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Lessons Learned

A current “buzzword” for motivating employees is the “E” word. I consciously never used the term “Empowerment” in any communications with our employees. Yet, I worked diligently to push down decision making, authority and responsibility to the lowest levels of the organization-at the point where decisions needed to made. My belief is that the term is confusing, overused, misused and too easy to be marginalized. Likewise, I avoided using “Accountability” for similar reasons. Employees can relate much better to being told what they are responsible for and giving them tools to make it happen.

In our company, the first step was disbanding our purchasing function and moving to a “Kanban” system using the FAX for ordering inventory items. The crew in our inventory stocking area were “authorized” to issue PO’s, deal with pricing, returns, etc. without intervention from upper management. When stocks ran low, an inventory card was turned in and FAXed to the vendor with quantity, price, lot size and description to drive the replenishment purchase. Giving the unit the tools to do it themselves allowed them to be in control.

Next, to augment our internal capacity, we started to outsource our internal processes like machining and assembly, avoiding having to invest in capital equipment to support peaks in demand. Our machining center programmers and assembly leaders set costing for those services, negotiated with vendors on pricing, delivery and terms and reconciled quality issues. Again, they were given the ability to manage multiple resources to meet their department schedules. All vendors were “qualified” by the Quality Assurance department ahead of time, who also tracked their delivery and quality performance.

Purchasing for maintenance items, tool room components, shop and office supplies were all pushed down into the organization to employees who needed and used the items holding the authority to issue Purchase Orders under their own signature. The accounting department closed the loop by verifying delivery with the person who placed the order.

In our Customer Service area, Program Managers set all pricing, negotiated concessions and returns, offerred discounts, and charged premiums…all without any emphasis on “gross margin” since we did not have a cost system that would tell us margin by product. We used some very simple Excel spreadsheets that assigned “selling rates” to various value-added services we provided with adjustments for volume. Customers quickly understood that the person they were talking with had the authority to make decisions.

We spent many years and thousands of dollars on training in team work. Work cells made their own line balancing decisions, solved problems, cross-trained each other and set their own production targets. It took lots of practice with guidance from professionals to get beyond the broad concepts and to apply it to each of our departments. The devil was in the details and making things simple.

Of course, we were small and our focus was on lead time reduction and on-time delivery, and less on margins and we did not have an computerized MRP system or other sophisticated computer systems. And, we did get burned: a tool maker stole $250,000 worth of equipment and components to compete with us out of his garage; we overbought during the telecomm run-up in the late 90’s and got stuck with $2,000,000 of excess and obsolete inventory; some of our vendors took advantage of our lack of attention on prices and we probably had some vendor/employee “cozy” situations that were not appropriate. But in my mind, it was worth it as we drove down our lead times from 8 weeks to 2-3 weeks and picked up new customers because of it.

When our computerized ERP (Enterprise Resource Planning) system was installed, we continued to push it down into the organization by setting up department schedules that were the tools for running each functional area. Initially, each team struggled with compliance and understanding, but we moved our overall OTD (On Time Delivery) up to 95% from 75% as a result. Employees very quickly claimed “ownership” of their own schedules!

In my opinion, the broad concept of “Empowerment” is easy to understand, but much, much harder to implement in a way that is meaningful to each employee. Our “profit sharing” system “recognized” employees for their efforts to make the right decisions every day and see results in their paychecks! Confusing employees with fancy words was much less effective than simply being very clear about our expectations and the expected results. For the record, I am a great supporter of the “process” just not the vocabulary!

If you have comments…website or letters to editor. The Harbus and Jim would love to hear from you at letters@harbus.org, or comment online at www.harbus.org.

AUTHOR’S BIOGRAPHY
Jim Sharpe (MBA `76) is one of theÿHBS Entrepreneurs-in-Residence for the 2009-2010 academic year, who ran an aluminum manufacturing business for 21 years while working with his wife, Debby Stein Sharpe (MBA `81) after both left careers at GE and large companies and sold the business in late 2008. ÿJim can be reached at: jsharpe@hbs.edu, 310 Rock Center, 617-496-6285.

October 26, 2009
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