind of detailed data on individual jobs that computer systems can provide. My job was to make that information available to everyone." Sloss was in full accord. The mainframe computers he had installed a few years earlier were capable of providing information on when jobs were due, how much time was spent on each job, and how profitable jobs were. Management was supposed to track this information, distill what "really mattered," and provide insight and leadership to employees. The employees were supposed to give their input to management, not based on empirical data, but on their intuitive sense of what was going on. But the mainframe packaged software was so cumbersome that many of the features and programs were never implemented; some plants didn't use the system at all. No managers had time to review the reams of data the systems could produce. Somehow, Connor needed to decentralize information - provide it justin-time to those who could really use it to make a difference, the employees. So Quarrey set about creating PC-LAN based programs that could provide shop floor employees access to all the information they could use for the jobs they were working on - prices, schedules, set-up information, performance compared to estimate, previous quality problems, raw material and outside processing specs, etc. The programs were designed participatively, allowing the employees an opportunity to help structure the software to meet their needs, rather than having to fit their information needs into a pre-programmed system. At first, most of the computers were in the office, but as a test case one was put in the shop in the Los Angeles plant and several employees were trained to look up information on-line. The experiment had been underway only a short time when Roy Gallucci, a non-management spring maker, stopped Bob Sloss as he was walking through the plant one day. Roy said he liked having access to the system, but what would really make a difference would be the ability to enter comments into a job on the computer and "force the office to pay attention." Figure 1. Tim Higby, product designer; Tom Harris, tooling manager; and Marcy Alvarenga, production engineer, utilize the pro-engineer design station while evaluating a new die strip to ensure the manufacturing process meets customer specifications. This was the origin of "shop hold," the system's most innovative feature. It allows anyone to enter a comment on a job and then, until an engineer talks with the employee and dispositions the comment in writing, Connor cannot accept another order for that job. It is a simple idea really, one that could be implemented on almost any computer system for tracking manufacturing orders in any company. And yet it is one of the most extraordinary and tangible examples of real employee empowerment. Shop floor employees can stop the company from accepting orders that they cannot manufacture. Within six weeks of implementation in Los Angeles, employees put over 120 "shop holds" into the system. As expected, a number of these indicated that estimated run speeds were too fast or that set-up times were too short. But about a third ofthe requests to change run speeds indicated that the employees could make parts faster than estimated. Connor had succeeded in a) creating a company culture in which employees were motivated to improve productivity; and b) an information system that allowed them to monitor their progress and suggest specific improvements. For example, when the system was first introduced in Dallas, a team of employees setting up a new manufacturing cell for a major customer began tracking their run speeds and setup times on the computer. At first, they were not making the estimated times. By providing constant feedback on the effects of their process improvements, the system helped shorten the team's learning curve. Within six months not only were they making the estimates, but these non-management Shopfloor employees can stop the company from accepting orders that they cannot manufacture. 13

6 Figure 2. Carlos Hernandez and Marcy Alvarenga, production engineers, consider alternative plating options for anew battery contact used in aportable electronics product. employees had made a game out of comparing current run speeds with run speeds on previous orders - they had invented a system for measuring continual productivity improvement. No one had told them to do this, or showed them how to do it. The plant manager calculates that this team on one job saved the $30,000 initial cost of the entire computer system in Dallas. While about a third of the shop holds have focused on productivity issues, most have targeted ways to improve the process: combining, adding, or eliminating steps; changing raw material or outside processing specifications; requesting capability studies; and so on. Shop hold provides employees with an electronic suggestion box keyed to job numbers. Unlike most suggestion systems, this one helps employees focus specifically on improving what they work on and it ensures that their suggestions are acknowledged and dealt with. Another advantage is its "just-in-time" nature: Employees enter comments while they are working on the jobs; engineers review the shop holds when and if they are evaluating a new order for that job. Connor's results are dramatic. The company has completed three record years in a row with shipments growing to $24 million in By mid-1993, orders were being booked at a $29 million annual rate. Profits have increased steadily also, as have various measures of quality, productivity, and on-time delivery. The improved performance has benefited Connor's employee owners as well. The ESOP fund has grown by over $2 million and the stock value has doubled since These results have been achieved through hundreds of small steps made possible, in part, by the "employee information systems" approach. Employees, once they have access, will use information in creative and unexpected ways. In most cases management would never get involved in such detail, but with 200 employeeowners making incremental adjustments, Connor's operations are continually improving. For example, a production worker in the Dallas plant noticed that he could look up on the computer any comments he had made on his daily job costing/time cards. The original intent of this feature was to provide a less dramatic way than shop hold for employees to document minor notes about what was happening with their jobs on a daily basis. Ray Martini, however, decided to start recording set-up information in this area. Soon he had eliminated the need for his years-old file box of setup cards - his information was now available on-line for him or for anyone else to reference. This is what happens when people have access to the "electronic file cabinet." They use information the way they need to, regardless of what the designers of the filing system intended. Employees, on their own, have found ingenious ways to store set-up information, look up stock levels, find out when material is due, and so on. None of this was designed-in, but all of it is possible because of the open-systems nature of Connor's approach to computers. Many of the employee's innovations eventually get incorporated into the software. Indeed, having employees experiment with the system and push it to its limits is one of the best ways the company learns about needed enhancements. Although Connor has recently hired a full-time programmer, Quarrey believes the real promise of employee information systems lies in more powerful software that allows non-programmers to develop their own multi-user applications. The new role of the information systems department will be to provide an environment in which employees can do this: hardware support; software evaluation; and training. Some of this has begun at Connor where Portland employees programmed their own bar-code packaging systems; Dallas employees have created an application to complete first article calculations; and the QC department in LA has developed a series of programs to automate their internal paperwork. 14

7 GOne/UBlon In the early 1980s Connor recognized that job shop manufacturers would be required to meet specific, individual customer needs at speeds and costs that would be inconceivable under traditional manufacturing approaches. In just five years, Connor moved from a conservatively managed, low-technology job shop to a high-investment, advanced technology, participative organization. In the ensuing three years, Connor created what is arguably the most employee-empowering information system in the country. Elements of the now "old" participation system were replaced by new approaches; foundations of the original employee information system have already been re-thought. As the information system develops in the next few years, Sloss and Quarrey want the employees to drive the system's design. "Computers allow for an extraordinary amount of participative input," Quarrey notes, "but few computer systems allow employees any role in the design and change of their programs." Five years from now, Sloss and Quarrey will no doubt view their 1993 system as creaky and archaic. What is distinguishing Connor, then, is not so much the particulars of the company's organizational innovations, but the pace with which they occur and the openness of the people m me orgamzauon to Keep cnangmg. UJa management systems were characterized by their certainty, structure, and replaceability. What Connor shows about new management systems is that their defining features will be flexibility, adaptability, speed, and universal access. I. John Case, "Emancipation Capitalism," Inc. April 1993, pg Byham, William C., lapp! The Lightning ofempowerment, Random House, Corey Rosen is executive director and cofounder of the National Center for Employee Ownership. The center is aprivate, nonprofit membership and information organization based in Oakland, ct. Mr. Rosen received his Ph.D. in political science from Cornell University in 1973, taught politics, and worked as a professional staff member in the US. Senate until 1981, when he started the center. He has co-authored three books and written over 100 articles on the subject ofemployee ownership. 1994AME For infonnation on reprints, contart: Association for Manufarturing Excellence 380 West Palatine Road Wheeling, Illinois /