Five principles to improve productivity, reduce churn & increase profits

Posted on 18. Nov, 2011 by ger in Leadership, New Ways to Work

Project collaboration new business books

Five books describing a new approach to business

There’s a revolution happening in the way businesses are being run. This post will distill five key principles of this transition from five “new approach” business books. These principles will help you increase productivity, reduce staff turnover and increase profits.

Many books and blog posts have been written about this new approach to business. Many present case studies from companies like Apple, Best Buy, Enterprise, Semco, Salesforce, and WL Gore. The Whole Foods Market story is profiled in Gary Hamel’s “The Future of Management”.

The Whole Foods Story

Whole Foods Market is made up of many empowered teams. Each team:

  • Has autonomy and is in essence a small business inside the store
  • Has freedom but is held accountable
  • Transparently publishes their performance (profit/hour)
  • Can veto new hires
  • Can decide what to stock

Each store is benchmarked 10 times a year. The pressure to perform comes from peers not managers. This non-hierarchical structure means decision making is distributed and small problems don’t fester before being noticed and addressed.

While this might sound new-age and chaotic, Whole Foods Market is the most profitable food retailer in the US (per sq foot). Whole Foods Market rallies around a clear purpose. “We want to improve the health and well-being of everyone on the planet through higher quality foods and better nutrition. We can’t fulfill this mission unless we are highly profitable.”

Other Success Stories

Other companies have made similar radical transitions and seen performance improvements:

  • Salesforce switched their product development to agile and increased productivity by 38% and doubled their revenues over a two year period
  • WL Gore has $2B in revenues and has been run as an innovation democracy for 40 years
  • Best Buy started a “results only work environment” and increased productivity by 41% and reduced staff turnover costs by 90%
  • Thogus Products a small manufacturing company increased output 67%

These revolutionary techniques come labelled in many ways: radical management, future management, agile businesses and protean organizations. Whichever label you choose, companies that use these techniques are surviving and prospering. Companies who stick to the old techniques of cost cutting, salary reductions and layoffs lose productivity, customers and frequently enter a downward spiral from which recovery is extremely difficult.

The key principles

Empowered teams of engaged individuals

Scott Page studied groups solving complex problems and found a cognitively diverse group of people outperforms a group of like minded experts. Teams which are given autonomy and control perform better. When people at the grassroots of the organization have a clear line of sight to customers they can see how they are contributing to the organizations goals.

Delivering true customer value

Unhappy clients can damage a brand. People with a line of sight to the customer feel more motivated. The meaning of their work is not the toy they’re assembling or the profit the company will make, but the delight on the face of a child. Companies like Enterprise have used net promotor scores to delight customers and turnaround their business. In contrast, David Carroll’s YouTube video “United breaks Guitars” has been watched over 11 million times (at the time of writing).

Using short iterations value adaptability over predictability

Projects with long timelines and complex Gantt charts repeatedly miss budgets and deadlines. The iterative approach was used to great success on Polaris submarine program in the 1950’s and 1960’s. By reducing the amount of work in progress and breaking large projects down into four weeks long or smaller iterations, teams can become far more effective.

Information radiators

Lack of management transparency has resulted in a number of disasters. Problems are brushed under the carpets. Well-meaning questioning is rooted out as dissent. When teams create dashboards to show progress there’s no need for status reports. Anyone can see information about the project. The best performing organizations have universal accountability.

Introspection and action

It’s hard to imagine how stopping a production line for a defect could be a good idea, but it is. The team must first recognize reality and the issues that exist but that’s less than half the battle. Taking remedial action is usually the hard part. Changing people’s behavior to fix systemic issues is even harder.

    “Implementing continuous self-improvement requires a fundamentally different kind of mind-set from traditional management. It involves creating an environment in which the organization draws on the full talents and capacities of the people who work there… It’s about powering up the internal energy of teams so that they transcend their limitations and create products or services that generate client delight.” – Stephen Denning

The time to act is now

Maybe you’re thinking “yes this is important, we’ll do something about it soon.” Maybe you’re too busy. If your business is not improving it’s standing still. Companies who delay will: miss opportunities, lose customers, and be outmaneuvered by nimble competitors.

Learn more

Thank you for reading. We hope you found something useful. Please try Goshido, our collaboration & project management platform. Goshido can help you and your teams to apply new business principles to improve productivity.

If your company is an Enterprise Ireland client you can avail of training and support to introduce Lean and Agile techniques to your business.

Some books we recommend

Here are links and summaries to some great books on the “new approach” to business.

Stephen Denning’s book The Leader’s Guide to Radical Management applies agile techniques to the organization as a whole, not just a single team or the product development group. Denning translates Agile and Scrum from software development into general business terms.

The Way We’re Working Isn’t Working by Tony Schwartz, Jean Gomes and Catherine McCarthy creates a road map for a new way of working. At the individual level, they explain how we can build specific rituals into our daily schedules. At the organizational level, they outline new policies and practices that energize great performance.

In Succeeding with Agile, Mike Cohn describes success factors in applying an agile technique called Scrum in your organisation. It is mainly written from a software development perspective but there’s some valuable suggestions on team dynamics and the need for enlightened leadership. Chapters 10 and 12 describe the mind shift needed to become a “servant leader” of self-organizing teams.

Gary Hamel in The Future of Management makes the case that management innovation fuels long-term business success. He profiles a number of companies who have successfully reinvented management for their organizations.

In What Were They Thinking?: Unconventional Wisdom About Management, Jeffrey Pfeffer describes conventional business wisdom and the problems it can cause. He focuses on three common themes: understanding feedback effects, self-managing teams, and avoiding overcomplication.

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