How Pay for Performance Leads to Manufacturing Profits with Kevin Johnson

Connect with Kevin: kevin.johnson@bhamfast.com 

Show Transcript:

Lisa Ryan: Hey, it's Lisa Ryan of the Manufacturers Network podcast. I'm excited to introduce you to Kevin Johnson. Kevin is V.P. of manufacturing at Birmingham Fastener. He has 25 years of experience in steel and steel products. He has worked for Nucor, Fontana Grupo in increasing responsibilities. And his current role is responsible for sales, manufacturing, engineering, maintenance, shipping, and quality. He studied metallurgical engineering at Purdue University and is the chairman of the Industrial Fastener Institute chairman and is also on the A.G. Gaston Boys and Girls Club board. 

Kevin enjoys spending time with his wife Cindy and their two children, Amani and Jada. Kevin, welcome to the show. It's good to have you here. 

Kevin Johnson: Thanks, Lisa. Glad to be here. 

Lisa Ryan: Well, you and I had the opportunity to meet at the Industrial Fasters Institute, and now you are in charge of that. So not only dealing with manufacturing at your plant but also I'm sure that you hear many things from your members. So when it comes to your background, please share with us a little bit about what brought you to manufacturing and how you got where you're at. 

Kevin Johnson: OK, well, you know, I come from a manufacturing family. I'm the third generation. My grandfather was in aluminum. My dad was in steel, and I ended up in steel as well. That kindled my interest in metallurgical engineering. So I received a scholarship for that. I attended Purdue. It was in-state. And from that, I went to my first job, which is an Otakupu, and started in their lab. They moved me up to the lab supervisor, then over quality control. I went over to Nucor, hired in as a metallurgist, and again had a similar thing. I went over quality and then went over all manufacturing and had a wonderful career with those guys. 

I went to Fontana Gruppo, where I was director of operations and plant manager and had a great relationship with the team here at Birmingham fastener, so I took a vice president of manufacturing job with them. And it's been great. Getting to see all of the sides of it helped me project through various roles of increased responsibility. 

Lisa Ryan: What are some of the things that you're doing right now at Birmingham fastener that are working well for you? What are the retention efforts you're doing? What's going well? 

Kevin Johnson:  Well, I'll tell you, we've focused on incentivizing people to try to keep some more walking the talk. I mean, at the end of the day, we want to give people the best job experience we can. We also know what goes in your pocket has a little bit to do with your happiness. In one particular area where we do our performing, we instituted a pay for performance plan. And this plan has just been great. 

Production is up about 30 percent. And for the people that are into numbers, to be candid, the payroll has roughly stayed the same, even though those guys are making more money themselves. And you say, well, how can you do that? Well, overtime has just totally disappeared in the area and the productivity there. So we look at what's the speed of a machine and what's the best output that it can get. Can somebody do that through the day now? 

So we take an arbitrary number of, say, 80 percent of that goal, and that 80 percent will pay you X amount they hit. That amount will virtually double what you're currently making. So, of course, we drop their base rate when we interviewed them in this program. But it does probably pay them twenty-five percent more than what they made in prior years. And they're working fewer hours. So you have to find that win-win. 

That's what we looked at. We've also looked at attendance, and we say, hey if you're going to have perfect attendance, we get pretty handsome rewards for those who achieve that. 

Lisa Ryan: Awesome. So when you were talking about the pay for performance and lowering their base, tell us the process of how that worked, and because I'm sure you had some haters right off the bat saying the man's trying to take advantage of us. 

Kevin Johnson: That's the scary part of these things, is the implementation when you can see the long vision, but everybody else is saying, I'm not seeing it because I do not see that immediate gratification. 

So, to share a little bit about your process. You hit that one on the head. When you tell a guy that his base rate from what he was making a guaranteed number and say, hey, that drops 30 percent or 40 percent, he's going to say, hey, what's going on here? And there's going to naturally always be a little bit of apprehension. They're going to be there's a concern. I'm taking care of my family. So, you know, we understand that. 

We took what you made on that plan that we said will, based on your production and what you were making before. And for about four or five months, we let the guy know this is what you would have made off the production bonus plan, and this is what you're actually making. So he had a clear reference to say, hey, I'm saying that I would have been better off on the new plan every week than just this hourly rate I was on. 

And it happens over time. Now, the employees might have a bad week. And if you just did it over a week, of course, he's going to have a sour taste in his mouth. But after three or four months, you can clearly see that you're going to be 20 percent, maybe twenty-five percent better from that. Most guys that I really care about making money and all that stuff, they got the opportunity, and it's worked out pretty well. 

I mean, at times, we have guys say, hey, I can watch his machine while he goes and eat lunch. And so I will try to run what I can. You can't do that all the time, but you probably can for 15 or 20 minutes. It depends on where you have set up. So they've got creative in themselves, finding ways to stay on top of things and be productive. The other thing you'll find is that bonuses to make should be a better manager. 

And you say how if I don't give them those tools and resources that they need, they will definitely come into my office or their boss's office and say, hey, you can have your tools here. We need to have these tools. And you know what? I need one spare of this because I want to make sure that I'm running all the time. And this is the feedback that you wouldn't usually get. But when you align, everyone that makes you a better manager makes them a better employee. 

Lisa Ryan: There are so many good things that you just said in there. Number one, the amount of time that it wasn't just a, hey, we're changing the comp plan overnight. Here it is. And you are dealing with people who are just fighting that. But you took that time that three or four months to prove to them that this system was going to work. You're also empowering them to get creative instead of micromanaging everything. Sometimes, as leaders, you want to make sure that everything's doing well, and you don't necessarily trust your employees. 

And it sounds like not only are you trusting them to figure out how to do their job because you're seeing the production levels going up. But now it's OK because maybe before you would have said, what do you mean you're going to watch that guy's machine while he's off eating lunch? Who do you think you are? And now you're seeing that employees are trusting you, and they're buying into the process. But this is certainly not something that happens overnight. So I'm just such a good reminder to people who are looking for that immediate gratification. 

Kevin Johnson: They won't be. I'll tell you one more thing. After a year of doing it, we compared their W2s. I sat down with each person. Even though there's a manager and a supervisor there, I sat down with each one of those guys individually; H.R. put together how many hours they work, how much they made, overtime hours, and the bonus, versus what they were the year before. And I was able to sit down and show all of them these are the differences and work this many fewer hours. 

You make this much more money, more time with your family. More time to do what you want to do instead of here, and it was pretty rewarding. Now, always recommend that step because I did have one guy say, oh, man, I didn't realize I made this much more. Some guys don't look at their numbers may be the way that they should, but it's worth investing that time. 

Lisa Ryan: And how many employees do you have working there that you sat down with? 

Kevin Johnson: Approximately twenty-five. 

Lisa Ryan: OK, so again, you're investing the time and being in management there, being the V.P., employees see you as a different level of person. So the fact that you're sitting down with your employees and talking to them and getting to know them and showing them the benefits also gives them a lot more confidence in the leadership. So that's just that that's great work that you're doing over there. 

Sure. The last thing to get is that a machine only makes money when it's run. OK, changeovers, all the stuff they hurt you. Right. Or if it's down, if our guys actually stay with maintenance, not go and get a Snickers or a Pepsi. When the machine goes down, we pay him his production bonus based on his average. If he's in there fixing the machine with maintenance, that gives me two things. One, he gets a little bit more confidence. Two, he can start fixing that machine himself, and we'll be less reliant on maintenance. So that's just another key point that we put in there. Our guys, to actually learn how to fix their machines. 

Lisa Ryan: Wow, that's awesome. So what are what's one thing that's keeping you up at night right now? 

Kevin Johnson: I'll tell you right now, the thing that worries me is how we have maybe some would call a changing of the guard. You have a potentially new president-elect. And the tariff situation is one that that worries me a lot. It was an advantage to the steel guys, but then the steel products guys didn't get all of the help to balance things out with China. 

So from that, we finally adjusted. We pushed through price increases, trying to keep our margins. We don't look at making more. We want to make the same. And that's what we focus on. And we got those through. So now what happens after you make all these changes to survive? If that all pulls away, then we're going to be back in another situation that will take another couple of years to adjust back. 

So that's the main concern for me because the tariffs are now staying up a lot. So. Another thing that worries me is just finding quality people. That's been a very tough thing. The skills gap, the people that are actually interested in manufacturing, the kids that actually want to work and get their hands a little bit dirty and have that that rugged satisfaction, that grit, a lot of them say, hey, I'll rather work at the local electronics store, or I want to work in the video game. 

So, I mean, it's slightly different. And that's been tough pulling talent and. 

Lisa Ryan: Yeah, especially since everybody's competing for the same talent. And that's why I talk about so much in my programs of just retention. Now, if you have good employees and there are so many things that we talked about, you are doing to keep employees as far as sitting down with them, allowing them to make more money, empowering them, and showing them their work results. That's how you keep them. 

But you're absolutely right. We're looking at the skills gap of just being able to have to change the conversation about manufacturing, to get more young people to look at it seriously as a career, and even more importantly, to get the guidance counselors at their schools and their parents to buy into the ideas as well. 

So if you were to think about creating a network of manufacturers and think about something that either question you have or support that you would like to get from other manufacturers, what would be something of that? 

Kevin Johnson: Well, I think many things right now with the current PPP situation. One of the people dealing with laws should discuss how this was originally going to come out and the questions. Now, the question is if that's are actually put out there, two totally different things, and especially with larger companies that might have had more than two million dollars and they're subject to an audit. 

And another thing so that, as you mentioned, employee retention is always going to be at the forefront. Working with people, doing job fairs, whether it's virtual, whether it's just joining forces and working on that, those type of things with different types of H.R. issues and situations. Then you have an administration possibly coming. 

So what can we expect? Are we going to handle reporting these things that we need to stick together? Because you could actually give a company name recordable injuries based on exposure, you can't prove they even happened at the workplace. So we need to make sure that we're all working together and have a unified voice. And that would be great to have manufacturers get together and share on these things. 

Lisa Ryan: And so from your experience, not only at Birmingham but in the rest of your illustrious career in the metals industries, where do you feel that you would best be able to support other manufacturers or help them out with some of their situations? 

Kevin Johnson: Well, I have worked with a lot of folks before. In areas, you know, somebody needs help with trying to implement an incentive program. Like I mentioned earlier, I have a lot of feedback on it. Government affairs and I also have experience with the SBA side of it. Those are just a few. But there are so many topics that you manufactured. Yes, margin safety. That's even very important, even though the industry can be somewhat fearful. 

There are a lot of things you might say, hey, you know, I realize that this last year, this one does great in this environment we've been using for the previous five years. We compete on many things, but I'm not going to compete with anybody on say anything that I do directly. I'm going to share with you on the safety. 

Lisa Ryan: Awesome. I know that you're involved with the Industrial Fasteners Institute and now the National Association of Manufacturers. So really encouraging people to join your local trade association, get involved with that, because learning on things like this podcast is going to give you a general overview of manufacturing and things that you can use in your plant that may not be in a completely different industry, but it can still work for you. But when you are in your trade association, you get to learn from your peers. 

And like you said, there are things that, of course, you want to keep secret from a competitive point of view. But for the most part, there's enough work out there for everybody, and it's just really doing the job well and creating those connections. Well, Kevin, we're getting to the end of our time together. And I know that we are connected on LinkedIn, but if somebody wanted to reach out to you and connect with you, what's the best way for them to do that? 

Kevin Johnson: You can email me.