If company thrives, so do the paychecks

Bonus: Businesses are increasingly embracing the trend toward linking employees' compensation to the company's financial success.

February 13, 1999|By William Patalon III | William Patalon III,SUN STAFF

It wasn't exactly pandemonium at the Hunt Valley headquarters of Millennium Inorganic Chemicals yesterday, but the feeling among workers such as communications assistant Candace V. Cangialosi was of pride in a job well done.

Yesterday was the first time the chemical company -- which makes white pigment at its plant at Hawkins Point in Anne Arundel County -- granted bonuses to administrative, professional and executive employees based on how the company fared financially in 1998. Millennium Inorganic Chemicals exceeded the financial targets the parent company had set, so the bonuses were bigger than most workers had expected.

The bonuses totaled $9.2 million and put an extra $2,000 into Cangialosi's checking account. She had expected about $500.

"I was pretty shocked," said Cangialosi, who plans to buy a dining room table and window coverings for the Ellicott City house she and her husband, Frank, just bought. "I really didn't know. I just figured $500 was what we'd get, really."

Millennium Inorganic, with about $1.2 billion in annual sales, accounts for about 75 percent of the business of its Red Bank, N.J.-based parent, Millennium Chemicals Inc. The locally based subsidiary has nearly 4,000 employees worldwide and just under 1,000 workers in the Baltimore area.

The company is trying to create a pay-for-performance culture and saw the bonus program as a key piece of that strategy. It seems to be having an impact: Despite a tough year for the chemical business, Millennium Inorganic's operating profit jumped from $60 million in 1997 to $136 million in 1998.

"It is the first year we've done this. Everyone is very excited about it," said Robert E. Lee, Millennium Inorganic's president and chief executive officer. "Everyone worked very hard. I think they knew we had a good year," but were surprised how good that year was.

Unionized employees -- about half of Millennium Inorganic's Baltimore work force -- did not get the bonuses because their contracts preclude it, the company said. Lee said he is working to include union workers in the bonus program in the future.

Worldwide, Millennium Inorganic is paying out $18.7 million to 1,950 eligible workers. The amount of the bonuses varies, based on wage levels and team and organizational objectives. Most of the individual payouts range from $1,500 to $30,000, though Lee will receive about $660,000, half of which must go into the parent company's stock.

But even for an administrative worker making $25,000, the bonus amounts to $1,500, which is 6 percent of the annual salary, said Neil Gussman, Millennium Inorganic's marketing manager.

Parent company Millennium Chemicals has a plant in Dundalk that is part of a separate specialty chemicals business and has 48 employees. Workers there also got bonuses, the amount of which the company declined to disclose.

Bonuses are part of a growing trend, known as "pay for performance," among companies trying to link worker compensation to company results. Some businesses grant stock options instead of bonuses, but the objective, to get workers to devise better ways to do their jobs, serve customers and cut waste, is the same.

Millennium's bonus program is a good attempt at aligning the interests of workers with those of shareholders, said a management professor who is also a consultant.

Sensible reward

"It's the best kind of reward because it makes good, common sense," said Janet C. Barnard, associate professor of management at the Rochester Institute of Technology College of Business. "You are rewarded if the company does well, and you know what you did to help achieve that success. Not only is it a personal reward, but it encourages employees to identify with the company. And that's a perfect combination."

Cangialosi, the communications assistant, said she thinks twice before paying a messenger to deliver documents somewhere. Many times, she drops the paperwork into the mail.

When it came to procuring company cellular phones, Luanne Donato, a senior administrative assistant, shopped carefully until she was sure she found the best deal.

Pamela D. Hall, a marketing analyst, found on the Internet statistics she usually gets in paper form. That saved $20 a year but, more important, cut the time it took her to do a report from four hours to a matter of minutes.

Donato, who received a bonus of about $2,000, said she will use her windfall to buy a new helmet for her in-line-skating husband, Frank, and tuck the rest of the money into the college accounts of the Baltimore couple's three young children.

Hall, the marketing analyst, said she'll use her bonus -- she wouldn't reveal the amount -- to replenish her savings account, which was depleted when she bought a new Dodge Stratus. Her 140,000-mile Oldsmobile was crunched by a falling tree at her Catonsville home during a recent ice storm.

Benchmarks vary

Pay-for-performance companies are embracing different benchmarks to measure how well workers did. At Millennium Inorganic, the benchmark is "economic value added," roughly speaking, a measure of the profits from operations after taxes that the company earned as a percentage of the money invested in the business. That profit is essentially the value the employees added through the products they made. And workers can influence that return through their collective actions.

Understanding that it's important to create value is part of the company's culture. Posted daily on a sign in Millennium Inorganic's headquarters reception area is the parent company's closing stock price of the day before.

The push to save money and build the company "keeps us all on our toes," said Donato, the senior administrative assistant. "This is our company, this is our team, and we need to keep thinking of how to make it work."

Pub Date: 2/13/99

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