A clean slate at Owens-Corning.

• Author: Vair, Rick
• Position: Employee Benefits

If your employees take their benefits for granted, perhaps it's time for a make-over. Read how Owens-Corning scrapped its entire program and started over, freeing up much-needed cash in the bargain.

There's nothing like a healthy dose of self-interest to motivate employees. And there's nothing like a direct link between compensation and the bottom line to improve morale, increase performance and lower current costs. That's the philosophy behind Owens-Corning's new variable compensation and flexible benefits program - Rewards and Resources. The program is being rolled out this year to 3,500 salaried employees in the United States, and plans are already in the works for future company-wide expansion.

Adopting a "clean slate" approach, Owens-Corning overhauled every existing benefit plan and added a new global stock plan funded with stock and stock options. On January 1, 1996, variable incentive awards began gradually becoming a greater portion of total cash compensation. The result: a program that ties employee rewards - and company costs - to corporate performance. It saves considerable cash while supporting the human resources strategy and overall business plan.

CATALYST FOR CHANGE

Owens-Corning, formed nearly 60 years ago as a joint venture between Owens-Illinois and Corning Glass, has been an independent publicly traded company since 1952. In addition to manufacturing and selling building supplies, its 17,000 employees around the world develop technologically advanced materials for home and industry.

In 1992, CEO Glen Hiner inherited a company with stalled sales and negative net worth. Employment levels, morale, and research and development were depressed, while the balance sheet was burdened with debt from restructuring and an enormous reserve for asbestos litigation, even though Owens-Corning stopped making products containing asbestos in 1972. "The company had a great deal of potential," Hiner says. "However, it clearly had some problems we had to address to motivate employees and free up the cash we needed to grow the business."

By late 1994, the transformation was underway, with business processes enhanced and productivity being maximized. A new senior human resources executive, Greg Thomson, developed a strategy to retool the corporate culture, change employee attitudes and meet difficult financial goals.

The existing benefits program wasn't compatible with the new strategy, nor did it reflect the company's core values. On the contrary, the various benefits plans represented a large fixed expense to the company and did nothing to motivate employees. There wasn't even a pretense of a total compensation strategy. In general, benefits were inflexible and entitlement-oriented. The welfare benefits (medical, dental, life, long-term disability, etc.) were "one-size-fits-all," offering, for example, only a single point-of-service health care option, while the retirement benefits accrued independent of company profits. Further, required cash contributions to the plans were escalating...