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The Three Laws of Performance in Manufacturing

March 8, 2009
With one action that took less than a minute, a manger transformed how steelmaking occurred to the mill workers, and thus, their performance.

Executives at New Zealand Steel faced what looked like an impossible situation. As HR head Ian Sampson said: "When you think about it, we were expecting the impossible from the employees. Headcount was going down, change was everywhere, and the business was built on shaky technical assumptions. It was widely known that we might close down entirely. And yet we needed people to become proactive, positive, energetic and to dramatically change their relationships with each other."

Sampson's words, although uttered in 1996, reflect the state of manufacturing today. The odds are stacked against us, and finding a way sometimes seems an impossible task.

The First Law of Performance: How People Perform Correlates To How Situations Occur To Them

Although there are facts about how and why things are the way they are, the facts are much less important to us than they way those facts occur. The First Law rejects the commonsense view of performance -- that people do what they do in a situation because of a common understanding of the facts -- and instead takes the view that people do what they do because their actions are correlated to how the situation occurs to them.

Finding a way to apply the First Law of Performance requires two steps. The first is to see the connection between people's actions and how situations occur to them. The second is to find a way to alter how situations occur to you and others. If you can do this, action shifts, automatically. At New Zealand Steel, the situation occurred as dire, destined to fail and seemed impossible to turn around.

The turnaround moment happened when the CEO of New Zealand Steel told the workers: "I think we've done a lot of good planning and efficiency work, but it won't get us to success. I've been sitting here, thinking about what will. It gives me a problem. I now know we need a future that excites us, and I'm not the kind of guy that can do that. I'm an operator. I love making things work, but I'm not a visionary. I can't come up with that future. I'm going to put together a process that'll allow everyone to collaborate on creating the future that we need. I do know this -I'll know it when I hear it."

While it's rare for a single speech to hit a chord, his did. It worked because he articulated how the situation occurred to people, and also challenged the prevailing view.

How the situation occurred to people shifted. They began to see opportunities to cut costs, innovate their process and do more with less. Keeping the business open and profitable became a company-wide, aligned on goal.

Notice the facts of the situation didn't change, but performance elevated.

How Leaders Can Improve Performance

While you can't control or determine how situations occur for others, you do have a say. Ask yourself:

  • How can I interact with others so that situations occur more empowering to them?
  • What processes, dialogues, or meetings can I arrange so that people can feel like coauthors of a new future, not merely recipients of others' decisions?

As you engage yourself and others in these questions, you will begin to alter how the situations occur.

Following the Three Laws of Performance Radically Improves Productivity and Morale

Once you see that the facts of the situation are distinct from how the situation occurs to people, you begin to have power over how situations occur. The Second Law of Performance is: How A Situation Occurs Arises in Language. This includes assumptions and expectations -- especially the unspoken -- for example our thoughts about the economy and our interpretations of what that means for business. A great leader masters the conversational environment so that something new can be created.

A leader practices the Third Law of Performance: Future-Based Language Transforms How Situations Occur To People. Consider this story from one of the greatest industrialists of all time. In 1917, Charles M. Schwab wrote the following in his book Succeeding with What You Have:

I had a mill manager who was finely educated, thoroughly capable and master of every detail of the business. But he seemed unable to inspire his men to do their best.

"How is it that a man as able as you," I asked him one day, "cannot make this mill turn out what it should?"

"I don't know," he replied. "I have coaxed the men; I have pushed them, I have sworn at them. I have done everything in my power. Yet they will not produce."

It was near the end of the day; in a few minutes the night force would come on duty. I turned to a workman who was standing beside one of the red-mouthed furnaces and asked him for a piece of chalk.

"How many heats has your shift made today?" I queried.

"Six," he replied.

I chalked a big "6" on the floor, and then passed along without another word. When the night shift came in they saw the "6" and asked about it.

"The big boss was in here today," said the day men. "He asked us how many heats we had made, and we told him six. He chalked it down."

The next morning I passed through the same mill. I saw that the "6" had been rubbed out and a big "7" written instead. The night shift had announced itself. That night I went back. The "7" had been erased, and a "10" swaggered in its place. The day force recognized no superiors. Thus a fine competition was started, and it went on until this mill, formerly the poorest producer, was turning out more than any other mill in the plant.

Schwab articulated how the situation occurred-that the workers were capable of producing exactly six heats each shift, and no more. He challenged that view with a simple action. The workers responded by making the whole situation a game. Productivity rose, workers were empowered, and everyone benefited. Notice the genius of Schwab's action was that he modified how the situation occurred for the workers.

Today, businesses still wrestle with how to boost productivity, but they also struggle with problems unknown when Schwab was building his empire. Although much has changed, Schwab's simple action points the way to rewriting the future of organizations.

It's worth spending a moment on the question: what did Schwab really do? Without the Three Laws, we would say he created a public measurement system and boosted competition between shifts. But was there something else? Perhaps even something brilliantly simple?

From the perspective of the Three Laws, Schwab used one word -- "six" -- to create and challenge how the situation of manufacturing occurred to his employees. The situation went from fixed-people could make six heats-to a game. With one action that took less than a minute, he transformed how steelmaking occurred to the mill workers, and thus, their performance.

In these difficult times for manufacturing, it's worth challenging how situations occur for you and your people, and, together, create a new future that inspires elevated performance.

Steve Zaffron and Dave Logan are the authors of The Three Laws of Performance: Rewriting the Future of Your Organization and Your Life, part of the Warren Bennis series published by Jossey-Bass.

Steve Zaffron is the CEO of the Vanto Group, a global consulting firm that designs and implements large-scale initiatives to elevate organizational performance. Zaffron has directed major corporate initiatives with more than three hundred organizations in twenty countries.

Dave Logan is on the faculty at the Marshall School of Business at the University of Southern California and is a former associate dean. He is also senior partner of CultureSync, a management consulting firm and has written three books.

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