Changing the human resources equation in manufacturing

While manufacturers undoubtedly appreciate the human element in their processes, focus on other important aspects of the cost structure often draws attention away from optimization of the payroll budget. Better managing employee compensation lets you maximize the efficiency of all of your spending, not just your labor costs. Still, the ability to better manage these costs definitely contributes to bottom line improvement.

Many manufacturers fall into compensation traps that lead to ineffective and wasteful use of payroll and the attendant turnover costs related to inability to attract, retain and motivate key employees. Whether it is pay compression from failing to keep structures in line with the market, or the inability to stay competitive when giving “across-the-board” or “cost of living” adjustments, failing to develop and implement a full-feature, modern compensation program compounds difficulty in managing pay correctly.

Merces has worked with manufacturing clients since its founding in 1992 and has maintained a strong relationship with the Michigan Manufacturers Association (MMA) for 25 years. We’ve learned the manufacturing market, not just through client assignments, but from our manufacturing compensation and benefits survey program with MMA. This experience gives us a unique advantage when working with manufacturers. We provide our manufacturing clients with a broad range of services that help them run more efficiently, better utilize their financial resources, improve the opportunities for their employees, and enhance the ability of the organization to operate profitably.

Explore our services to manufacturing firms below. Beneath that, you’ll find some of the manufacturing clients who have worked with Merces in the past.


Many manufacturers suffer from guilt by association: The impression that labor unions, activists, and the media give the public about executive compensation is the feeling that, since Fortune 500 executives earn millions, the executives at the stamping or tool and die firms down the street are also earning millions. Because privately held companies don’t have disclosure requirements, employees and the public are free to believe whatever they want, and it’s always easier to blame than to understand. Add the complexity that often comes from being part of a family-owned business, and executive compensation issues can overwhelm a management team.
The truth is that a well-designed executive compensation program is necessary, whether the executives are owners or non-owners, family or friends. Today a structured program is not a luxury but a necessity. Merces works with top management, owners, and Boards to:

  • Establish a formal compensation philosophy
  • Develop and implement procedures for determining executive pay
  • Separate pay for the jobs owners hold from their roles as owners
  • Collect and analyze competitive data
  • Set up formal salary ranges and incentive compensation plans
  • Develop approaches for managing performance and adjusting pay.

We understand the challenges of working with owners and managers who do not have expertise in the area of executive compensation. All of our assignments include training and presentations to stakeholders to ensure they understand the implications of their actions and can feel confident in their decisions.

Very likely, your organization is already paying enough, in total, to support a workforce at its current level of performance. It is just as likely, unfortunately, that pay is not distributed fairly and equitably. Without a structured approach to compensation management, manufacturers see problems such as:

  • Needing to pay more to new hires than experienced staff in the same job
  • Becoming training centers for other local employers through failure to keep pay competitive
  • Having long-serving staff who are paid well above the market but performing at a low level

None of these problems are inevitable. With extensive knowledge and more than 30 years working with manufacturers nationwide, from very small job shops to the nation’s largest industrial organizations, Merces has built expertise in developing, implementing and administering structured employee compensation programs. Our programs take into account the realities of the manufacturing environment, reflecting the differences between these settings and those of the service sector.
We approach pay management by considering three key elements of pay fairness and equity:

  • Internal Equity – A job evaluation methodology determines the relative value of jobs to the company, ensuring pay opportunities match job contributions, even when no market data is available. A pay program that does not properly incorporate job evaluation is not only less effective, but it also opens the organization up to potential unnecessary liability.
  • External Competitiveness – Defining ranges that clearly outline the pay opportunities for each job helps manufacturers understand the nature of the market and also how their “non-benchmark” jobs fit in. We ensure that companies properly define their “market” and collect the data that is most appropriate, not just for their market, but for their business model.
  • Paying for Performance – A fair and equitable pay program does no good if it isn’t administered fairly and equitably. Creating performance management plans that ensure appropriate compensation for employees’ contributions to the company is key to effective pay management. We can show your organization how to use job descriptions to create customized performance management programs for each job.

Our clients report high levels of satisfaction with the pay programs we develop. Beyond solving immediate problems, they help management better budget and understand their cost structure, and they promote a higher level of understanding among employees of how their pay is determined.

Managing a manufacturing firm requires an understanding of not just organizational structure but of the organization’s history and purpose, its customers and vendors, and the communities in which it operates. As companies grow or change over time and pass from generation to generation, they need to look closely at how they are staffed to achieve their objectives. The increasing challenge of not just growth but competition and new technologies brings about the need for more operational and administrative sophistication, which often calls for changes in organizational structure. Merces helps manufacturing firms critically review their existing structures and develop a path toward the future, working with both executive management and owners. Merces has worked with companies in a variety of situations, including:

  • Helping with strategic planning to make sure human resource implications of proposed strategies are understood
  • Aligning senior management structures to respond to staffing changes and new operational challenges
  • Preparing organizations with succession planning in anticipation of senior management change and change in the participation of family members
  • Developing new organizational models to manage growth
  • Working with owners and Boards of Directors to create new role definitions for executives and establishing programs for performance management
  • Creating accurate and effective job descriptions tied directly to performance management programs

We understand that each organization is different, but that organizations in an industry can learn a lot, not just from each other, but from those in other industries. Effective solutions begin by clearly defining the objectives and expectations, and working toward the best possible results.

Many human resources programs and other organization initiatives fail, not because they are poorly designed, but because they are poorly communicated. Communication is not simply a matter of volume of information, but also effectiveness of delivery. Any new program – or any change – requires development of a strategy to ensure that information is effectively disseminated to the right population at the right time. The communication also involves gathering information from employees, whether it is for deciding which approach to take or gauging the reaction to actions already taken.

We work with our clients to:

  • Design strategies for communicating new programs and practices, preparing supporting materials and delivering information to employees
  • Collect employee opinions and feedback through surveys and focus groups

Communications services can be provided as part of another consulting project, or as a stand-alone assignment.