Polyproject Sweden, Sweden: Make work pay – make work attractive
Polyproject Sweden AB is a small manufacturing company producing components and equipment for the treatment of industrial waste water. The company introduced a profit-sharing system, together with training and improved information, for the benefit of employees. The new system has contributed to improved flexibility and commitment among the employees and improved the overall performance of the company.
Polyproject Sweden AB is a small manufacturing company situated in the small village of Krokek. The company produces components and systems for the treatment of industrial waste water. The products are mainly plastics and composite materials. The company has one shop for thermo plastics, one for GAP (glass fibre reinforced plastics) and a steel shop. The annual income is around five million euro, half from the sale of components and half from delivery of complete industrial waste water treatment systems. All products are customer specific and each production worker works from blueprints and customer specifications using production methods that are largely manual.
Polyproject has 35 employees, 20 in the factory and 15 in administration and sales. Only five employees are women: one in production and four in administration and sales. The company is affiliated to the relevant employer organisation and almost all employees are union members.
All employees are trained by Polyproject as there are no nearby training institutions for plastic workers. As production is customer specific, it is important that all employees can manage several jobs and functions in production. The motivation and skill of the individual worker is important to meet customer quality specifications and delivery times. Delivery time is often very important as the products are parts of larger systems and delays can hold up large building projects.
Description of the initiative
The company recruited a new managing director in 2003 and a new owner replaced the company’s founder, who retired. This resulted in a number of new initiatives in the company. Unexpected business opportunities led to some new recruitment and the opening of a new range of products. The new managing director noticed that the long-standing bonus system seemed to do little to motivate the employees. Negotiations were begun between the company and local union delegates about a new profit-sharing system.
The company performance is dependent on the active commitment of all employees. The workforce must be flexible and have a good understanding of what is required in each specific process. The organisation is flat with one supervisor for all 20 production workers, some of whom work temporarily at the customer’s site. For several years, the company used a system with individual bonuses, based on working time. The required working hours were estimated for each product and if the work was finished in fewer hours the persons involved received a bonus. The company, however, found that the time-based bonus did not give the desired result as the performance of the company depended on a number of factors. Flexibility and cooperation are very important, especially when workers share floor space, lifting equipment and other common facilities.
The management and the two local unions (IF Metal for the blue-collar and SIF for the white-collar employees) negotiated a new profit-sharing system. The employees share 10% of profits exceeding one million Swedish krona per year. The share is paid annually after the annual report has been accepted by the board of directors. After the deduction of one million krona, two sums of 10% each are calculated: one sum is divided equally among the blue-collar employees and the other among the white-collar employees. This means that the white-collar employees get more per person as they are fewer in number. All employees that are employed at the end of the year take part in sharing the profit. People working part time or joining the company during the course of the year get a reduced sum, in proportion to their working time. Short-term absenteeism is not taken into account but persons who are absent (for reasons of illness, childcare, etc.) for a longer time receive a reduced share.
The introduction of the new profit-sharing system has complemented other initiatives to improve the flexibility of the company. Some workers have been given training to perform work in areas of production where they normally do not work, in order to meet variations in production demand.
The previous bonus system led to poor optimisation in several ways. Each worker tried to minimise the working hours on ‘their’ order without considering the interests of the whole company. Workers were unwilling to leave their job to give a hand to a colleague. The important aspect of keeping delivery time was left to the management, and was not seen as a concern for the production workers. This was unfortunate as delivery time is an important aspect and contracts often include heavy fines for delays. The fact that the incentive system was tied to the individual product rather than to the performance of the whole company was also a problem.
By introducing a system that tied the bonus to the total economic performance of the company means that everybody gets an incentive to take a broader view of their role in the company. The new profit-sharing system was also linked to improved information to all employees, regarding sales, order, customer reactions, etc. Each employee was encouraged to understand and identify with the whole company rather than with their individual position or department. The new profit-sharing system was the basis for this relationship between the individual and the company.
The year 2005 was the first full year with the new profit-sharing system. Polyproject made a profit of 0.6 million euro, about 10% of the annual income, which was its best profit ever. This was a result of several factors, such as a strong export market, successful introduction of new products and a stronger financial situation. A dedicated and flexible workforce also played an important role in the performance of the company. The managing director and the union delegate are content with the functioning of the bonus system. The union delegate noted, however, that it may lead to years of no bonus, in spite of strong efforts from the workers. The union delegate also pointed out that some of the drive from the workers to beat their budgeted time per order has been lost with the new profit-sharing system. The previous bonus system was a strong driving force to meet the budgeted time per order.
Exemplary and contextual factors
Profit-sharing systems are traditionally not very common in Sweden, but have become more popular in recent years. Performance-related pay systems, based on production results and production performance are more common. Polyproject is an example of a small manufacturing company that has tried incentive systems, based on production performance, but found that they led to poor results. Workers tried to optimise their own bonus but had little regard for the performance of the company as a whole. The profit-sharing at Polyproject actively motivated the employees to switch to a more flexible working method and a better performance, in terms of product quality, delivery time and productivity.
Olle Hammarström, National Institute for Working Life, Stockholm