C&S Wholesale Grocers – What Happened Next? (HBS Case Study)

After reading this article, I was curious as to whether Rick Cohen had implemented his self-managed teams ideas and how effective they were in making his warehouse(s) more productive.  In my internet research on C&S, I ran across its Forbes.com listing.  Here are some quick stats:

America’s Largest Private Companies
#10 C& S Wholesale Grocers (ranked #7 in 2006)
CEO Richard B Cohen
Second-largest food wholesaler in the U.S.
2006 Revenues – $19.45B
Employees – 18,000

Apparently, Mr. Cohen did a lot of things right.  At least, I thought that it sounded like a great success with no hitches…until I found this article:

Workers Claim C&S Wholesale Grocers Cheats its Warehouse Workers out of Millions in Weekly Wages (LawCash.com)

In the case study, the new compensation scheme was detailed.  Potentially, if all five workers on a self-managed team (the article states that it is four to eight employees currently) correctly produce 9,000 perfect cases of product, they can make $74.25 per hour by my calculations from information in the case study [(9,000 x $0.08 + 9,000 x $0.25) / 5 workers x 8 hours per worker)]. 

The steep penalty of $1.00 per wrong case, when there are so many components in each case, is one of the major concerns of the lawsuit.  Although it doesn’t specify the exact penalty (remember that the case study was only an estimation, not the actual implementation figure), that would be hefty.  Consider if one person placed a case of apple juice in place of a case of grape juice on 2,500 cases.  Then this potential pay of $2,970 in a shift for all five workers is cut by $2,500. 

For one person’s mistake, five people must split $470 for their shift’s worth of work, which would be about $11.75 per hour – A difference in per hour pay of about $62.50.  Now, even if the implemented compensation scheme differs from the case study in terms of dollar amounts, the inherent problem is still there.  Employees will still think that they are being punished for the mistakes of a few people. We also have to consider that if employees are making mistakes of that caliber, then they probably shouldn’t be working there. 

What is fair in this situation?

Some Thoughts on “Mt. Everest – 1996″ (HBS Case Study)

Last summer, Aaron was obsessed with Everest.  During those few months, prior to Into the Wild‘s premier, we watched the IMAX film made on a Breashears/Viesturs expedition as well as an interview with Dr. Beck Weathers, the man who surprised the camp by walking in at 4:30 pm after that fateful night.  Into the Wild was based upon another book that Jon Krakauer wrote.  Krakauer was also the author of Into Thin Air, his memoir about the tragedy that occurred in 1996 on Chomolungma.  What the case study does not present, however, is the story on The Other Side of Everest, which may add some insight as to whether you support Krakauer’s theory on responsibility for the disaster or Boukeev’s rebuttal as deaths also occurred there on similar expeditions. Personally, I can see it both as an act of mother nature as well as human error. Often these things are combinations of both – but that is simply my opinion. You might want to consult an insurance actuary to see some real statistics on the subject.

My general thoughts are that people were functioning as individuals in this case.  This is neither right nor wrong.  How we prize the individual!  Especially when it comes to feats of great determination and dedication (also traits our society cherishes).  However, we as businesspeople as well as human beings must think more collectively.  To work as a team means that at times, we must give up our individuality and our pride.  

Another idea that I took away from this study was that even if you have a high power distance, if something seems amiss, you MUST feel that you can speak up to your superiors.  Our day-to-day decisions are not as deadly as those made on Everest in 1996, but in order to protect each other and help each other, you must not undervalue yourself as a member of your business team.  One person cannot possibly know all there is to know about a business decision.  Managers must constantly nurture this kind of open attitude in order to avoid the dangers of bad decisions.

Here is more on the disaster. (LINK)  Here is the first part of the IMAX film.  I highly recommend it.

Some Thoughts on “Business Teams at Rubbermaid Inc.” (HBS Case Study)

In his book What America Does Right, Robert H. Waterman, Jr. explains that small units within larger businesses not only promote innovation, but innovate the company structure itself through reinvention.  Rubbermaid needed both sorts of innovation to retain their competitive advantage against companies such as Tupperware, who were always right on their heels as well as copycat products made more cheaply by other manufacturers using Rubbermaid ideas.  By breaking their large units into smaller ones, while keeping the connection between the two in terms of a control system where performance evaluation and compensation were concerned and more autonomy and ownership of their work itself, Rubbermaid could enhance the innovative power that kept them ahead in new product introductions.

The more small, market-driven units functioned more as entrepreneurs.  Their ideas were better tested once run through the gamut of development and presentation to their respective operating teams.  Of course, this also created dissension between the business teams and operating teams.  If they were autonomous enough to bring a new product from start to the point of pre-production, why would they not also be able to make the decision to “cast the mold”?  Also inherent was the problem of consistent compensation across the company between those who formed the teams.  Even removing team members whose performance was not up to par may not be an effective way to gain equilibrium in pay schemes.

Rubbermaid Inc. was trying to become what it had started out being.  One man with one good idea.  Multiplied by however many teams they must have today…

Interesting Article on 9-to-5 Extinction

http://www.pickthebrain.com/blog/why-the-9-to-5-office-worker-will-become-a-thing-of-the-past/

Although this isn’t from my usual sources, I found this article (purely someone’s opinion) to be very interesting.  It’s not that I can’t concentrate for eight hours or more in a day (if I couldn’t, then I wouldn’t be working full-time and doing my MBA, along with my music and arts hobbies), however, I feel that I am most productive in the first four hours that I am in the office.  After lunch, I enjoy a shorter period of about two hours of solid concentration and productivity.  So the question is, what am I doing when my concentration isn’t at its highest?  I find that I organize my work.  Just organizing my files, cleaning up my emails, and making “To Do” lists and the more administrative tasks are good things for me at these times when my production ability starts to waver.  I think that these spurts of intense productivity are just as effective as doing a constant, steady stream of medium-level production.

I also think that I would be a beneficiary of telecommuting in my current role.  As one of our business managers said in an informal meeting, if your job is mainly a production job, peppered with meetings for project and planning work, then telecommuting is a good idea.  Especially if you have other familial or educational responsibilities, in my opinion.  For example, we are moving into our first home (don’t have kids yet, but still is an undertaking).  I would love to be a telecommuter, so that I could pack things here and there while I work.  (I am a fully functioning multitask machine – I think I could handle that much!)  And in case anyone needs me, I am a phone call or IM away.  Simple.  Right?  I guess it really isn’t, though…

Or why does it take corporate America so long to adapt to our 21st century (e-)culture?

Did Fannie, Freddie Use Incentives To Boost Stocks? (npr.org)

Listen HERE

“Creative Accounting”?

Neil Weinberg, senior editor at Forbes magazine, talks with Renee Montagne about whether executives at Fannie Mae and Freddie Mac used financial incentives to pump up the mortgage giants’ stock prices.

• Found out that they had a “house of cards”
• ½ of money considered capital used to cover emerging bad debt was deferred tax credits (if profit, you don’t have to pay a certain amt of taxes due to past losses)
• Acceptable in accounting – In reality, not money they can pull to cover debts
• Previous scandal at Fannie and Freddie before
• Making books look pretty as possible benefits senior executives as they are financially compensated for stock going up
• Sarbanes-Oxley was supposed to clean up their act, but the nation’s corporations still have scandals erupting at various times

Mr. Weinberg also wrote about accounting scandals at MCI WorldCom in his book Stolen without a Gun

For Many Employees, A Dream Job Is One That Isn’t A Nightmare – Sandberg (WSJ Online)

“That may be one reason why two-thirds of Americans would take the same job again “without hesitation” and why 90% of Americans are at least somewhat satisfied with their jobs, according to a Gallup Poll.”

Sandberg asks people what their dream job entails and gets an answer that you wouldn’t expect.  Some of them like their current jobs, but wish for small changes – a fellow employee that they liked to return, little office pet peeves to be eliminated (such as everyone washing their dishes instead of leaving them in the break room dirty).  Some just liked to “dream the dream”, but would still take their jobs the way they are. Well, almost just as they are.  Perhaps minus some of the bureacracy or politics and just down to rewarding merit.

Most said that it is more than pay that makes them like their jobs.  Furthermore, the pay just is a “validation of you work and approval” (Barry Shaw, University of California Berkeley’s Haas School of Business) and ”work as a means for demonstrating some sort of responsibility and achievement”, which from what we’ve learned in class, is intrinsic motivation.

Article HERE

The Management Myth – A Great Read!

http://www.theatlantic.com/doc/200606/stewart-business/4

This article sums up a lot of our concepts, but moreover, it is entertaining.  This really helped me to solidify the concepts that we are learning in my mind.  This guy boils it down to the dichotomy that exists in today’s Org Behavior debate.

Can I Work for You? The SAS Institute (A) + (B)

A common theme among our articles is “putting people first”, capitalizing on the human asset, seeing (and treating) your employees as assets and not costs to be reduced.  The SAS Institute has actually put into place all of these ideas and shown that they work.  I found a great interview with the man USA Today called the “lanky, laconic CEO” in this article from 2004 wherein his aversions to going public are futher outlined. Here’s a Q&A with a tech angle, but still very informative. (If anyone dislikes Microsoft, the fourth to last question provides more fuel for the fire.)

Q and A – Dr. Jim Goodnight from Computer Business Review

A lot of our companies are still very conservative and hold many management myths high to this day. Our reading is encouraging – that we might still lead our organizations to the SAS model insofar as our people are concerned.  Not every idea works for every situation in every organization, but I think that some of the ideas of letting employees become more autonomous – Not watching the clock every second and letting people take time off where they see fit, as long as they accomplish their and the organization’s goals.

I was also interested in the ideas of providing employees the outside services that they need so that they may focus more on their jobs.  The on-site medical facility, health club, daycare, masseuse, elder care, laundry, etc.  are things that may not be feasible for every organization, but think of what would happen if we did have those things available to us!  Then I wouldn’t be making doctor’s appointments that usually take me away from the job for hours at a time.  One complaint I often hear at work is “These cafeteria lunches are extortion!”.  In comparison to what I pay everyday for lunch in the cafeteria, I know that SAS Institute employees are paying half or less for probably a better quality meal.  A good nutritionist will tell you that a filling, healthy meal is conducive to brain functioning at the highest level.  Instead, I try to cut costs by having a “barely there” salad bar bowl (it is priced per pound).

Yes, food is a powerful satisfier…and I definitely know when it’s not there to my satisfaction.

Harrah’s Entertainment, Inc.: Rewarding Our People – Delong and Vijayaraghayan

Dr. Pfeffer mentioned Harrah’s transformation – especially of the influence of Gary Lovement, President and COO – from a corporate culture that prompted high amounts of employee dissatisfaction and no motivation to one in which employee morale was an integral part. A few things that were institute to achieve this goal:

To decrease turnover, we will find the right people for the job and improve our hiring and socialization process. Make employees feel comfortable.

To motivate employees to achieve customer service, we will institute new rewards systems that are not affected by the profit or loss of the company.

The numbers prove that by putting people first (both employees and customers), Harrah’s succeeded in weathering external changes when other casinos failed.

Six Dangerous Myths About Pay – Pfeffer

o Don’t think that adjusting compensation levels is a cure-all for your organization’s overall health. Some of the deeper issues – the ones that are long-term and often the most difficult to change – are more probable causes for your organization’s decrease in market share or decline in profitability.

o Focus less on the labor rate and more on the labor cost. What can you do to make employees more productive instead of decreasing or freezing wages?

o Consultants make their money through quick fixes. When these fixes backfire, who will be back again for your organization’s money to help? Don’t be a victim!

o “Most merit-pay systems share two attributes: they absorb vast amounts of management time and make everybody unhappy” – except the money-grubbing consultants. What could your management accomplish in terms of a true competitive advantage in lieu of all the time you spend tinkering with pay?

o Recognize that every person is interrelated in your organization. Promote “free trade” of ideas and best practices. Replicate success in different business units, where appropriate. Teams should be competitive, but not at the expense of the overall organization.

o Risks are necessary! Convention is even more risky (when your business model is unable to change)!

o People come first. Everyone wants a work environment in which they feel valued and that their work has some kind of meaning. Don’t forget FUN.

o There’s a reason why the seven dwarves “whistled while they worked” and this probably made them the most productive imaginary characters in the forest.