Tag Archives: Momentum

Build a Positive Culture in Your Organization by Rewarding the Right Heroes

Heroes define the culture of a company. They encode the true values of the business in the stories that emerge from their actions. We all remember stories of an employee working through the night with no regard for sleep, wagering everything on a new product, unifying a contentious team, or stopping everything to address a problem. These are the heroes of your organization, and these stories become the legendary standard of what makes a good employee. These heroes’ legends are passed on to employees new and old, subtly conditioning their behavior to match the stories’ values. Heroes can lead your company to long-term success, or they can act more like outlaws who bring it to its deathbed. Much of the success of your company’s culture depends on which heroes you reward and which you redirect.

Positive Example of Heroes in Legendary Customer Service

Two excellent examples of creating the right kind of heroes are Nordstrom and Ritz-Carlton. Both highly value customer service and emphasize its importance. However, more than company handbooks, what really express the significance of customer service are the stories told of past positive examples. Nordstrom heroes include a Nordstrom employee who accepted a customer’s return of tire-chains even though the clothing store did not sell tire-chains and an employee who ordered and personally tailored an Armani suit overnight for a desperate father-of-the-bride, even though Nordstrom did not sell Armani products. Likewise, most at Ritz-Carlton have heard about one of its housekeepers who upon finding a laptop left in a room, immediately bought a $2000 plane ticket to Hawaii with the company’s card and personally delivered the laptop to the desperate former guest about to present at a conference. The next day, the housekeeper received a simple “good job” note from her boss because she had simply done what was expected. These heroes’ examples quickly answer fellow employees’ questions of “just how important is customer service?” This creates an empowered workforce, inspired by stories of heroes before them, to move forward promoting the stories’ values.

Community-building Sheriff vs. Lone-gunman Outlaw

Although the goal of fostering values with positive heroes is obvious, many businesses inadvertently foster heroes that are better described as lone-gunman outlaws. For example, you can quickly destroy a positive culture by praising accomplishments that “got done no matter what.” As important as results are, the method of obtaining those results builds your company’s culture. For example, if you publicly recognize an employee that ignores procedures to accomplish an “urgent, important” goal, then you begin to build a culture of breaking procedures. Rewarding results, regardless of the how the hero gets them, often builds a business climate prone to waste money, discourage teamwork, squander growth, and drown good ethics.

On the other hand, choosing the right qualities to emphasize can bolster heroes that can save your company and propel it into future growth. This hero, the community-building sheriff, makes good things happen by persuasion rather than force. Instead of making others dance by shooting at their feet, this person motivates employees to join in a common goal. Driven but respectful, he or she both follows and helps improve procedures so that everyone involved accomplishes their goals. Indeed, these hero sheriffs often help build the company’s structure so that success can continue to flow long after they ride into the sunset. By recognizing and supporting the sheriff heroes who accomplish with your team instead of lone-gunman outlaws who accomplish despite your team, you can build a positive culture that saves money, fosters teamwork, encourages growth, and promotes good ethics.

What type of heroes do you have in your organization? Share your thoughts in a comment below, and subscribe to future posts.

[Image by Denis Medri. Used with Permission.]

Slash Obsolete Inventory with this Simple Hybrid Purchasing Strategy

Obsolete inventory, the stock of products that you’re not actively selling anymore, holds back many small businesses from future investment and growth. It ties up cash and hogs valuable warehouse space. While small businesses can certainly implement various methods of liquidating old products and move on, the best solution is to stop over-purchasing in the first place. Of course, never buying obsolete inventory is an obvious solution, but it’s a very elusive goal. Obsolete inventory has a way of sneaking into warehouses. As a cowboy would say, “how did all those sick cows wander onto my ranch – and how can I avoid them in the future?”

In order to reduce future stockpiles of obsolete inventory, you can work with your supply chain team to implement a simple hybrid purchasing and manufacturing strategy that combines small-batch validation with high-volume price discounts. It combines the power of validation and speed to market with the cost benefits of large-batch, long lead-time outsourced manufacturing. We’ll look to a calendar company to explain the hybrid strategy.

Hybrid Strategy Example: ABC Calendars

ABC Calendars sells a wide variety of unique and fashionable calendars. Each year, some of its styles do very well and sell out, but some of its styles barely sell at all. In July, ABC doesn’t know which of its styles will sell well, and in February of next year, its leftover inventory will drastically drop in value. Not too many people buy new calendars two months into a new year. In the past, ABC Calendars has moderated focus groups to forecast the winners. Based on forecasts, ABC sent out large purchase orders to its Asian vendors. These vendors produce in large batches with long lead times, but their low cost helps keep ABC’s margins high. ABC needs these margins to offset the money it loses from the styles that don’t sell. Historically, ABC has done pretty well picking winners, its right about two-thirds of the time. However, as the competitive market changes, ABC needs to do much better.

The real problem ABC Calendars is facing is that the low-cost, outsourced vendors require long lead times and high order quantities. This forces ABC to guess the winning styles before it has any real sales data. To make a good margin, ABC can’t rely on local or in-house manufacturing because it costs so much more. Nevertheless, ABC is trying a new hybrid strategy that will give it quick and valuable validation while still enjoying the lower margins that outsourced vendors offer. The following graphic and explanation show how ABC utilizes a hybrid purchasing and manufacturing strategy to reduce inventory and better calibrate which products deserve a large purchase order.

ABC defines the first step in each product’s life cycle as the prototype phase. More than just a working prototype to proof and pass around the office, this is a chance for ABC to get some initial customer feedback and validation. Even at a very high cost, this phase enables ABC to print around a hundred of each calendar design. It then places them in a few test stores to see how they sell. This first wave of customer voting with their pocketbooks will guide ABC to know which styles show promise.

Based on initial sales in the prototyping phase, ABC begins low-volume, higher-cost manufacturing. Whether ABC manufactures itself or uses a local company, it can slowly increase volume with smaller batches. It can then continue to sell to its early customers and obtain more validation. Usually the higher cost of local manufacturing erodes ABC’s profits. However, before it jumps into the investment of a large outsourced order, ABC doesn’t mind paying a higher price to gain market insight. It actually prefers giving up some margin to avoid piles of obsolete inventory later.

Now that ABC knows which styles have the most positive momentum, it’s ready to place the large orders and capitalize on the lower price from higher volumes. However, before placing goliath-sized orders, ABC plans its exit strategy for the items it’s ordering. ABC orders a substantial amount to carry it through most future demand, but not enough to sustain demand through February. Instead, ABC orders enough to satisfy around 80% of projected demand, planning to run out of inventory around mid-January. Then, when inventory starts to run low, ABC switches back to the local manufacturing option. Again, this decreases margin, but it helps guarantee its warehouse will be nearly empty when March 1 comes and demand disappears for its product.

In addition to printing calendars, any business that produces a large number of SKUs and relies on slow but cheap outsourced manufacturing can significantly benefit from this hybrid strategy. It’s certainly not a lean, one-piece flow or a built-to-order supply chain strategy, but it’s a realistic step in an effort to reduce inventory through hybrid purchasing strategic shift.

What are your thoughts? Please add your experiences or thoughts in a comment below. Additionally, please subscribe here to receive our weekly insights.

Achieving Great Things

Lean Quote Roundup

Leonard Bernstein, a composer and orchestra director, isn’t mentioned in any supply chain book I’ve read. However, I love his quote that hangs above my computer:

“To achieve great things, two things are needed; a plan, and not quite enough time.”

The pressure of a deadline has a unique way of motivating action. Even if a plan isn’t perfect, the momentum from starting helps course correct and guide to the final goal.

Personal Significance

Recently, my company was able to clear out most of its obsolete inventory to a liquidation partner with a single order. In total, this included a fifth of everything we stocked–quite a bit of product. To make the project more challenging, we needed to repackage everything into different configurations. This rework amounted to 850,000 touches in two weeks; the task daunted my small crew and me.

I jumped into the production plan. Any mistakes at the front would hinder us from filling the order with variety packs, because if we used the wrong SKUs at the beginning, we would end up with the wrong ones at the end. I built a simulation in Excel that laid out exactly what items should be in each of the cases. It wasn’t perfect; I knew some of the inventory numbers were incorrect, but it helped me move forward in the right direction.

Since my team was busy with our usual orders, I brought on a new team of temporary employees just for the order. I even had my wife come in, since she was on summer break from teaching. We lined up everything numerically, built an assembly line to pack the boxes, and worked tirelessly. While slow at first, everyone contributed ideas of how to improve speed and quality. After instituting many suggestions, we reached a pace previously thought unachievable. Pallet after pallet filled our warehouse with product that was ready to ship. As the final Friday deadline rolled by, we were calmly cleaning up because we had finished ahead of schedule.

Now I’m not sure everyone would concur that several truckloads of reworked product qualifies as a ‘great thing’, but to me and my company, it was.

What’s your recent great thing? Please add your Comment below and share your story.