Stasto Stocker, Austria: Make work pay – make work attractive
Stasto Stocker KG, an Austrian family-owned wholesale and service company in the automation process sector (pneumatic, hydraulic, industrial fittings) has put in place a profit-sharing scheme called ‘Mit-Unternehme.’ The aim of the scheme is to combine sustainable economic performance with long-term commitment of employees to the company on the basis of transparency, high-trust relationship and participation.
Stasto-Stocker is a family-owned wholesale and service company in the automation process sector (pneumatic, hydraulic, industrial fittings, etc.). The company was founded in 1974 and is located in the western part of Austria. The main market is Austria but some sales and distribution activities have been started in Czech Republic, Germany, Ireland and Poland, The export rate is around 10%. The company employs 53 employees, of whom two thirds are male and one third is female. The average age of the workforce is 34 years and the skill structure is as follows: 53% un-skilled/semi-skilled workers, 38% skilled workers and 9% academics. The entire workforce is employed in permanent contracts, with 90% working full time, 5% part time and 4% in marginal employment. In 2005/06 sales reached 12 million euro.
The management structure is characterised by flat hierarchies and the personnel policy is geared to long-term relationship and employment of the workforce. The organisational culture is based on high trust, transparency and communication. This is the view of both owners and employees, and is the main reason why, up to now, no initiative from the employee side has been taken to establish a works council in the company.
Description of the initiative
In 1993, the company implemented a joint ownership model called ‘Mitunternehmermodell (MUM)’, which means ‘Joint Ownership.’ The explicit aim was that as many employees (who would become ‘joint venturers’) as possible should have a share in the form of a ‘silent partnership’ (echte ‘stille Gesellschaft’) in the capital (Gewerbekapital) of the company. For the company, 1993 was a year of crisis: one partner left and the return on investment was weak. The owners sought to spread some risk and responsibility among the employees and to gain sustainable economic growth by binding them in the longer term to the company.
The basic framework of the scheme was worked out by the owners and then discussed and elaborated by five managers (heads of departments). The biggest challenge was the creation of a fair distribution system, which has been modified several times since the beginning. The maximum level of share ownership is limited by the so called ‘function factor,’ which is connected to the position (skills level and degree of responsibility) in the company. This function factor can double an employee’s monthly salary. ‘Stille Gesellschafter’ means that company losses are excluded. In a worst case scenario, employees would lose their invested money in case of insolvency.
The distribution sum is calculated out of the annual balance. First, a basic sum for safeguarding the future of the company is discounted, which includes deduction, interests of outside capital and equity and a fixed amount for future safeguarding. All return above this basic sum up to a limit of 50% of the basic sum will be completely distributed between the company and the employees. Half of all proceeds beyond this basic sum will also be distributed.
The distribution system is based on a two-tiered model: out of the calculated sum the managers (heads of departments) decide together, based on the scheme, the distribution to the departments. The distribution amongst the employees in the departments is calculated on three different factors:
- Involvement – or participation – factor, which is a function of occupational competence (degree of responsibility) and social competence (requests for joint venturers). This factor is fixed anew every year by heads of departments and employees (joint venturers).
- Employment factor, where full time equates to a factor of one.
- Attendance factor, where full presence equates to a factor of one. Every week of absenteeism reduces the factor by 1%; in the case of a whole year of absence because of severe illness, a 50% presence is calculated.
The multiplication of the three factors amounts to the sum for the single joint venturer. Even though this scheme is the basis for the distribution of the shared profit, the real distribution is discussed by all employees of a department. Even the share for the head of the department is tied to the agreement of the employees. He has to ‘defend’ his calculated amount on the basis of the scheme. This is a crucial democratic aspect of the whole model. In practice, the basic allocation formula is accepted in the discussions in the departments only.
It is important to mention that the whole range of the function factor in the company is fixed at a ratio of 1 to 5. This means that the function factor of the managing director can only be five times higher than that of an employee with the lowest income level.
At present, 44 out of 50 employees from all positional levels take part in the scheme. The initiative is a clear part of the wider personnel policy and organisational culture, aimed at long-term orientation and stable employment rather than short-term success. The owners, therefore, stated in an interview that management by objectives is explicitly not an option.
The wage level in the company is about 10% to 15% above the collective agreement level, which is lower than in other companies of the sector, which are up to 25% above the collective agreement. With the MUM scheme, 98% of the ‘Mit-Unternehmer’ gain a higher income than before and their overall income is more than in other firms. The difference, or advantage, is higher at lower function levels than at management levels. Disadvantages in terms of pension levels because of lower fixed wages are compensated by a pension fund.
The ‘MUM’ scheme is based on, and functions best, as a long-term management strategy, a trust-based organisational culture, combined with a high degree of transparency. Gaining sustainable economic growth and competitiveness by offering long-term employment and commitment is the main aim of the scheme. The possibility for all employees to participate, not only in the scheme but also to a certain extent in the distribution of the available money inside their department (including the head’s share), is a democratic aspect of the scheme. The intensity of the discussion on a fair distribution system, and the fact that it has been modified several times show the importance of a widespread acceptance of the model among employees.
The abdication of management by objectives and the limitation in the range of the ‘functional factor’ (1 to 5) underlines the long-term orientation on a socially acceptable basis. Even though management does not put an emphasis on short-term economic pressure and success, the performance of the company, its productivity and the effectiveness of work has increased, which is seen as a clear effect of the MUM-model. Another impact of the model is the increased transparency and openness in the organisational culture. This is a precondition for the functioning of the model, and the ongoing process of annual discussions on the distribution of the profit is also a crucial aspect.
Lessons learned out of this case are the following: this system does not work on a profit-maximising management strategy, but must be embedded in a trust-based organisational culture. The required transparency of the model and the domination of short-term business success in many other companies are seen as the main obstacles for a wider diffusion of the model. In addition, the model has to be adapted and specified for each company, for example, the elaborate and time-consuming distribution process may not possible in big enterprises.
Exemplary and contextual factors
Exemplary factors in this case are the long-term management strategy, in which the initiative is rooted, the covering of all employees in the scheme and the fair and participative distribution system of the shared profit. Transparency, openness and high trust relations are key factors for the success of the model, which is seen by the participants as being counter to the predominant share holder value-orientation in the wider economy.
Manfred Krenn, FORBA, Vienna