Transcripts

MARK STEIL: The 500 workers at Zytec take a direct hand in the planning and manufacturing of power supply units for computers and other equipment. If an employee comes up with a way to improve the process, it's usually implemented. At one work station, a column of trays rotates at the touch of a button, bringing parts to the worker instead of having the employee stand and reach, as in the past. Nearby, an exercise session is underway, an employee-organized effort to improve dexterity and cut down on injuries.

SPEAKER: And you pull back on your arm. 2, 3, 1, 2, 3.

MARK STEIL: Worker self-management is winning converts at many companies, but Zytec goes further than most. Employees don't file time cards. The company trusts them to put in their 40 hours. Managers don't individually review worker performance or even inspect the final product. Zytec, vice president for manufacturing Al Camp, says giving workers more responsibility frees upper management from day-to-day chores to concentrate on long-range efforts like product design and customer service.

AL CAMP: It's a matter of disciplining yourself to giving them the opportunity to really shine and do what you know they can do and what they know they can do, and then focusing and letting them develop and grow.

MARK STEIL: What happens if an employee is slacking off? A company memo urges them to comply with Zytec's trust expectations.

AL CAMP: It's very much a team concept and a trust concept. Absolutely. It's working for us.

MARK STEIL: The Zytec approach is based on the management ideas of W. Edwards Deming, a 93-year-old Washington, DC-based consultant who was instrumental in convincing Japanese companies to adopt team ideas in their postwar recovery. Zytec is trying to blend managers and workers into one team by eliminating differences which can divide them. The company has ended standard management perks like company cars and bonuses. It's even taken the unheard of step of ending commissions for the sales staff.

Brad Morris works for the Eden Prairie-based BRAAS Company. He studied the Zytec method during a recent seminar at the Redwood Falls plant. Morris was impressed, but labeled some of the approaches bizarre.

BRAD MORRIS: All of us as people need an incentive, and most salesmen are incented by dollars. Sales is a game. It's fun, but you keep score with money.

And as far as the executives, again, I just find it really unusual that you're not motivating them to take more risks, to come up with new ideas, to be the innovator and doing it with again, dollars. That's very typical. And I think that's going to be a mistake that they're going to retreat from in the coming years.

MARK STEIL: Vice President Camp though says the system works. He says the best measurement is quality. The reliability of Zytec's power supplies equals the best Japanese products and customers report problems with only 2 of every 1,000 Zytec units.

The company's success, though, doesn't mean it's immune to the ups and downs of the business world. Zytec had about $77 million in revenue last year. However, because of reduced orders from computer companies, it expects that figure to drop by as much as 15% this year. Camp says the company took action last month to deal with the downturn.

AL CAMP: We felt what we wanted to do, rather than to have a significant layoff at that time, was to share it equally with the salary reduction. And so we did a salary reduction, starting with the lowest paid people at a 10%. And then as their salaries increased, we escalated it to 25%.

MARK STEIL: Zytec has attracted attention in Redwood Falls, which, like many rural Minnesota communities, is trying to diversify its economic base. While gambling money from the nearby Jackpot Junction Casino has helped the town's service industry, Zytec leads the way in manufacturing. Mayor Gary Revier says Zytec's contribution is more than just jobs.

GARY REVIER: You see the people with the blue jackets on that are employed by Zytec and they do stand just a little bit above. They hold their head up high. People have an attitude about them, which is good. I think that's great.

This attitude permeates the community as a whole. And you go someplace else and say, I'm from Redwood falls. Well, that's where Zytec is. You bet.

[HISS, THUMPS]

MARK STEIL: The presence of Zytec has led to the creation of at least one other company in the area. In the town of Morgan, this machine helps build parts used by Zytec and others. Bob Sandmann is president of B&L industries.

BOB SANDMANN: We manufacture what's called a toroidal inductor. It's like a donut with wire wrapped around it.

MARK STEIL: Sandmann and another former Zytec employee started the company one winter in an unheated former bank building. In three years, using the Zytec management philosophy, B&L has grown to 46 full and part-time workers with annual sales of almost $2 million.

BOB SANDMANN: We provide service 12 miles from Zytec. So anytime they have a problem or need something, we can be there in a matter of 15 minutes. Likewise, it provides a pretty healthy payroll for the town of Morgan.

MARK STEIL: The team philosophy of Zytec and other non-traditional companies grew out of the Japanese challenge as US companies adopted new management tools to meet the cost and quality of Japanese products. Manufacturing Vice President Al Camp says Zytec has met the challenge, and in some cases gone beyond what the Japanese are doing. He says survival is a powerful motivator to change. This is Mark Steil, Main Street Radio, Worthington.