L. Bart Adams

You often hear of business owners who have had a difficult time making payroll. It seems that most entrepreneurs have a story. Here is mine.

During my first year of ownership, in 2013, we struggled with growing enough mushrooms to supply our market demand. We also had many equipment struggles. We had to purchase four new forklifts, complete a major overhaul on our steam boiler, rebuild a water tower for our chilling system, and numerous compost turner issues, which led to purchasing a “used” compost turner. To top it off, the line of credit from our bank was approaching the credit limit. The combination of these elements was forming the perfect cash flow storm.

I started extending my payments to vendors to improve cash flow for the near term. It got to a point where I was three weeks past due on many of our accounts. The time came where I could not extend these vendors anymore without paying long-term consequences. The time came for the perfect storm to hit our shores. We were not going to make payroll.

To make the next weekly payroll, I had to act fast. I liquidated all of my savings and lent it to the company as a loan from the owner. Next, I negotiated with one of the most prominent vendors to hold off on payment for an additional three weeks on top of the three weeks we were behind.

I never made a more significant sale than selling this idea to my wife. She needed to believe in me and the progress we were making at the farm. She needed to believe that I could restore our life savings in a timely fashion. She needed to believe that the company could recover. She believed.

We made payroll that week.

The following week, I negotiated with my bank to change the way the credit limit was calculated. This more favorable credit limit gave us the breathing room we needed to be current with our vendor payments and pay back my loan. To improve our production, we started increasing the number of trays for each mushroom crop, increasing our ability to meet the market demand and improve profitability. Our financial picture began to be more favorable.

My “making payroll” story happened over three years ago, and we are still recovering from the financial consequences, namely paying down the line of credit. I believe this experience was a test from the Almighty to see how bad I wanted it. Did I want this business to be a success? Was I willing to put it all on the line? Did I have what it took to sacrifice for my employees and business success?

Yes.

We once had an employee who asked for a raise. I asked this employee's supervisor, "if he deserved a raise?"

He replied emphatically, "No!"

"Why did this employee not deserve a raise?" I inquired.

He went on the tell me how this employee had been underperforming in his job. The supervisor had had several "coaching" conversations with the employee about improving his performance. His response was, "If you pay me more I will work harder. I feel like I am working the level of my pay." This employee's performance did not improve. A few weeks later, this employee again asked for a raise and was denied.

He quit.

I'm not sure where this employee developed his mindset of working to the level he felt was proportional to his pay? In my experience, this is a unique thought process regarding wage-earning. Especially considering the following:

• He worked in the picking department before transferring to this "new" position. He understood our policies, procedures, and company culture.
• He worked from time to time at this position (while still working in the picking department) to learn the job before applying for the full-time position. So, he understood how to calculate the wages and the work required.
• His supervisor coached him on multiple occasions about his sub-par performance.  He understood he was underperforming.

Perhaps his mindset was influenced by the previous two positions he held at our facility. He worked as a box folder and a picker.  In each case, the job pays on a piece-rate basis. His speed or performance determined his wage. He was in control of how much he earned. I can only conclude that making the shift to an hourly wage proved to be too difficult to change this employee's mindset. If he had improved his performance, he would have earned a pay increase. What he failed to understand was that he still controlled the amount he made by his performance.

How Am I Paid?

Our mushroom harvesters are paid by the pound of mushrooms they pick each day. At the start of each shift, the harvester receives a new punch card to track the number of baskets of mushrooms they pick. Each punch is worth one lug, which is four baskets. At the end of each day, we calculate the total pounds harvested and divide it by the total lugs for the day to get the average lug weight. The lug weight is then multiplied by the number of lugs on the harvester's punch card resulting in pounds harvested by that day.

This method of calculating the lug weights was employed long before I started in 2003. Since its inception, the harvesters generally assumed that the average lug weight was 10 pounds per lug or 2.5 pounds per basket. This assumption was incorrect as the lug weights were actually between 8-9 pounds per lug.

From Misconception To Understanding

About one year ago, I learned about this misconception amongst our harvesters. I was shocked to hear that they had this idea that the company was "stealing" pounds from the harvesters. I learned it was a common sentiment with the harvesters and was being shared with our new harvesters. At orientation and from time to time, we review the pounds calculation with the harvesting department. However, there was still a disconnect between the assumed and actual pounds harvested. You can probably imagine the effect this was having on employee morale.

In our next team meeting, we brainstormed for ideas on how to help the harvesters understand the actual pounds calculation and payment method. We considered:

• Reviewing the pounds calculation with the harvesters, as a group or individually
• Weighing each basket, by the harvester, instead of using a daily group average
• Spot checking and weighing baskets for each picker
• Posting a report of lug weights by the picker

We ultimately settled on a combination of the last two.  Our controller and HR Manager, Lisette Garcia, and the Harvesting Manager, Gilberto Gutierrez, worked together to implement this project. They purchased a scale, made a worksheet, and began recording lug weights, by picker, for each room we picked. I created a database for this data to be recorded and made a report that the department managers could print for the harvesters to review daily. On the report, any harvester that was below 10 pounds per lug was highlighted in red.

From Understanding To Accountability

We saw three immediate changes in the harvester's behavior after we started posting this report.

1. The harvesters started filling up their baskets to ensure they picked over 10 pounds per lug. They did not like seeing their name is red in the report for their coworkers to see. At this writing, our trailing twelve-month average lug weight is 10.40 pounds per lug.
2. Because they were being paid with an average lug weight, any harvester that was under the average was being paid more than their fair share. The harvesters quickly caught on to this and started holding each other accountable to fill up the baskets.  Within a month, the number of names in red went from 15 per day to 1-2 per day, on average.
3. The harvesters now understood how they were being paid, and their morale improved significantly.  Many of the harvesters expressed how they felt like they got a pay raise. This was, of course, purely psychological because nothing had changed in pounds calculation or the payment method.

Aside from the boost in morale, this also resulted in an operational improvement. Our product cooler capacity was effectively increased by 20-25%. The baskets were 20-25% fuller while maintaining the same physical footprint in the product cooler.

This experience taught me that employees need to understand how they are paid, appreciate knowing where they stand, and help keep each other accountable.