Magazine article Workforce

Using Cash Drives Strategic Change

Magazine article Workforce

Using Cash Drives Strategic Change

Article excerpt

Owens-Corning's renewed compensation program supports business goals.

It's not every day that a company gets the attention of Business Week, The Wall Street Journal, Compensation & Benefits Review, CFO, Financial Executive and scads of other business publications. But, then, it's not every day that company management completely revamps its compensation and benefits programs eitherand starts with a clean slate.

The HR staff at Owens-Corning, the Toledo, Ohio-based construction materials manufacturer, did just that. In January 1996 it scrapped its existing compensation and benefits programs and completely overhauled every element of them to create Rewards and Resources, a variable compensation and flexible benefits program that's tied to performance. The total remuneration program is extensive and complex, but the goals are straightforward and clear: to create a mindset that helps employees understand and see the impact of their work efforts in tangible form. What makes this package unusual is its flexibility and the fact that employees are awarded stewardship of their choices. Furthermore, it continually emphasizes the dollar-value of previously considered entitlements, changing the perception of them into sought-after benefits and valued rewards.

Moving from the past.

Not so long ago, Owens-Corning was plagued with poor sales and costly asbestos litigation that affected both cash flow and employee morale. At the same time, the company was burdened with fixed-and costly-compensation and benefits programs that not only affected cash flow but also created an entitlement mentality. The medical benefits were of a one-size-fits-all nature, which didn't make sense anymore because the composition of the workforce was getting younger, and the needs of the company were changing. So, in addition to improving the financial picture, a goal of senior management was to alter the mindset of employees from entitlement to performance.

In 1992, incoming CEO Glen Hiner led the creation of new corporate goals called Vision 2000. Along with targeting $5 billion in sales, he led the creation of new company core values: customer satisfaction, individual dignity and shareholder value. The entire focus of Vision 2000 was to involve employees more closely with the bottom line. Enter HR, and the new HR vice president, Greg Thomson, who would help create a remuneration package that would drive cultural change and move the organization toward its business goals.

"With Rewards and Resources, we tried to design a program that reflects those three core values and most obviously ties into the last two," says Thomson. "We started with a very simple systemic strategy that begins with the business results we want to produce. Then it used all of the human resources systems and processes as either levers for change or drivers of the business strategy."

In other words, Thomson and the HR staff looked at the business plan and ascertained the HR needs. They asked some of the tough questions, like what would the new workforce need? What type of employees would the company need to attract and motivate? What behavior did the company want to reward? The staff focused on these high-level issues first and gradually translated the business needs and the very high human resources needs into a specific direction for the compensation and benefits program.

"We looked at all the programs, threw them all in a hopper and asked ourselves how we could design an overall compensation plan that met our guiding principles," says Rick Tober, leader of Rewards and Resources. The guiding principles were to conserve cash, reduce fixed costs, provide flexibility that employees didn't currently have, be competitive in the total package (not necessarily individual pieces of the package) and encourage employee stock ownership. "We wanted to encourage and empower employees to think and act like owners," says Thomson.

By doing so, the company moved its compensation philosophy into the future. …

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