How handing out $500 checks to 448 employees helped keep one company from going under

Jim Cline, President and CEO of Trex
Source: Trex
Jim Cline, President and CEO of Trex

In January 2008, when Jim Cline started as CFO of Trex, a wood-alternative decking company headquartered in Winchester, Virginia, the business was $134 million in debt and on the verge of bankruptcy.

"When I came on board, what I found was that we had managed to piss off all of our employees, our bankers, the investors, our shareholders, and our customers," Cline tells CNBC.

"One of the things that was not working well in particular was the manufacturing operations. We needed our factory workers to work with us. We needed to make sure their heads were in the right place."

To do this, Cline and Ron Kaplan, the CEO of the company at the time, changed the compensation system.

"When Ron and I joined the company, the bonus program was paid once a year to the factory workers and was based on EPS [earnings per share]," explains Cline, who succeeded Kaplan as CEO in 2015.

"These guys didn't really know what EPS was, so it wasn't a very meaningful program. We developed a program that would put them on equal footing for improvement that they could make in the production process."

Cline and Kaplan, who had spent years working together at Harsco, decided to introduce the new program in a less than conventional way: They handed out $500 checks to all 448 employees working in the company's two manufacturing plants.

"We got everyone together in the factory and we said, 'We're going to be passing out some checks today. If you want more of these, play ball with us and work with us to make improvements,'" says Cline.

"That got their attention."

While the employees hadn't necessarily done anything to earn the bonuses, "we wanted to let them know that we wanted their involvement and their participation," Cline explains.

"Based on that initial attention, we identified changes that we wanted to make in the manufacturing operation and solicited their input on how we could implement the changes and whether or not they agreed with them."

There is now a "very close working relationship on the plant floor with plant management," the CEO says. "We have new materials that are introduced all the time. Some of those materials are very difficult to work with, so getting the guy that actually works with it to give you feedback is a lot more productive than having an engineer who sits in his office trying to figure out how to make it work."

The numbers show that the internal improvements have made a difference: Trex is debt-free and its sales and earnings have soared over the past couple of years.

In 2008, the company was doing about $320 million in sales. Cline notes that during the economic downturn its sales dropped to as low as $267 million. Last year, Trex recorded total revenues of $441 million.

While there haven't been any more spontaneous check giveaways since 2008, factory workers still have the opportunity to earn bonuses every month and can boost their income by up to 15%, thanks to the upholding and development of Cline and Kaplan's bonus system.