Marlin Steel and the Six Features of a Great Employee Bonus Program

Maureen Conway: Good good afternoon everybody good afternoon and and welcome I'm Morin Conway and I'm delighted to welcome you to today's event beyond great places to work the business case for investing in Frontline workers um we're delighted to have you here today at our working in America series The Working In America series is an ongoing discussion series that highlights an array of critical employment and job quality issues for low and moderate income Americans today um while we've seen job growth and uh lately it's still not enough jobs for people who need them and also the quality of jobs are are often insufficient to help people make ends meet in today's economy unemployment and underemployment remain troubling uh so too many working Americans struggle uh to make ends meet based on their work and in this series we confront this difficult issue and try to surface Solutions and ideas to address it um we are very grateful for the support of the Ford Foundation The Charles Stewart M foundation and the the Serna foundation and the Hitachi foundation for uh for working with us on this series and I'm particularly pleased to welcome our colleagues from the Hitachi Foundation to the series today they've uh worked with us on um the design of today's event and so I will introduce now Mark papovich from the hiptop Hitachi Foundation he's a vice president of programs at the Hitachi Foundation where he leads the team managing good companies at work uh the program emphasizes the role of business in society and the importance of social sustainability and and um I've known mark for a really long time uh but we agreed we wouldn't count exactly how many years it was earlier today so but Mark has just uh been a wonderful colleague for the economic opportunities programs for many years he's been a terrific thought partner for us in a variety of our work and we're really pleased to have uh Mark here with us to uh launch today's event

Mark Papovich: So thank you Moren um thank you all for coming uh we're really pleased to be here today in heart because for a number of years we've been consumers of these kinds of series and consumers of a lot of what Moren and her colleagues have done in the economic opportunities programs and in some of the other areas of the the Aspen Institute in terms of the work that they've done we've also more recently become a contributor in terms of giving financial support for the seminar series and we finally gotten to the third sea where we're providing some content as well and we're hoping the third sea goes as well as the uh the two before that have done um I don't know how many of you know the Hitachi Foundation very well raise your hand if you think you know us reasonably well that's pretty good we have some friends and colleagues here who I recognize in the audience and uh I'm sure that our Communications team will be happy that we had that number who already know us I just want to introduce one of the members of the team Laura Falkner Jeff White uh heads that team um so let me just say a couple of things for those that don't uh mentioned Barbara Dyer our president and CEO who really is over and the the moving Spirit behind all the work we do she's the president and CEO of the foundation um has been there uh for uh for many years as only the second President of the foundation um we're not a corporate foundation in the traditional sense and that we were set up as an independent 501c theory of an American board and we're focused only in the United States um for the last 12 years or so we focused on a particular Niche due to our limited size and asset base and our limited staff our Niche has been on the role of business and society and where that intersects on the potential for better outcomes for lowincome low asset individuals in the United States and where we've decided over time that the biggest leverage point would be that we would focus on is the role of of business as an employer now there are many many far too many businesses who are not good employers but we decided on a strategy because we had seen many employers who were good employers and were investing in a way that resulted in the business doing well the employees progressing uh becoming higher earning and it worked out for the business for the employees for the communities and for our economy as a whole now that kind of work uh was driven by a research strategy called the positive deviant research active research strategy because if you're going going to be a deviant you should be a positive deviant and in fact it had been originally um uh as a as a as a approach to research had been pioneered in international Health where you had very little time very little resources to try to get really good outcomes for people who were in really bad conditions so we applied that and began a search for you begin positive deviants by searching for the outcomes that you want not the strategy that you think works so you go and you look in this case for businesses in two sectors manufacturing and health that had really great outcomes for Frontline lower wage workers meaning like 10 20 50% increases in wages and earnings career advancement that lasted High retention rates better job satisfaction and it worked out for the business in a way that was really sustainable and where another business would say as you'll see talking to some of these employers today I want to be like them because that's a very successful business so we developed working with our colleagues in a number of organizations about a 100 business cases and from those business cases we came so we found it was pretty easy to find businesses who did these good things and we wanted to look at their strategies and in the beginning when we started this work we had an assumption an idea about what made a difference and what we assumed was the case is that Innovations in human capital made the difference train the way you deployed people the way you trained them the way you supported them the way you supervised them I'm not saying that's unimportant but what we found is that's the that's the follower not the driver we looked across all these hundred businesses in two different sectors and what we found is it was really driven by innovation in these two spheres first it was innovation in products and services innovation in method and means and that result Ed in driving human capital Human Resources policies and practices and then when those overlap that's where we got the biggest lift for the business the biggest lift for the employees and the biggest lift for the community as a whole that was the sustainable virtual virtuous model so let me introduce the the the video the the union health uh clinics video and when you see a video about Healthcare you don't think about it as an employer and a bunch of employees you think about it as a human Ser Services you think about quality of care and all of those are demonstrated in this model but I want you to step back and think about those three spheres of innovation that we talked about they were Innovative in the product or service that they did they really changed the way that they did primary care for pretty sick patients they for chronically ill patients they substantially changed the way what they were doing they changed the way they were doing it they did team-based patient- centered care and they had to support people in a way to do that so they did training they did advancement they did job ladders and they did pay increases the one thing you won't see in this video because it's designed for health clinic and Hospital administrators is any are all of you Hospital administrators and health clinic managers okay this wasn't designed for you but we're showing it anyway um is when people entered training for this job ladder they went from an entry level to a 12% increase in their hourly wage when they completed the training which was in about a year they got a 20% increase that's total 12 plus 8 and if they went to the next run which was health coach you'll see health coaches they got another they that was health coach and if they went to floor coordinator that was another 27% so 47% increase in earnings over a couple of years of work and in the job ladder we're going to have a tremendous increase in the number of people working in the front line of work of Health Care those Frontline jobs are really poor paying and poor opportunities for advancement this is a model where we're about to show you uh where there's much better outcomes and I hope we can do that for patients for our employees and the front lines of healthcare and for the clinics themselves so look mind k okay for for for one yeah for

Maureen Conway: good great well I think that was really helpful to uh you know set the tone and I want to thank um the Hitachi foundation and and recognize Tom strong in particular Who U managed the production of that video so I want to thank the Hitachi foundation for uh the video and for all their work on this and encourage you to also visit that website where you can see more and uh from their practice library and see their report called doing well doing good and now it is my great pleasure to very quickly introduce our panel for you um uh you have materials uh on your chairs with their bio so um you can see how impressive they are I won't read those to you I will just quickly kind of put names to faces so right next to me is Drew greenblat who is president of marlin steel um next to Drew is Kelly walski senior trainer for zapo insight uh next to Kelly we have uh David Owen who is primary care medical director of South Jordan Health Center and we're delighted to have Steven pearlstein as our moderator today who's columnist professor and allaround knowledgeable person of lots of things that this is an economic so thank you very much Stephen for being here and take it away

Steven Pearlstein: thank you very much and welcome um if some of you who can't see me I if I can't see you it's probably true that you can't see me if you want to come up to some chairs here and if there are some people who can't see uh Drew uh uh Drew over there you might want to move your seats there are seats where you can see everybody um so uh I'm going to uh start with a softball question for each of uh of you um and start with uh Drew Drew I'm going to read something that you wrote when I bought the company that's Marlin steel everyone was earning minimum wage and I was the only one who owned a home or a car there used to be no cars in the parking lot and I could park wherever I wanted now more than half of the employees own a home 100% own one or even two cars and the parking lot has cars double or triple parked I like it when people complain about all the cars in the parking lot because it means they're all successful so um David uh how come how have you been able to uh to be such a boon to the Auto industry

Drew Greenblatt: we have great people and great people are what makes our company Thrive and prosper they come up with innovative ideas uh they think outside the box they're dedicated to making sure the clients are happy and uh there's a classic it's a classic case of what goes around comes around if you compensate your people well if you give them very objective targets of what we're trying to accomplish uh and you give them the tools to be effective uh they're going to do wonderful things you just got to get out of their way and my job is to hire great talent give them very clear goals and uh get the heck out of the way

Steven Pearlstein: so you've obviously though if they can now afford houses and cars um you've obviously changed the work that they do um uh so that it is it is a higher value added work and so you can't afford to pay them more so how did you do that

Drew Greenblatt: absolutely so when I first bought the company uh we were in Brooklyn New York uh everybody we made Bagel baskets and every Bagel basket was made by hand so literally people would take their arm and they would bend a wire one at a time to make the frames of a basket or they would weld a basket one at a time uh it was right out of a Dickens novel that's the company I bought and we had two people missing eyes we had two people people missing fingers uh it was a very different kind of company everybody was minimum wage the health insurance plan was you go to the emergency room um so uh fast forward we've reinvested a tremendous amount of money into the company we've put over $4 million into new technology new robots and what's happened is is because we have this new technology our employees are much safer uh they're outside the cage where the robot does the the bending and they're doing more interesting work the monitoring a series of robots uh and the quality is much better we're shipping much faster and we're able to be more competitive with countries like China and uh and you moved well Beyond Bagels absolutely so now bagels are less than 1% of our sales and uh over 99% of our sales are the clients like MK and fizer and Boeing and caterpillar so we've migrated away from commodity Bagel baskets into uh Precision engineered products um and with the use of this technology and the great talent we've really thrived and and uh the employees are paid uh you know between anywhere from you know 50 to 100 something Grand a year on the factory Flor look great

Steven Pearlstein: okay David uh story um uh I recently um uh had the problems with my achilles attended and I had to um basically get it operated on and so I went to um a local hospital which will remain unnamed uh to see a specialist an orthopedic specialist who specializes in ankles and uh so I go into the first time I get go into the orthopedic office there uh I opened the door and I knew I was in trouble because there were about as many people in the waiting room as there are over there uh and they were all there uh and then over here was the desk uh and and behind the desk there were all women uh and then they were in uniforms blue uniforms and there were about eight of them and they were doing nothing they were talking to each other so uh and I go up and so then one of them hands me the thing and fill out these eight forms and in the eight forms I had to repeat in in in their own eight forms I had to repeat the same information many times um and then it turns out that they already had that because I'd been at Georgetown before and anyway they already had most of it anyway but so I'm finished and and then I sit there and I wait for for uh long time past my uh thing and and no one ever comes to me and says well here's what the problem is you know here's why we're making you wait finally um I get showed into a room where I wait another half an hour by someone who didn't say anything to me uh didn't ask me what was wrong what I needed or nothing like that then the doctor comes in for 5.5 minutes uh looks at me and says you know you need this test in this MRI and then come back so I go out and to the about the six or seven ladies and they say okay I need you to help me get you know the MRI and this and they say we don't do that and I said what do you mean a it's a big hospital don't you have an MRI machine and oh yeah we have but you have to go to those offices and make your appointments yourself and then when you finished with that then you call us back and then you make an appointment to come back and see the doctor um which of course as you can imagine that was going to be 3 days anyway that was my last visit cuz I never I never did that I went to another place uh much more expensive and uh got it done U it all worked out very well I'm back playing tennis but I I do that as a setup for you because this is uh tell me what you've done so that people who go uh to South Jordan Health don't have the same same experience that I had

David Owen: well first of all I'm sorry to hear about uh what happened to you and unfortunately that is a fairly typical experience I think in healthcare today uh there's a lot of inefficiency there's a lot of waste and uh it's expensive for the patients in time and money but it's also expensive for the Health Care system too and we ran up against that uh at South Jordan in the University of Utah's Community clinics where I work because they were uh mismanaged when we first started getting into this business just going back a little bit to uh the year 2000 uh the University of Utah decided that it needed to have a network of outpatient clinics in order to have a referral stream for the Specialists up on the hill the the University of Utah Campus where the Specialty Hospital was we didn't have anything like that and so we bought a group of clinics from FHP who used to be in our market and no longer is but we didn't know how to run them and so the first year we were open in 2000 we lost $20 million due to inefficiencies like what you just described and all of a sudden we decided this isn't going to work we're going to have to make some major changes and so what we did to try and improve things is uh something that I thought was very refreshing for an academic Medical Center they built uh what they called the beta site which was a test Clinic it had two primary care physicians in it and I was one of the two they gave us a lot of leeway to make changes into to try experimental things that were outside of the box that were different hopefully from the model that was existing previously and we looked at outside research what others had done we had patient surveys um we had patient focus groups and provider focus groups to come up with the ideas that we tested and what we ended up coming up with was a very expanded role for the medical assistance they uh were given the flexibility to do multiple tasks and so for example in the example you described how you had to go to the other department and wait there to schedule an appointment we tried to free up the medical assistants to have roles of scheduling um they could do everything that the front office could do uh they were trained to be limited radex so that they could even just walk patients over to X-ray and take uh simple x-rays uh they were given the freedom to do photomy blood draws just right there in the room to try and bring all the services to the patient in the room where they were being seen when they were ready to receive them so that they didn't have to go from place to place to place throughout the clinic to have things done in an inefficient manner

Steven Pearlstein: okay thanks Kelly um at zapo where um you work I'm told it cost $50,000 to recruit hire and ENT train every new employee on average that sounds like a lot of money um particularly reference to probably what the average paid what the average pay of your employees which is you know not the highest in the world um so explain to me why you would spend that much money

Kelly Walski: um well it's really important to us to kind of really load that at the front and kind of frontload that that investment and and really I think speaks to the the view of investing in employees I mean we're talking real money here um and that that recruiting process is pretty rigorous statistically if you know if you buy into statistics it's more difficult to get hired at zapo than it is to get into Harvard um statistically okay we don't have clearly we don't have the same sat requirements and there's no well there there is an essay actually so maybe that's part of it there is an essay yes but it is it is a long process and it it's that important to us I think that we keep then the turnover and engagement um low and high respectively so what is the turnover um our annual turnover averages around 20% Which is not really where we'd like it to be um we've this year we're on target to be around 16% and really between that in somewhere in the middle teens around 15% is for us I think a healthy churn if you consider our industry it's retail it's also a little bit of Technology um so if we can keep a healthy CH there we're getting enough new ideas in um and we're also moving people through our pip and where does does most of the expense come in the the recruitment process I would say it's split with recruiting and then training our onboarding is four weeks four weeks yeah so so it's and and how many weeks is it to the process for selection uh about it's average is 12 weeks um from from um initial application date to start date so 16 weeks almost 4 months go goes by before between you know initial application and when someone starts a job which could be being at the other end of the phone on fulfillment and if they're if they're working in the customer loyalty team doing that that that kind of customer service job there's an additional three weeks after that okay so that's a that's a big investment um so uh let's talk about training I'm going to ask you each to talk about uh trainings a couple of minutes tell us what are some of the interesting or unique things about um your training uh how you how you do your training um and and why it's different than others in your industry why don't you start da

David Owen: okay so when we bring on new medical assistants they've uh they've been trained already in medical assistance school and they have a fair number of clinical skills but then to work within our model they need additional training one of the things that sets us apart I think from uh maybe a more standard model I would say is that the medical assistants participate in the documentation uh in the chart they participate more in the care of the patient than would normally be the case I started out working in in a standard model and I had a medical assistant who worked with me and she was great she knew everything about my preferences and my Tendencies and she could she could anticipate when I was going to make mistakes and try and correct that and so she was she was fabulous to work with but when she would get tied up like when she was on the phone with somebody or when a complicated patient was being checked in it would bottleneck the whole process and uh we couldn't move forward and so we decided that in our training we wanted to try and prevent that and so we've trained our medical assistants to work together as teams and they're not paired one to one with a provider like used to be the case for me so if someone gets tied up the next Ma just brings the next patient back and Care keeps happening to help so that you don't have to wait in the lobby for an hour like uh used to be the case and does that assistant basically stay with the patient from when they if not arrive uh at least get back into the offices and when they leave that's true and um they weren't used to that and so a lot of the stuff that they do required additional training so when they bring the patient back they take the vitals like used to be the case but then they go through a history of present illness this questionnaire with the patients and they didn't know how to do that but the questionnaires are all standardized and designed by physicians so if someone comes in for abdominal pain uh the ma goes through all these questions for abdominal pain all the things that the provider has to know like when did it start where is it do you have a fever have you had vomiting have you been exposed to Ebola you know all those different kinds of things uh and then when I go in I can just sit down and say so tell me about your abdominal pain and I don't have to interrupt them every time I think that they're Miss missing stuff that I have to know so we had to train them how to do that uh we had to train them how to prioritize things because sometimes a patient pulls out a list of like 30 things and somehow the Ma has to sort out what are the real important things what are the less important things what just needs refills to kind of triage the process of the visit and set it up for me as a provider to make things more efficient when I go in there I don't want to talk for 15 minutes about their toenail if they're really concerned about their chest pain for example so it's important to make things efficient that way so that that required additional training for the ma so they go through all that um and then they Shadow an MA who has been trained as a leader or as a trainer they have a little bit more of an advanced position for four weeks so the two of them go in and go through this process every time a patient comes back for 4 weeks and that's been very helpful for us too to solidify the things that they've learned and then we also have have a six-month probationary period uh because one of the things that we found is not everyone that comes out of ma school is qualified to do these additional tasks sometimes it's a little bit more challenging and and we might move them to another area of the clinic where not so much is required of them and so we have 6 months to figure that out and that that's been very helpful as well

Steven Pearlstein: okay so Kelly tell me about uh all what do you do with these folks for all those uh uh weeks um give us some of the highlights

Kelly Walski: sure the four-week new hire training process um everyone is something that everyone goes through so if you're coming in to be a part of the customer loyalty team or even to be on our facilities team um facilities team means you the person that goes and gets the shoes or whatever oh no I mean the person who fixes the light bulbs that kind of facil fysical plant because our fulfillment is handled by Amazon and it is in a separate location now well is it's in Kentucky um so if you're going to be our new CTO you're still in that class um they're het heterogeneous classes and we're talking about a couple of things one is the big thing for us is really infusing the culture and having people go from an interest and maybe um you know liking our core values but understanding how we really operationalize our culture because that is a that is a huge thing for us and when we're hiring people part of the reason it takes 12 weeks is we're looking for people who are already aligned to those core values but through the new higher training process and we're very very explicit to the point that as a trainer I'm sometimes thinking are you guys even like you know are you just so tired of hearing me say well we do this because of X um we do that and then the other half of it really is the nuts and bolts of customer service because everything at the root of what we do is the belief that everyone has a customer and you have internal customers and you have external customers and we want employees to have great customer a great customer experience as employees just as we want our customers to have great experiences when they're purchasing you know Shoes and Handbags from our website and it's something that you mentioned is just that when you treat people well what happens is that that that pours out from them and they pour it out into other things and it's not a zero sum game for us we we really believe that we can make our customers happy and our investors and our vendors and our employees

Steven Pearlstein: so you when you say well I mean one of the things that struck me is that if you take an employee to come into you know let's just say A you call them Customer Loyalty but someone might call them um you know a telephone fulfillment job um which is not exactly the highest you know a job on the ladder but you want them to understand not just the nuts and bolts of the business but you want them to understand the sort of the economics of the business how this business works and you treat them with a certain degree of respect therefore sort of an intellectual respect and you hope that therefore that rubs off on their treatment of their C of of the outside customers

Kelly Walski: absolutely um Simon cnnic um is really um someone that we admire a lot and he has his whole Ted Talk and books start with why and he talks about that golden that Golden Circle and when people understand why they're doing something the what and the how are naturally going to to to fall into place so we start with that very basic this is why we're doing this this is our goal this is the purpose this is why we're all here and what we find is we give them a lot of freedom with the what and the how and it still works um people are because we're very transparent with our employees and we're we're just as transparent as we absolutely can be with even our customers and with the with the world outside um the laws are a little bit different when it comes to outside the company but because we're transparent people feel a sense of ownership and that's where that idea of empowerment comes from I think that we use empowerment a lot in the business world and what we really mean is Authority we want to give people the authority to solve the problems or carry out their responsibilities that is not what empowerment is empowerment is when I feel like I have that authority to carry out those responsibilities and you can't do that just by giving people Authority you also have to share with them that purpose and that bigger picture

Steven Pearlstein: so uh Drew tell us um about the skills Matrix

Drew Greenblatt: skills Matrix is a critical part of marlin what we do is we have in our lunchroom so everybody can see this a huge Excel spreadsheet and every column is every single one of the employees and every row is every activity at the factory that is productive or that we need accomplish so for example setting up the laser we have a laser in our Factory if you could set up the laser and you know how to do that you get points for learning that skill and if you know know how to set up the punch if you know how to set up the robotic wire forming machine each of these is a different row and you get points for learning more and more skills the beauty of the skills Matrix is multi uh beneficial not only for the employee but it's also good for the company Marling uh the reason why it's good for the employee is because they have a clear path to know how to get ahead it's a clear path these are the skills that Marlin cares about and anytime you learn one of these skills you get paid more so it's very uh motivating to employees to get more skills because you get paid more it's also motivating because your points are literally on the lunchroom wall so there's a uh incentive because you want to have a lot of points okay because you have buddies in the company and you want to be one of the more astute people in the company so a little healthy competition it's a little healthy competition the nice thing for Marlin is that we could see where our Achilles heel is because we really want to cross Trin everybody in the company because we don't want to have everybody know the laser but nobody knows the wire forming machines because our luck next week we'll get a lot of wire forming work we won't have any laser work what are we going to do with our employees so what happens is by everybody learning these skills and US seeing where our weaknesses are so we can throw more talent to learn those skill sets over weekend what happens is that we're we're as a company we're more Nimble our employees are more valuable because they're adaptable so if we're buried with sheet metal work and laser work well then we can pivot people over to that area and uh the guys in The Wire forming Department won't be necessarily working in the wire forming Department they'll be working in the laser cell this week so the idea is that everybody uh gets a full paycheck every week everybody's more valuable because they could be either a wire form person or a laser person and it's more engaging as as an employee because you're doing different things you're not doing the same thing every single day okay so the skills Matrix is intrinsic to our company

Steven Pearlstein: so let's pivot now why don't we stay with you D since you talk about how compensation is done and how it's changed so one thing we know is that the more skills they get the higher their pay is irrespective of whether they're using any particular skill at a particular time is there any other kinds of uh wrink to your pay structure

Drew Greenblatt: absolutely and by the way back to the skills Matrix the nice thing about it is it's a meritocracy okay there's no row there that says plays golf with owner or you drinks beer with plant manager okay so in a typical way that's how you get ahead okay but with us it's a clear objective meritocracy and we show what we care about on this document um another important way we uh are able to prosper and Thrive at Mar Marland is that we have a very aggressive bonus program where most companies have employees that are blue collar they punch in they punch out and they have very little skin in the game we're the opposite we have entrepreneurs in our company normally you have one entrepreneur and then you have everybody else that just wants to leave at five our company's unique in that we have everybody engaged because what we do is we have a very aggressive bonus program we pay every two weeks which is not too long a lot of companies have you know an annual Target for a bonus that's too long most people live paycheck to paycheck they got to pay for their rent they got to pay a car payment they got to pay for Timmy's braces you know they need a two weeks Horizon okay that's one benefit of the our bonus program another one is we have it very micro so all the guys in the laser cell have to hit a certain Target if they hit their number for their period they get a big check talking about like $950 if they hit their number the assistant get 350 bucks that's a lot of money to a bluecollar worker and this is very motivating for the employees because when you're there if you can hit your numbers you get 950 bucks so we used to have a whole layer of management that would walk around with clipboards and would wag your finger and say you're taking too many bathroom breaks okay you're talking about the Orioles too much you're talking about the Ravens too much that was their job okay counting up how many little widgets they made now that whole row is gone that whole row of our management structure doesn't exist instead we're paying these huge um uh bonuses to these people that now have skin in the game they're mini entrepreneurs they have a little shop they're like shopkeepers they care about their laser they they want to make sure that all the parts coming in all the parts going out are going out in a timely basis in a good quality way they ship a bad quality part they don't get credit for that this week so they have real skin in the game and we treat them like adults I mean we're not walking around saying hey you went to the bathroom too often so it's it's a very productive useful tool and uh we're able to ship faster because of that and we have employees that are more engaged more dedicated to the company

Steven Pearlstein: and on average what percentage of total pay compensation comes in the form of these bonuses for again for typical line worker

Drew Greenblatt: so we pay every we pay 26 pay periods a year every two weeks and uh on average it's about 14 pay periods a year a bonus is awarded some sales do better they're more aggressive they're more hungry they're in the 20 week 20 pay period range others do less 8 or 12 a year so but in terms of dollar amounts it it turns out to be anywhere between 10 and 50% of what their compensation is in some in some periods if they do extraordinarily well it could be 100% of their pay okay so we have their engagement we have their focus and the thing that's wonderful that I didn't realize is everybody thinks I'm the boss I'm not really the boss why because when the spouse sees that check they want to know are you going to hit your bonus this week what happens is the family budget migrates up including the new bonus check so the spouse is kicking you know who in the butt all right to go get those laser cut parts off as fast as possible okay because I want my 950 bucks we can we can do the car payment this month

Steven Pearlstein: so this is sort of I just want to because there's a lot of in in the compensation world there's all sorts of disagreements about this how much should be individual bonus how much should be small group bonus and how much should be company performance bonus you focus on the small group very micro because you can control micro but not the individual because you can't really determine you know within the whatever you call it the group The welding the cell within the welding cell can you tell whether John is better than Julie or or

Drew Greenblatt: so so we do we try to make the sell as micro as possible so for example we'll have sample makers that are Solo they have to hit 20 grand in the twoe period if they hit 20 grand they get a bonus if they hit 30 grand they get a bigger bonus okay if they hit 19 Grand they get zero so they're very focused on hitting their 20 grand okay so we'll have a single person in a cell or we could have five or six people in a Cell but we try to make it as micro possible you don't want to have it companywide because they can't control you know if you're in the laser cell you can't control a wire forming cell they're over there you're over here you can control your little part of the world the beauty of this is if every little cell does well the whole company does well right if every little micro battle is won we're going to win the war so the company is healthier

Steven Pearlstein: all right so uh Kelly what about your compensation any any interesting wrinkles there

Kelly Walski: so it's actually uh we do have skill sets which I think is interesting we don't put ours up on the wall that's kind of cool um you wouldn't put them on the wall anyway you put them on the screen wouldn't you we would probably put them on a screen or we'd probably hang them from Little we have license plates at our desks and so um skill sets do have little badges um and we're we've had kind of a physical badge for years with that people put on their lanyards um but we're actually moving to a badge more of a badging system um like U open Badges and that sort of thing um we do not have any incentive pay um everything is base rate uh we are a production environment if you think about a call center it is is very much a production environment um but we actually uh approach it from a different from a different angle uh we have a a good P base pay um they start at $11 an hour um during training and after that they go up to $13 an hour and then the skill sets that they can acquire the average salary for a phone's rep um is running around, 1650 an hour right now okay and that's because that's the skill sets that they're getting and it's much like whether you're using them right now or not you're getting you know you're getting paid for that skill set that you're paid for what you can do for us um we also then have added to that there's a very robust benefits package which for um call center work is very unusual and that's another that actually is well it's it's about 30% of people's U of of their their what's the average age of your um the average age is 33 uh companywide so that also includes tech and and nhr and those sorts of things um but what we have found is we have different metrics we look for and we have chosen to um explore the engagement from that Authority standpoint um a lot of call centers have things like average handle time if there's reason that you feel rushed when you call the bank it's because your bank rep has to get you off the phone in 180 seconds okay um and it doesn't give the employees and the Reps an opportunity to really solve problems and again that the feeling that of the authority is the empowerment so we look at things like hey we want you to spend 80% of your time in a customer facing capacity okay talking to a customer or waiting to talk to a customer the other 20% that's up to you okay and that so what else could you do um you're putting in notes maybe you're just taking a little bit of a break we want um customer service is very very high um High empathy okay and you're pouring out a lot into people there are some days you feel like a therapist um people take their shoes serious iously um so it really is it is an opportunity for you to to kind of pull back we also have another 8020 that we operate on which is when we schedule out the time we schedule about 20% of that is slack time for you to take classes pursue passion projects and things like that so when we're talking about the time management 8020 80% customer facing that is 80% of the 80% that I'm actually scheduled to be taking calls or doing that sort of thing

Steven Pearlstein: there is a school of thought I suspect that your HR or your CEO is it it that that bonuses are not a good idea that money compensation money bonuses is is is actually not right there's a guy around here named Dan pink who's written a couple of books about that um and there's a lot of controversy about this is that basically your your philosophy

Kelly Walski: so to a certain degree uh we we really um we're big fans of Chip Conley and and he talks about maso's hierarchy of and really that once people once you've reached all of your needs and some of your wants money becomes less of a motivating factor um and we do have opportunities for people to grow through skill sets and through progression because we think that the idea of perceived progress and and perceived control is more important in many cases than just money but that only happens if you're paying enough that people can afford to live

Steven Pearlstein: okay now I'm going to this is a politically incorrect question most of your line employees men most of your line employees women um yes slight slight majority slightly so just think about something about testosterone and competition uh and whether certain people are more motivated by competition with other people um than females on the team that are happy to accept the checks

Drew Greenblatt: so I I I reject that I mean I think I think you know people people are uh professionals they're engaged they have a Target to hit uh they want it bring home more money for their family they got bills to pay and uh I I uh in our case it's working very well okay uh as I say there's there is a very wide difference of opinion in the HR Community about this uh what what about your compensation

David Owen: so you know when we uh first started with the the test Clinic the beta site it created a compensation challenge for us that we we had to solve and we didn't anticipate it in advance like we probably should have but we started out uh paying the Mas what the Mas were earning medical assistance what they were earning in the other clinics and yet they were asked to do a lot more and they were asked to learn a lot of new different skills and so we actually had to come up with a matrix like uh what Drew described where once the Mas were doing photomy routinely and had been trained for that they earned a little bit more per hour uh once they learned the receptionist skills they earned more per hour for that uh once uh they uh were able to do limited x-rays for example they learn they earned more for that and so little by little they all started earning more than the other clinics Mas did and that it created some interest in the other clinics because they started hearing about this and uh in the beginning when we rolled out the model you some of the Mas actually wept you know because they thought how am I going to learn all these things and they had notebooks and uh they were the Little Manuals that they were carrying around in their lab jackets and trying to remember passwords and all kinds of different things like that but then other people started getting interested in it and they weren't so hesitant to to take on the skills because they learned that they were earning more money to do these things but now that the model has been rolled out to all of the clinics um there's just a set amount again per ma per hour that they make because they're all expected to do all the skills so they're they're all paid more than they were before we don't have a bonus program it's kind of hard in medicine to do that um you know when you incentivize things in medicine sometimes you get unwanted results like if we were paying more to the Mas for signing people up to get their colonoscopies they might start doing it inappropriately and you get extra tests that don't need to be done uh but we do have recognition programs where we recognize them for doing good job and there's this thing called the the circle of Distinction where medical assistants that are constantly meeting their goals and providing excellent Patient Service uh get to go on a lunch with the leadership of the clinic and and they they share with the leadership all of the wonderful things they're doing and how they're doing them and this information is gleaned and then inserted back into the training program to try and improve things for everybody

Steven Pearlstein: I'll tell you one thing by the way on my experience when I went to the basically to the good Clinic the the Medical Assistant gave me her card and I could actually call her number or email her email in medicine you know is a very new thing you can't you can't email doctors God forbid but uh but I could email her and call her and she took care of things and it was it was H but when she gave me the card I was so impressed you know she had her cart and uh I thought that was a great idea if you come see me you can email me that me you can okay um now final question that uh is a little less appropriate um for you uh so let me start with you let's talk about the tradeoff between heavy investments in training and recruitment um and bonuses of some sort or incentive pay versus profitability now in your case you're a nonprofit but let's just say versus not losing money like $20 million a year um do you have do you feel that there is a tension there and do you feel if you've resolved it in a certain way what would you say to the others in your industry who resolve it differently than you

David Owen: so we were worried that there would be ATT tension there when we started um when we hired these medical assistants and trained them to do extra things and one of the things that's interesting too is that since we're working in teams instead of being paired one to one just one medical provider for One MA we ended up with a higher ratio more like two to one two medical assistant per provider in the clinic and so we were worried that it was going to increase our costs quite a bit but we decided they they gave us the leeway to experiment with this anyway in the test Clinic one of the things that we found out it was very interesting um as we went forward with this model the medical assistants were doing the photomy they were doing the x-rays so we didn't have to pay a labtech to sit there you know 60% of the time and maybe draw Labs 40% of the time we didn't have to pay a radiology tech to maybe take X-rays 20% of the time and sit there 80% of the time if something needed to be done an MA would just take them over there do it and then come back so we are only paying someone to do those things when they needed to be done so even though we were paying the Mas more overall as a clinic we were paying less for staff and so the the staff cost per visit actually went down when we went to this model so that was something that we hadn't totally anticipated before

Steven Pearlstein: did it improve doctor productivity I'm sorry to use these very business-like words but did it improve do does it it did it improve doctor uh uh productivity

David Owen: so yeah they you know they measure this kind of stuff with us and it makes we don't like it as doctors to be honest but they measure this kind of stuff with us all the time and so the visits per hour in the clinics where this was rolled out either stayed the same or went up so some of the the clinics were actually seeing more patients per hour some were seeing about the same um but the the way that one of the ways they measure productivity with us is something called the relative value unit or the rvu and based on how complicated the visit is you get more points so to speak and how they judge how complex the visit it is is based on how much you write in the chart about what happened so I I know it sounds kind of weird to think about that's higher reimbursements right so the reimbursements went up because the medical assistants were putting in these standard questionnaires for every visit when I was in a hurry before sometimes I would leave stuff out I hate to admit that but you know you get going really fast and maybe even though the patients tell you things you don't have time to write it all down and and if it's not written down it didn't happen you know according to the billers and the coders and so you make less per visit so the the reimbursement actually did go up with this model so we were investing more in the staff but then it it paid off in the end so in a business sense we would say your productivity went up even though because because it's adjusted for Revenue in a business would say your productivity went you're not a business so

Steven Pearlstein: okay now let's go to the now let's go to the two businesses and what about uh the the trade-off between profitability and invest upfront investment and uh what is it that your competitors don't get

Kelly Walski: so I think yes there's a tension I would definitely say there's there's a tension that's felt um I don't think that we feel it I think that outside um outside feels it um the big thing for us is that we are a full margin retailer and and when I think of of zapo competitors we're competing with brick and mortar mostly okay there is not there there's not a a whole lot of uh full margin retail out there on the on the web and I think that the biggest tension for us is is really um kind of training our customers um to understand that we are a retailer we are not a Discounter people think oh automatically they think oh it's it's online it should be discount and that so that helps that that helps to kind of answer that tension for us but really ultimately what it what it is for us is creating those great experiences for our customers means 75% of our sales are from repeat customers and that of the 25% or so who are new 40% hear about us from a friend indicate that they've heard about us from a friend or family member so when it comes from a profitability standpoint we see it because we we believe that creating those great employee experiences enables employees to create great customer experiences which brings customers back um we are we were privately held for many for many years uh we were purchased in 2009 by Amazon um which is a publicly traded company um but not profitable yes I know the timing of this the timing of this panel however uh tough call the other day um we both work for Jeff bezos's head we don't make any money either but I can I can say that zapo has been profitable since 2008 okay um and we are profit profitable um and we want to be profitable we want to be um we want to be Amazon's favorite you know investment we want to be their favorite subsidiary um so we can you can be profitable and answer these things there are some trade-offs and one of the things is we're not a Discounter and that's one of the things that we have to know is we have to recognize who our customers are and what is balancing the really the the tension is really balancing what do our customers want make sure we're creating an experience that we're giving value to our customers so our customers feel comfortable paying

Steven Pearlstein: I suspect if yours was a Harvard Business School case the professor would say you spend more on this customer service experience which involves training and recruitment but you spend less on customer acquisition because it comes in much easier

Kelly Walski: it absolutely in fact we have a very very small small marketing budget compared to you know compared to other companies our sides and and it really that's the tension for us so the reason that we're happy to be part of the Amazon family is is it Shields us from that because if we were just strictly if we had gone the IPO route U which was a possibility for us back in 2009 when we were looking we we needed to leave the nest from Sequoia Capital they were ready to for us to be on our own um we would have a harder time talking to shareholders about well we're investing in our employees because it is very much a longterm thing and Amazon is a is that that's aign to Amazon's view which is why Amazon is a very long term

Steven Pearlstein: uh it's a great deal the answer is it is on sale the answer is it's a great deal uh investing in your people over investing in your people is a fabulous return on investment um when I first bought the company uh we were Revenue was $660,000 per employee in the first half of this year we were over a quar million dollar per employee um so uh we spend 5% of our employee salary is uh training which just a tremendous amount most of my competitors are less than a half a perc or 5% that's an incredible uh number and in the United States it's gone down to about what you said it's less than 1% now that's I think that's shortsighted and I think that's a mistake because you want to have the best talent running that million dooll machine or or dealing with that wonderful Prospect you want to have a a coherent intelligent so when you go to the National Association of Manufacturers meetings or whatever meetings you go to uh uh uh and you tell this story to other manufacturers who have been had it drilled into them that their employees are a variable cost that you want to Outsource as much as possible to other countries or to temp agencies that you want to drive down um Personnel costs uh uh labor costs as much as possible when you tell them your story what do they say to you back

Drew Greenblatt: see that's the fundamental difference is that I think every employee is a fixed cost they're like a mortgage payment okay they're like you know a a rent payment you you're going to pay the rent right period so then it's the question of how to get the best out of them right since every one of my employees are fixed cost they're given they're not variable you know when times are bad we don't let them go when times are up you we're not going have float them around like this if you treat them like that then what's going to happen is they're more dedicated more engaged they're going to watch your back and if they're a fixed cost you want them to be really well trained because they're they with they're they're with you forever

Steven Pearlstein: so what do the other guys tell you when you tell them this story I bet they say oh but that won't work with us is that what they say it won't work in my company or my industry you don't understand is is that what they say

Drew Greenblatt: um you know I I it's uh it doesn't work for me uh my I I don't get I can't get my arms around it I mean don't you want the best talent working on your side but what do they say to you well they're trying and control costs you know there you know it's a cost center okay employees are a cost center and if I can drive down my uh headcount they use words like headcount right then uh and they and and the cost associated with those heads right then we're going to have more profit but that's short cited because I think if you have great talent they'll come up with innovative ideas and they'll be able to push the machines harder than anybody else they'll be able to solve problems the clients come up with and you'll be a layup for reorders as you were describing so I I I reject that thesis employees employees should be thought of as a fixed cost and if you start with that Paradigm if that's your context then you want to train the heck out of them because you're going to have them for 20 years 30 years

Steven Pearlstein: okay so now we're going to um open it up for questions uh please um I'm just going to uh just tell you that I am a vicious moderator so you can have one comment or question not two and not three uh and uh just get over the clearing of your throat stuff so you just say it concisely no clearing of throats um and tell us who uh tell us your name and if it's relevant tell us where you're from so we know where you're coming from yes ma'am

Carol Wayman: Carol uh Carol Wayman with Congressman Ellison my question is about when you do training one of the things that employers say is when that training walks out the door and goes to another job and we've heard a lot about non-compete requirements in and we've heard a lot about non-compete requirements lately with Jimmy Johns and some others franchises that require that do you have such kind of non-compete or do you do anything to that you think restricts employees that you've train to leave for other jobs

Steven Pearlstein: J Jimmy John's the sandwich maker non-compete for making sandwiches it's freaking fast flip that flip that on its head so think about that the other the alternative strategy so I not going to train my people at all and they'll stay with me do you really want that person to stay with you I mean that that doesn't know anything you know you want you want to have really smart people so and and what is your turnover by the way

Drew Greenblatt: we we we have very low turn we have very low turnover and uh you know it's it's less than the 20% that we're were talking about lunch um what happens is we train people in the beginning uh and we keep them on as temps initially for the first 520 hours and we evaluate them and if they are our kind of people then we bring them on full-time

Steven Pearlstein: any anyone else want to talk about about you know you train them and they walk out the door so why would you do that that's the classic explanation of why it's it's their fault not our fault if if they wouldn't leave then we would train them

David Owen: you know we've started to think about uh the medical assistant job a little bit more as a pass through position now before it was an end of the line End of the Road job where people would come and they would be Mas for 10 15 years or so or or possibly leave and go somewhere else but now uh we're we're getting more highly motivated people now that more is required of them and more is expected of them and the training is better and so we're getting a lot of people now that will work for us for a year or two and then get into like our scholarship program for nursing school where they can uh work towards nursing school and be a medical assistant at the same time and then we've had a couple that have gone on to become uh nurse practitioner uh we had one that ended up going to M MBA school afterwards and became a clinic manager um we've had Med students come through where they get off cycle with their med school training and they have to take several months off before they can get back in in a new semester because really the way we're we're set up now it's almost like doing an extended med student rotation where they're shadowing a physician for months on end and learning a lot of things and so we're we're seeing it more as a pass through position position and what we're hoping is that a lot of them will stay with our organization I know once they get those uh nursing school scholarships there actually is a requirement that they have to get a job with the University of Utah for a year or two afterwards and many of them just stay

Steven Pearlstein: so this Carol I think the answer to in some way your question is is virtuous and and and vicious circles you can either get yourself into the Vicious Circle where you have less and less training and shorter and shorter tenures or you can create a virtuous circle where you get more and more training and longer and longer and they keep the two things keep feeding on each other um either in One Direction or other if you see your company dumping money into training you you're more inclined to stay you're more inclined to and you find the job more interesting you're doing more compelling things and it's like a magnet to keep you yeah and I think having a pipeline is important half of our jobs are filled internally

Malia Caravati: yes ma'am hello I'm Mal caravati with the American Federation of teachers uh you all talk about training once you've gotten employees what about the educational background and the skills as you hire people have you looked at that at all is there anything that you can tell us about what kind of people you're looking for your question is having to do with the the skills that people come to you when they apply and what's your question about that what kind of educational background are you looking for have you looked for specific kids say who come from uh Co Community College or Career and Technical education or do you have any educational requirements

Kelly Walski: take that cuz you have some interesting so um there is there there's very little um requirement as far as education as far as an educational requirement for most jobs at zos um even if you wanted to be a software developer we do not require um you to have um any sort of University training we do require competency in the language and that sort of thing um what's interesting is we do have a fair number of folks who do have who are college educated um who have for whatever reason for one reason or another come into the service industry maybe they fell into it like I did because I was an art major and guess what that's not really yeah that's not really something that has huge career prospects um but then kind of discovering and giving them an opportunity to kind of carve their own paths we do not have that requirement and and interesting ly enough I think part of the reason we have the requirement is um Tony Shay our CEO um who has an IV League education has has very famously said to to any parent who will ask him um don't make your kids go to college give them that money he wanted his parents just give them that money to start a business um so it's not it's interesting while we invest heavily in education in our area in you know secondary education postsecondary education is not a requirement for most jobs in our organization um okay

Elise Jenbacher: okay yes ma'am I'll go up to this side next thanks um I'm Elise jenbacher I'm with the national Governor Association um federally there's a lot of emphasis right now on apprenticeship and some of the elements of the training you're talking about sounds like apprenticeship increased wage gains you know set wage gains with set skills gains I'm wondering if that was a model you considered um when you considered you know either in-house or um also Partnerships with other providers for training um and can I just are you in your mind are you talking about sort of college apprenticeships or at that at that age level is that what you're talking about um registered apprenticeships or uh you know depending maybe not technically registered apprenticeships anything from you know one to four years they're pretty flexible now there's emphasis it with that Federal emphasis on apprenticeship um I think it's moving towards a broader understanding what apprentiship is

Drew Greenblatt: anyone want to comment on we have very specific uh uh machines lasers and punches so we use our vendors primarily uh to teach us how teach our team how to operate the machines uh so they'll fly out to Connecticut for a week for laser school and then a couple weeks later for advanced laser school so that's that's how we handle we don't have uh like a local community college that we team up with in that way uh regarding the the other question uh stem is a big problem um you know we're in we're in Baltimore City uh in the inner city and uh we need need stem Talent uh very badly you need to know how what a radi is a tangent is a cosine is uh you need to know what a 16th of an inches uh these are things that our schools have to teach and they're not doing it and it's very bad and we need help uh schools are critical to Our Success um

Kelly Walski: anyone else have any experience with apprenticeships we actually have internal we call them Z apprenticeships because we put Z's on things um and um if you're going to apply for an internal job um almost everything I there's maybe like a handful of occasions where you would go directly into that job but you almost always go into a 90 days apprenticeship and um to we keep your previous Department we keep that headcount sorry we keep that headcount open so your job is held for you and at the end of that 90 days on either side if it's if if you don't really have the passion for it and you want to go back to your other job no harm no foul you tried something something new and you probably develop some new relationships and you're bringing things back to your old job or if maybe it's just you know maybe your skills aren't quite there yet and you can go back or you would continue into that so we actually use that a loose um interpretation of an apprenticeship model for all of our internal postings

Questioner: yes ma'am talk a little bit about cultural fit if you know because everybody says sapos has got this down I've talked to a lot of companies customer Centric companies in Missouri about about what makes for successful new hires and they say personality basic attitudes and behaviors and cultural fit cultural fit cultural fit so how do those of us who are helping prepare successful new workers help them learn to gaug cultural fit

Kelly Walski: um it's one of the things actually I I'm super passionate about this you need to understand if you're going to join an organization I don't care if it's a job or a synagogue or a church or a Civic organization you need to understand what the values are are of that organization and when we're talking about culture we're looking for behaviors traits and characteristics so for us it for anyone coming to is is all about also I think it would be great if in schools um if schools would talk about what your personal core values are what your personal values are um I think we a lot of times think in terms of family and all those things but um tribal leadership and Dave Logan has a great um activity that he does it's kind of a Peaks and valleys and it helps you identify what are the things that are important like for me I know it is important that I feel like I'm contributing to my to my family I need to feel productive I also need to have my creative muscles exercised on a regular basis I need to feel like um I can be in relationship with co-workers interestingly enough I don't really care if the work I'm doing is um incredibly meaningful evidently according to my personality um the work itself doesn't matter to me as much to some people the work itself is incredibly important so I think it's I think as Educators if anytime you can help um your your your students and and all of everyone coming into kind of become a little bit more um have a higher emotional IQ I guess really and I and be more self-aware and self-aware

Steven Pearlstein: because your questions seem to imply is there some way we can prepare them so we can for your culture and what she's saying back is you know a lot of this has to do with personality types and it's not a question of preparing someone for my culture it's do they fit or not um and are they paying attention see it's important just to know to pay attention yeah you know Walmart has a culture too it's not like zap's culture but it attracts a different kind of people and if you say gee I like a lot of autonomy and I you know I don't follow rules so much you know that that'll be the end of you right uh uh and that's their culture obviously it works for them and it works for their customers apparently so um but it doesn't mean that one's necessarily better than the other and that you have to you know you can't prepare you could not prepare a student for both cultures it's just not possible I mean if if they're screening correctly you will not be at least one of them will reject you right so um sometimes it's not a question of preparation we have one more time for one more question okay oh yes ma'am way back there a little shy a little hesitant stand up Ken

Karen Schulman: Karen Schulman National Women's Law Center um what are your employees work schedules like and how much control do they have over them

David Owen: so we we have a pretty variable work schedule at a clinic we have extended hours and so we have shifts that that begin at 7:30 and some of them go till 9 at night and so they they sign up for different shifts but having some control over that has been crucial to try and keep people happy and so we try to make that as flexible as possible uh and give them as much input as we can some of them want to work at night some of them want to work in the morning uh but uh yeah it unfortunately in healthcare it does tend to be fairly variable

Kelly Walski: are you 247 Kelly we are 247 um and employees bid we have U Mass floor wide shift bid three times a year so one of the things that bity based on seniority and one of the things that seems to work out is what's a great shift for me is not necessarily a great shift for you and um while you may not get your first choice of shift um I've never seen anyone leaving in tears um but we also give if we're going to make a change um we want to give at least 3 weeks notice um if we have to do that when we're doing our floid shift we give about two months notice so people can make changes in their care situations

Drew Greenblatt: usually we're 24 hours a day uh 5 days a week and two days a week we're um 12 hours a day and really you're 24 and uh do people want to work the graveyard shift we pay them a lot more uh the weekend the weekend shift Works 3 Days 12 they they work 12 hours a day 3 days a week and get paid 40 hours and then because they work in the graveyard shift uh they get a a significant bump for that as well huh

Steven Pearlstein: okay uh we have time is there one other hand there yes ma'am how many weeks vacation do you get and um how many weeks sick leave do people get okay uh why don't you start Kelly

Kelly Walski: um uh vacation they get 12 days and um 5 days of sick and they can roll that over to up up to 80 hours of sick and 160 of vacation

Drew Greenblatt: EI either of the others of um based on you know how long you've been there it's two weeks paid vacation out to six weeks paid vacation what was the other question on sick sick leave uh we we have a plan where it's like you know you could take either vacation or or uh SI and Cruz yeah um

David Owen: yeah and for me you know to be honest I I don't remember exactly since I don't manage the Mas directly um but it's the standard university benefits package I think it's pretty good they get uh summmer off you mean no it's not that good you

Moreen Conway: all right uh thank you all thank you for uh a great panel and thank you all for coming not on I just wanted to say thank you all for coming we'll have more I think our next event is in early December please watch for that and hope you'll join us again thank you