Harold Corner is a powerhouse of energy. When he speaks, people listen. When he says that American business can beat the foreign competition-including the Japanese-he speaks with authority and experience. Corner is one of the old breed-or is it the new breed?-of entrepreneurs that believes anything is possible and means to prove it.
But Corner did not always feel and talk this way. Back about six years ago, Corner was in trouble. The early 1980s were a tough time for companies in the tool and die industry. Intense competition from Asian manufactures had already driven many major U.S. manufacturers overseas, reducing the demand for tools and dies at home. Then the industry was hit by a second wave of attack from foreign tool and die makers entering the previously inviolate domestic market, which conventional wisdom said would never happen since close communication between tool maker and manufacturer makes proximity very important. But it did happen to the industry and to Corner.
Corner is founder of C & J Industries in Meadville, Pennsylvania and a former President of the National Tooling and Machining Association. He awoke one morning to find many of his long-established customers buying molds from his Japanese competition. And the reasons were not difficult to understand. The Japanese were offering their custom-made molds delivered in the U.S. at lower prices and with faster delivery dates averaging 16 weeks compared with C & J Industries 32 weeks.
Unlike many in his industry who resigned themselves to apparently inevitable decline, Corner decided to take up the challenge and fight back. He set as his goals to cut his production costs and delivery dates to less than that of his foreign competitors and announced his intentions to every employee in the company. He then set about reviewing and revamping virtually every system, operation and activity in the company to raise performance to the highest possible level. He introduced a massive training program for upgrading the skills of people at all levels of the company, including special training on how to use systems more effectively. He also launched a quality program to get all his people involved in improving the molds they made.
Over the next 30 months, Corner brought down his production time from 32 weeks to 16 weeks and cut operating costs by $540,000. Business poured in and the company began to grow rapidly. During this period sales increased by 40% to cross $10 million in 1987, then rose another 30% in 1988 and are projected to reach $17.5 million in 1989-a near tripling of the company's revenues. Corner's remarkable turnaround illustrates the latent potential available to any company for tremendous improvements in performance within a short period of time. It also illustrates key elements of the process by which companies energize themselves for growth. It all starts with energy.
Over the last few years we have asked more than 1,000 U.S. and foreign companies to describe to us their most recent experience of rapid growth. Their responses reveal that during periods of rapid growth, companies share several common characteristic: a high level of energy and enthusiasm, a clear sense of direction, smooth running systems, good coordination and teamwork, good morale, pride, non-stop recruitment of new people and continuous learning of new skills. These characteristics reduce to four essential elements: high energy, clear direction, streamlined organization, skilled and motivated people. The relationships and interactions between these four are the keys to the process of converting corporate potentials into practical results in terms of high performance, high profitability and rapid growth.
In our study of major U.S. corporations with long histories of sustained growth described in The Vital Difference: Unleashing the Powers of Sustained Corporate Success, co-authored by Garry Jacobs and Frederick Harmon,3 we described the tangibly intense atmosphere of energy we experienced in high performance companies like Apple Computers, Intel, Merck Pharmaceuticals, Marriott, Coca-Cola, General Mills, Delta Airlines and Northwestern Mutual Life Insurance. High energy is the fuel and driving force for high achievement. It excites and enthuses people to great efforts and accomplishments. It spurs the organization to perfect its operations and raise the quality of its performance. It attracts customers, motivates employees and stimulates creativity and innovation. The generation and unleashing of that energy and its effective utilization by the company are the keys to an endless expansion.
The single most common characteristic reported by fast growing companies is a high level of energy. The task of accelerating the growth of a business requires an enormous amount of energy and hard work. Most companies feel comfortable growing leisurely at rates of 5, 10 or 15% a year and find that demanding enough on their energies. To grow at higher rates-30, 40, 50% or more-means to accelerate the process and that is considerably more demanding.
Regardless of the rate of growth, energy is the fuel for that expansion, and accelerated growth, like high speed driving and flying, demands a proportionately or disproportionately greater amount of fuel. Without that energy you cannot even think of doubling. You cannot plan for it or build for it.
That energy starts with the people at the top-the founder, the CEO and the management team. They must generate energy, embody it, radiate it, communicate it to everyone else in the company and express it in everything they do. That energy is needed to maintain and develop every component and every activity of the company: to formulate and implement plans, to give and carry out instructions, to maintain regular production, to meet delivery schedules, even to maintain facilities in a clean and orderly fashion.
Energy is needed to enthuse our people, to excite our customers, to attract investors, to negotiate with vendors, to carry conviction with the board and the management team and every employee in the company.
Think about the energy level in your company. Before planning to double or triple the company, you should be sure there is sufficient energy to achieve that goal. Are you generating and releasing sufficient energy to carry on routine operations effectively and to propel the growth of the business? Unlike the fuel capacity of a car or plane, the energy of a company is not fixed or subject to any finite limits. Our own energy level and the energy level of our people is under our control and it can always be increased. In later chapters we will be examining many ways to release further energy in yourself, in your customers, in those who report to you and even in your boss, if you have one.
Energy is the starting point, but energy alone is not enough. By itself it is aimless, uncontrolled and unproductive. It will not produce anything. It may even become destructive like the raw energy of a cyclonic wind or a raging river. In order for a company to utilize that energy effectively, it must possess the other three characteristics we referred to earlier-a clear direction, a streamlined and efficient organization, skilled and well-motivated people. Direction, organization and people focus and channel the energy and convert it into higher sales and profits.
Companies give direction to their energy by formulating goals to define their purpose and intentions. These goals are both quantitative and qualitative. Quantitative goals define how large the company wants to become-large in terms of revenues or profits or production volumes or offices in the city, the state, the country or the world. Companies also direct their energies by establishing shorter term quantitative objectives-to double revenues in two years, to triple profits in three, etc.
Quantitative goals describe what or how much a company wants to achieve. Qualitative goals define the manner in which it wants to achieve them. Disney wants its theme parks to be spotlessly clean and its employees to be cheerful and friendly. Federal Express wants every parcel to be delivered on time. Marriott focuses on carrying out every routine activity in a systematic manner. Dupont gives a near fanatical importance to safety. Merck is obsessed with product quality. Northwestern Mutual places a tremendous importance on communication and teamwork. Delta wants all its employees to feel happy and secure as part of the corporate family. IBM is deeply committed to the growth and development of its people.
Qualitative goals like cleanliness, orderliness, punctuality, safety, systematic functions, communication, coordination, service to customers, teamwork and development of our people are what we mean by corporate values. These values help us communicate to everyone in the company and to our customers and vendors precisely what type of performance we are trying to achieve. They direct the energies of our people, not only at the level of senior management, but all the way down through the organization by clearly stating how each activity should be performed.
Values focus and concentrate energy. Think of how much energy it takes for Disney to maintain a commitment to the value of cleanliness when 100,000 visitors edit check figures with company-including children of all ages-go through the park in a single day. Or how much energy is required for Federal Express to achieve 96% performance on their value of the on-time delivery, when a single plane delayed by bad weather could result in 30,000 disappointed customers.
According to the laws of physics, when energy is given a specific direction it becomes capable of accomplishing work. By giving direction to the energies in a company, corporate values and objectives convert those energies into a force. They not only focus the available energy. They also magnify it.
We all have seen the power of a goal to release people's energies for an extraordinary effort. In the last two minutes of the 1989 Superbowl game, the San Francisco 49ers drove 95 yards to score a touchdown and come from behind to beat the Cincinnati Bengals for the national championship. During that drive Joe Montana and his team moved down the field with a power and effectivity they had not displayed during the previous 58 minutes of the game. That is the power of a goal to release and direct energies for accomplishment.
How effectively does your company give direction to the energies of its people? How clear and inspiring are its values and objectives? How fully are they understood and endorsed by people at different levels? In later chapters we will be looking at ways to increase commitment to corporate goals and enhance their power to release and focus people's energies.
A SUPERTANKER CHANGING COURSE
Nedlloyd Lines is a 100 year old Dutch shipping company, a $1 billion company with the largest worldwide network of routes, the largest fleet under the Dutch flag and a very strong financial position. Those who know this somewhat traditional and conservative company well refer to it as "a sleeping giant in the process of awakening." As a first step toward that goal, the top management of the company has been actively trying to raise the level of energy and enthusiasm within the company by opening up the channels of communication, getting people involved and giving them an opportunity to participate in discussions about the company's future. The second step has been to provide a clear direction for the those energies. Senior management has formulated a strategic plan to double its revenues over the next five years, that is, to achieve in the next five years growth equal to that which the company achieved over the last one hundred. Announcement of the company's plans to purchase $750 million in new container vessels over the next five years has sent shock waves through the company and the rest of the industry.
Having successfully initiated this process and stirred the energies of this vast company, the Chief Executive, Theo M Oostinjen, has a major concern. Will Nedlloyd's organization be able to properly channel and effectively utilize the energy that is being released?. "How can we ensure that all the energy which is released will be properly harnessed for productive purposes, that it does not generate unrealistic expectations and impatience that end in frustration?"
Oostinjen's concern should be shared by every executive who tries to accelerate corporate growth. Because releasing energy and giving it a direction are not sufficient to achieve results. That energy needs to be controlled and properly channeled into productive activities. It needs to be converted from raw force into organizational power. That is the role of an organization.
When a company's energies are given a clear direction, they are ready for purposeful action. But that still is not enough to ensure that the company will grow rapidly and profitably and keep on growing. A mob possesses a high level of excited energy and a passionate direction, but mobs are only effective for destructive purposes, and even then they are not very efficient. Even in physics, a force must act on or through some instrument in order to accomplish work. Heat cannot do work in a vacuum. Electricity cannot do work unless it is converted into mechanical power by a machine.
In order for the directed energy in a company to become a productive power, it has to be channeled through an organization and harnessed to carry out specific tasks. Organization defines levels of responsibility and authority: who will make which decisions, who will give what instructions, who will execute each type of work, who will monitor and evaluate the work. Organization defines systems and procedures: how each operation is to be performed, how it will be communicated, and how different operations will be coordinated. Organization utilizes the energy of countless people-workers, supervisors, technicians, engineers, scientists, administrators, sales and marketing personnel, accountants, managers, etc.-to carry out a multitude of specialized activities according to specific plans in order to implement the company's values and achieve its objectives.
Imagine Joe Montana trying to drive his team down field without assigning each player to a specific position (job) and without a portfolio of carefully orchestrated plays to run (operating systems). He might find ten receivers going deep for a pass on a play he intended to run. Even if his team consisted entirely of highly motivated superstars, their enthusiastic energy and physical power would be no match for any well-organized team of professional players running well practised plays.
Think of your organization as a power plant which harnesses the raw energy of a river and converts it into productive power. How much of the available energy is the organization able to mobilize? How effectively does it control and channel that energy for productive work and expansion? How efficiently does it utilize the energy in its routine operations to maximize profitability? In subsequent chapters we will be examining strategies to convert a good organization into a championship team.
SWITCHING ON PEOPLE
Organization focuses and distributes the energy precisely to the points at which it is needed and guides its expression through policies, rules and systems. This gives organization a tremendous power to accomplish work. But the quality and effectivity of that work finally depends on one more crucial element-people. The skills and attitudes of our people are the last vital link in the process of converting that raw energy into practical results-high performance, high profitability and rapid growth. A company may have the best laid plans and the most sophisticated systems, but if the skills and attitudes of its people are not appropriate, it cannot achieve the maximum results.
How many companies seem to forget this self-evident fact? You pay $3,000 for a round-trip airline ticket to the Orient and when you ask the flight attendant for a blanket so you can sleep through the long flight, she tells you matter-of-factly that there are none left-without so much as a smile or an apology--a $3000 ticket with no blanket, no apology and no smile!--either because she has not been properly trained or she is not properly motivated. Here you are flying on a $50 million dollar plane belonging to a billion dollar airline with tens of thousands of employees and a worldwide network of routes, but what you remember about the flight is the blanket, the smile and the apology which the company forgot. It is a matter of skill and attitude.
You check into a luxury resort hotel at 3:00 in the afternoon with confirmed reservations made weeks in advance and the check-in clerk informs you that your room is not ready and asks you to check back in an hour or two. When you ask him to call you in the restaurant as soon as the room is ready, he informs you that there is no procedure for doing so. Is there a procedure for the room not being ready on time? It is a matter of skill and attitude.
There are literally hundreds of skills and attitudes that impact on the performance of our people. Each is like the hair thin filament in a light bulb. There may be plenty of power flowing through the electrical wires, but if that tiny little filament is broken--no light. If even a single skill or positive attitude is missing, the circuit is not complete.
The reverse is also true. In every company there are hundreds of small connections that are not being made right now, because a small filament is missing. Provide that missing link and astonishing results may follow. One CEO saw his business literally triple in a year, growing from $400,000 to $1.2 million, after he took a course to improve his interpersonal skills and he learned how to be more friendly in dealing with his customers. One course, one skill tripled his business.
Do your people have all the skills they need to get the maximum results from their efforts and maximum profits for the company? What more can you do to switch on your people for peak performance?
SAS TAKES OFF
When Jan Carlzon took over as CEO of Scandanavian Airlines in 1981, the company was losing altitude. It had lost $20 million the previous year. The market was stagnant. Energy and morale were low. Performance was sagging. In a business dedicated to getting you there fast, SAS had acquired a reputation for late departures and late arrivals. Punctuality had deteriorated so much that customers sometimes joked that the company's customer service was so good that if you were late arriving at the airport for your flight, chances were the plane would still be there waiting for you.
Much has been written about the story of SAS's turnaround, including a book by Carlzon himself. The steps that he took to re-vitalize the company are an excellent example of the power of the process we have been describing. His first task was to raise the energy level. He did that by pouring his own energies into the company, meeting with his management team and addressing groups of employees to stir them out of complacency.
Next, he gave a new direction to the company by formulating a new mission, values and objectives. The mission was "to become the world's best airline for the business traveller." The values he focused on were punctuality (on-time departures), pleasing the customer, and employee involvement. He set a standard to raise on-time departures to 100%. The objectives were explicit too: increase profits by $25 million in one year and by $50 million in three years. To ensure that the message was communicated down to every employee in the company, he distributed copies of a small booklet to all 20,000 employees describing the new mission and goals. These goals evoked an enthusiastic response from the people, a new energy, and focused that energy for a dramatic comeback. Carlzon writes: "Once they understood the vision, our employees accepted responsibility enthusiastically, which sparked numerous simultaneous and energetic developments in the company...The new energy at SAS was the result of 20,000 employees all striving toward a single goal every day."4
In order for these new energies to be converted into improved service and financial results, Carlzon realized that major changes would have to be made in the company's organization, which at the time was slow, unresponsive to customers and employees, authoritarian and bureaucratic. So he conceived of the now famous idea of turning the organizational pyramid on its heads, viewing the people on the front lines in touch with the customer as the real top of the pyramid and the other levels of management as essentially supporting staff to assist the front lines in carrying our their jobs more effectively to fulfill the mission, values and objectives of the company.
Whether the pyramid was ever actually turned upside down is open to question, but there is no doubt that Carlzon did institute very tangible changes which flattened the SAS organization and had a very real impact on its ability to channel corporate energies. The major change was to shift the focus of the entire company from managing a business to serving customers better. Responsibility for achieving corporate goals was clearly assigned. Many more decisions were delegated to people on the front lines, empowering them with authority to act to improve customer service. The jobs of middle managers and even executives were redefined to focus on the values of service and punctuality.
The new organization was also streamlined by improving systems and reducing paperwork to a minimum. New systems were introduced to make delegation more effective. Everyone was involved in achieving the corporate goals. Procedures were modified to reduce the time required to service planes between flights. A computerized monitoring system was introduced to measure performance on cargo delivery times and flight departure times.
Beyond all these changes, Carlzon focused on one more critically important element in the equation for energizing the company--the skills and attitudes of the people. Unless each individual in the company possessed the skills needed for high performance and an enthusiastic commitment to the corporate goals, there was no way to ensure that the company would achieve those goals. To provide those skills, the company conducted customer service training programs for 12,000 employees. They also introduced cross-training, so that employees could perform more than one job.
Changes in the organization had a positive impact on employee attitudes. Delegation got people more involved. It created an atmosphere in which new ideas could sprout at any level of the company and have a chance to be heard. It "unleashed our employees' creativity through decentralization."5 The company instituted awards, celebrations and other forms of social recognition to acknowledge peoples' efforts and contributions to improved performance.
The results of these efforts: On-time departures improved dramatically. In the first year alone, profits increased by $80 million, against a goal of only $25 million. In a stagnant market, passenger volume increased by 30% in three years. In 1983 Air Transport World named SAS Airline of the Year, fulfilling Carlzon's aspiration to make SAS the best.
ENERGY CONVERSION AND DISPERSION
The process which Carlzon initiated at SAS closely parallels what Harold Corner did in his company and what we have seen companies of every size and description do to energize themselves to dramatically increase profits and grow rapidly. This process can be thought of as a series of lenses which focus and magnify corporate energies and convert them into material results. The first lens consists of the ideas that give direction to the energies. This lens focuses and converts the energy into force. The second lens consists of the organization which harnesses and controls that force and converts it into a productive power. The third lens is made up of the skills and attitudes of our people which express that power in millions of tiny acts every day--what Carlzon called "moments of truth". Figure 2 depicts this process of converting energy into material results.
Think about how your company generates, releases, directs and channels the energies of its people. How effective is the company in converting these energies into productivity, profitability and growth?
The questionnaire at the end of this chapter is intended to assist you in evaluating the company to identify ways to increase the flow and conversion of energy into revenues and profits.
Figure 2. Corporate Energy Conversion
ENERGY CONVERSION QUESTIONNAIRE
This questionnaire contains five sections: energy, direction, structure & systems, communication & coordination, attitude & skills. Each section consists of twenty statements.
Evaluate how true each of these statements is for your company on a scale from 0 (low) to 10 (high) as shown below. You may score the statements with any whole or decimal number, e.g. 2, 3.5, 6.7, 9, etc.
After answering all the questions, add up the subtotal for each of the five sections to determine which areas need improvement in order to increase the generation and conversion of energy in your company.