Labor-Management Case Study
Zircoa,
Inc.
and
the
Written by the
Northeast
Ohio Center for Labor Management Cooperation
at
Work
in Northeast Ohio Council
(WINOC)
for 
with support from the
Ohio Labor-Management Cooperation Program
of the
Case
Study
on
Background:
Zircoa, Inc., a division of ANH Refractories Company, is located in Solon, Ohio. As a manufacturer of various zirconium based products, Zircoa products are used in a wide variety of applications and industries such as auto spark plugs, air-bags, turbines, corrosion resistance in metals, quartz, gems, and more recently auto paints. Zircoa is the market leader in their industry. There are approximately 150 employees at the Solon facility with the hourly employees represented by the United Steel Workers Local 1033. Annual sales average $20 million.
ANH Refractories Company is a family of companies that sells and services under the well-recognized trade, service and brand names: A.P. Green, North American Refractories Company, and Harbison-Walker.
These businesses provide high-grade fireproof ceramic refractory products and services for high-temperature applications in the cement and lime, energy, chemicals, non-ferrous metals, glass, iron and steel, and environmental technology industries.
Zircoa was founded in 1952 and the business ownership has changed several times in the early years. During those early years Zircoa worked with NASA’s Lewis Research Center on yttrium-stabilized zirconia plasma spray powders. This work led to adoption of the thermal-barrier coating that is now the standard on modern aircraft engines and other similar applications.
Manufacturers of industrial products made of zirconia powder for applications that require resistance to extreme heat, extreme corrosion, or contamination. Products include specialty powders, refractories, and ceramics.
Mission of the Company
John A. Kaniuk, who has been with Zircoa since 1990, serves as President, Scott Abel as Plant Manager, and Eric Nelson as union head of the Local 1033.
The mission statement of Zircoa is understood and practiced by all employees. It states that “Zircoa is a pioneer in helping customers solve unique problems through invention and innovation of specialty ceramic materials. Our primary operating objective is continuous improvement to ensure customer satisfaction and our long term profitability.”
Operating
Principles
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Customers are why Zircoa is in business. We will develop long term relationships by treating them with respect and honesty.
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Employee commitment through teamwork is key to continuously improving our materials, processes, products, and systems. Employees are entitled to respect, proper training and fair compensation.
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Communication with both internal and external suppliers and customers is essential to ensure clear understanding.
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Statistical techniques will be used throughout the company to prevent defects and reduce variability.
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Community, environmental, and safety needs are Zircoa priorities.
Responsibility
Every employee must be wholly committed to manufacturing quality products. Management has the responsibility and authority to take action to ensure that Zircoa meets or exceeds customer requirements.
Marketplace Challenges
On the global front, Zircoa exports approximately 25% of sales, with a goal to increase exports by 40% within the next few years. Zircoa has been experiencing excellent growth over the last few years with manufacturing operations generally running seven days a week around the clock. This continuous growth in their market has resulted in several recent new hires and plans for a plant expansion. Although always located in northeast Ohio, Zircoa is seriously considering the benefits of expanding some operations off shore due to the ever-increasing costs associated with environmental and regulatory requirements. Cost numbers at one operation indicate that 30% of cost is due to such requirements. New raw material suppliers to Zircoa recently include companies from China and Russia. With a growing international customer base, more raw materials coming from European and Asian suppliers, and tighter environmental regulations state-side, the argument is compelling for Zircoa to consider off-shore operations.
Company Culture
A management philosophy toward employee participation has thrived over the past 15 years. Extensive effort has been directed toward employee selection, training, development, and compensation while new equipment and procedures have been introduced to improve employee and workplace conditions.
Zircoa management practices an open-door policy with a high regard for on-going communications and collaboration. Employees are encouraged to be self-directed in many of their duties and therefore have received extensive cross training. Even during lean times in the early 2000’s, Zircoa devoted significant attention and investment to employee training and development.
As a division of ANH Refractories Company, Zircoa has been recognized as a corporate leader in many of ANH’s indicators of success; therefore, Zircoa has not been unduly influenced by corporate mandates.
Labor Relations
Hourly employees at Zircoa are represented by the United Steelworkers union (formerly the American Flint Glass Workers). Being a strong advocate of collaborative practices, Zircoa uses labor and management committees to handle both employee relations issues as well as process problem solving. The company has never had a formal work stoppage and most contract negotiations have been addressed within the collaborative process. Employee grievances are generally handled at the verbal first-step level, and are low by industry standard.
Recently a union/management committee addressed the rising cost of health insurance; and was able to find a better alternative. This required a contract change and was accomplished independently of the union contract negotiations. Committees also address work flexibility issues. Other issues addressed by committees include: a new 401-k retirement plan, voluntary lay-off plans and changes with their hourly crew-leaders.
The
international union reps are supportive of the Zircoa local; and use them
to benchmark other locals in the region.
The union leadership has also played a key role in defining the
company gain-sharing plan, which has been modified several times over the
past decade.
Union leaders also take an active role in employee “hiring-teams”, helping to select good new employees.
Resources to Stay Competitive
Among Zircoa’s many strengths, two areas are particularly noteworthy, extensive employee training and a gain-sharing system that gives employees outstanding opportunities for involvement and for sharing in Zircoa’s success.
Beginning in the early nineties, the company used outside resources such as WINOC (Work in Northeast Ohio Council) to help design their employee involvement process and gain-sharing plan. All employees received up to three days training in small group problem solving and facilitation.
The company has used other outside resources such as local colleges and non-profits such as ERC and CAMP as well.
CAMP (Cleveland Advanced Manufacturing Program) has recently provided Zircoa assistance with new employee selection processes.
Employee Development
All employees are provided opportunities for training and development. Zircoa provides training not only for job related skills, but also for life skills such as literacy training, stress management, and effective communications. Zircoa designates 1 to 3% of sales to be used for employee training and development, excluding on the job training and safety training.
Gainsharing Program
Zircoa leadership believes that “putting everyone in the same boat”, both hourly and salaried, is a good way to stimulate enterprise wide improvements.
Originally designed in 1991, the Zircoa gainsharing plan has received several fine-tunings from the company Labor and Management committee. In 2004, the actual gains were almost double what were expected.
The goal of the program is to increase profitability and productivity while maintaining quality products and customer satisfaction.
The Gain$haring is an agreement between Zircoa and its employees to share monetary gains from an established baseline.
The program requires commitment, involvement and teamwork equally from Zircoa and all employees to manufacture quality products using the best production methods available to make measurable gains.
This agreement may be terminated at any time by either Zircoa management or the Union. In the event of termination, the hourly employees will be compensated per the current union contract agreement (Gain$haring “protection”).
All employees, including part-time, are eligible to receive a share after ninety days of employment at Zircoa.
Measures of Success
While Zircoa’s profitability suffered in the early 2000’s with the rest of northeast Ohio manufacturers, it remained positive and has improved significantly in 2004.
On-time shipments average over 95% and customer loyalty (measured by a survey on whether customer would recommend Zircoa to others) is over 95%.
The speeds and yields (i.e. productivity and quality) have improved significantly beyond corporate goals.
Annually, Zircoa conducts a Strategic Quality Audit (modeled after Baldrige multi categories) and score in the top 90% of their goals.
Collaborative systems at Zircoa have resulted in expanding sales, new products to market faster with less expense and less start up problems, easier ISO certification, and improved employee relations.
Zircoa is beginning to employ more Lean manufacturing techniques to enhance its collaborative approach of employees. Extensive use of “5-S” has made their chemical process areas more efficient.
The Malcolm Baldrige award criteria has helped Zircoa in its strategic and operational planning processes, but it also serves as a good “yard-stick” for its annual Strategic Quality Audit.
Lessons Learned
The
leadership from both the management and the USW union report the following
suggestions to other local companies.
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Trust, train and use your people to the maximum.
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A comprehensive business strategy that is understood by all employees is important. Use models like the Malcolm Baldrige award criteria.
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Measurement of progress is important and ties profitability directly to employee’s pay (i.e. gainsharing).
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Use outside resources for employee development.
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Labor and management should work together to ensure business success in hiring, training, work rule interpretations/flexibility, and gainsharing.
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