Herman Miller tied every bonus to one visible ratio, not piece rates or profit-sharing

In 1950 Herman Miller was a small Michigan furniture maker with about 120 employees, 90% of them on the production floor and paid by piece rate — a fixed amount per unit produced. One long-time employee later recalled that "if you'd get good rates you could really make good time," and that the system bred "a lot of inequality," because workers who discovered faster methods had every reason to keep them quiet: reveal a shortcut, and management would simply reset the rate lower next time, erasing the gain.

Piece rates reward an individual for output today but punish anyone who shares a better method, since a faster method just gets rate-cut tomorrow — the incentive structure itself trains workers to withhold their best ideas. The other obvious fix, ordinary profit-sharing tied to overall company earnings, avoids that trap but creates a different one: profit is moved by pricing, raw material costs, and sales performance that shop-floor workers don't control, so they can't see how their own daily choices move the number, and the incentive goes slack.

Replaced piece rates with one visible ratio of labor cost to sales value, pooling all savings from beating it, so sharing a better method raised everyone's bonus.

Piece rates rewarded hiding faster methods because revealing them led to rate cuts.

A single company-wide ratio made the link between daily work and bonus visible.

Pooling and sharing all savings meant sharing a better method raised everyone's bonus, including the sharer's.

Elected worker committees gave every idea a clear channel to affect the ratio.

To surface efficiency gains, tie pay to one transparent ratio everyone can influence, and share all savings from improving it across the whole workforce.

In 1974, the plan's best year, Herman Miller employees earned bonuses averaging 22.83% of base pay from savings they proposed.