Costco Doesn’t Sell Cheap Toilet Paper

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“There are a lot of companies with low prices,” Curtis began. “But people don’t talk about Costco the way they talk about Walmart.”

“Why the curiosity?” I asked.

“We can debate the low prices, but what they talk about is the people,” Curtis replied. “Why is there such a stark difference in the people who work at Walmart versus the people who work at Costco?”

I nodded. “Tell me more.”

“When I visit, Costco employees seem happier. They’re helpful. They work there longer, turnover is less. Even though the carts are jammed full, the checkout lines move quickly,” Curtis explained.

“How do you know?” I pressed.

“I’ve shopped there. I’ve read stories. Friends tell me the same thing.”

“So, these are observable behaviors?”

“Yes,” he nodded.

“Both companies are in the category of low-cost-provider,” I said. “What’s different about what Costco believes about their team members?”

“Well, I know they pay their employees more,” Curtis was quick to reply.

“If Costco pays more, why isn’t that simply a higher expense? What does Costco believe about their team members that is different?”

“It’s not just about the money,” he stopped to think. “I think they believe that if turnover is less, recruiting costs are less, people gain more experience, experienced people make fewer mistakes, they know the merchandise better, that the total cost of personnel is worth the tradeoff against low wages. That creates a completely different working environment.”

“Do you think that different working environment has an economic impact on other things? Are customers more likely to renew their memberships? Are customers likely to buy more? If that’s the case, then is paying higher wages really an expense or is it just part of their business model? Do customers look at a visit to Costco as an adventure?”
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Premeditated Culture, now available from Amazon.

Independence

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In the United States, we are celebrating our 250 anniversary since our Declaration of Independence. In 1787, Elizabeth Willing Powel asked Benjamin Franklin, “Well, Doctor, what have we got here, a Republic or a Monarchy?” Franklin replied. “A Republic, if you can keep it.”

Stay safe this July 4th. We will see you next week. -Tom

This podcast just dropped.  All about Elliott.
KPI Fireside Chat, hosted by Keith Norris, guest Tom Foster.

Slow and Fast

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“I’m curious,” Millie announced.

“That’s a good mind-frame,” I replied.

“How come every time I get the team together to talk about a new method or procedure, when we are done talking, they go back to the way we did it before?” she asked.

“I assume you got some feedback and agreement at the meeting?” I replied with a question.

“Well, no one objected,” she said. “They nodded. At least they pretended they paid attention.”

“And, they pretended to do things the new way, while going about things the old way?” I smiled. “How long have they been doing things the old way and how long have they pretended to do things the new way?”

Millie pretended to think, but her answer was quick, nodding, “The old way, as far as I can remember. The new way, three days since the meeting.”

“And, so, what is your insight?” I asked.

“I can presume they haven’t had the time to assimilate the new way with the old way. But this change is so different, it’s not a matter of folding in a new method. They have to literally stop doing some old things and start doing some new things.”

“And I assume,” I continued to smile, “that three days is not quick enough for you?”

“Look,” she stared directly, “the new method will be slower at first before it picks up. Once they get used to the new method, it should double throughput. I want to get through the slow part as fast as we can.”

“I appreciate your impatience,” I said calmly. “Sometimes, you have to go slow, so you can go fast.”

This podcast just dropped yesterday, all about Elliott (53:00).
KPI Fireside Chat, hosted by Keith Norris, with guest Tom Foster.

The Value of a Manager

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“I don’t understand,” Margaret lamented. “I know I used to be a part of the team, and then I was promoted to manager of the team. It’s different, these used to be my friends. We used to do favors for each other, cover each other’s shift when we had a family emergency. Now, it feels disconnected. I feel disconnected.”

“Your role has changed. What else changed when that changed?” I asked.

“Now, I have to tell them what to do. I have to make decisions on priorities. I have to dictate the method and the sequence of the work. I have a bigger job, now,” she said, making a face that showed she was not happy.

“Where does the disconnection come from?” I wanted to know.

“I think everyone thinks I am bossy, when it’s just my job,” she replied.

“Is it really? You are certainly accountable for the output of the team. But, is it your job to be bossy? Look, you have worked with this team for a long time. Do they know how to get the work done? Do they know what tools to use and how to use those tools? And, more. Do you trust them in those things?”

“Of course, I trust them. I have worked with most of them for more than two years,” she counted.

“Then, what would be your most valuable contribution to the team as their manager? What value could you bring to the table. They know the routine, they know the methods, they know the materials, they can make the easy decisions and solve the easy problems without you. What value can you bring to the team?”

Not an Ideological Discussion

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From the Ask Tom mailbag –

Question:
I have been told that my org structure is misguided, that I need to flatten my organization out, that my various teams should be able to make their own decisions. What gives?

Response:
What seems like an off-the-cuff remark about the way you run things, turns out to be a bit more complicated. The organizational structure is not something dictated by a friend, or a consultant, based on some ideology about modern companies and the new look of the corporation.

Organizational structure is simply the way we define the working relationships between people. If we draw it on a piece of paper, it looks like an org chart. If you give me your org chart, it tells me how you think about those working relationships with respect to these two questions –
Who has the accountability for output?
Who has the authority to make what decisions?

Your org structure defines those two questions according to your business model. Your business model will guide you to the structure you need based on the complexity of the decisions you make and the problems you solve. Easy decisions and easy problems don’t need much structure. But no one builds a growing business based on easy decisions and easy problems, things become more complex. The complexity of the work provides clues to the structure you need.

How complex is your business? If your company replaces residential roofs, one project at a time, with no overlap between projects, things are pretty simple. Add a second story to that residential roof and suddenly you have more safety issues. Simultaneous contracts add more complexity with scheduling, crew capacity, material receiving and staging. Shift to commercial roofing and things stack up faster. Professional buyers enter the picture. OSHA oversight and compliance. Insurance and risk management. Code compliance and risk retention. Cash flow and credit facilities. Operational and quality assurance systems. Warranty and maintenance contracts. There are multiple levels of complexity, all part of the business model which dictates the structure required.

You can remove the management layers in your company, but the complexity remains. You should have no more layers in your company than is required by your business model. But removing layers will leave some decisions to be made by people who do not have the capability to make those decisions. Removing layers will leave some problems to be solved by people without the capability to solve those problems.

Organizational structure is not an ideological discussion.

Scalability

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From the Ask Tom Mailbag –

Question:
When a medical service based business begins to scale and the customer experience becomes inconsistent, how do you typically determine whether the issue stems from personnel training or organizational structure?

Response:
It’s both, and a basket full of other things. Inconsistent customer experience usually stems from a lack of well thought out internal systems that bring that consistency. Your internal systems have to identify the common elements in all service delivery and be flexible enough to account for individual nuances. Those nuances need to be looped back in for consideration to how the system handles them, to constantly refine your system. And, then you have to train for the system.

That training will also teach you (as management) what realistic system deployment looks like, in terms of its predictability, repeatability and whether it can be delivered within the confines of your revenue stream (meaning, is your customer willing to pay for and value your system delivery). Sorry for the length of the response, but your question is not a binary either/or.

And, if you are truly looking to scale, your system is not just your service delivery. Scalability requires the integration of all of your systems. You have to have a well-thought out, consistently executed marketing system, a sales system that guides the right clients to your services. Most companies only focus on the operational system, but you also need consistent appointment and reminder systems, post-service follow-up systems, a privacy system, insurance and self-pay system. If you want to scale, you have to integrate ALL of your systems.

Second Guess

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“Why the long face?” I asked.

“I’m concerned about Rafael,” Eliana explained. “He was our best lead technician, always enthusiastic, knew his stuff, the team really respected him. We promoted him to supervisor two months ago and since, I noticed a slow disheartening withdrawal, from the work and from the team.”

“What does your intuition tell you?” I wanted to know.

“I don’t know, it’s like he is a different person,” she replied. “He seemed like a natural born leader and I wanted to give him the opportunity to shine. So when his supervisor got promoted, it was an easy decision. He said he wanted it. He got a raise, a small office off the production floor. But, now, I am having second thoughts.”

“I am flattered you wanted my advice, but you might find the conversation more productive if you talk to Rafael. He is the one who knows what is going on. Don’t avoid the conversation. If we made a mistake, we can easily correct it now, we have many options. If we wait another six months, the fix may be more difficult and we will have fewer options.”

Clarity

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“I don’t get it,” Elizabeth shook her head. “We hire MBAs, engineers, and industry veterans. Individually they were all great hires. Yet our projects still miss deadlines.”

“And what have you concluded?” I asked.

“That we need better people,” she said with a downbeat.

“Maybe. But tell me, who designed the roles they occupy?”

Elizabeth looked straight at me in an unspoken question.

“The smartest person in the world struggles in a role where the accountability is not clear,” I replied. “And a capable team member fails when they are given work beyond their current capability.”

“So the problem might not be the people?” Elizabeth showed a bit of doubt on her face.

“Most often, it’s the structure,” I nodded.

Elizabeth leaned back. “We’ve been replacing players when we should have focused on clarity.”

“And, clear to you may not be clear to the team member.”

 

Premeditated Culture is now available from Amazon.

Culture is Not a Poster

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Al Ripley arrived at Outbound Air on a Monday. The teamwork posters arrived the Friday before. He ordered them from Chicago, in the period when Outbound Air was simply the next assignment. One poster showed fifty people jumping out of an airplane holding hands. He used this poster before. It communicated, in a single image, the two things Ripley needed the organization to believe simultaneously, that everyone was in this together, and that they were all in freefall.

Premeditated Culture is now available from Amazon.

Technical Contributors as Managers

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“When did you notice the slowdown in throughput?” Catherine asked. The response from the client was consistent and overwhelming.

“Right after we promoted Duncan to manager.”

“And what was Duncan doing before he was promoted to manager?” she wanted to know.

“Duncan is an engineer. He was doing engineering. Best engineer we have, so we promoted him to Engineering Manager.”

Catherine knew engineers and the worst decision was to make an engineer a manager. She interviewed the team and documented her observations. Her initial report was so precise, so descriptive that it climbed the ladder to the client’s executive team, in charge of engineering integration with every other function in the company. She did not expect the email, but there it was in front of her. “We know we had a small budget for this project, but we want to expand deployment across all teams. What could we expect?”