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Published: April 26, 2010
 / Summer 2010 / Issue 59

 
 

Leading Outside the Lines

Service to our customers was strategically important given the company’s increased focus on large retailers with high expectations. StockPot’s ability to serve customers well was a source of pride, and the metric tapped into and reinforced that emotional energy to help drive more coordination between shifts, efficiency improvements, and better quality assurance.

The metric of lbs/day was also carefully chosen. “At first,” Carolan said, “we focused on pounds per labor hour, the standard way to measure how many pounds of soup the facility produced per hour worked. The problem was that the pounds per labor hour metric was meaningless to the team. It’s hard to figure out what’s a good number and what’s bad, and how people can individually make a difference in the number.” Even worse, the lbs/labor hour metric created some concern that management might try to improve that number by simply lowering the number of hours worked.

“Of course, that wouldn’t have made sense strategically,” Carolan said, “because we were trying to grow volumes in our new plant. But many employees are paid by the hour, and, as such, hours are critically important to them. That’s how they pay the bills and put food on the table.” It was therefore important to avoid any perception that the number of hours might be lowered. For management, this was eye-opening. “Talk about a simple and absolutely essential learning!” Carolan said.

So Carolan and his team changed the metric to lbs/day. “Everyone handles the product — from preparation, to filling, to packaging and shipping,” Carolan said. “It’s tangible and meaningful. And people can get excited when they see that number moving up. It also helps people coordinate and work together as a team. Pounds per day implies all shifts need to perform and help each other perform to maximize a day’s production. Now the idea of cleaning and prepping for the next shift has taken on a whole new meaning. Everyone feels connected by pounds per day. They feel like part of the same effort to drive that metric.” In other words, the lbs/day metric was meaningful not just at an individual level; it also helped drive collaborative effort.

As successful as that measurement proved to be, Carolan was careful not to add too many more of them. “You want a small number of metrics to create focus. When there is a proliferation of metrics in a bunch of detailed scorecards, it can be hard to ensure everyone is aligned on what really matters. The teams that win are the ones that figure out the short list that matters the most. Even so, you need enough metrics to make sure you’re covering the range of what’s important for the business and the people. Having a balanced set makes it more likely that everybody can find at least one that really motivates them.”

Instant Awareness

Another principle that Ed Carolan followed with the metrics was that communication about them had to be visible and clear. The most important metrics were displayed on LCD screens throughout the facility in stoplight colors: green for metrics on target, yellow for those in danger of getting off track, and red for metrics below target. “If you have the right metrics, and suddenly one of them goes red, people instantly understand what it means and how they can help,” Carolan said. “That’s often a frustration people have when they deal with overly analytical and abstract metrics — they don’t know what they can do about it.”

Carolan also uses ad hoc metrics, picked up for particular short-term purposes, and he does so as thoughtfully as he employs the more formal ones. “When we negotiate with big retailers, for example, cost becomes very important. I tried a pennies per pound metric with the employees, but it was hard for them to care about a penny lost when they accidentally spilled some soup or dropped an ingredient. So instead, I talked about how our performance on that metric had made a difference in winning or losing a customer’s business. When people understood that we could win or lose a big sale because of [the competitive pricing advantages that came from saving] a few pennies, they paid a lot more attention,” he said. In this way, Carolan not only tapped into the team’s pride in winning customers and growing volume; he tapped into their informal connections. No one wanted to let down the sales team that was out there working hard to land a big contract.

 
 
 
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Resources

  1. Andrea Gabor, The Capitalist Philosophers: The Geniuses of Modern Business — Their Lives, Times and Ideas (Three Rivers/Crown, 2000): Introduction to business thinkers on the hard (Taylor, McNamara), soft (Maslow, McGregor), and integrated (Deming, Drucker) sides.
  2. Jon R. Katzenbach and Zia Khan, Leading Outside the Lines: How to Mobilize the Informal Organization, Energize Your Team, and Get Better Results (John Wiley & Sons, 2010): More ideas and tools for helping both sides of an organization work together well.
  3. Zia Khan and Jon R. Katzenbach, “Are You Killing Enough Ideas?s+b, Autumn 2009: Making innovation more effective by rethinking your informal and formal practices.
  4. Harold J. Leavitt, Top Down: Why Hierarchies Are Here to Stay and How to Manage Them More Effectively (Harvard Business School Press, 2005): Formal structures exist because they fulfill basic human needs — and thus we’d better learn to manage them humanistically.
  5. Douglas McGregor, The Human Side of Enterprise, Annotated Edition (McGraw-Hill, 2006): The classic on escaping the tyranny of the formal — and reconciling the two sides of the corporate personality.
  6. For more thought leadership on this topic, see the s+b website at: www.strategy-business.com/organizations_and_people
 
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