Case Studies from the Wilson Group
This section of our website contains several actual case studies of companies that have developed and utilized highly effective reward systems to address critical business issues. They reflect for their own organization a “best practice” and an excellent example of how rewards can link directly to an organization’s key challenges. Once you have reviewed the summary and selected the case studies you are interested in, clink on the link in the summary and you will receive a download pdf of the case study. We hope you find this information helpful to discovering how your organization can address its particular needs.
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Allied Signal
Creating a Process for Winning Together
Allied Signal is a highly diversified worldwide company that develops and manufactures components and systems for the aerospace, automo¬tive, chemical, fibers and plastics industries. As part of their growth and manufacturing improvement strategy, Allied Signal implemented a program called: “Winning Together” in order to increase both employees’ productivity and their vested interest in the company. Since its inception, the “Winning Together” Program has been expanded to many of Allied Signal’s plants and has generated over $250 million in savings, over 40 times its costs.
Amazon.com
Shaping a High-Performance Culture through
HR and Reward System Design
Amazon.com is the world’s largest Internet bookstore and one of the most visited sites on the World Wide Web. Founded in 1994, Amazon.com sells everything from gourmet food, to books, music and flat-screen monitors. Due to its explosive growth and enormous revenue potential, Amazon.com strives to recruit the top talent in the field. Though providing relatively conservative salary packages for it new-hires, with very competitive stock options, Amazon was able to attract talent that shared its growth objectives. With its share price skyrocketing from $18, when it first went public in 1994, to $200 by 1999 (adjusting for the stock split), even low-level employees saw enormous gains in their income. This strategy helped to minimize cash expenses when the company had very low profit margins, but provided employees a direct stake in the growth and success of the company. The alignment between the business, total compensation and culture has been a key element to Amazon’s continued ability to attract and retain top performers.
Avid Technology, Inc.
Linking Reward Systems to a Business Turnaround
Avid Technology revolutionized the entertainment industry by changing the way motion pictures, commercials, broadcast news and TV shows were edited. However, internal structure was sacrificed at the expense of extreme growth until Avid began losing stock value and saw decreased customer and employee satisfaction. Under new leadership, Avid re-pieced together its compensation plan, which included a plan based on earnings-per-share, a profit-sharing program (the former and the later both based on ROIC - return on invested capital) and a restructured stock option program. In order to retain critical hardware and software development talent, base salaries and retention bonuses were adjusted based on the productivity of individual employees. As a result, turnover fell dramatically and profitability soared, aptly reflected in the quintupling of Avid’s stock price.
Baptist Health System, Inc.
Evolving the Rewards Focus from Entitlement to Results
Baptist Health System (BHS), a not-for-profit company, is Alabama’s largest integrated healthcare delivery system, providing high quality healthcare through its 11 hospitals, primary care network, Birmingham-based Health Partners Southeast HMO, wellness/exercise facilities and senior living communities. BHS was recently ranked in the top 50 of the Integrated Health Care 100 Directory. BHS, along with virtually every other healthcare system in the United States, faces unprecedented challenges to its business mission from multiple pressure points. BHS’s success is attributable to its incentive plans, which reward employees for increased productivity and quality with quarterly incentive pay, the ability for certain employees to telecommute, and variable gain-sharing, which compensates highly productive employees for their hard work.
Blanchard Training & Development, Inc.
Learning to Soar With the Eagle Award
Blanchard Training & Development Inc. (BTD) is a management training and consulting firm located in Escondido, California. Founded in 1979 by Ken Blanchard, coauthor of The One-Minute Manager (New York: Berkeley Publishing Group, 1986), and his wife, Margie, BTD employs a particularly effective form of recognition to keep employees motivated called “Eagle Awards”, which are presented to individuals who have gone above-and-beyond their job roles to assist a customer or a co-worker. Though incentives do not include monetary awards, customer service has become the number 1 priority of BTD as company employees (who have become invested in the program) have begun to recognize one another for their achievements, which has led to overall improvement for the company.
Burke, Inc.
Retaining Critical Talent with Customer-Focused Rewards
Burke, Inc. is a leading international business research and consulting firm helping manufacturing and service companies understand and accurately predict marketplace behavior. As an incentive to retain its top performers, Burke decided to develop a performance-focused plan benefiting the senior consultants who provide a direct link between Burke, Inc. and its customers. Senior level consultants were provided with the resources to effectively “run their own business” within the organization. As a result, costs and turnover have decreased and profitability and management capabilities have increased.
CIGNA HealthCare
Retaining Employees when Faced with Consolidations
When corporate buyouts, layoffs and decentralized operations management disrupt an organization, restructuring must reasonably follow. Such was the case when CIGNA HealthCare acquired Healthsource in 1997. In order to retain employees prior to the restructuring and layoffs in two Healthsource operational areas, employees in the closing locations were offered generous severance packages and bonuses for remaining with the company before and after the transition date in order to maintain performance prior to the closing of the locations. As a result, turnover before the targeted date remained low and customer satisfaction and performance did not decrease. After the locations were closed, employees received ample time to find new employment.
Cisco Systems Inc.
Creating a Share in the Success
In just a little over 20 years, Cisco Systems Inc. has become one of the top 40 companies in the world, offering products ranging from networking routers to integrated solutions-oriented equipment and services. Cisco Systems has built itself on its acquisition program, which has allowed it to diversify by entering new markets. Company profitability is driven in part by its compensation plan, which incorporates both a cash incentive program (tied to the company as well as the individual performance) and a stock options program (tied to both employee contributions and growth potential). The programs have led to both retention of employees and employee maintenance of company stock as well as the retention of talent and an adherence to company strategy and values.
The Coca-Cola Company
Linking Incentive Compensation and EVA to Drive Shareowner Value
The Coca-Cola Company leads the global beverage industry in volume, profitability, growth and innovation. The company is managed from an economic value added (EVA) and economic profit viewpoint to keep profits high and maintain a high return to investors. Compensation programs were realigned to give value to stockholders by creating variable pay programs to focus on economic profit. Two compensation programs were designed. The annual incentive program provides rewards to high performing divisions, while the stock option program provides options, based on a percentage scale, to all employees depending on performance. Both programs have led to increased profitability for the company and an amplified stock price for investors.
Colony Communications, Inc.
Team Incentives to Increase Customer Loyalty
In this age of fast-paced technology growth, keeping up with the industry is imperative. Colony Communications Inc. is one such company. In order to adapt to the changing pace of the technology industry, Colony had to come up with a compensation plan for its employees to increase their involvement in the changing company culture. The compensation plan they developed was called SPIRIT and served to promote growth within the company by providing individual payouts to company business units on a quarterly basis. Employees also became eligible for bonuses based on their involvement in volunteer groups and activities. As a result, turnover decreased and customer satisfaction, teamwork and profitability increased.
Community Health Plan (CHP)
Engaging Physicians in the Process of Change
Community Health Plan is involved in the changing culture of healthcare. As HMOs, doctors and hospitals seek to maintain equilibrium based on achieving the best care for its patients, physicians must rightfully be compensated for their new role within this healthcare dynamic. CHP of Vermont developed a pioneering compensation plan for its physicians. The program based the payouts on a combination of quality of care, patient access, physician performance and group medical cost management; the payouts were made both quarterly and annually. Physicians in the program were educated about the desired behaviors and practices reflected in the metrics and were involved directly in the plan’s design. They became highly vested in the program. As a result, patient care improved with a marked decrease in unnecessary emergency room visits. Additionally, more and more physicians received payouts for the services rendered, demonstrating that financial incentives can reinforce desired quality of care, patient satisfaction and medical ethics. This program lead to a dramatic improvement in both the financial health of the organization and the culture and commitment to patient and quality medical care.
Corning Inc.
The Case of Continuous Improvement-GoalSharing
Corning Inc. (formerly Corning Glass Works) is a highly diversified manufacturing company. Corning replaced its old compensation plans with a new program that gave employees great line-of-sight into how their actions impact business unit and overall company performance. A GoalSharing matrix was devised based on a list of measures vital to the productivity or performance of a business unit and included a portion tied to the Company ROE (return on equity) performance. Cash bonuses (later with the option to buy company stock with the bonus) were awarded based on a simple scorecard formula that compared their achievements to the established goals. As a result, the performance of each business unit improved significantly, overall company productivity increased, and Corning achieved a top quartile rating of ROE among other Fortune 500 companies. The GoalSharing program rapidly became a model for how to bring line-of-sight performance measures into alignment with compensation and total reward programs.
Cummins Engine Company
Sustaining Continuous Improvements in a High Performance Work Setting
Cummins Engine Company is the leading manufacturer of large diesel engines and power generators with annual sales in excess of $5 billion. The Atlas Crankshaft, Inc., a division within the Cummins, decided to develop a variable compensation program to increase the link between its employees and the awareness of their productivity. Employees are rewarded with quarterly payouts based on specific business performance of the division which included feedback on their service from customers. The results have not only strengthened the division competitiveness and profitability, it has reinforced a culture of engagement and excitement lead by the division’s leadership team. As clearly demonstrated by the program at Atlas, employee involvement in the performance challenges of the organization on all levels is important for productivity, customer service, employee safety and financial results.
Fleet Financial Group, Inc.
Retention for the Technology Solutions Group
Fleet Financial Group Inc. (Fleet is now owned by Bank of America), among many other financial services corporations, saw that in the period prior to the new millennium, many areas (namely New England) experienced exceptionally low rates of unemployment and high turnover. This was especially true for Information Technology professionals that at this time were highly attractive to other companies, namely consulting firms, for higher salaries and more perks. The challenge to Fleet was in how to retain this talent and prevent the organization from facing a potentially major disaster in computer operations at the change in the date — 1999 to 2000 — the millennium. The Fleet Technology Solutions (FTS), the group where retention of employees was the most critical, developed a compensation strategy and program to address its issues. In the Merit Augmentation Program, FTS employees’ salaries were assessed and boosted to above competitive market levels where necessary and also received special awards of stock options. For the highly valued staff, a retention bonus award and personalized thank you letters were given to employees who remained with the company over this period. Fleet learned the valuable lesson that while money was important; its value was enhanced by a simple “Thank You” from the organization’s leaders. This demonstrated to employees that they were appreciated for helping the company avoid a major disaster and improve its ability to serve customers.
Harvard University Health Services (HUHS)
Bridging the Gap between Physicians and the Organization
Harvard University Health Services serves the faculty, students and staff members of the Harvard University and operates as an independent managed care organi¬zation. It must compete with local managed care institutions for physician and other clinical and technical talent. Harvard University Health Services employs a myriad of health professionals to serve the Harvard community. In order to retain talented health professionals, especially its physicians, it needed a special compensation program. They developed an innovative physician variable compensation program that, if they were successful, would provide above market rates for total compensation. The program used a variety of measures linked to a set of clear, job responsibilities and payouts were provided based on the actual performance against the set of objective standards. The program was also used to assist in educating physicians in serving HUHS’ patients in unique and innovative ways. The compensation plan has had a very positive impact on lowering costs and raising levels of patient satisfaction.
Keane, Inc.
Utilizing Values to Achieve Competitive Advantage
Keane Inc. is a software consulting firm based in Boston, Massachusetts. Its purpose is to help clients build and manage high performance information technology systems. Keane has been recognized nationally for its excellent reputation and response to year 2000 issues. Keane offers a variety of incentives for employees depending on their function within the firm ranging from yearly bonuses for recruiters to a two-tiered bonus system for those involved in sales. These bonuses and commissions are tied to the individual performance of company employees. Highly productive employees are also eligible for stock options. Branches within the company also participate in special peer recognition programs for their staff. Keene’s incentive programs maintain a client-focused, fun and highly productive business environment.
The MathWorks, Inc.
Retaining the Spirit of an Emerging Company
The MathWorks Inc., the creator of MATLAB®, is a highly productive IT company creating products for the design of cars and air traffic systems, for medical research, and as education tools for scientists. The MathWorks has become the world’s leading provider of tools for engineering and scientific professionals. Employees at The MathWorks are kept up to speed with company operations to maintain a highly vested workforce. In response to issues with a prior compensation program, the company’s executives developed the “Stakeholder Program.” The program is a bonus-based compensation plan, which uses quarterly payouts based on individual performance and company profitability. By linking the payouts clearly to specific common performance measures, the company has been able to create a very meaningful stake in the growth and success of the company. The compensation system has increased employee involvement and commitment to the success of the organization and has created a “stakeholder friendly” culture within business.
Saturn Company
Being a Different Kind of Company
Saturn Company is a wholly owned subsidiary of General Motors. Initial compensation systems implemented at the company at its inception placed company pay levels below market averages. However, employees were then paid a percentage of the salary for their performance. Employees were rated on their quality of performance, achievement of training goals and their achievement of team goals. Employees also received quarterly payouts based on their ability to exceed budgeted earnings. As a result of its highly innovative system, Saturn began to turn a profit only 3 years after its creation. Despite today’s decreased market for small cars, Saturn continues to lead by example with its compensation plans, commitment to its customers and highly engaging employee practices. It has a culture ready for change and eager to build cars and provide services that are clearly superior in the marketplace. It needs this to remain competitive in a very challenging and dynamic market.
Sears, Roebuck and Company
Regaining Market Leadership
Sears, Roebuck and Company, a 100+ year old company known for its vast array of products and services, began facing competition from growing competitors that offer similar products at lower prices. In response to declining financial prospects, the senior leadership team embarked on an infamous transformation of the company. The process engaged managers and employees at all levels in strengthening the attractiveness and competitiveness of the company in the retail marketplace. Much was changed about the company. One of the key discoveries was the clear linkage between people, customers and financial performance. Sears was able to document that financial results were determined heavily by customer loyalty; and customer loyalty was determined heavily by employee satisfaction. Customer and employee loyalty became leading indicators of financial performance. This principle was then integrated into the company’s entire range of variable compensation plans. Management incentive plans were linked to the three key measures of employee productivity and satisfaction, customer loyalty and financial results. Employees participated in the company’s profit sharing program and all salaried employees were granted stock options. As a result, profits have increased and customer loyalty, once dangerously fleeting, increased dramatically. The company was able to turn its financial results around and secure a very competitive position in the retail marketplace.
Southwest Airlines
Finding the Formula for Success
Southwest Airlines, selected for several years as one of the Best Places to Work, has achieved an outstanding reputation in its short lifespan. A high level of employee commitment is maintained at Southwest by engaging all employees and hiring new employees who fit the Southwest standard. The pay for its 85% unionized workforce is related to seniority, which reinforces longevity. Pay for new hires is frequently well below market, but increases more rapidly than other companies as individuals demonstrate their active contribution to the company’s success. Executives within the company are paid less but are more invested in stock to create a greater investment in the company. But, the most distinguishing characteristic of Southwest Airlines is its highly involving, exciting recognition programs. People throughout the company are actively and publicly recognized for small and large contributions to key success factors of the company. It is estimated that at least every hour of every day, someone (or some people) in Southwest are recognized by management or their peers for doing something special — for customer support, operational efficiency, and supporting others within the company. Southwest has learned that their success depends on the ability and style of their people (hence the importance of hiring) and the culture (hence the attention to innovative recognition and compensation programs). This has resulted in a company with incredible success in the airline industry and a great place to work.
Starbucks Coffee Company
Building a Unique Total Rewards and HR System for a Unique Company
Starbucks Coffee Company has exploded with growth since it’s founding in the 1980’s. It has become the leading retailer of specialty coffee in North America and operates 1,800 retail locations in North America, the United Kingdom, and the Pacific Rim. Full- and part-time “partners” are offered a comprehensive benefits package, which remains atypical of the industry. Company employees also have the ability to buy discounted stock in the company. Both the benefits and compensation plans have increased employee satisfaction, and as a result, created higher levels of customer satisfaction. Company employees are asked for their input about the operations of the company parallel to customer feedback programs. Employees receive ample training and are held to the company’s mission statement with regular feedback from management. Surveys have demonstrated a high level of employee satisfaction and a low level of turnover has been maintained. Starbucks has also been named as one of the Fortune 100 “Best Companies to Work For” and has retained an enormous share of the market providing quality products to loyal consumers.
Techneglas, Inc.
Increasing Competitiveness with Productivity Improvements
Techneglas Inc. is one of the world’s leading producers of glass panel used in the production of television tubes and the largest such manufacturer in the United States. The company is a wholly owned subsidiary of Nippon Electric Glass, Ltd. (NEG). In the later 1980’s and early 90’s, the Pittston, Pennsylvania plant of Techneglas began to face growing market competition. To maintain their stake in the market, the plant began to implement programs to increase productivity and employee engagement in the company. They developed a compensation plan known as PRIDE +. In this program, a portion of the plant’s profits are allocated as quarterly payouts to employees based on specific, competitive measures of performance. Departments are also given special recognition awards based on their contributions to the plant’s overall performance. As a result, overall productivity increased, employee safety has become a high standard, and the company has retained its competitiveness and its characteristics as a great place to work.
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