It’s newsletter time again. The first couple of paragraphs are a reprint of the day 581 daily letter just to make sure everyone sees it and understands the new profit sharing program. This is a new program and was put in place for the employees to share in our success. We need the economy to continue to cooperate for it to be a victory, however. The supply chain issues are going to affect our profitability and will affect the profit sharing, but we are working hard to maximize the profits for the 4th quarter so everyone can win!
Profit-Sharing. It’s finally here. The profit-sharing program is ready to be implemented and 2nd quarter PS went out October 22nd. I know you’ve heard that before, but it is true. We had a major glitch in our system trying to get things finalized, but all that is behind us now. The 1st quarter for 2021 was not profitable for any region, but the 2nd quarter was profitable for all four regions, and the third quarter is profitable in three of the four regions. The 2nd quarter profit sharing has gone out, and we’re working on and finalizing the 3rd quarter profit sharing and intend to send it on the November 19th payroll. It’s been a good year so far and everybody’s going to win.
With the profit sharing structure now in place, it’s our strategy to calculate and send profit sharing each quarter a region is profitable. For instance, Q1, January 1 to March 31, will distribute in April. Q2 should distribute in July. Q3 will be an October distribution and Q4 which ends December 31, will pay out at the end of January the following year. See the attached program description for the details. We may modify it from time to time as necessary to continually improve the plan, but this is the way we think it will run for the next few years. Give me your feedback and let me know what you think. The whole idea is to have all the employees that helped make a quarter great, share the profits.
Part of the profit sharing is an additional 401k distribution. When you receive the profit sharing on your check, you can check your 401k for an equal distribution. The instructions are the same as looking up your tool allowance in Paycom. If you have any additional questions, check with HR on the program.
(For 2021 only, the 401k will not match 50/50. This is due to the 401k rules, we need to declare a percentage each quarter through the end of 2021. With that being done, the check maybe slightly higher or lower than the 401k addition. This should be fixed by Q1, 2022. You guessed it; this has been part of the holdup…)
Cost of Living. Inflation has risen in 2021 and has affected the costs for our materials and the cost of our freight as well as our overhead making it just a little harder to make a profit. We discussed the supply chain issues above and they are affecting you as well. You see it at the grocery store, the gas pump, and other markets. The federal government just ended its fiscal year and as their 2022 fiscal year begins, the Fed has increased the social security benefit by 5.4%. The government fiscal year is 6 months ahead of our typical COLA increases which take place in March each year. Lone Star annually reviews the cost-of-living impact in early March and if a COLA adjustment is warranted, that increase takes place on the second payroll in March. Last March we did a 1.6% increase. However, with the large rise in inflation in the first half of 2021, we are making an immediate COLA increase of 4%. If you have been with Lone Star for 90 days or more, expect to see an increase on your next paystub. We will revisit it again in March of 2022. It is our hope that this will help take the sting out of the increases you see at the supermarkets and will make it just a little easier. This will take effect on the November 5th pay date.
4th Quarter. We have officially entered the 4th quarter for 2021 This has been a very good year for our strategic plan and initiatives. We have accomplished so much this year and I am very proud of all of the members of the SPC team. Here are a few of the successes of the annual planning:
Rising Star. The Rising Star program is one of the biggest programs we have implemented, and it was borne out of the SPC. This program has been tested in Central Texas and Grand Prairie with a few techs but has been extended to all technicians in all regions recently. The concept of this program is an employee can join the company as an entry level technician and on Day 1 know where they could be (with lots of hard work on their part, of course) in 3 to 4 years.
KPIs. We have set KPIs, Key Performance Indicators, goals and have used those KPIs to manage the performance of the company. Some of these KPIs are standard for the industry, some are specific just to Lone Star, but either way, they give us a goal to shoot for and know when we are achieving that goal or when we are off track. These KPIs are the major reason why we are doing so well this year and can share profits. We have become a more efficient company and our performance has become more predictable.
Acquisition Playbook. We set a goal early on to write a plan on how to bring companies into Lone Star and to blend their processes with the Lone Star processes so that we can operate as a single company. Jennifer Mahan out of the Little Rock office has led this program and has done a masterful job. She has written a 37-page manual and checklist on how to integrate new companies with Lone Star to avoid some of the problems we have had in the past such as conflicting processes or “we don’t do it that way here” type comments. As a natural transition, the One Lone Star Project has been created to bring all of our processes into alignment. Everyone in all offices, at the management level for sure, wants alignment among all offices. We all know we are going to have to compromise to find alignment. Though the manual is substantially complete, the One Lone Star Project will continue with the goal of all regions becoming fully aligned by the end of the year.
Subscriptions. Another initiative of the SPC is the move to subscriptions or recurring sales as opposed to only capital sales. Though capital sales are not going away any time soon, the move to a recurring payment model is underway and we are moving to make that transition. This is a long-term goal and will be underway for several years. This is a big project and will not only require Lone Star to change its reimbursement model, but it also requires the acceptance of customers and must go through a number budgeting cycles.
TECHStar. The TECHStar app is here and is now being used by of a number of Lone Star employees already and is being rolled out to the rest of the field staff over the next few weeks. This app, from the SPC group, created by Lone Star for Lone Star is a single source of information on all of our jobs and systems Lone Star implements or provides. Its goal is to be a source of historical information as well as new information from technical to sales to training and beyond when it is fully implemented. It is being released now with our current jobs in the database, but it will be backfilled to include all of our installations to date. This program was originally the brainstorm of DOD, Division of Disruption. The DOD group was created out of the idea discussed in the SPC meetings, for a group of people tasked with looking ahead and seeing what might happen in the future and to get ahead of the industry. This group reports to the SPC monthly on ideas seen in the industry. It foresaw the need for a single source of information to make it more efficient for the field staff to work on our jobsites, share information with customers and so forth. It has grown to be offered as a tool that will be sold on a monthly subscription to all Rauland distributors to help them become more efficient as well. The plan is for us to provide continuous updates to the program and databases each quarter which will justify its monthly subscription amount.
Professional Services. I could go on and on about all the initiatives, but I will end with this one. We have an initiative to create a Professional Services group. We have been providing professional services at a basic level in the form of IT or implementation of servers from time to time as part of the Responder 5 system for years. We have also provided professional services in the form of workflow establishment, again with the Responder 5, and quarterly retraining sessions. But things have changed, and the health care facilities are expecting more. We need to move our services to a new level and be able to provide workflows and other patient satisfaction improvement processes. That is why Donna Montgomery was added to the group in 2019. We added Sharlisa Raley, then John Salyers, all three very experienced RN’s and finally Jeff Richard who himself has many years of experience in hospitals as a respiratory therapist and recently the COO of the McKinney Heart center bringing his experience and expertise to Lone Star. This initiative is led by Justin Bailey and is a long-term strategy and is ongoing. But this initiative is getting closer to reality every day and you will see some press releases about this initiative over the next few months.
That’s all for now. Please give me feedback on the profit sharing program and any additional thoughts you may have. We appreciate all you do for Lone Star, and we value every employee. All of our programs and benefits have been put in place for you, the employee, to make Lone Star the only place you would want to work. We are trying to build the kind of place every employee will become an employee for life! Let’s have a great 4th quarter everyone!
-By Ray Bailey, President