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Ideas to Read and Pass Along

Kevin & Jackie Freiberg

Ownership is a State of Mind, Part 2

screamWhen someone is thinking like an owner, he or she will ask: “Since this is my business, how will I sell this product?” Or, “Would I request this piece of equipment for my department? Should I ask for another full-time position? How should I treat my employees?”

Owners step out from behind titles and job descriptions to act on behalf of the customer and the company. You never hear them say, “It’s not my job.” They never throw problems over functional walls (“Let me transfer you to . . .”) or make excuses. Owners cater to the organization’s mission, vision, and values; non-owners cater to the boss.

Owners

Focus on the business results of their actions, no matter who is watching.

Non-owners
Focus on how they’re perceived by the chain of command.

Owners

Have the guts to ask the tough questions. They understand the consequences of complacency, and they aren’t afraid to challenge the status quo with the mantra, “How can we make it better?”

Non-owners
Are preoccupied with their own security and gravitate toward the predictable and less disruptive.

Owners

Disregard functional boundaries to consider what is good for the company as a whole

Non-owners
Engage in tribalism and turf protection.

Owners

Bend, stretch, or even break rules that don’t serve the customer

Non-owners
Live by the letter of the law, even if it is flat-out contrary to common sense.

Owners

Pay attention to details.

Non-owners
Fail to notice.

Owners treat the company, well, as if they own it.

Last month we started a list Ownership is a State of Mind—Part 1 to get you thinking about what it takes to inspire an ownership mentality within your organization. This month we build on that list and offer seven more ways to turn up the volume on ownership.

Publicize the Payroll

whole foodsOnce a year, Whole Foods (Whole Foods—A Disciplined Democracy) conducts a survey that probes employee attitudes (notice, they are not measuring satisfaction). This is a no-holds-barred exercise that measures employees’ confidence in team leaders, store leaders, and regional leaders. It asks about fears, frustrations, and whether or not they believe the company is adhering to its values. Brutally honest stuff — the results of which, you guessed it, become public information.

Ready for the capper? Whole Foods even posts everyone’s salaries. This policy is undeniably radical. But in a democracy, openness is strength. The policy banishes the destructive whispers and rumors about who makes what. Every store has a book that lists the previous year’s salary and bonus for all employees. And the trust-building payoff is substantial. Mackey initiated the policy in 1986. “I kept hearing that people thought I was making so much money,” he recalled. “Finally, I just said, ‘Here’s what I’m making; here’s what cofounder Craig Weller is making — heck, here’s what everybody’s making.’”

Surprisingly, most employees don’t spend much time studying the salary book. Once the novelty wears off, and people discover that the cashier in the next aisle makes roughly what they make, they get on with their jobs. Of course, Whole Foods’ approach to sharing information is not for the faint at heart. If you’re going to create a no-secrets policy you’d better have the guts to talk straight with people.

Mackey told Fast Company magazine that the open-salary policy does spark disagreements — but disagreements have their uses. “I’m challenged on salaries all the time, but almost always by managers. ‘How come you’re paying this regional president this much, and I’m only making this much?’ I answer straight, ‘Because she’s more valuable. If you accomplish what she does, I’ll pay you what I pay her.’ It leads to deeper, more honest conversations. It creates a culture that values authenticity. And that’s all to the good. That’s part of democracy. If you’re trying to create a high-trust organization where people are all-for-one and one-for-all, you can’t have secrets.” When it comes to information, gutsy leaders let it flow.

Make Strategy Clear to Everyone

Ownership requires the faith and confidence of both employers and employees. As a leader, you must feel confident that when the decisive moment comes, those who have assumed ownership will exercise common sense and good judgment, which is far more likely if the company’s strategy has been made abundantly clear to everyone. Teaching your strategy should focus on helping people make the right choice among many. One way of assuring that is to ask your employees to define what trade-offs are worth making in any particular situation. Encourage them to think about what makes the company unique. If they must make a trade-off, finding the right one will be easier if they have a clear understanding of what the company stands for, where it is going, and its reason for being.

If strategy gives people autonomy within clearly established boundaries, then the company’s purpose, vision, and values define those boundaries. Though some would argue that boundaries limit creativity, anarchy is not our aim. Any owner-employee must be able to answer these questions: What business are we in? Why do we exist? What makes us unique? Providing direction doesn’t restrain people’s energies. In fact, such guidelines give people the freedom to act.

swa planeWhen a Southwest Airlines gate agent in Austin, Texas, was approached by a very distressed customer who spoke only Spanish, her willingness to think like an owner may have saved the man’s life. The customer was on his way to Houston for a kidney transplant, and he had mistakenly gotten off the airplane in Austin. The gate agent spoke Spanish, too, and she was able to figure out that not arriving in Houston early the next morning meant that he could lose his chance to get the kidney. She knew there were no more commercial flights from Austin to Houston that night, but she remembered that Mark Robbins, an Austin ramp agent, was a private pilot. In entrepreneurial fashion, she explained the customer’s predicament to Mark, who flew the man to Houston that night. And the gate agent went along for the ride, knowing the customer would be more comfortable having someone else with him who spoke his language. No call was made to the CEO or anyone else to ask permission. The two employees simply handled the customer’s problem, knowing that the company would support them.

Once people understand the strategy, they become empowered, knowing that their actions, in line with that strategy, will be highly valued and considered legitimate and productive by those who share the strategy. Great breakthroughs and extraordinary acts of service usually happen out on the radical fringe of a clearly defined boundary. When boundaries are fuzzy, people get nervous. They tend to cautiously gravitate toward the center of the playing field, where things are safe. When this happens innovation goes out the door, inertia sets in, and it’s business as usual.

Make Everyone Business Literate

How many people on the front lines of your organization understand how revenues and costs translate into profits? How many are capable of interpreting a financial statement? How many would know how much it costs to run their part of the business? If your business is a car dealership, do your employees know the volume each service bay must yield to earn a profit? Could they tell you the number of new and pre-owned cars that determined last quarter’s profits?

If the business is financial services, do they know how many loans you need to make before you cross the breakeven point and move into net interest margin? If you find errors in five percent of the loan documentation orders, are people familiar enough with the figures to know the cost of correcting them? How about the amount lost when someone in the call center has to make three calls instead of one to resolve a dispute? How many times did something comparable happen last year?

If you manufacture heavy equipment, who can tell you the cost of a service technician’s extra hour drive to retrieve a part that is needed only because engineering didn’t originally use a standard size?

Our bet is that 80 percent of your profits come from 20 percent of your customers. Do your people know that? If so, does it effect how they deal with the top 20 percent? How can we expect employees to lower costs and find new revenue-generating opportunities if they have never been taught that side of the business?

The airline industry is notorious for its high operating costs and low margins. When the profit squeeze worsened in the mid-90s, Southwest Airlines responded by educating its employees about the razor-thin line between profit and loss. Using the previous year’s financial information, a pilot pointed out that lesson by calculating the number of passengers per flight that determined the airline’s profitability. The answer was five. Just five customers provided each flight’s profit.

The story was printed in Southwest’s newsletter, “LuvLines,” and distributed to every employee in the company. How does this new information affect employees? Consider a hypothetical case of two gate agents working an oversold flight. One feels victimized and complains that the reservations people have “done it again.” This instinct to blame others will inevitably affect the way this agent treats customers. But the other agent points out that, since just five customers make the difference in their profit-sharing, every one of them counts. The second agent works to accommodate those who will not get onto this flight. One is thinking like an owner; the other, like a casualty. Which of them would you want working for you?

Launch a Business Literacy Campaign

Follow the lead of Semco (Semco—Insanity That Works), Stanley Steemer, and Southwest Airlines: simplify your financial statements, then teach your employees to read and analyze them.

If you don’t already know it, figure out your breakeven point, then communicate it clearly and vividly. Illustrate the ripple effect of $1 of sales. For example, ask them to consider how might Sears’ salespeople be affected if they knew that 3 cents of every dollar represents profit? Would they watch costs and serve customers more conscientiously? Would Sears feel the difference?

Keep your presentation simple. Remember that you’re not trying to teach the intricacies of accounting. Instead, find relevant measurements, such as, what is the profit earned per product?

In fact, you can turn your teaching into a game. Delta Airlines’ business-literacy campaign, called “Our Airline, Our Business,” has a board game based on running an airline as the centerpiece of its all-day event. A roll of the dice determines revenues and expenses, and chips represent costs, such as labor and fuel. Inter-departmental teams fill out balance sheets and income statements, expand or contract routes, allot shareholder dividends, and assume debt. As a result, workers realize — and more importantly, care about — the financial ramifications of nearly every aspect of the operation, from lost luggage, discounted tickets, and bad weather. Learning about revenues, the hiring process, and food services, just to name a few of the factors that constitute running a sprawling company in a brutally competitive industry, they become better employees in every way.

About this process, aircraft mechanic Paul Blair said: “Before I took the class and played the game, I didn’t understand . . . the numbers that we hear back on the floor. Now the cost-savings measures make more sense. . . . In a lot of ways, a big business is just like your home budget. . . . [Since] I didn’t really understand how Delta, with all the millions in revenues, could lose money, I resented being asked to give back. Now, I see that it really is necessary.”

Embrace the Mantra: If You See a Problem You Own It

Don’t hide behind policies and rules or regulations. NEVER let: “I DON’T HAVE AUTHORITY” become an excuse. This concept should be embedded in your culture, and an integral element of how work is done. We don’t mean that those who identify the problem are necessarily responsible for solving it, but they are obligated to marshal the appropriate resources to insure that it is addressed. Establish an ironclad rule that under no circumstances does anyone ignore or walk away from a problem, regardless of whose area it falls in.

Sweat the Small Stuff—Everything Counts

The crews who clean carpets for Stanley Steemer’s Phil Dean can not only give you a job’s exact cost, they can break it down by labor, gas and oil, truck and equipment repairs, chemicals, and insurance. They can tell you how many “redos” they did last quarter and the cost of all their service calls. They also know how many paying jobs a crew could not do because they were occupied with “redos.” The ground crews at Southwest Airlines can often tell you what it costs to turn an airplane just two minutes late.

What if every butcher in the meat department of a grocery store knew the costs of discarded Styrofoam trays at the end of the year? What if every bagger at the checkout counter knew the cost of grocery bags? Perhaps they would pay attention to things they would otherwise consider trivial or unimportant. When employees start thinking this way, there’s no telling what can happen in your organization. Creating this level of shared interest requires that your people know the facts and understand that hundreds or thousands of little things add up to big numbers at the end of the year.

Design Matters—Make Information Simple, Relevant and Fun

The key to creating business literacy and getting people to care about the small stuff is to internalize the important information you give them, and the medium can determine whether or not this occurs. It’s all about design! The way information is packaged is so important that companies spend vast amounts of time and energy creating print ads, Web sites, and annual reports that truly communicate. (Again, the language and words used make a difference). Yet the same organizations often overlook the importance of designing and packaging information for those who matter most — their employees. Before you complain that people don’t read your memos, ask yourself, “Do we package information in a compelling fashion that gets people’s attention?” If not, distill your message — and then deliver it in a way that is fun, lively, and easy to grasp. GE’s Jack Welch once said, “If a manager can’t describe a plan or proposal to me in one slide, I send them back to rework it, because it means they don’t understand it very well.”

When Southwest Airlines was ready to distribute its mission statement, it contracted with Cracker Jacks to insert the document as the prize inside the box. Then each employee received a box. People were so surprised and delighted, they talked about it continuously, and, of course, the talk was as much about the company’s mission as it was about the Cracker Jacks. The mission statement, ingrained in people’s hearts and minds, was fun to learn and interesting to discuss.

southwest p and lWritten at an eighth-grade level, Southwest Airlines’ annual profit-and-loss statement is illustrated with pictures, icons and cartoons, and housed inside a tabloid entitled, Plane Tails: Sensational Stories About Sensational Employees, which is designed as a spoof on The National Enquirer. Everyone picks it up because its packaging catches the eye and its contents are easily understood. Consider a young aviator, who doesn’t have an MBA and doesn’t know a lot about business. He picks up a tabloid on the coffee table in the pilot’s lounge. The pilot reads and understands the company’s profit-and-loss statement because of the way it was packaged. This employee is now better equipped to think about the entrepreneurial role he plays in managing some of the line items on that P&L.

For example, when pilots read that the company spent $500 million in jet fuel in a single year, they now understand the magnitude of jet-fuel prices on the corporation’s cost structure — and his or her own bottom line. Armed with this knowledge, they start looking for new ways to reduce their fuel-burn rate in flight and still get customers to their destinations safely and on time. For example, the pilots can save money by flying at a different vector (a more direct route) or at a different altitude (a plane burns less fuel at higher altitudes). Southwest Airlines flies approximately 3,000 flights a day, 365 days a year. If every pilot engaged in reducing the fuel-burn rate by just $5 or $10 per flight segment, it could save the company as much as $10 million a year. The savings are significant when you consider that fuel accounts for approximately 20 percent of Southwest’s expenditures.

So, if you want your employees to read, respond to, engage with, and talk about information, consider presenting it in a playful yet informative way.