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Employee Retention of Digi-Key

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Pratik Kukreja
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Employee Retention of Digi-Key - April 7th, 2011

Digi-Key is the fourth largest electronic component distributor in North America and a broad-line distributor of board level components. It ranks as the 8th largest electronic component distributor in the world. Ronald Stordahl founded the company in 1972 and its name was derived from the digital electronic keyer kit that he developed and marketed to amateur radio enthusiasts.[1] It was called the “Digi-Keyer Kit.”
Mark Larson, who joined Digi-Key in 1976 as its general manager, has been its president since 1985. He has led the company from its initial focus on the hobbyist market to the expanded market it serves today.
In 1995, Digi-Key introduced its website that offers complete online commerce capabilities along with access to product inventory. Digi-Key currently hosts 82 websites in eight supported languages.
In only six years, Digi-Key has moved from 16th largest to fifth largest among the more than 300 electronic component distributors in North America. According to their website, in 2007 EE Times conducted a survey in which engineers rated Digi-Key “#1 for Overall Performance for the 16th Consecutive Year.”
Digi-Key is located in a single, centralized location in Thief River Falls, Minnesota, USA. Its facility measures 600,000 square feet (56,000 m2) and houses over 2,300 employees. Its product distribution center stocks over 500,000 products from over 440 manufacturers and ships to 170 countries worldwide.
Digi-Key serves design engineers and the prototyping market, as well as an expanding role in supplying production quantities for OEMs and contract manufacturers.

Digi-Key, the fourth largest electronic parts distributor in North America and the ninth largest in the world, is hiring 400 new employees in the next three months at its Thief River Falls headquarters to keep up with demand for the electronic parts it sells around the world.

Most people have probably never heard of the products Digi-Key sells, like capacitors, resistors and connectors. But company president Mark Larson said most people use Digi-Key products every day.

"Our customers are household words. I would say it's highly probable that if you have a cell phone, that cell phone was designed with Digi-Key parts," Larson said.

Digi-Key doesn't make any of those parts. The company distributes them for manufacturers like Panasonic and Sanyo.

The company started in 1972, selling parts to ham radio hobbyists. Larson said in the company's early days, he had to beg suppliers to sell their electronic components through Digi-Key. Last year, by contract, it had 600 offers from companies who want to work with Digi-Key.


Digi-Key warehouse
The privately-held company has made a name for itself in the electronics industry by focusing on customer service.

About 600 people in long rows of cubicles process orders by phone, Internet, e-mail and fax. Company policy says no caller should be kept waiting more than five seconds.

As a salesman enters the order on his computer, the order comes up on a screen in the warehouse. One worker pulls the parts from a bin and puts them on a conveyer belt. Another worker double-checks the order and boxes it. Fifteen minutes after the order comes in, it's ready to be shipped.

About three million orders will be shipped this year. Curt Barber, a Digi-Key employee, packs about 120 orders a day. Like most of the workers, he wears headphones to block out the noise and listen to his favorite music.

"It's a great job, great job. Got great benefits, nice 401k plan," Barber said. "You can't beat it around here, that's for sure."

Entry-level jobs start at $11.45 an hour, but some workers say it's the benefits that are better than the competition.

"It's highly probable that if you have a cell phone, it was designed with Digi-Key parts."
- Digi-Key president Mark Larson
The company says it has about 8 percent annual employee turnover. All workers need to complete eight weeks of training before they take a customer order. Larson said because workers tend to stay with the company, Digi-Key can afford to spend more on training each one.

About half of Digi-Key workers live within 10 miles of the company's Thief River Falls headquarters. Digi-Key has added nearly 1,000 workers in the past eight years. Some commute as far as 60 miles from Crookston or Grand Forks.


Larson hopes to hire 400 workers in the next three months. He says the company is growing so fast, if 200 qualified workers walked in the door today, he'd hire them.

"Right now it is challenging, because we are just surging a little bit too fast," Larson said.

Some of that surge is coming from faster-than-expected growth in international markets. Larson estimates Digi-Key has about 5 percent of the North American market for electronic components, and less than 1 percent in Europe and Asia.

Larson said although Digi-Key has a tiny fraction of European and Asian markets, sales are up 160 percent in China and 40 percent in Japan -- and 90 percent of those sales come from the Internet.

Kevin Brown, who's now vice president for advertising, was a senior in high school when he joined the company part time in 1982. His original job was designing a 72-page catalog. Now he oversees a 2,800-page catalog and Web site in nine languages. Brown said the company puts a lot of effort into its Web site.


Digi-Key
"Roughly four of every 10 Web searches for electronic components in the world come to Digi-Key's Web site," he said. "We really dominate in terms of traffic."

Digi-Key has customer service call centers in the Netherlands, Hong Kong, Japan and Korea. But Larson says it still has only one warehouse, in Thief River Falls.

Larson said that makes Digi-Key unique in the international market; most distributors have warehouses in every country they serve.

Exploring the right training and developing the skill-sets of the existing
talent pool as the key to success in retention
Developing an effective strategy for employee attraction and
retention
Enhancing retention and job satisfaction by customising the right
opportunities and compensation and benefits for the existing talent
pool
Gain a deeper understanding of career development in the
organisation
Learn the effective methodologies in conducting a job interview and
determining the right candidate
Understand and appreciate the cost of attrition
Using emotional intelligence to improve retention of top performers
Applying executive coaching within a competency based approach to
fit the organisational leadership and cultural expectations
Manage graduate and Generation Y recruitment and development

Health Plan – Digi-Key Corporation provides coverage through Blue Cross & Blue Shield of Minnesota. Coverage has no deductible, if you use one of our network providers. The employee's share of the cost for a family policy is $702 annually. Single coverage is free of charge to the employee. In-Network services include no deductibles and there are no office co-pays. Formulary drug prescription plan provides prescriptions to plan participants for a $7 co-pay. Plan enrollment date is 30 days following the hire date and the first of the month following that period. Example: Employee starts May 15 and coverage becomes effective on July 1.

Flexible Spending Accounts – Our flexible spending accounts enable participants to pay for health plan premiums, unreimbursed medical and dental expenses, as well as dependent care expenses out of pre-tax funds. Consult your tax advisor for assistance regarding this opportunity.

Life Insurance Plan – Full time employees are covered by a company-paid life insurance policy that provides benefits equal to three times the employee's annual earnings. Plan enrollment date is six months following the hire date and the first of the month following that period. Example: Employee starts May 15 and coverage becomes effective December 1.

Long Term Disability Insurance Plan – Disability insurance is provided to all full time employees. Following a 30 day waiting period, eligible employees may receive benefits equaling up to two thirds of their covered earnings. Plan enrollment date is six months following the hire date and the first of the month following that period. Example: Employee starts May 15 and coverage becomes effective December 1.

Dental Plan – Digi-Key Corporation provides coverage through Delta Dental. This is a voluntary employee plan that features low deductibles of $25 per person / $75 per family (no employee cost or deductible for diagnostics and cleanings) and involves employee participation in the form of bi-weekly payroll deductions of $5 biweekly (single coverage) or $15 biweekly (family coverage). Plan enrollment date is 30 days following the hire date and the first of the month following that period. Example: Employee starts May 15 and coverage becomes effective on July 1.

401(k) Plan – Wells Fargo Bank administers Digi-Key Corporation's plan. Employees must be 18 years of age and have worked at Digi-Key for a minimum of 30 days to be eligible. Plan entry date is the first of the following month. Digi-Key matches employee contributions dollar-for-dollar up to 3%. Six year vesting rules apply to the Digi-Key match.

Profit Sharing – Profit sharing utilizes the 401(k) plan's tax-deferred advantages. Digi-Key Corporation may provide a profit sharing contribution directly into your retirement account. In order to receive a contribution, you must be eligible for it. Plan eligibility rules require that you must be at least 18 years of age, have a minimum of 1,000 hours of service in the current calendar year, and be employed on or before March 31 of the current calendar year to be eligible for a profit sharing contribution the following January. Historically, annual company contributions have totaled up to 4% of annual income. Six year vesting rules apply.

Personal/Vacation Time – 48 hours of unpaid personal time are provided to you annually, including your first year. In terms of vacation, forty hours of paid vacation and forty hours of unpaid vacation is provided in your first year. Eighty hours of paid vacation time is available after one year of service, 120 hours of paid vacation time is available after ten years of service, and 160 hours of paid vacation time is provided after 20 years of service.

Holidays – There are six paid holidays, including New Years Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Other Benefits:
Employee Purchases – Full time and part time Digi-Key employees may purchase Digi-Key components and supplies at 10% above Digi-Key's cost.
Automatic/Direct Deposit – Available for all employees' payroll disbursements.
Educational Reimbursement – Digi-Key University provides more than 30 college credits to employees in a diploma program that includes content that assists employees in better understanding Digi-Key's business.
Employee Assistance Program – Available to all full time and part time employees.
Relocation Assistance– Available to all full time employees.
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