subject: Setting Systems to Handle Increased Complexity [print this page] Setting Systems to Handle Increased Complexity
The ultimate goal of imposing structure and instituting systems is, of course, predictability. Unless a CEO can pinpoint where his company is today and can project where it's going to be this week, this month, this quarter, and this year, it's not on a trajectory for growth. In fact, it might not be on track for survival. At McKinney Lumber in Muscle Shoals, Ala., Joe McKinney inherited a $5 million family business and built it to more than $50 million in revenues in just over a decadethanks, he says, to his almost slavish devotion to metrics and measurements. McKinney started by training his entire work force to understand terms like "cost of sales" by having them operate a sandwich business at lunch. He also established and popularized an internally understood "critical number," a measurement of plant productivity. Through that number, or "dollaring the production costs," as he calls it, everyone at the company can tell, daily, how much profit, if any, is headed for the bottom line. "The number gives you a firm foundation that lets you know where you are, even if you don't like the answer," McKinney says.
Like everything else associated with growth, predicting the course of a business becomes more difficult as revenues increase and the stakes grow bigger. "When we were measuring for a cake, a measuring cup worked fine," McKinney says. "But we needed a bigger bowl for a state dinner, and the accuracy has to be therebecause a 2% error rate on ten is nothing, but on 1,000, it's a miss by 20. So the tolerances of the system have had to tighten up as the company grows."
Of course, the best-designed system will work only if you get everyone reading off the same page. Many gazelles find it useful to set priorities for each quarterno more than fiveand then to identify one goal that supersedes the others. That is known as a Top 5 and Top 1 of 5 priority list. At Carney Interactive, an Alexandria, Va., software company that has grown to $4.3 million in revenues this past year from $1.9 million the year beforeand hopes to double again this yearfounder John Carney keeps the Top 5 corporate priorities for the quarter and the company's eight core values on 82-by-11-inch laminated sheets posted near his employees' noses. There's also a place for each employee to write his own Top 5 priorities for the quarter, aligning them with the company's Top 5. The postings remind the work force what's important, like the necessity of bringing projects in on budget, and core values such as the need to manage corporate resources wisely. In addition, the postings serve as a simple but effective quarterly-performance-appraisal system. But Carney also likes the impression the signs make on visitors. "It sends a clear indication to a client, a banker, or a prospective employee that there's something different about how we do business," he says.
Like many gazelles, Carney's company drives quarterly priorities under the rubric of a theme. Choosing a space motif, Carney first set a "launch" theme and introduced it at an all-company event held at the Challenger Center for Space Science Education, in Alexandria, Va. "Our current theme is escape velocity,' because as the organization is growing, we're escaping the old bonds of how we used to do business," Carney says. "It's like a spaceship escaping gravityyou've got to exert a lot of energy to do it." Each time the 40-member work force hits a sales goal, there's a theme-related celebration, with prizes and recognition.
While many companies tend to concentrate on sales goals, it's important to focus on other areas too. "We tend to pick a nonsales goal in our fourth quarter each year," says the Scooter Store's Harrison. One year he established a robotish Sy-Fi (systems-finance) theme, which identified critical areas for improvementincluding a call for zero defects, "which was at that time ridiculous." The following year Harrison defined a "customer wow" theme, which aimed to have customers saying "wow" whenever they interacted with the company. (Harrison created the first "wow" by riding an elephant into a kickoff meeting for the new program.) Harrison set another challenge: cutting back on the time it took to get a customer's malfunctioning wheels fixed. "The industry average is seven days," he says. "We got it down to a day."
What makes a quarterly goal achievable is a daily and weekly rhythm aimed at keeping everyone informed, aligned, and accountable. "It's amazing what you can accomplish when you get 100 people all working on just one priority, instead of 27," says Bolanos. One of the most successful practices any company can implement is that of a daily huddleno more than 15 minutes per group, in a room or on a daily conference call, just to celebrate progress or identify barriers blocking that progress. The great petroleum tycoon John D. Rockefeller held such a meeting with his executives every day of the 19 years he spent building Standard Oil (see box). The meeting not only keeps people informed but also helps put out fires that could burn up time at the weekly meeting, where the main topic should be the quarterly goals.
This rhythmic "pulsing" of daily and weekly meetings constitutes the heartbeat of a growing company. To make the best possible use of these sessions, some companies set aside a huddle area where the walls are mapped with priorities, core values, metric charts, and market data. "Our executive team calls ours the situation room, because we're surrounded by stuff that's big picture to us," says Harrison. "The fact that we meet there keeps us focused."
