Reviving a Mature Business: Leadership and Culture Change at PMF

Introduction: PMF's History and the Challenge Ahead

Poly-Metal Finishing, Inc. (PMF) has been my employer for the past eight years, and has my respect as a fine company. It has been in operation for over thirty years and has a combined experience in the anodized aluminum field of over one hundred fifty years. It has always been a world-class company in its dedication to preserving the environment and dealing in an honest and ethical manner. A number of its policies with regard to its clients are above and beyond the standards of the industry.

However, in spite of all these evident strengths, the original manager and founder was succeeded by a management team that adopted a totalitarian style of leadership. Gradually the confidence and cooperation of the employees began to erode, replaced with cynicism and negative attitudes. The company slowly became neither the best nor the most enjoyable place to work.

Within the last year, a new management team — of which I am a part — has replaced this unsuccessful structure. Now as one of the top managers, I have set myself the goal of seeing things turn around and the company becoming the world-class business it once was. The new management team and I share a vision of moving the company forward to a new and higher level. We are aware of the work and dedication this process will involve and know that pitfalls await us. However, we are encouraged by our commitment to a common goal and by our knowledge of the company's innate potential.

I am using this Independent Learning Project to explore ways in which the new management team can decide on strategy for PMF. Now is the time to determine what steps we will need to take to change the course of the company. With the impending retirement of the current president of PMF within the next few years, the task of running the company for the next few decades will fall on the shoulders of three of us. It is our goal to make PMF a strong, viable, long-lasting company — one that we will be proud to say we manage.

It is my personal goal to make PMF a company of choice. We all must work for a living, and since we must work, it seems obvious that those years would be better spent in a pleasant, stimulating, rewarding work environment — one that enhances our overall sense of purpose and pleasure in life. It is my goal to make PMF a company that will attract the best and brightest employees and give all of us a sense of accomplishment in what we do.

The current president and the three vice presidents share common ideals and visions, and it has been a satisfying process to work together and create a shared dream for PMF. One of our objectives is the empowerment of employees, in order to create a dynamic, powered-from-within organization. However, because of the prevailing negative attitude of the workers, we have realized that this change in atmosphere will be a challenge. We believe it is essential to overcome this cynical attitude, and we hope to effect a positive change so that the workforce can move on to a more meaningful and productive relationship. We have accepted that not everyone will choose to make the transition and that some employees will inevitably choose to leave PMF. If that is the case, we will have to have created a paradigm for finding and training new employees who will fit with the empowered and re-energized company.

With all these goals in mind, I have attempted to find a starting point from which the management team can begin the change. I have assembled our current system of beliefs as they are spelled out in our company literature, then researched current thinking about how successful organizations can and should be run, and what management's responsibilities are in facilitating a productive climate. These findings, along with a series of suggestions for how to implement the most relevant of them at PMF, are summarized in this paper.

These ideas will obviously be of great benefit to the new management team of PMF. In a sense, we are fortunate to have the company's successful history on which to build. The setback the company has experienced is not drastic by comparison with some, but it is serious enough to send a wake-up call and motivate us to try every means possible to recoup the strengths of the past — and hopefully even to surpass them. On the other hand, we are to some extent bound by the company's very success, and must preserve as much of its heritage as possible. Because of this, we are constrained to work with some existing systems, whereas a new company just starting up — although it would lack PMF's evident strengths — would also have the advantage of starting with a clean slate.

It is my thesis that there are many American companies in the position of PMF. They are mature and successful, yet somehow the honeymoon luster has worn off. There is some disillusionment and disgruntlement in the ranks. While there is no open revolt or strife, the team spirit is simply not there. No one presently employed at the company is directly to blame, yet all share a certain ennui — a TGIF attitude. The changes in world economy, and particularly in the wake of the events of September 11, will test the mettle of all companies. Those who are divided in purpose and not wholeheartedly involved in their business's success may find that division marks the difference between survival and failure in the years to come.

Therefore, I have attempted to keep the findings of this paper general enough to be useful for any company in PMF's position. I have researched the beliefs of many entrepreneurial and management thinkers, and summarized those most concerned with bringing about attitudinal change. I have tried to discover how successful leadership teams revive a spirit of enthusiasm and candor in their employees, and how these shifts in philosophy affect a company's relationships with its clients, suppliers, and communities.

Literature Review: Customer Service

In this chapter, I summarize my research into the writings of various entrepreneurship and management thinkers who have developed theories for effective leadership over the past two decades. Many of these authors have been chosen because of their field research, which was conducted on actual companies — some of which rose to the challenge and some of which failed to do so.

I have attempted to choose the most relevant studies to PMF's particular situation. In thinking about the strategic direction that PMF must decide upon, it seemed to me that the current situation involved three inter-related yet distinct factors: our relationship with our customers, the morale of our workforce, and the challenge of initiating cultural change in an existing business. I have divided my research accordingly.

Michael Mercer advises anyone wishing to please a customer to forget the Golden Rule. "The Golden Rule states, 'Treat other people as you want to be treated.' This idea does not go far enough." Instead, he advocates the Platinum Rule: "Treat other people the way they want to be treated" (Mercer, 1994, pp. 14–15). In the global economy, his point is well taken. Customers today come from a wide range of cultures and backgrounds, and every company has unique needs and wishes. Therefore, a successful company must not interpret what the customer wants based solely on its own experiences and values; it must determine from the customer himself exactly what he needs to make the transaction completely successful.

Atkinson attributes the success of Japanese business to their determination to target certain markets and then thoroughly do their homework to find out exactly what that market's customer wants. The automotive and electronics industries are examples of their success in overcoming the earlier stereotype of producing shoddy goods. More recently targeted and dominated sectors include banking and financial services, with pharmaceuticals appearing to be next. In each instance, the Japanese were ready to overcome cultural and ideological barriers to understand what the customer really wanted, then apply the Platinum Rule (Atkinson, 1990, pp. 3–12).

British Airways offers a compelling case study in customer service transformation. Robert Tucker relates how the airline had defined poor customer relations in the 1980s. New CEO Colin Marshall decided that the company was going around in circles trying to determine what customers really wanted, and he authorized a customer survey. The results revealed that customers resented the British staff's reserved manner and interpreted it as unfriendliness and hostility — a factor that weighed twice as heavily with them as décor and ambiance, which the airline had assumed would be more important. The company spent millions training its staff and is now ranked among the tops in service by the International Foundation of Airline Passenger Associations (Tucker, 1991, p. 168).

Tucker also gives the example of Nordstrom Department Store. As the retail industry attempted to compete with big-box stores on pricing, most retailers cut staff and made stores essentially self-serve. Nordstrom went in the other direction, stressing personal service that goes above and beyond, along with a wide range of free value-added services. Staff are the highest-paid in the industry and prices are higher than the norm, yet growth has been steady and positive. The public welcomed the chance to enjoy good service and were prepared to pay for it (Tucker, 1991, pp. 165–166).

Tucker also tells the story of Barry Fribush, founder of Bubbling Bath Spa and Tub Works, who was so frustrated with the poor service following his own spa purchase that he started his own company. He bought superior merchandise to minimize breakdowns and hired technicians who worked during the day for companies such as Xerox. These people, although expensive, had the expertise and people skills to handle computerized spa controls, and they were available in the evenings when most customers needed them. To reduce callbacks, he paid his technicians only for the first service call. Through these measures, he set a new standard of excellent service for the spa industry while keeping operating costs in line (Tucker, 1991, pp. 166–168).

Tucker offers seven suggestions for improving customer service:

1. Improve service from the top down. Management must genuinely believe in excellent customer service — not merely pay lip service to the idea — and must be aware of the basics of their own operation. 2. Set measurable customer-service goals. For example, what is the maximum number of times the phone can be allowed to ring before answering? 3. Recruit a customer-centered team, hiring on the basis of communication skills and demonstrated excellence in customer service. 4. Hire experience and then provide more training — as Home Depot does by hiring technical experts and then training them further. 5. Give incentives for excellent service: recognition, or an arrangement similar to the spa company's model of paying the technician to fix the problem the first time. 6. Empower the team to solve problems immediately, without excessive red tape — for example, a Cadillac dealership in Dallas that authorizes salespeople to maintain a per-customer budget for after-sale adjustments. 7. Encourage heroic acts. Provide special recognition and ensure that employees who go out of their way for customers become the stuff of legend (Tucker, 1991, pp. 169–176).

Tom Peters and Bob Waterman defined the new approach to the customer — the shaking off of complacency that began in the 1980s — as obsession: "This [obsession] characteristically occurred [in the excellent companies] as a seemingly unjustifiable overcommitment to some form of quality, reliability or service. Being customer-oriented doesn't mean that our excellent companies are slouches when it comes to technological or cost performance. But they do seem to us more driven by their direct orientation to their customers than by technology or by a desire to be the low-cost producer" (Peters & Waterman, 1982, p. 157). This ties in with the second of their eight essential principles that drive excellent companies: staying close to the customer's preferences — following the Platinum Rule.

Larry Wilson sees the most insidious danger to established, successful companies as the gradual erosion of that obsessive desire to learn the customer's wishes and then delight him by surpassing them. A comfortable market position develops and the early start-up desperation subsides. The company falls victim to "organizational arrogance"; it becomes "fat, dumb and happy" (Wilson, 1987, p. 41). It begins to repeat known patterns of success and the entrepreneurial spirit begins to atrophy. In order to wake itself up, it needs to take risks again, search for new answers, and recommit to quality in its internal workings and in its dealings with clients and suppliers (Wilson, 1987, pp. 41–51). He sums up the whole Platinum Rule as a variation of the baker's dozen — a value-added philosophy that gives "thirteen for twelve," constantly exceeding the customer's expectations and stretching the company's understanding of its own capabilities (Wilson, 1987, p. 200).

According to Fred Jandt, "Actual working conditions are less important to job satisfaction than employees' feelings that management is concerned about them" (Jandt, 1994, p. 107). He cites the so-called Hawthorne effect to prove this point. The Hawthorne Works plant of Western Electric conducted an experiment, increasing the level of lighting to see if it would improve employee morale. Morale went up. Later, when they decreased the lighting level, morale remained up. The employees were responding more to management's interest in them than to the lighting itself.

Literature Review: Employee Morale

Atkinson tells a similar story about a visit to a Mitsubishi plant (Atkinson, 1990, p. 139). A shop-floor employee was asked about suggestions he had recently made, and he mentioned that he had pointed out that a button he frequently pressed was so low that he had to bend to reach it. Management had immediately had the button moved up. Moving it did nothing for overall productivity or profit, but it made his life easier — and he was delighted that management had acted for that reason alone. These two stories demonstrate the influence on employee morale of believing that management is genuinely concerned about workers and willing to act in a timely manner on things that may not have a direct effect on the bottom line.

Jandt makes the point that although employee morale may not directly translate into productivity, it does so in indirect ways. Absenteeism and substance abuse cost payroll dollars and may be the result of poor morale. Employee turnover is also a real robber of profit; the cost of recruiting and training a replacement employee can range from $1,500 to $12,000 (Jandt, 1994, p. 108).

He discusses the differences between a bureaucratic or authoritarian management philosophy and an entrepreneurial one (Jandt, 1994, pp. 147–149). In the former, there is a clear requirement for obedience to authority. Self-expression is limited, and the employee is asked to sacrifice or commit to company goals without clearly knowing what they are or how they will affect him. Because of this culture, the employee starts to play politics — becoming calculating about what he says, not telling the truth unless it is what the higher-ups want to hear, and engaging in back-stabbing. In a more participative climate, by contrast, the supervisor and employee can both say no when they mean no. They tell the facts without mincing words out of fear of political incorrectness. They share information, including bad news, and use plain language rather than double-talk. Jandt adds that "the evidence clearly shows that, today, high-control, autocratic, top-down systems are often less effective and less productive than more democratic participative systems" (Jandt, 1994, p. 148).

He also identifies models for understanding existing employee-employer relationships, based on the degree of trust and agreement between leader and led. High-agreement/high-trust relationships are between allies who share a vision and candidly share information, positive or negative. Low-agreement/high-trust situations allow those who honestly disagree to hear each other's viewpoint and arrive at a settlement in good faith. High-agreement/low-trust scenarios occur when both parties agree about something — perhaps for different reasons — while recognizing that this agreement does not reflect a deeper meeting of minds. Low-agreement/low-trust situations are genuinely lose-lose, and the parties should probably abandon any attempt to work together. Unknown-agreement/low-trust means the supervisor senses that an employee has reservations, but does not know whether the employee truly agrees or not. In an autocratic climate, the employee will hesitate to reveal his real opinion (Jandt, 1994, pp. 149–151).

Brian Joiner talks about building a trusting climate, telling the story of the Madison, Wisconsin police force's handling of the purchase of new police cars. Usually the purchasing department would generate a list of specifications, get quotes from various dealerships, and purchase the best value as they saw it. However, the decision was made to let the officers choose their own cars. The officers chose reasonably, and everyone was happy with the outcome. The morale of the officers was immeasurably enhanced because of management's leap of faith. Joiner sums it up: "How would you like to risk your life in a car somebody bought on price tag?" (Joiner, 1994, p. 233).

Giving that much leeway to employees is a daunting thought for most supervisors. While most employees would be highly motivated to act honestly because of the responsibility they have been given, there is always the bad apple who spoils it for everyone. Joiner advocates that management commit to a trusting relationship and then deal with offenders individually and decisively (Joiner, 1994, p. 233).

That brings us to performance appraisals and other human resource tools for rewarding good performance and correcting bad performance. Most companies have a standard mechanism for dealing with offending employees — verbal warning, then written warning. The message must be clear and non-emotional, the employee must be given a reasonable time frame, and every possible assistance must be offered in changing the problem behavior. If the behavior does not change, the employee is let go. The steps in this procedure are well documented by Jandt (1994, pp. 132–137).

However, in Joiner's view, the standard performance appraisal creates real problems for morale. He argues that employees are demoralized by typical rating systems because safeguards against "grade creep" imply a bell curve: a certain percentage are "outstanding," a certain percentage are "fair," and a certain percentage "need improvement." Raises are then indexed to these ratings. The effect is to "create artificial scarcity. All [these parameters] require that there are only a few winners and that we find losers to have winners. All have the net effect of discouraging cooperation: why help someone else be a winner when that might only force you lower on the scale? Having losers in your group is an asset!" (Joiner, 1994, p. 238).

He suggests that the alternatives — to raise morale and reward excellence — are ongoing feedback, rewards and recognition, and the establishment of a system to measure organizational performance. Ongoing feedback can originate from customers or suppliers, who are positioned to objectively notice fine performance. Rewards and recognition can be spontaneous or can take the form of organized celebrations of achievement. Organizational performance can be measured against any number of company goals, such as overall customer satisfaction, total cycle time, or first-pass quality. These measurements need to be communicated clearly to employees and tracked on an ongoing, timely basis.

Joiner stresses that these measurements should not be directly tied to compensation. In his own company, he performs labor market studies to determine comparable salary rates and uses these as starting salaries. Every year, each employee can expect a cost-of-living increase, consistent across the company, plus a prosperity-sharing increase — also consistent percentage-wise — assuming profits are available. Individual adjustments are made for things like new positions. This system eliminates individual incentives and commissions, which he sees as divisive and counter-productive to team achievement, while still providing incentive to work together to increase profits (Joiner, 1994, pp. 236–248).

Aubrey Daniels expands on this idea when he discusses increasing morale to the point where people think "Thank God it's Monday!" He believes that "the job itself is not what appeals," and he uses an analogy to prove it. He describes the conditions of an NFL offensive lineman — squatting repeatedly, pushing and punching other large individuals, being knocked down frequently, working in all kinds of weather, suffering frequent injuries, some life-threatening — and asks: if such conditions were posted in a job ad, who would apply? Yet professional players accept those conditions, and so do people who play without pay. They do it for the enjoyment. How, then, can an employer create that type of enjoyment at the workplace, where the actual task may not be intrinsically fun? There is a perception in many companies that fun at work is time-wasting. However, Daniels proposes that the workplace should welcome fun in the form of celebrations of accomplishments — occasions to "relive an accomplishment" (Daniels, 1994, pp. 191–194).

He sets out several ways a company can do this effectively. First, employees need to participate. The employer should not simply stand up and declare how well employees performed; employees should tell their own stories, focusing not only on the result but on what it took to get there. If the company gives a tangible reward, it should be designed to create memories rather than serve as monetary compensation. Joiner gives a good example: an employee who kept a surveyor's transit on his desk. When asked about it, he would explain how a survey had shown that his work was excellent, and how he had been given the transit (a pun on "survey") in recognition. "I get to tell this story over and over again. I know it sounds corny, but I get to relive the sense of pride and energy we all had... I'm very proud of the work we did" (Joiner, 1994, p. 241).

Daniels also suggests taking a "celebration walk" — a tour of the plant in which the employer asks employees about what they have accomplished. The purpose is to seek out occasions to be celebrated, not to correct or scold. Visitors, whether customers or suppliers, should also be invited to tour, as this gives the opportunity to ask a high-performing employee to explain to the visitor what he is doing and how. This not only builds relationship with the guest but subtly rewards the high-performing employee and builds morale (Daniels, 1994, pp. 192–196).

Atkinson also suggests ways to sustain morale, recognizing that by its very nature it is apt to fluctuate. When a new initiative such as a Total Quality Management concept is introduced, everyone tends to be enthused. This initial response will inevitably fade as naysayers begin to explain why it will not work. When training for the new initiative happens, enthusiasm builds again, only to die away if action and implementation are slow to follow. He recommends that something be planned to keep enthusiasm and morale alive at least every six weeks (Atkinson, 1990, pp. 211–215).