“It made a big difference,” he nodded. “But it wasn’t exactly the world’s most popular move.” Hiram was well aware that a certain segment of the Rainbarrel workforce currently referred to him as “Fire ’em.” He pointed to another number on the spreadsheet. “Now, that one tells a happier story: lower costs as a result of higher productivity.”
“And better customer service to boot,” Frank chimed in. They were talking about the transformation of Rainbarrel’s call center—where phone representatives took orders and handled questions and complaints from both trade and retail customers. The spreadsheet indicated a dramatic uptick in productivity: The number of calls each service rep was handling per day had gone up 50%. A year earlier, reps were spending up to six minutes per call, whereas now the average was less than four minutes. “I guess you decided to go for that new automated switching system?” Frank asked.
“No!” Hiram answered. “That’s the beauty of it. We got that improvement without any capital investment. You know what we did? We just announced the new targets, let everyone know we were going to monitor them, and put the names of the worst offenders on a great big ‘wall of shame’ right outside the cafeteria. Never underestimate the power of peer pressure!”
Sally, meanwhile, was already circling another banner achievement: an increase in on-time shipments. “You should talk about this, given that it’s something that wasn’t even being watched before you came.”
It was true. As much as Rainbarrel liked to emphasize customer service in its values and mission statement, no reliable metric had been in place to track it. And getting a metric in place hadn’t been as straightforward as it might seem—people haggled about what constituted “on time” and even what constituted “shipped.” Finally, Hiram had put his foot down and insisted on the most objective of measures. On time meant when the goods were promised to ship. And nothing was counted as shipped till it left company property. Period. “And once again,” Hiram announced, “not a dollar of capital expenditure. I simply let people know that, from now on, if they made commitments and didn’t keep them, we’d have their number.”
“Seems to have done the trick,” Sally observed. “The percentage of goods shipped by promise date has gone up steadily for the last six months. It’s now at 92%.”
Scanning the report, Hiram noticed another huge percentage gain, but he couldn’t recall what the acronym stood for. “What’s this? Looks like a good one: a 50% cost reduction?”
Sally studied the item. “Oh, that. It’s pretty small change, actually. Remember we separated out the commissions on sales to employees?” It came back to Hiram immediately. Rainbarrel had a policy that allowed current and retired employees to buy products at a substantial discount. But the salespeople who served them earned commissions based on the full retail value, not the actual price paid. So, in effect, employee purchases were jacking up the commission expenses. Hiram had created a new policy in which the commission reflected the actual purchase price. On its own, the change didn’t amount to a lot, but it reminded Hiram of a larger point he wanted to make in his presentation: the importance of straightforward rules—and rewards—in driving superior performance.
“I know you guys don’t have impact data for me, but I’m definitely going to talk about the changes to commission structure and sales incentives. There’s no question they must be making a difference.”
“Right,” Sally nodded. “A classic case of ‘keep it simple,’ isn’t it?” She turned to Frank to explain. “The old way they calculated commissions was by using this really complicated formula that factored in, I can’t remember, at least five different things.”
“Including sales, I hope?” Frank smirked.
“I’m still not sure!” Hiram answered. “No, seriously, sales were the most important single variable, but they also mixed in all kinds of targets around mentoring, prospecting new clients, even keeping the account information current. It was all way too subjective, and salespeople were getting very mixed signals. I just clarified the message so they don’t have to wonder what they’re getting paid for. Same with the sales contests. It’s simple now: If you sell the most product in a given quarter, you win.”
With Sally and Frank nodding enthusiastically, Hiram again looked down at the report. Row after row of numbers attested to Rainbarrel’s improved performance. It wouldn’t be easy to choose the rest of the highlights, but what a problem to have! He invited the consultants to weigh in again and leaned back to bask in the superlatives. And his smile grew wider.
Cause for Concern
The next morning, a well-rested Hiram Phillips strode into the building, flashed his ID badge at Charlie, the guard, and joined the throng in the lobby. In the crowd waiting for the elevator, he recognized two young women from Rainbarrel, lattes in hand and headphones around their necks. One was grimacing melodramatically as she turned to her friend. “I’m so dreading getting to my desk,” she said. “Right when I was leaving last night, an e-mail showed up from the buyer at Sullivan. I just know it’s going to be some big, hairy problem to sort out. I couldn’t bring myself to open it, with the day I’d had. But I’m going to be sweating it today trying to respond by five o’clock. I can’t rack up any more late responses, or my bonus is seriously history.”
Her friend had slung her backpack onto the floor and was rooting through it, barely listening. But she glanced up to set her friend straight in the most casual way. “No, see, all they check is whether you responded to an e-mail within 24 hours of opening it. So that’s the key. Just don’t open it. You know, till you’ve got time to deal with it.”
Then a belltone announced the arrival of the elevator, and they were gone.
More Cause for Concern
An hour later, Keith Randall was calling to order the quarterly meeting of the corporate executive council. First, he said, the group would hear the results of the annual employee survey, courtesy of human resources VP Lew Hart. Next would come a demonstration by the chief marketing officer of a practice the CEO hoped to incorporate into all future meetings. It was a “quick market intelligence,” or QMI, scan, engaging a few of Rainbarrel’s valued customers in a prearranged—but not predigested—conference call, to collect raw data on customer service concerns and ideas. “And finally,” Keith concluded, “Hiram’s going to give us some very good news about cost reductions and operating efficiencies, all due to the changes he’s designed and implemented this past year.”
Hiram nodded to acknowledge the compliment. He heard little of the next ten minutes’ proceedings, thinking instead about how he should phrase certain points for maximum effect. Lew Hart had lost him in the first moments of his presentation on the “people survey” by beginning with an overview of “purpose, methodology, and historical trends.” Deadly.
It was the phrase “mindlessly counting patents” that finally turned Hiram’s attention back to his colleague. Lew, it seemed, was now into the “findings” section of his remarks. Hiram pieced together that he was reporting on an unprecedented level of negativity in the responses from Rainbarrel’s R&D department and was quoting the complaints people had scribbled on their surveys. “Another one put it this way,” Lew said. “We’re now highly focused on who’s getting the most patents, who’s getting the most copyrights, who’s submitting the most grant proposals, etc. But are we more creative? It’s not that simple.”
“You know,” Rainbarrel’s chief counsel noted, “I have thought lately that we’re filing for a lot of patents for products that will never be commercially viable.”
“But the thing that’s really got these guys frustrated seems to be their ‘Innovation X’ project,” Lew continued. “They’re all saying it’s the best thing since sliced bread, a generational leap on the product line, but they’re getting no uptake.”
Eyes in the room turned to the products division president, who promptly threw up his hands. “What can I say, gang? We never expected that breakthrough to happen in this fiscal year. It’s not in the budget to bring it to market.”
Lew Hart silenced the rising voices, reminding the group he had more findings to share. Unfortunately, it didn’t get much better. Both current and retired employees were complaining about being treated poorly by sales personnel when they sought to place orders or obtain information about company products. There was a lot of residual unhappiness about the layoffs, and not simply because those who remained had more work to do. Some people had noted that, because the reduction was based on headcount, not costs, managers had tended to fire low-level people, crippling the company without saving much money. And because the reduction was across the board, the highest performing departments had been forced to lay off some of the company’s best employees. Others had heard about inequities in the severance deals: “As far as I can tell, we gave our lowest performers a better package than our good ones,” he quoted one employee as saying.
And then there was a chorus of complaints from the sales organization. “No role models.” “No mentoring.” “No chance to pick the veterans’ brains.” “No knowledge sharing about accounts.” More than ever, salespeople were dissatisfied with their territories and clamoring for the more affluent, high-volume districts. “It didn’t help that all the sales-contest winners this year were from places like Scarsdale, Shaker Heights, and Beverly Hills,” a salesperson was quoted as saying. Lew concluded with a promise to look further into the apparent decline in morale to determine whether it was an aberration.
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