Profit Sharing -- Part of the Solution

The problem of course is income inequality, and the United States needs to end the disparity between the very rich and the struggling remainder of its citizens. Fixing this problem will ensure the survival of the great egalitarian democracy our founders envisioned, and provide a model for the the future, not only for the United States, but for the world. Many alternatives to the status quo of untrammeled, and some would say immoral capitalism have been proposed and tested throughout this young nation's history. The lack of success of Soviet socialism puts the lie to capital "C" Communism, small "c" communism is unpalatable to a great majority, but "trickle down" doesn't work either! This leads to considering possible modifications to the highly successful but increasingly unfair system of capitalism we have at present.

Being totally practical, we have to continue riding the vehicle we're on, and any new ideas may be criticized as analogous to changing a tire while rolling down the road. But only the most jaded, moneyed or idyllic can deny the stress and lack of hope characterizing the state of the citizenry today. Most certainly, it will take a whole suite of ideas to improve the distribution of wealth in our country, and by our example, the planet. In that perspective, I'm offering this suggestion. Find a way to legislate mandatory profit-sharing! Let me back up and provide a few calculations based on personal experience so the reader may appreciate the genesis of this idea, that corporate profit-sharing can lift us out of the downward spiral of our overall economy and quality of life.

I graduated from Foothill College on the San Francisco peninsula in 1974, when Silicon Valley was just beginning to roar. It was difficult to find a job with "just an AS" and no experience, but luckily a fairly long strike by IBEW 1969 had drained the Lenkurt Corporation of many of its technicians, and when the strike ended I was happy to climb aboard. Although my skills were current I apparently failed their trouble-shooting test and spent 3 months inhaling lead vapors in a room full of other unfortunates doing nothing more technical than de-soldering visibly burnt or broken components from the canvas mail carts full of failed telecommunications equipment we received on a daily basis. As soon as I was eligible for re-test, I took the same trouble-shooting test, received the same module, got the same result and this time was told that I had passed and could now work as a technician. I moved to swing shift, making well above the minimum wage, plus a 10% shift differential. In spite of the dues, working hours that separated me from family and friends, and the many incongruities of the union environment, I hung in there. After almost a year witnessing employees with tenure taunting the supervisors by doing nothing, unwittingly working on units that were passed over by other technicians because they were virtually irreparable or had unrealistically low work standards, I thought it would be worth giving up the shift differential and took an opening on the day shift. That was a big mistake. I was the low man on the totem pole, had the worst gear on my bench, and actually worked in a cage with reprobates who kept obscene joke books in their half-open drawer and took turns shouting out their profanities. I asked to be returned to swing shift and in a lunch time interview when the supervisor told me it "wouldn't be a good management decision" to move me back and cost the company the 10% shift differential, in disgust and anger I threw the supervisor's sandwich at the wall! Unionism failed me -- I agree with the Volkswagen workers in Tennessee who recently voted against unionizing.

In 1975 I worked for TRW Vidar in Mountain View and was mentored by a senior components engineer. Even though my pay was less than the union job, my fellow employees were not as angry, and less profane than the union techs. As a young worker I made some mistakes, none too costly -- "When you're chopping trees you're gonna have a few chips" -- my boss told me after I erroneously cross-referenced a relay causing a purchasing return and production delay. I learned a great lesson at the expense of one of the custodians, though. It was his job to unlock the back gate a little before noon so employees could lunch and jog at a nearby park. The day that he failed to do that I was returning from my nearby rented digs on my bike, and I picked up some thorns that flattened both my tires when I went around to the front via the shoulder of the railroad tracks. Upset at this inconvenience I told his boss, and the next day I encountered a red-faced angry custodian. "You complained, sir! And my boss used that against me in my performance review. You cost me and my family a 1 1/2 percent raise!" I immediately realized that I should have taken my complaint to him -- not management. After all, it was the Human Relations department that fired me from my previous job. The great importance he attached to losing that raise made me curious, too. I discretely asked several employees how much more a year they would require to pay their bills on time and have something for unexpected expense and special occasions. My number was about $2000, and that turned out to be the consensus. I looked at the numbers from the previous fiscal year, divided the company profit by the number of employees and it equaled just about $2000! My salary was around $9K which meant a 22% higher rate would be welcome -- but if everyone got their breathing room the company would be unprofitable.

It took a few years, but I learned some very valuable methods for insuring the quality of an electronic company's purchased parts, and armed with my two-year degree and some fortunate references I eventually became a components engineer myself. I was hired by a manufacturer of computer terminals, and received continued mentoring from one of the founders, "employee number six," the documentation manager. Zentec Corporation actually made Intel based microcomputers masquerading as "glass teletypes," wrote their own code and ran it from read only memory chips. The company was known for excellent engineering and a well-thought out manufacturing methodology. Using innovative purchasing, stocking, quality assurance and manufacturing ideas, the company spirit was buoyed up by quarterly profit-sharing and an open-door policy. Rather than risk total dependence on just-in-time buying, the company cleverly used the prefix on their piece part documentation to describe a stocking location next to the assembly area. There were no part substitutions without engineering approval, and incoming inspection was reserved for sub-assemblies. Individual components went to stock if the received part numbers matched the purchase order drawn from the approvals in the data base. These policies created the lowest "DOA" rate in the business, increased profitability and the profit sharing environment made for positive motivation and constant improvement. By 1980 I was making about $19K a year plus quarterly profit sharing checks that added about $1500, an additional 7%. Unfortunately the marketing department bet the company on a series of work stations and servers running UNIX -- not a bad idea in itself -- but the design depended on the impending release of the 80186 microprocessor and Intel decided to wait 6 or 8 months, skipping to the 80286. Until fate intervened the company had financed its growth from profits, saw employees leave to start spin offs Televideo and Wyse, and never had a layoff. Even though I was spared from the first ever Zentec layoff, the spirit was gone, sales were spinning downward and I left for a "blue pasture" at GE Calma.

Within 6 months Calma was experiencing their own downturn. A manufacturer of computer aided design stations that depended on mainframe computers for their processing power, they used a questionable manufacturing and shipping process that cost them millions when customers refused to accept shipments because they wanted to wait for the next wave of minicomputers. Calma had blanket orders for their CAD systems with staggered delivery. To make their quarterly numbers look good, they would build ahead and store the systems under plastic sheeting in a 45,000 square foot warehouse. Zentec worked their numbers, too, calling a unit shipped when it went through the "hole in the wall," but GE Calma was 3 to 6 months ahead of their shipping schedule, and the costly systems languishing under yellow argon lights in the back were "shipped" when they were locked behind the cyclone fence.

Thankfully, the 16% layoff at Calma was mitigated by an employee outplacement effort, and they helped hook me up with a promotion to Quality Assurance Manager a few miles away at Amtron, a manufacturer of 19 inch precision color monitors. Amtron's main selling feature was a low selling price and a form factor that matched the mounting requirements for a popular Mitsubishi monitor. I soon learned that I had walked in the door for my interview about an hour and a half after management had met and decided they would hire the next biped who applied for QA Manager -- they had a roaring quality problem and their existing QA man was a lame duck coasting toward retirement. I passed my first test on day 3 when my boss, the Director of Manufacturing asked me if I wanted to send everyone home because we received another batch of circuit boards full of solder shorts -- or should we inspect our way through and cherry pick enough good ones to keep building? We kept the line going, but I immediately tried to find another vendor, which is difficult when your company is in bankruptcy and the bills are being paid by a financial holding company. The situation was so bad that we would get a rental truck and move all the RMAs that were stacked in the hallways to local storage lockers when prospective customers wanted to do a site inspection.

I used everything I had learned from previous mentors, senior QA men, a series of management and statistical QA courses I had taken, and stories in the trade press about successful quality programs, and crazy as it seems, we fixed the company. There were engineering meetings twice a week, concentrating on fixes for the most frequent problems. I discovered an employee altering drawings, then "fixing" problems after they occurred with great flourish of his red pen. "Tip and tell" devices inside shipping boxes led to a change in our shipper. We created a motivational program called "Murphy's Dead." But the greatest improvement came from converting end of the line inspectors to early bird monitors who checked the accuracy of kits, processes, drawings and employee readiness at the start of the day, and throughout the daily process. Within 3 or 4 months the rework caused by units failing inspection had disappeared. I was disappointed that customers who had been burned refused to give us a chance at requalification, and then a three person delegation of manufacturing employees came to visit my office. They pointed out that when they were doing rework they got 8 hours of time-and-a-half on Saturday, and 4 hours of double time pay on Sundays. Sure it was nice to get off the 7 day a week treadmill, but now they were having trouble paying their bills, they couldn't care for their families on $6.50 an hour minimum wage. I took their case to the company president who was astounded at my naivete. "I'm not going to pay people extra for doing what they were supposed to be doing in the first place! And I want you to stop the inspectors from wandering around. Put them back at the end of the line where they belong, and take down your damn signs." I did as he said, the company slid into the abyss, and I had to lay off several people before a special vice-president "subsumed" my position.

The hourly employees were grossing $260 a week (this was 1984) plus $104 from their 12 hours on the weekend. This works out to a 40% increase above the minimum wage -- curiously close to President Obama's proposed 39% lift to $10.10. I used the autobiographical examples to convince you that I'm not "just woofing" -- there is an actual need for greater wages -- but it can't be satisfied by simply raising the rate of pay. Each example I cite above has slightly different characteristics. The TRW Vidar anecdotal evidence suggests that if an employer simply gives everyone a raise to ease their financial stress, profitability goes down the drain. The Obama $10.10 number for a minimum wage is a good number in a compassionate, human sense -- would have been good years ago -- but any business that depends on entry level workers for its profitability will balk at this imposition, like the company president at Amtron. That leaves us with the Zentec model of efficient operation coupled with motivational profit-sharing as the best method for achieving both corporate profitability and employee satisfaction.

It will take a cultural shift in perception to align all the forces required to effect any great improvement, and simply passing legislation in a vacuum with no support or understanding is not a proper solution. But I firmly believe that careful, thoughtful, phased modification of the legal framework for our corporations can bring us to a point where a combination of increased employee wages and motivational profit-sharing coupled with other efficiencies can help stabilize and heal our society.

-- Don Baraka