The Payoff

In big, bold digits the numbers stand out on the bulletin board in the break room. They have a regular spot on Page 1 of the company newsletter. And, of course, they're updated regularly on the company intranet. Every employee watches them, and everyone knows what they mean. Incentive-pay programs, be they stock options, gain-sharing, profit sharing, or employee-stock-ownership plans, truly force employees to care about the numbers. But money alone doesn't magically inspire results. This year's 100 Best-Managed Companies -- many of which extend pay for performance down to the plant floor -- achieve month-to-month and year-to-year improvements on the strength of employees' ideas. These companies expeditiously review and implement thousands of suggestions annually. Employees are motivated by the understanding that what they do really does make a difference. They see it in the numbers. And there's always that bonus check, which is where the superior performance of IndustryWeek's 100 Best-Managed Companies really pays off. The 100 Best-Managed Companies chalked up median revenue growth of 9.7%, compared with 3.4% for the IW 1000, IndustryWeek's list of the world's largest publicly traded manufacturers. The Singapore-based contract electronics manufacturer, Flextronics International Ltd., led the pack with revenue growth of 62.4% and recorded profit growth of 158.8%. With truly global operations and a steady string of acquisitions in 1998, Flextronics is one of the few Asian firms that has continued to excel throughout the regional financial crisis. Qualcomm Inc. is a close second in terms of revenue growth. The booming market for wireless communications devices drove annual revenues at the company to $3.3 billion, up 59.7% from the previous year. Only five years ago the company posted total sales of $272 million. Five of the 100 Best-Managed Companies recorded profit margins higher than 20%: Amgen Inc. (31.8%), Computer Associates International Inc. (24.8%), Intel Corp. (23.1%), Eli Lilly & Co. (22.7%), and Schering-Plough Corp. (21.7%). As one would expect, this performance measure is led by pharmaceutical and high-tech companies, but several companies from more traditional industries also show up near the top. These include Reliance Industries Ltd. (19.9%), Coca-Cola Co. (18.8%), and Cemex SA de CV (18.6%). Reliance, India's largest nongovernment company, produces petrochemicals and textiles. As a group, the 100 Best-Managed Companies reported median profit margins of 7.5%, compared with 3.2% for the IW 1000. Engelhard Corp. recorded profit growth of almost 300% to a record $187 million in net income. The company bounced back from 1997 when earnings were hurt by a $117 million after-tax restructuring charge. For 34 of this year's 100 Best-Managed Companies, profits increased more than 20% from the previous year. General Electric Co. made the most money in 1998, $9.3 billion on sales of just over $100 billion. On the strength of revamped production methods, favorable exchange rates, and the redesign of its Boxster and 911 models, revenues at Porsche AG climbed 20.4% to $2.95 billion for its fiscal-year 1998. A shining example of the way employee innovation drives success, the company directly attributed some $5.5 million in cost savings last year alone to its employee suggestion program, which awards cash bonuses commensurate with the economic benefit of employee ideas. Net income at the company grew more than 100% to $166 million in 1998. Every company's 50th anniversary should be so good.