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Kevin & Jackie Freiberg

Ownership is a State of Mind, Part 3

screamIn Whole Foods — A Disciplined Democracy, Semco — Insanity That Works, and Stanley Steemer and Southwest Airlines: Creating Business-literate, Cost-conscious, Revenue-seeking Entrepreneurs we told you about four revolutionary companies that are way out there in terms of unleashing talent and inspiring a spirit of ownership. Leaders like Whole Foods’ Mackey, Semco’s Semler, Stanley Steemer’s Dean and Southwest’s Barrett and Kelleher know that employees must feel a personal stake in the enterprise’s success before they can be expected to step up to the plate. The gutsy leaders we’ve met work hard to unleash their people’s ingenuity, pride, and passion, and it doesn’t happen overnight. They experiment with programs, make their share of mistakes, fine-tune systems, and replicate what works. What remains constant is an unyielding commitment to giving everyone in the organization power and responsibility. Going back two issues, we started a list of things you can do to engender a spirit of ownership and personal accountability in your organization. See Ownership is a State of Mind — Part 1 and Part 2. In this issue we’d like to finish that list—at least for the time being.

What are you doing to create a culture of ownership?

Drop us a note and tell us what thinking and acting like an owner looks like in your company.

As we get more responses we’ll add to this list.

Throw “Financial-eeze” Overboard

Does presenting a profit-and-loss statement (See Ownership is a State of Mind — Part 2) at an eighth-grade level with pictures and icons seem condescending? Think again. If a financial statement is written in accountant-speak, no one, perhaps including yourself, will look forward to reading it. Do you look forward to reading your P&L? Why would frontline workers force themselves to plow through such a report, and then discuss what little of it they did comprehend? In these circumstances, most people would prefer that you tell them what to do, rather than engage them in a conversation in which they will feel stupid. You can’t build shared interest without a shared language.

Another problem occurs when employees’ lack of knowledge is misconstrued as apathy. Of course people care, but the information they receive — such as monthly financial reports — is impenetrable. And, of course, no one confronts management about that, because doing so would be admitting incompetence.

Though many companies include “dignity and respect” within their values, they don’t employ those values when they’re really needed, such as when it’s time to disseminate information. You need to assess whether your information is either too complicated or too mundane to capture your people’s interest.

Insist on Accountability

planet hondaHow’s this for gutsy? An auto dealership gives you a 100-percent guarantee that if it doesn’t fix your car right the first time, it will fix it again, then refund all your money. We screwed up so here’s your money back! It’s audacious, and only one of many things that differentiate Planet Honda from every other dealership out there. Tim Ciasulli, president and CEO, insists on his service technicians’ accountability because he is passionate about the dealership’s accountability to its customers. Through interviews and focus groups, Ciasulli and his team learned that bringing the car back a second time for the same repair is at the top of a customer’s list of complaints. As Ciasulli told us, “It’s a complete waste of time, and time is money.” Planet Honda repairs 30,000 vehicles a year; these days, less than 1 percent of them return because the car wasn’t fixed right the first time.

When Ciasulli offered this radical guarantee to customers, he was raising the performance standards for technicians. Planet Honda openly posts weekly “fix it right” charts detailing the record of each mechanic. A technician who doesn’t fix a vehicle right the first time doesn’t get paid to fix it the second time.

We screwed up, so here’s your money back.

Since that could cost up to $500 in lost pay for a mechanic who messes up overhauling a transmission, you can imagine the resistance from the technicians’ union. But Ciasulli convinced the union that he wanted to enhance his technicians’ skill levels and pay rate by building an “A” shop. This meant accelerating the usual time it took for a technician to achieve the highest level of certification. While it ordinarily takes a mechanic seven to eight years to move from a “C” to an “A” rating, at Planet Honda, it now takes three. Ciasulli’s strategy has made the union happy because its technicians are moving into higher-paying jobs faster, the dealership has increased productivity and a more flexible service operation, and the customers couldn’t be happier with a guarantee they can’t get anywhere else.

Ciasulli attributes his success to the fact that he helps people create better lives for themselves. He helps customers by taking the aggravation out of buying and owning a car, and helps the technicians get to the highest skill level quickly. Ciasulli is quick to point out that none of this would be possible if information were not readily available to everyone. People must know the company’s target and have ways of continually measuring their performance against that standard. This feedback gives employees the satisfaction of knowing they are performing well, or the knowledge that they have to do better.

Make it Clear What Everyone Contributes

Southwest’s “Plane Tails” takes an inventory of each department’s major milestones, so you learn, for example, that:

  • The audit department performed 125 audits resulting in cost recoveries of over $1 million.
  • The reservations agents handled 81 million calls, and the ramp and cargo departments moved 6 million pounds of mail throughout the system.
  • The finance department processed 789,773 invoices for payment.
  • The cleaners cleaned 17,760 aircraft.
  • The executive office team assisted Jim Parker (former CEO and vice chairman), Colleen Barrett (president and chief operating officer), and Herb Kelleher (chairman), with an astonishing 9,094 pieces of mail on top of 40,000 birthday and anniversary cards.

The free flow of information lets people appreciate how hard their colleagues work. Employees feel accountable to each other and begin to take pride in and care more about each other. They recognize that one department’s results affect everyone else, and everyone is in this together. When people naturally reach across the boundaries of departments and job descriptions to help each other, you know you’ve achieved ownership.

Jettison Class Mentality

Nowhere are our class divisions more apparent than in the corporate arena. They are the antithesis of the meritocracy that every successful enterprise must strive to be. Relying on stereotypes to form opinions of others reflects a lazy intellect that can’t be bothered thinking about each person as an individual. When you pigeonhole someone based on your view of his or her job description, salary, or education, you limit that person’s ability to contribute to your company. Inevitably, you will stifle that individual’s imagination, initiative, sense of responsibility, and most important, his or her investment in the organization.

If you’re playing to win, every mind must be fully engaged.

Leaders who are serious about leveraging the knowledge of every person in the enterprise must be adamant about confronting these ingrained views. People who are oppressed under a class system psychologically check out and become order takers and robots. This is the antithesis to ownership and accountability. If you want people to become engaged in making the business better, seeing problems and owning them, they’ve got to feel important. For example, when an airline assumes that an 18-year-old ramp agent loading bags on the tarmac is too young, indifferent, or uneducated to read a financial statement, it is trapped in a class mentality. This view is destructive in three ways. First, it strips the worker of dignity and lowers morale. It’s another way of ensuring that power resides at the top, and that the gap of inequality between people remains wide. Second, it steals talent from the organization by not capitalizing on people’s knowledge. In the most basic terms, the company pays for insight it never receives, and deprives itself, in this case, of a young person’s potential. If you’re playing to win, every mind must be fully engaged.

Finally, such discrimination crushes entrepreneurial spirit — and not only that of the specific person involved. The organization will suffer because, as our examples demonstrate, no senior management knows or can do everything. Stereotypical assumptions about class kill everything you’re working toward, including profits.

Give People a Stake

Gutsy leaders believe that when people become fully engaged in the business, they should participate in the financial success they helped create. When this happens, a very powerful emotional bond between the organization and the employee is formed.

The people of Southwest Airlines care about their company. Employees own 13 percent of it. It is no surprise that when people have an emotional, intellectual, and financial investment in the business, they are more cost-conscious, industrious, and imaginative. Since 1990, Southwest has contributed an average of $180 million a year to profit sharing, which is based on average net profits of $625 million a year. This means that, on average, 13 percent of the employees’ annual income came from profit sharing. Over the years, many people at Southwest have become financially independent based on their stock ownership.

While profit sharing and stock options can be powerful incentives for getting people to think and act like owners, we believe they must be offered in the context of an appropriate environment that supports and educates people on how best to use these motivational tools. As we have said, people think and act like owners because they are equipped, encouraged, and expected to do so. In this context, adding profit sharing and stock options rewards and reinforces people for behaving in ways that are consistent with an already established culture. Thus, you leverage the power of the incentive.

Celebrate Your Heroes

The most important resources you have are your people’s excitement and enthusiasm. Unfortunately, they are also the most perishable. With this in mind, Southwest’s leaders devote their own time and energy to nourishing the entrepreneurial spirit. Primarily, they do this by recognizing heroes and telling their stories in the company newsletter, or starring them in videos that are distributed company-wide. For instance: The mechanic who changed a tire on a landing gear in six minutes so that a plane could fly on time; the provisioning person who spent his own time designing an ice chest for the trucks that decreases melting and reduces the amount of ice a station needs by 45 percent; the flight attendant who brought a distressed, elderly passenger home with her for the evening, then made sure she was on another flight the next day; the sky cap who parked a late customer’s car, so he could make his flight.

These are examples of ordinary people doing extraordinary things to better the business. They show what it means to act like an owner of the company. Their implicit message is, “this is the standard we’re trying to uphold.” And often they inspire people to become heroes in their own jobs, from which a culture of ownership emerges.

What do you do when people act heroically in your organization? Do you publicize it? Given the right culture, getting people to act extraordinarily is not the challenge; making sure that these stories are captured and shared immediately is the hard part. It works so well at Southwest because people can rely on the fact that if they send a story to employee communications or the executive offices, it will be broadcast far and wide the next day.

Make it Personal

In the aftermath of the dot-com explosion, we came across a high-tech company that obsessed about its stock price as a measure of investor confidence. From the outside looking in — and based on what employees told us — the whole focus was on pressuring people to “blow out” the numbers at the end of each quarter. Every time senior management had a difficult call with analysts or major shareholders, employees would get their emotional chains jerked. It wasn’t surprising that turnover was high and morale was low. What the company’s leaders seemed to have overlooked is that most people come to work for personal reasons, as opposed to pleasing shareholders or making outrageous amounts of money for owners.

Of course, we understand the need to pay attention to the numbers. But, if that’s all that you talk with employees about, they feel taken advantage of. In contrast, when people are hired at Planet Honda, Tim Ciasulli talks to them about how the dealership can help them accomplish their dreams and goals in life. He wants to know the individual behind the salesperson or technician, and he wants Planet Honda to be a vehicle through which they can realize their vision. In fact, every week Ciasulli and the leaders who report to him discuss their highest priorities for that week, both personal and professional. He expects these leaders to do the same with their teams.

swa planeWhen Herb Kelleher talks to the people of Southwest Airlines about a competitor, he rarely emphasizes shareholder value. His interest is always what success or failure means to them personally. He explains the consequences of losing a fare war in the context of its relevancy to their personal lives—sending children to college, taking a vacation, buying a home or a new car.

At Southwest, ramp agents, flight attendants, and pilots all know that, on average, a take-off delay of just 30 seconds can mean less in profit sharing, increased wage concessions, and lowered job security, all of which would have tremendous impact on their personal lives. It would also mean less money for the catastrophic fund, which helps employees in crisis. The company’s contributions to charities, such as the Ronald McDonald houses nationwide, could also be jeopardized. Employees have learned that they are responsible for protecting what matters most to them, and they do. For example, Colleen Barrett tells the story of a new pilot who saw a flight attendant cleaning up the gate area in between flights and reminded her that doing so wasn’t in her job description. The flight attendant fired back, “I know, but it is part of my profit sharing.”

Have your employees made the explicit connection between the success of the company and their own success? Establish a way of frequently reminding them of the relationship between their job performance and business results. Then show them how those business results affect their lives. Have the guts to be interested in your employees’ personal lives.