Company turnarounds are never easy. They generally require more than a few drastic measures, often including significant cuts in headcount and substantial cost reductions. Conduct a web search on “how to carry out a company turnaround” and you’ll find that there is a lot of help out there in the form of “how to” articles and lists. Not many of them talk about the importance of changing the culture of the organization.
Imagine that you’ve just been hired as a plant manager and you quickly find that your new company is a burning ship. Morale is low, sales are dropping because of poor quality, production throughput is rock bottom. Even making payroll is a week-to-week adventure. Oh, and another thing … the company’s ownership is taking the few financial resources the organization has and is using them to support its own high-flying lifestyle. How would you go about righting the ship? What would be your plan to turn sales around, improve quality and throughput and get morale going in the right direction?
Ron had that very experience early in his career; he was hired to oversee operations for a company that built Olympic-class boats. The organization had been renowned for its product but was now owned by someone who let the business suffer. Ron was faced with the problem of making payroll his first day on the job. He was in the position of having to tell associates that they were either not going to get paid or, at best, were going to receive partial checks. Further, he had to tell them that even those actions might not save the business and that they could all soon be put out onto the streets.
The workforce was very skilled in tasks that weren’t otherwise much in demand in the marketplace. In effect, these talented folks were being held for ransom, as most had learned their skills after decades of apprenticeship but had little or no formal education. Morale, understandably, was extremely low.
A circumstance like this is especially difficult because every problem is immediate, every demand must be met instantly, every existing barrier must be overcome promptly even as new roadblocks are appearing each day. The challenge of figuring out just what to do and where to start can be overwhelming. But as Ron found, there is a path to success: Change the culture of the organization. In other words, radically modify the way communication, problem-solving, decision-making, motivation, learning, innovation and teamwork get done.
For example, on Ron’s second day, he instituted a daily town hall meeting. These meetings had several purposes:
1. Convey daily progress against customer orders
2. Discuss production priorities
3. Raise and discuss team issues and concerns
Early meetings weren’t very productive, but supervisors, leads, and associates participated more energetically as they found that problems got solved and team performance improved. Before long, Ron didn’t have to remind them of the meetings; they were motivated to attend by their peers. No one was eager to explain to his or her co-workers why they didn’t respect the effort of the team to be a world-class builder of the smart Olympic competitor’s choice for small-boat racing. An improved communications culture led to improved output and quality.
While Ron was working to change the culture, ownership was driving the traditional “turnaround” approach of drastic cost cuts. That demand led to a mandate that factory temperatures be held at 50 degrees. Morale plummeted along with temperatures as associates became so cold as to be physically uncomfortable. They were forced to don extra layers of clothing, which impeded their ability to do their work safely. But it was that or stay cold all shift.
Further, an ambient temperature of 68 to 84 degrees was needed to achieve the proper cure of the materials. Temperatures below this range contributed to the boats being overweight and out of compliance. This ultimately led to sales needing to discount the price point of delivered boats by as much as $1,500.
Ron’s efforts to change the culture led to a suggestion from one of the manufacturing associates, who recommended the installation of an additional ceiling heater and a change in the vane direction of all of the existing heaters to point towards the floor. For the cost of $9,000 in used parts and labor, the temperature problem was solved. That investment was returned in just a few days as first-pass output improved by 30%, which, in turn, led to reduced scrap and rework. Not incidentally, the morale of a more productive … and warmer … workforce improved dramatically! The new culture of engagement in problem-solving led to increases in production and quality. As we said, no business turnaround is easy. They can be made all the more difficult when leadership undertakes poorly considered steps to cut costs or “improve efficiencies”. On the other hand, an improved communication culture means everyone knows what they need to know, when they need to know it. A culture of participative problem-solving means that everyone is engaged in identifying and eliminating sources of waste. Along with the other steps necessary to a successful turnaround, wise managers focus first on changing the culture of the organization.
Ron Jacques is a 35-year veteran within the lean, manufacturing and consulting arenas. He is a Certified Lean Practitioner who has delivered hundreds of kaizen and transformational solutions to clients and companies within the Pharma, Medical Device, Automotive, Food/Beverage, Electronics, Military Defense, Personal Care, Consumer Durables and Capital Equipment industries.
Rick Bohan, principal, Chagrin River Consulting LLC, has more than 25 years of experience in designing and implementing performance improvement initiatives in a variety of industrial and service sectors. He is also co-author of People Make the Difference: Prescriptions and Profiles for High Performance.