A business story
Today, when students go to business school, they are taught that profit is everything. Business students will spend many years study finance, revenues, costs and profit. After graduate many become managers and they practice what they learned in school. When a company does well, managers are rewarded but when company does poorly, managers fire workers to reduce costs. The reason is some managers consider workers are disposable. They let them go when they do not need them because they can always hire workers when needed. The less educated labor workers often have no choice. For every open labor job, hundred are applying. That situation will get worst as with globalization, more labor workers are available and competition is fierce.
Last January, I was surprised to read an article from an Australian newspaper. The article stated that workers at an Australian nickel factory got a very big surprise at their Christmas party. Mr. Clive Palmer, the owner of Yabulu Nickel Refinery gave each of his 860 employees a gift in recognition for their achievements over the past 18 months. These gifts were not the traditional box of candies as expected but much more. Among them, 55 workers received Mercedes Benz cars, 750 received two week luxury vacation in Fiji island, and 50 who have just joined the company received a week stays at a luxury hotel in Queensland.
Mr. Palmer told the newspaper: “The workers have worked tirelessly since July 2009 to make this business a success so I want to reward them. The rewards for all workers match the performance of each individual and that is why the prizes are so big – a total of 20 million dollars because they deserve it.”Mr. Palmer bought the company 16 months ago when it was losing a lot of money. The company was ready to file for bankruptcy and every worker expected that the company would close down. Mr. Palmer bought the company, fired most managers, but kept all workers. That was an unusual decision because what he did was completely difference from other company owners. Then he did another “strange thing” by raise the level of pay for all employees. To the industry, it was something that never happened before for a company that about to fail. One business owner commented: “What would he expect to achieve when giving more money to workers in a failed company?” Many people thought he was insane.
Mr. Palmer did another “strange thing” by asking employees to give him ideas how to improve the company. He suggested that they send him email with their recommendations. This created a lot of questions from the business industry. Many owners asked: “Instead of having managers making decision, he asks workers what to do. Did he know anything about the business? Asking for workers suggestion is a stupid idea that never produces anything.”
Mr. Palmer explained that he did not follow the common business rules. He listened to workers’ suggestions and implemented their ideas. As a result, more workers began to made more suggestions to which he again listened and implemented them. Within six months, many changes happened in the company. The results were so successful that by the end of that year, the company saved $16 million dollars in operation cost. Mr. Palmer explained: “When I bought the company, I recognized that I did not know how to run it as good as the workers there so I let them do what they thought was best.”
The fact was many workers who made good suggestions, who are driving new Mercedes cars now, are people who improve the factory process and help save the company. Since 2009, production at the refinery has increased significantly and the company is once again turning a big profit. Mr. Palmer rewards them for their works well done. He said: “It is the workers that do everything; the success of the company belongs to the workers.”
Last month, he was invited to the university to meet with business students. They wanted to know about his success and he explained: “As students, you are taught to show your appreciation for workers by praising them, maybe at the end of the year, you give them a small gift but the big bonus always goes to you, the manager. For years, business school is focusing on the managers because they are the educated and they are entitled for what they think belong to them. I believe reward should go directly to workers because they do most of the work. I believe that reward must be used to set the direction toward a particular result. According to business tradition, workers have no idea what they will receive even if they do well. For years, workers know that big bonuses always go to managers. If they are lucky, they may receive something like a box of candies. That is not fair. I believe workers should know exactly what they will receive in advance. They should know what they could receive if the company does well. That is why I put in writing that if the company achieves certain profit, workers will receive certain bonus. There should be no doubt, no confusion about anything. Workers are part of the company just like the owner. What I want is to promote long-term relationships to the company.”
Today the company is growing fast, more workers want to join the company. So far it breaks all records for high quality, high productivity and customers satisfaction. The reward in clearly put in writing, if profit reach certain level, there will be more Mercedes and more luxury vacation. Another “strange thing” also happens there too, the company has fewer managers than previously since the workers are self-organized. They know what to do and do not need someone to supervise them. There is something every student could learn from this lesson. This is how a single person turns a bad company into a great company. This is how an almost bankrupt company became a successful and highly profitable company. It starts with a leader with vision and good heart. I also want to mention that today, Mr. Clive Palmer is one the richest person in Queensland, Australia.
- Blogs of Prof. John Vu, Carnegie Mellon University