Wescast: leadership with HEART.
Ask an industry bystander about the success of Wescast Industries, Inc., Wingham, Ontario, and he'll likely say it is due to the company's expertise in ductile iron manifolds. As the world's largest producer of auto manifolds, the firm has tallied total sales of $93.7, $131.8, $167.2 and $230 million (Canadian) the last five years and expanded from only a single casting operation in Wingham in 1990 to a 1500-employee, publicly-traded organization with three casting and two machining shops throughout Ontario.
But, when viewed from the inside, the company's recipe for success is more complex, and includes an indispensable ingredient - its Scanlon-based participative management and employee-involvement program called HEART (Helping Everyone Achieve Rewards Together).
Impetus for Change
In 1986, Wescast (which at the time was known as Western Foundry) was a profitable and growing $25 million, 250-employee, family-owned foundry in Wingham that had established itself as a supplier to the North American auto industry. But this success, according to Dick LeVan, president and CEO, had masked some serious problems.
"Although we were financially successful, we were experiencing some corporate difficulties," said LeVan. "We had reached a plateau of growth because we couldn't implement the productivity improvements that were needed to reduce cost. In addition, we had problems satisfying customer's delivery requests and we had a great deal of difficulty reaching another union agreement."
During small group meetings LeVan was having with all the employees to correct these productivity problems, he began to realize what the true problem was.
"The lack of communication and intense employees' distrust toward senior management was devastating to the company as well as to myself personally," said LeVan. "I always thought we made decisions in the best interest of the people, but I guess I never asked them."
LeVan, for the most part, blames himself for the underlying problems Wescast faced. Up to that point in his career, he had adhered to the principles of traditional top to bottom management, where he was the only one with the answers.
"I figured I could determine the correct 'how to' better than anyone else," said LeVan. "I used criticism as a prime form of motivation and wouldn't publish any of Wescast's financial results unless they were negative."
LeVan realized this form of management wasn't going to help the company reach his vision.
Wescast had always developed five-year plans with aggressive growth strategies, said LeVan. The company had determined its expertise was in the production of highly-cored, thin-walled castings, and that was its future.
"We were beginning to develop a focus in 1986-87," said LeVan. "Our goal was variation reduction and statistical process control in our production and marketing."
But for Wescast to develop into the company LeVan envisioned, radical change was needed, He solicited the help of a friend, Peter Kenny, president of Neelon Castings, a 300-employee gray iron shop in Sudbury, Ontario, who had performed a turnaround of his operation during a Steelworker's Union crisis. The advice that Kenny provided was the same his company had followed - seek out the Scanlon Plan.
Implementation of a New Era
At its roots, the Scanlon Plan is a system for personal, professional and organizational development. It consists of assumptions about human behavior, a set of principles for the management of organizations and a participative process of implementation. Despite its name, it is not a textbook plan that specifies a mechanistic procedure to be followed in a standardized fashion (as no two Scanlon Plans are alike), but instead it is a self- or organization-developed process to achieve greater productivity and human fulfillment.
The Scanlon plan was developed from the work of Joseph Scanlon during the 1940s and 50s. His experience as a steel-worker and union leader during the depression prompted him to conclude that a company's health required a climate of cooperation rather than competition between labor and management. As a staff member of the United Steelworkers of America, Scanlon used his ideas to improve productivity, saving many organizations and jobs.
At the foundation of Scanlon's ideas and today's Scanlon Plan are four basic principles:
* Identity ensures that everyone understands the expectations of the organization's customers, investors and employees. Each employee, from CEO to floor worker, must learn to recognize the role he or she can play in satisfying these expectations:
* Participation provides a chance for all employees to contribute creative solutions to business problems and to influence the decision-making process;
* Competence evolves through continuous improvement. It is an ongoing corporate goal to enhance everyone's proficiency throughout the operation;
* Equity requires that the organization balances the needs of its customers, investors and employees so no stakeholder benefits at one of the other's expense.
Implementation of these principles is accomplished through a rigorous organization development process, beginning with the top-level leadership's responsibility to articulate the organization's vision and then gain the understanding, acceptance and commitment of the executive staff, managers, supervisors, support personnel, union leadership and all other employees. The Scanlon philosophy is based in achieving trust - from the president to the plant floor - through constant communications nd team-based leadership.
The Scanlon Plan reaches its potential within an organization only if it becomes the primary tool for managing the business. It is not an end in and of itself, but instead must become the means of defining and achieving the expectations of customers, investors and employees.
"The Scanlon Plan is not a formula for success for an organization. It depends on the development of leadership," said Paul Davis, president, Scanlon Plan Assoc., East Lansing, Michigan. "It is a way for a leader to rationally manage an organization and develop employees who have an emotional stake in their jobs. But if the leader and the organization can't handle the demands it puts on them, then it isn't going to work."
These demands that LeVan faced almost kept him from taking the first step toward implementing a Scanlon Plan at Wescast. "At first, it was very difficult to understand the 'extra work' that was required to develop our version of Scanlon when we had so much 'real work' to do," LeVan said.
This hesitation prompted LeVan to begin communicating to Bill Greenwood, Greenwood Consulting Services, East Lansing, Michigan, a certified Scanlon expert. Greenwood was the first person to introduce the personal challenges of Scanlon to LeVan.
The Scanlon Plan provided the principles for Wescast to grow from, but the answers and direction they needed to achieve their goals had to emerge from within. Greenwood began to light this philosophical path for LeVan, trying to teach him how his thinking and role had to change.
"The development of the Scanlon line of thinking is not an overnight process," said Greenwood. "It is a long process," said Greenwood. "It is a long process that begins with the CEO. The leader has to learn how to lead. Dick LeVan didn't start out as an 'enlightened' leader. He had to learn how."
As coached by Greenwood, the first step for Wescast was LeVan's. The implementation of the Scanlon Plan is based on a 12-step roadmap (see The Roadmap to Scanlon Success sidebar) that was constructed to lead an organization through the self-development that is necessary to determine if it can become a Scanlon company. At the top of this list is the need for the leader to determine his vision and accept the openness that is integral to participative management.
As part of the self-analysis of the first step of the roadmap, the leader must answer three questions:
1. Do we believe that there is a compelling need to change our organization's performance?
2. Do we believe that people must be an integral part of this improvement to reach our potential?
3. Are we able, willing and ready as individuals, a team, a system and an organization to begin this improvement?
From the CEO, the roadmap followed through senior management, middle management, union leadership and plant employees. At every level, LeVan and senior management had to explain its vision for Wescast and what they were trying to accomplish. For the vision to move on, it had to pass a 90% acceptance (100% required at senior level of leadership), secret ballot vote at each level. "But the vote to accept had to be because they believed in what was being said, and not because the CEO was saying it," said LeVan.
This was the biggest struggle for the organization, said LeVan. Years of mis-trust between management and workers had created a wall, which needed to be dismantled brick by brick. In addition, for Wescast, another factor loomed in the acceptance of the Scanlon philosophy - the union.
The approval of the union was an important step to the plan's success. Instead of trying to ram these ideas through, LeVan and Wescast took a different path and partnered with the union in its quest to develop as a progressive company.
Prior to senior management seeking approval from the employees, it was working from the employees, it was working with union leadership to gain approval. After the initial mistrust with the union subsided, Wescast and the union not only agreed on the principles of Scanlon, but also ended up standing side-by-side before the employees in support of the philosophy. This is a joint force that still exists today, throughout the organization.
Once the proposal to explore the Scanlon philosophy had been approved at every level of the organization, Wescast created an ad-hoc committee to design its version of the Scanlon plan. The 25-member committee included LeVan, the union chief and employees from all levels of the organization.
After 15 months and 50,000 man-hours, what began as LeVan's realization of change, emerged as a program based on the four principles of Scanlon, but suited to fit the structure of Wescast. What was generated by the committee as the HEART (Helping Everyone ?? Rewards Together) Program.
"I didn't believe that our ad-hoc committee would be able to grow as it did and develop the HEART Program," said LeVan. "But this committee changed me and my understanding of the value of people."
HEART in Action
The base of Wescast's HEART Program is the four key principles of Scanlon - identity, participation, competence and equity - and their implementation through team structure. The team structure underlies the principles as it provides a forum for communication, learning and trust. These teams are formed along work lines (a coremaking team), task-related lines (a scrap team of molders, pourers and finishing) or cross-functional lines (a team to investigate the treatment of employees). At one point Wescast had 53 different teams working throughout the organization.
The identity principle for Wescast is based in the education of employees in business realities. By instructing employees on customers, competition, pricing, market share, etc., Wescast allows its people to understand how achieves results and, ultimately, profit ability and competitiveness. The structure for this principle is done through business information, team and leader ship meetings.
"At the base of our four principle is the identity and the employees under standing the realities of business," said Wayne Phibbs, vice president-human resources. "If our employees are well informed on how the business operates, they can better understand why the organization works as it does. The result is that employees are more able and willing to fully participate."
Participation is an opportunity that only the management can provide and a responsibility that only the employees can accept. It is a chance for the employees to influenced the decision making process in their own level of competence. Participation is encouraged through performance improvement team meetings, operational task forces and suggestion systems. At this stage of development, the strength of the team structure is evident as problems are worked through and suggestions are analyzed on a group basis to pull everyone's ideas together. In 1997, the organization received 500 documented suggestions from its employees (not all suggestions are formally documented), of which 300 were implemented. The firm has set a goal of 600 suggestions for 1998.
To enhance participation, the HEART Program strives for ever-increasing levels of employee competence. As a continuation of the business training established in the first principle, this stage is a commitment to regular technical and management training to improve productivity. Wescast's goal is to constantly raise the bar of achievement, so as never to become satisfied with the status quo.
"Scanlon and the HEART Program differ from other participative management programs," said Davis. "First, the identity principle states that business realities are vital knowledge for every member of an organization. Then, the equity principle is an accountability process. Every quarter, a Scanlon organization must stand under a microscope to explain to its customers, investors and employees what is going on, whether it is positive or negative."
The fourth principle - equity - is the end result for the HEART program. Equity ensures that there is a fair and balanced return to the three stakeholders in the company - the customers, investors and employees (the three sides of the Wescast Triangle, p. 52). As a result of this triangle, customers receive better quality castings, investors received a stronger stock and the employees receive job security, a challenging work environment, and if earned, profit sharing and gain sharing.
For the last three years, employees have earned an average of $2826, $4206 and $4645 in profit sharing and gain sharing benefits. In terms of gain sharing specifically, employees have earned up to $100 a month depending on their efficiency. The results of gain sharing are based on employee scrap rates, safety, quality defects, supplies usage, etc.
Of course, the success of the HEART Program doesn't stop with the employee results. In terms of sales, Wescast grew from $25 million in 1986 to $230 million last year. During this growth, it captured the General Motors Supplier of the Year award from 1993-96 (with '97 still looming), QS 9000 certification in 1996 and several awards of excellence from Saturn Corp., and the cities of Wingham and Brantford.
In addition, the average combined annual growth of the organization for the last five years is close to 30% a year. In 1997, Wescast experience a 7% reduction of variable cost, before inflation and pay raises.
Although these numbers and awards demonstrate the strength of HEART to an outsider, Wescast doesn't measure its program only by them. It focuses on its people.
"HEART has been a very significant factor in contributing to Wescast's growth," said LeVan. "If we hadn't harnessed all our people had to offer, we wouldn't be where we are today."
HEART of Today and Future
Although the implementation of the HEART Program was the most difficult step for Wescast, it faces new challenges every day. As with any system, regular maintenance is required. Wescast holds "Health of HEART" meetings once a month to determine last month's performance and establish a focus for the next month. In addition, the company performs a regular renewal of HEART, in which a new ad-hoc committee is formed to redesign a roadmap through the 12 stages.
"The HEART Program isn't cast in stone," said Greenwood. "The situation Wescast is in a growing, ever-changing, dynamic environment, and the plan must be able to change to accommodate the organization."
As Westcast has expanded, so has HEART. It is up to each of the facilities to determine if they need to participate in the program. When each decided to go ahead, it devised its own program - without influence from corporate other than the requirement of following the roadmap. Currently, four of Wescast's five operations are HEART facilities - Wingham Casting, Wingham Machining, Brantford Casting and Strathroy Machining. The Wingham and Brantford facilities are currently under renewal, while Strathroy developed its HEART plan last summer. Wescast's newest acquisition, Magalloy (casting and machining), is considering whether or not to pursue HEART.
For LeVan and Wescast, the future is about continued expansion. The firm wants to continue to increase its North American market share in manifolds (currently, 50% of the Big Three, 40% overall). In addition, the firm wants to further enter the European market with its product design capabilities. Wescast also is interested in expanding its auto-related product line to include another highly-cored casting, in addition to manifolds.
As the company continues to grow in terms of production and employees, the HEART Program continues to provide the guiding light. For LeVan, the change in leadership philosophy for himself and Wescast is what has lead them to where they are today, and what will lead them to where they go tomorrow.
"As we expand and add new people to the organization, the opportunity remains for misunderstanding and mistrust to be created amongst the workforce - despite our continued efforts in training and HEART," said LeVan. "But we have to continue to work - not just in communication and education - but for the opportunity to do listening and learning throughout the organization."
RELATED ARTICLE: The Roadmap to Scanlon Success
Scanlon implementation builds individual and organizational commitment by involving everyone in the design and approval of the plan. A basic Scanlon assumption is that no "expert" can possibly understand the needs of an organization as well as its own employees. Because the implementation of Scanlon is participative (building commitment at each step) it is not a "quick fix" solution for a company in trouble. As an average compiled from Scanlon companies like Sears, Beth-Israel Hospital and National Manufacturing, it takes 150 employee days over 36 weeks for design and implementation of a program.
Following is the 12-step roadmap for the initial implementation of the Scanlon Plan:
1. Top Leaders Explore the Principles/Processes
* Understanding/acceptance of Scanlon principles
* Understanding/acceptance of Scanlon process
* Support of participative management/employee involvement
* Clarification of expectations/roles
2. Leader's Vision & Mandate
* Our story: Where have we been, Where are we now?
* Vision: What must we become?
* Mandate: What is the reality?
* Is there a compelling need to improve?
* Who needs to own the problem?
* What is my personal commitment?
3. Senior Staff Education, Ownership, & Commitment
* Do we share a vision and mandate?
* Implications if we do...if we don't?
* What is our "roadmap?"
* Are we able, willing and ready?
* What will be commit?
* Secret ballot approval to proceed
4. Middle Management, Supervisors (Union Leadership), Education, Ownership, Commitment
* Understand and influence the vision
* Understand and influence the roadmap
* Understand and influence the implications of Scanlon for them
* Anonymous feedback to senior staff
* Secret ballot acceptance and commitment to proceed
5. All Employees Education & Feedback
* Our story
* What we must become (vision) and why (mandate)
* How we propose to get there (roadmap)
* Leader's commitments
6. Employee Vote (Secret Ballot)
* Is there a compelling need to improve?
* Is there potential for improvement?
* What's in it for me?
* Shall we form an ad hoc committee?
7. Ad-Hoc Committee Proposal Development
* Committee tasks, membership and leadership
* Subcommittees on four principles - identity, participation, competence and equity
8. Approvals of the Proposal
9. Education of Employees
* Explanation and illustration of the ad-hoc committee's proposal
* Expectations of benefits to customers, investors and employees
* Acceptance vote required
10. Implementation Vote
* Determines whether the proposal is accepted for a trial period
* Acceptance leads to implementation
* Rejection leads to identification of reasons
11. Trial Period
* Typical trial period: 12-24 months
* Training is a must
* Process is "fragile" in its infancy
* "Champions" and communication required
12. Plan Renewal
* Ongoing "refinements"
* Comprehensive review and audit at trial's end
* Participative process used to make changes
* Corporate approval and employee acceptance vote to continue
- Scanlon Plan Associates, http://www.scanlonassociates.org
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|Title Annotation:||Human Resouces; Wescast Industries; Helping Everyone Achieve Reward Together|
|Author:||Spada, Alfred T.|
|Date:||Mar 1, 1998|
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