Walman has long focused on getting ideas from its employee-owners. Paying employees for ideas is an old idea itself, and one that research shows often does not work very well, generating a limited number of very limited ideas. But these studies did not look at ESOP companies, where employees have a long-term interest in how the company does, not just a short-term payoff. Placing the incentives within a corporate culture that values employees may also change the motivational context. Walman certainly seems to bear that out.
The New Visions program at Walman, which the company has sponsored for over 25 years, pays employees up to 15% of the profit generated by their suggestions in the first year after implementation. Over 770 ideas have been submitted since the program’s inception, and one submitted by veteran employee Doug Kryzer resulted in a $40,000 payout.
The New Visions program provides cash incentives based on simple and clearly defined rules. All employees except company officers and people on leaves of absence are eligible to fill out a one-page suggestion form, indicating the issue being addressed, a solution, and a description of the benefit to the company, including the estimated net savings or profit. The program manual says that eligible suggestions contain all four of the following elements:
Sketches, photographs of models and copies of proposed form changes, statements of financial benefit to the company, etc., if appropriate, must be attached to the form at the time of submission. Items are automatically ineligible when they concern personnel policies, when they are already being considered, when they have already been submitted, or when they include a problem without a solution. Ideas that conflict with company values, company policy, or the company’s legal or contractual obligations are also ineligible. (Companies should consider allowing submissions just to identify problems. Just because someone does not have a solution does not mean that identifying a problem is not an essential first step).
The size of the reward depends on whether the suggestion is tangible or intangible. The program manual defines intangible suggestions as ones that “do not result in direct net savings or net profit, cannot be estimated, but improve employee safety, customer relations, customer service, public relations or working conditions.” Tangible rewards are almost uncapped. If a suggestion is adopted, Walman will pay the employee or employees an amount between $50 and $50,000; the actual amount “shall be no more than 15% of the first year’s estimated next savings or profit.”
If the New Vision committee believes that the size of the savings is uncertain, it may pay the reward in two parts, with the second made after the impact of the suggestion can be observed. Intangible suggestions receive an award based on a point system, up to a maximum of $1,000. In addition, anyone who has submitted an eligible suggestion is entered into a quarterly drawing for $500.
An individual or a group may submit suggestions. If a suggestion is submitted by more than one person, only the first person submitting the suggestion is eligible for a reward. Salaried employees may submit applications, but they will be eligible for a reward only if the suggestion is not related to that employee’s responsibilities. Each branch (a branch is a headquarters department or a location outside Minneapolis) has a branch coordinator, who is a non-manager and serves as the liaison for the Employee Ownership Committee and the New Vision committee. The branch coordinator receives a reward equal to 10% of the reward received by the suggester, as long as the coordinator was named on the suggestion form.
An employee fills out the one-page form and hands it in to his or her branch coordinator, who helps the employee improve the idea, if necessary. The suggestion is sent to company headquarters and forwarded anonymously to the New Visions Committee Administrator. The idea is then forwarded to the New Visions Committee, which is composed of non-executive employees. It’s important to note that the idea is presented to the committee with the employee’s name and any specific branch information removed. The committee finds this integral to the decision-making process. The idea is then researched and vetted, which can sometimes take months. If the idea is adopted, the evaluation committee hands it to a task force responsible for implementing the idea within 45 days. Both the employee and his or her branch coordinator receive letters of acknowledgement at each step in the process. Quarterly communications highlight adopted ideas.
Aside from being an ESOP, the structure of the Walman program succeeds because it has a specific structure that involves research, feedback, and gets non-management employees involved at every stage of the process. It’s an incentive system by and for employee-owners.