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Service Above and Beyond

“Service Above and Beyond”

PSS grows 46% annually by empowering employees to act as owners.

The delivery-truck drivers at health-care distributor PSS/World Medical carry business cards that read "CEO." That’s because Patrick Kelly, founder of the $1.5 billion company, believes everyone should perform their job as though they run the company.

In a highly competitive market, Jacksonville, Fla.-based PSS has grown an average of 46% a year by providing the fastest, most-personalized service in the business. Truck drivers not only make afternoon deliveries of items ordered that morning, they offer to unpack and shelve the merchandise. If necessary, they cheerfully accept returns for any reason. These are not your average delivery guys.

PSS distinguishes itself from companies by authorizing employees to run the business. In what has been dubbed "a cross between the U.S. Marines and ‘Animal House,’" lower-echelon employees shoulder an unusual amount of responsibility and receive incentives based on how well they and their co-workers do.

The empowerment begins at PSS’s 56 branches, which operate autonomously. Each branch sets an annual target for profits, but employees decide how to achieve it.

Besides giving them the authority to take charge, PSS motivates line employees with hard cash. Branch leaders and salespeople receive profitability perks similar to many companies — but employees also share equally at bonus time. After reaching a 5% annual operating profit benchmark, 20 cents of each additional profit dollar go into a bonus pool divided equally by everyone in the branch. This gives lower-paid employees a greater incentive, says Kelly. "And it reinforces the message that everybody counts, that we all sink or swim together."

The bonus encourages entrepreneurial behavior throughout the organization. Employees use monthly profit-and-loss meetings to hash out everything from inventory control to monitoring building lights and temperature.

Incentives Abound

There’s another benefit for attending branch meetings: Kelly’s "Million Dollar Incentive." Each nonsales employee who attends 10 of the 12 yearly meetings gets an equal share of $1 million in PSS stock. In 1998 1,150 people — about 55% of all qualifying employees — received almost $900 apiece in stock.

Another performance carrot is the "Blue Ribbon" surprise-inspection tour Kelly or another senior officer conducts once a year at each branch. Judged on dozens of factors based on delivery-truck cleanliness to how quickly phones are answered, the highest-scoring branch receives $3,000 per employee, and all workers at the top 10 branches win something.

In total, Kelly estimates that nonmanagement employees in the average branch receive at least 30% above their salaries in incentive pay. Though critics may view the PSS system as "handing the asylum to the inmates," Kelly is quick to point out that when it comes to the bottom line, few companies have come so far so fast.

Writer: John Duggleby