Plant manager T.J. Kerkman usually supervises IRMCO’s production of lubricants, but these days he’s likely to be seen painting, cleaning or fixing something.
Call it job security.
By eliminating landscaping and cleaning crews and handling most maintenance in-house, workers at IRMCO have done their part to avert layoffs.
“We don’t sit around and say, ‘I don’t do that,'” Kerkman said. “I’m here to mix (lubricant) or swab the floor.”
Kerkman also replaced the lighting throughout the plant, saving about $15,000 by doing it in-house, plus $6,000 in energy savings the first year. Other workers pitch in to mow the lawn or tidy the bathrooms.
The workers do it because they understand the company’s financial position and the economic conditions affecting automotive sales, IRMCO’s largest customer sector.
IRMCO practices open-book management, an approach in which employees are kept informed of the company’s financial measures and empowered to use that knowledge to improve performance.
In return, management gives them a stake in the company’s success, usually in the form of a monetary bonus, said Rich Armstrong, president of the Great Game of Business consulting firm in Springfield, Mo..
The critical elements of open-book management include sharing information and empowering workers to use the information to make decisions on the job.
“What it leads to is the central idea of transparency and education,” Armstrong said. “Being very open in terms of what’s going on in the business can help in so many ways.”
By saving here and there, IRMCO’s workers have cut $20,000 to $100,000 a year in expenses, said President and Chief Executive Jeff Jeffery, the great-grandson of the 96-year-old company’s founder. In return, the company pledged not to lay off workers despite a 40 percent decline in production volume during the recession.
The approach has helped the company return to profitability quickly, said Jennifer Kalas, chief financial officer. Sales are up 22 percent this year from last, and the company is making money again.
While open-book management is effective at boosting a company’s performance in good times or bad, interest climbed during the recession, Armstrong said.
“There’s been a big uptick in people wanting to learn more about this,” he said.
In tough times, companies might be reluctant to share bad news, but those that do often benefit.
“In this business environment, companies really need to get everybody in the business engaged. The more people thinking about the business, the better,” Armstrong said.
“In general, people do better when they understand the context in which they are operating,” said Brenda Ellington Booth, clinical professor of management and organization at Northwestern University’s Kellogg School of Management.
What’s more, a culture of open communication can avert mistakes that happen when employees don’t feel comfortable speaking up, Booth said.
“The consequences of not having open communication can be failure,” she said. “A lot of times, employees can have good solutions to problems if they know what’s going on. They might be closer to an operation or closer to the customer.”
Open communication also can make bad news easier to swallow.
When Krusinski Construction Co. in Oak Brook imposed across-the-board salary cuts, workers understood the context, said Joe Krusinski, chief executive.
“Employees appreciate being treated like adults and being given information,” he said. “It’s never easy to give them bad news, but it’s always better to share with them reality.”
Project manager Andy Johnson agreed: “When you have internal information about why those things are necessary, it gives you a sense of teamwork, rather than feeling as though they are taking things from you.”
At IRMCO, employees know most profits are reinvested in the business and distributed to workers in the form of bonuses. By sharing actual figures, “It creates a lot of trust and honesty,” Kalas said.
Open-book management starts with educating employees on how a company operates and where the money goes, Kalas said. If a company’s annual revenue is $10 million, “they may think the owner takes home $10 million,” she said.
The company issues a daily financial report to workers via e-mail, then holds monthly meetings to discuss results.
“People are going to do the right thing if they’re given the information. They’ll come up with ways to save money,” Jeffery said.
What’s more, open book boosts retention. “People don’t leave,” Kalas said.
Jim Arteaga, a batch-maker, travels about 45 miles to IRMCO from his home Lansing. The trip is worth it, he said, because the company treats him with respect and gives him autonomy.
“I know what I have to do, and it will be done,” he said.
By being cross-trained on a variety of duties, employees routinely cover for each other when someone is on vacation, ill or on maternity leave, saving the company from hiring temporary workers.
“They came up with that idea on their own,” Jeffery said. “It would be different if the big bad boss said, ‘We’re not going to hire a temp. You work twice as hard.’ But if it’s their idea, they’re all over it.”
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