08) A Big Happy Family

Probably the most distinctive thing about the Onan Company, going all the way back to the founding carried through to the present, is the unusual treatment of the workers and the resulting loyalty and high morale even in the toughest times.

Both D.W. Onan and his son, Bud, who succeeded him as chief executive officer, were firm in their belief that fair and compassionate treatment of their workers would have a high priority at all times, and this philosophy was so ingrained and successful that it has been carried on even after the Onans left the scene.

D.W. Onan felt strongly that workers should be paid well for their labors, but, in addition, if a company was profitable it should share those profits with the people who made it possible. That’s a popular conception today, but back in the 1920s and 1930s it was an unusual attitude on the part of management.

D.W. Onan was a pioneer in the country regarding profit sharing. Informally he shared his profits with his workers in several ways from the very beginning, and in 1952 he instituted a generous Profit Sharing Plan that continues in modified form to the present.

Profit sharing was only one of many ways the Onans showed their appreciation to workers. The liberal benefits over the years have made the Onan Company a model for others to follow.

The Onans were certain that by treating employees generously, the workers, in turn, would more than make up for it with high productivity, low absenteeism, high morale, low turnover, and generally be the big, happy family the Onans sincerely desired. That is exactly what has happened. There are literally hundreds of examples of how this policy has succeeded. Typical of remarks is one made recently by Ruben Solee, who started with Onan back in 1951. He said he had been offered another job and promptly turned it down. “I told them no. I love Onan as much as I love my wife. It’s the people here you don’t often find people like these. I used to work in the electric lab, and I remember how D.W. Onan would come around on Saturdays to say hello. He’d say, ‘Come down and visit my place in Florida.’ I worked with Jim Hoiby, Tom Valenty, Bud Onan all extraordinary people.”

Further evidence that Onan workers regard the company as much more than just a factory in which to put in their hours can be found in the way they have regarded union over the years. There have been. several attempts by unions to represent Onan workers, but all, with one unusual exception, have failed. At the Twin Cities plants there have been union elections in 1950, 1960, and in 1979 and all were soundly defeated.

In the 1950 attempt by the CIO to organize the workers, the plant workers rejected representation by the CIO by a wide margin, but the tool and die workers elected to be represented by the International Association of Machinists. The Tool and Die department, which numbers about 18 employees, has been represented by the IAM ever since. In 1960 it was the United Auto Workers that tried to organize the Onan factory workers; union representation was again turned down. In 1979, an election seeking representation by the IAM resulted in a rejection by factory employees. There also have been three attempts to organize workers at Onan’s plant at Huntsville, Alabama with the first two votes ending in a defeat for union representation and the results of the third election were contested by the company.

The majority of Onan workers obviously have felt there was no need for third party representation. And even if there were no impact on other workinq conditions, third party representation easily could change the friendly relationship between employees and management that has been built up during the past 60 years. The rejection of union representation by the Onan work force probably would never have happened if it wasn’t for D.W. Onan’s original philosophy that each employee must be treated as an individual and that mutual good faith and shared success is a very essential part of a solid business operation.

In the early years D.W. Onan did his sharing in a very informal way. His original idea of profit sharing was a healthy bonus at the end of the year for each of his small crew and a five or ten dollar bill for a worker on his or her birthday. Onan’s idea of medical coverage was to pay a worker’s hospital bill plus wages while away from the job from company funds. His idea of company social activities was a spontaneous party to celebrate a big order or a significant personal event in the life of a worker.

As the company grew, D.W. Onan realized he would have to formalize his system of benefits, and he was able to do so without reducing them. On the contrary, as the company became larger it also became more profitable and the benefits became even more liberal.

During World War II, when profits were plentiful, D.W. Onan not only shared with his employees, but he set aside a generous amount each month for all workers who had been called into military service. Other companies around the country copied his idea until the U. S. government stepped in and outlawed any similar plans in the future, The Onan plan, however, was exempted because it had been started early in the war. When the war ended, Onan workers who served in the military all received a healthy bonus of several hundred dollars, based on the length of time spent in the military. Most similar plans paid the person only if he or she returned to work, while the Onan plan paid each person regardless of whether or not they returned to Onan.

The Profit Sharing Trust set up by D.W. Onan in 1952 was one of the nation’s first and most generous programs. All employees became eligible after two years, and not a cent of employee money was involved. The entire program was funded by company profits. The plan, funded with pre-tax dollars, provided for up to 15 percent of each person’s annual wages, payable upon retirement, or in certain cases, after 10 years of service.

The program, now called the Onan Profit Sharing Plan has been modified several times since it was started. Another benefit program includes a thrift incentive feature where workers can add to their savings with their own contributions. For each dollar contributed in a given year by an employee to his or her own fund, the company matches that with a contribution of at least 25 cents, with up to an additional $1.00 matched company contribution depending on sales growth and profitability.

The company has all of the traditional employee benefit programs, including medical, surgical and hospitalization insurance, life insurance, disability insurance, paid holidays and up to five weeks vacation.

Back in the days when the company was smaller, Onan had a traditional Christmas party each year that evolved into a company-wide Christmas breakfast each December. All employees were invited to breakfast, which was featured by the announcement of how much was being contributed to the Profit Sharing Trust. The unusual part of the breakfast was the frank assessment of how the company performed financially during the year. D.W. Onan, and later his son, Bud, told all employees what the company did in sales and profits, and why. For a privately held company, this frankness was highly unusual, but there’s no question it helped boost employee morale.

All the Onan sharing with employees had had dramatic results with its relationship with workers. For years the absenteeism rate was two-thirds below the average for similar businesses in this area. And annual employee turnover traditionally has been less than five percent. Today with about 2,500 employees worldwide, the average length of service for all Onan employees is eight and one-half years. About 15 percent of U.S. employees have been with Onan for 15 years or more and there are about 150 workers with more than 25 years service.

Onan workers are also unusually active in events of their own choosing. There are leagues for bowling, softball, golf, tennis, trap shooting, archery, volley ball and other sports, and a retirees club.

It would be inaccurate to say management-employee relations today at Onan are the same as they were years ago when D.W. Onan knew the first and last name of each and every employee. Things have changed, but every attempt has been made to continue the philosophy of sharing with employees.

Bud Onan, who took over as chief executive officer following the retirement of his father, was keenly aware that it was his job to prepare employees for the change from a small, closely-knit company to a large, necessarily more impersonal, operation. His concern about this change came through in a letter he wrote to all employees on May 25, 1955.

The letter started: “A few years ago, it was an easy matter to make sure everyone at Onan knew what was going on – and why. Now, because of the problems of size and complex operation, it’s not so easy. It’s impossible to personally discuss plans and changes with each of you. The next best thing is a personal letter like this one, from me to you.”

His letter contained details about changes in the company, including plans for new products and the announcement that for the first time Onan had named non-family members to be officers of the company. He revealed that the four heads of major divisions at Onan had been elected officers of the corporation. They were Hi Hascall, vice president, sales; Jim Hoiby, vice president, engineering; Jerry Olson, vice president, manufacturing; and Jack Shea, vice president, administration.

Bud Onan felt this change was a milestone for the company, a leap from a family-run organization to a more conventional corporation, and it worried him. He included a chart showing the company’s new table of organization, but Bud Onan wasn’t comfortable with the chart, filled with boxes and lines. He said in his letter, “I would like to stress one thing about organization charts. No chart drawn on paper can completely and fairly picture an organization. People do not easily fit into blocks on a piece of paper.

Organizations are people, and just as people and circumstances change, so do organizations and the charts that reflect them. A chart is not a means of fitting people into arbitrary niches. It is not a limitation on initiative. It really works the other way. An organization chart is useful only in helping to define each of our current responsibilities, the authority we may exercise, and to whom we are accountable for our activities. We all like to know where we’re at.”

Bud Onan concluded his message by saying, “We are not a stuffy group around here. We have no intention of being so. Dad always believed in an ‘open door’ policy. So do Bob and I. We cherish and want the friendly and informal interchange of ideas that has helped to build this company. We want the kind of organization where each of us has the chance for individual expression, and individual opportunity. The fact that several of you are now officers of this corporation certainly proves that opportunity exists, and will continue to exist.”

Posted in Company History.