Making Vendors and Employees Into Stakeholders

Question: Why should companies get involved in their vendors' business?

Lawrence Koh: Our vendors basically dictate the majority of our performance.  So we excel and are known by most of our customers for on-time delivery, price competitiveness, and assured quality.  And our vendors are the ones who actually perform those services.  They’re the ones who give us competitive pricing, they’re the ones who perform the on time deliveries and they’re the ones that perform the quality assurance.  And so we’re basically, you know, receiving the merits... those accolades on their performance, and we’re the ones who get all of the praise for that. 

Another way that they’re able to provide competitive pricing and assist in providing competitive pricing is, most of those companies, eight out of ten, finance us.  So it doesn’t start off that way, it usually starts off with letters of credit, or making a wire transfer at the time the shipment is ready.  And then we will, over time, ask them if we can pay them once the shipment gets on board.  And then maybe we ask for a portion of that to be deferred for 30 days.  And then, if possible we ask them if they would be willing to defer the entire amount for 30 days. And eventually we will work to try to get that to 60 days, and we’re pretty successful at that.  And because of the type of relationship we have with them and how closely we work with them, as an example, one of the vendors contacted us and said that they weren’t going to be able to produce the product for us.  And I asked why?  And they said there was a problem with the vinyl, the vinyl was bubbling.  And I said, "I know exactly what that is." 

So the next day I caught a flight to China and explained what the problem was.  Well they didn’t have anything in China that they could identify that would help address the problem.  So we got a hold of some vendors and we modified some equipment and I was there for about five days and we finally solved the problem and that became one of their biggest programs.  And they were so amazingly appreciative of the fact that we actually got involved with them rather than just taking the program from them and relocating it to another vendor.  And, you know, we get as involved in their business as much as they get involved in our concerns and help us resolve those concerns for our customers.

Question: How can a company make its employees larger stakeholders?

Lawrence Koh:  The majority of people that we bring in for an interview, when we do have an opening there are always a bit taken back when I tell them that we have a different pay schedule, a pay policy in our company. In that when somebody comes into the company, their base salary, which is related to the skill sets that they bring into the company is established.  And once that’s established they never receive an increase in that base salary. 

But after the 12 months that they work, they switch over to their base salary times the number of months they work there will equal their individual quotient.  And then we take the sum total of everyone’s quotients and we divide that into their individual quotient and that becomes the percentage of the profit sharing that the company shares with its employees. 

So in many cases, people who have been there 10, 12, 15 years, their bonus can be close to half of their base salary.  And it gets them engaged and it makes them a significant stakeholder in the company.

Recorded on October 28, 2010
Interviewed by John Cookson

Becoming involved in your vendor’s business and retooling your payroll to give employees greater share can build a better business.

Why the ocean you know and love won’t exist in 50 years

Can sensitive coral reefs survive another human generation?

Videos
  • Coral reefs may not be able to survive another human decade because of the environmental stress we have placed on them, says author David Wallace-Wells. He posits that without meaningful changes to policies, the trend of them dying out, even in light of recent advances, will continue.
  • The World Wildlife Fund says that 60 percent of all vertebrate mammals have died since just 1970. On top of this, recent studies suggest that insect populations may have fallen by as much as 75 percent over the last few decades.
  • If it were not for our oceans, the planet would probably be already several degrees warmer than it is today due to the emissions we've expelled into the atmosphere.
Keep reading Show less

Why modern men are losing their testosterone

Research has shown that men today have less testosterone than they used to. What's happening?

Flickr user Tom Simpson
Sex & Relationships
  • Several studies have confirmed that testosterone counts in men are lower than what they used to be just a few decades ago.
  • While most men still have perfectly healthy testosterone levels, its reduction puts men at risk for many negative health outcomes.
  • The cause of this drop in testosterone isn't entirely clear, but evidence suggests that it is a multifaceted result of modern, industrialized life.
Keep reading Show less

Health care: Information tech must catch up to medical marvels

Michael Dowling, Northwell Health's CEO, believes we're entering the age of smart medicine.

Photo: Tom Werner / Getty Images
Sponsored by Northwell Health
  • The United States health care system has much room for improvement, and big tech may be laying the foundation for those improvements.
  • Technological progress in medicine is coming from two fronts: medical technology and information technology.
  • As information technology develops, patients will become active participants in their health care, and value-based care may become a reality.
Keep reading Show less