Second Best Company to Work For

Fortune Magazine’s 2017 “100 Best Companies to Work For” rated Wegmans Food Markets as the second best company to work for.

As Inc. Magazine’s article reports, Wegmans does not pay the highest wages compared to many of the other companies on Fortune’s list. However, it does have some attractive perks for tuition reimbursement and health care insurance but, in comparison to others on the best to work for list, it falls well short.

Why the high rating? Its culture and its management style receive high grades. This is true even though Wegmans has strict rules for its employees such as: the precise number of minutes for a break and the speed at which cashiers check out customers’ purchases.

Marriott International is number 33 on Fortune’s Best to Work For list. I became aware of Marriott’s rating when I was Chief Executive Officer of a distressed company in Austin Texas. The company I was managing had high hourly employee turnover. We paid minimum wage. Marriott also paid minimum wage to its hourly employees but had virtually zero turnover. I met with the hotel manager. Spent time learning how it was accomplished.

Marriott has similar reasons for being on Fortune’s list. Its culture and its management style. Heavy on employee recognition. Its support of employees and their families when they have a medical or personal issue. At the same time, Marriott also has strict performance measurements for it employees.

One minor example. A Marriott hourly laundry employee’s mother died. The hotel gave him paid time off to take care of the funeral arrangements. The hotel manager attended the funeral. The employee deeply appreciated it. He was moved to tears because the manager attended the funeral. He had thought he was a nobody at Marriott, fungible. He never forgot this gesture. He stayed with Marriott and was eventually promoted to a supervisory position.

It is not difficult to have a Wegmans’ and Marriott’s culture. It is not expensive. It pays off with higher than average profit margins and return on total capital.

Wegmans is a privately owned company. Some estimates put its operating profit margin at above 7% - higher than its largest competitors and Whole Foods.

Fixing General Motors

 
Even well-run manufacturing companies periodically have product quality problems. The lifeblood of a manufacturing company is controlling its costs. Quality problems increase costs and ultimately reduce sales. As such, successful chief executive officers pay attention to product quality costs and causes which are readily available in monthly financial and operating reports.

Reports that the General Motors’ CEO and senior officers did not have knowledge of this critical and tragic ignition switch defect points up a serious flaw in its management process and culture.

The cause of GM’s ineffective management process

As reported in a recent Bloomberg article, GM’s senior management may not have learned of the ignition switch problem because: “… people didn’t want to push bad news upward.”.

Depending on the culture, lower ranking employees may not come to a chief executive officer’s office to reveal a problem. Some may not speak up in a meeting with higher ranking officers. Even senior officers may remain silent so as to not violate an unspoken pecking order, keeping vital information from being considered.

If we are to believe that management was unaware of this extremely serious defect for a decade, it raises the question of what other hidden operating problems is GM’s CEO not aware of today that can affect its performance and reputation.

General Motors has a correctable management process problem. It apparently has a hidebound culture that isolates senior management from an accurate and timely understanding of what goes on in its operations.

Correcting GM’s flawed management process

CEOs and senior officers of successful companies accomplish being fully aware of problems by using “random walk” which results in “bottom to top” communication – commonly referred to as “bubble up”.

I was given excellent advice on my first day running an Emerson Electric division:

“Remember you are at the top of your division’s organization pyramid. You will only know 10% of what is actually going on. You must “submerge” yourself into the lower levels of the organization to learn about problems. You cannot be office bound. “Randomly” walk your office hallways and the floors of your manufacturing plants. Be visible. Ask questions. Listen. Relax. Smile. Do not make friends or make decisions lower management should handle. If you don’t have time to do this, you are working on the wrong priorities.”

Emerson Electric is considered an exceptionally well-run manufacturing company. Management is never surprised. The management process relies on hands-on, face-to-face cross-functional communication. No videoconferences or telephone meetings.

When Chuck Knight was Emerson’s chief executive officer, there were about 130 manufacturing plants. Knight carried a matrix with him that listed every plant with the dates of his visits. His advice: “…make sure you are in your plants frequently…go alone.” He was known for visiting plants unannounced and alone. An example of a successful CEO seeking an accurate understanding of what goes on in the company’s operations.

For GM to fix its process requires a change in its culture with the development of “bottom to top” communication. To make it work its CEO and senior officers must use “random walk”.

General Motors has about 10 final assembly plants in this country. Its other 34 USA plants produce the components used in final assembly.

A brief 4 hour visit twice a year to each of its 10 USA final assembly plants would require no more than 20 half days from a GM chief executive officer’s 250 day annual schedule.

This is all that would be needed to learn what is going on in GM’s operations.

GM’s CEO should go alone, without an entourage. Do not notify the plant that the CEO is coming – make it a surprise visit. This will avoid having the plant spending costly hours fixing and cleaning it. Walk through the offices and manufacturing floor alone, without the plant management.

After a few visits people will relax and talk to a CEO – particularly if they see a rational, approachable person that can be trusted. People will tell of problems, make suggestions, disagree with decisions or just vent their concerns. The CEO should ask questions: “How are we doing? Do we have any problems? How is our quality?”.

Once every three months randomly drop in unannounced and alone to various GM committees particularly the ones cited in the Bloomberg article: "At the heart of General Motors…slow response to fatally flawed ignition switches is a committee culture that impeded the flow of information…to the corner office.". Ask: “Do we have any quality issues? Any production problems?”.

A General Motors CEO’s periodic random walks will breakdown a dysfunctional management process and an inept culture. It will eventually result in communication flowing from the very bottom of the organization to the top.

If chief executive officers do not have time to do this, they are working on the wrong priorities. Thus, failure will be guaranteed.
 
Follow-up:

NY Times’ recent article: “G.M. Recalls Another 2.7 Million Vehicles”

Just two months after GM announced the recall of 1.6 million cars with the ignition switch defect it announced an additional recall of 2.7 million vehicles. This raises the question of what other hidden operating problems is GM not aware of today that can affect its performance and reputation.

Bloomberg’s recent article, “Don’t Bail GM Out Again” is a helpful read noting that GM continues to make poor quality cars which was one cause for its decline into bankruptcy. Its earnings are currently slumping.

Another worthwhile article by the Wall Street Journal in 2012 “General Motors Is Headed ForBankruptcy – Again”

Can GM fix its hidebound culture and ineffective management process?  

The Netflix Culture & Mistake

Netflix’s culture was described in a recent edition of the Business Insider. It makes an interesting read. At more than one hundred pages, it is quite long and detailed – but worthwhile.

While it is described as a statement of its company culture, it is more of a guide and blueprint for its employees on how the company operates or, perhaps more accurately what is expected of its employees.

Netflix’s culture document has three principal themes – Performance, Freedom, Responsibility - and expands into seven specific requirements which are listed below:

Values are what we value.

High Performance.

Freedom & Responsibility.

Context, not Control.

Highly Aligned, Loosely Coupled.

Pay Top of Market.

Promotions & Development.

 The several factors frequently emphasized:

“Performance” is the most important variable leading to success – it is cited repeatedly throughout the statement. It will overcome context and control failures, responsibility issues and success with hiring and promotions.

An indication of Performance’s importance are two warnings to employees: “Accomplish amazing amounts of important work.” “Adequate performance gets a generous severance package.”

“Think strategically.” “Focus on strategy & goals.”

“Minimize written rules.”

“Communication.” “Frequent department meetings.” “Honest, candid, non-political communication.” “Challenge prevailing assumptions.” “Courage to say what you think.” “Quick to admit mistakes.”

“Open internally about strategy and results.” (i.e., the company makes sure all employees are thoroughly familiar with its strategy and results)

“Judgment.” Largely refers to how decisions are made: Identify root causes, not symptoms. Think strategically, not tactically. Make good decisions regardless of uncertainties – i.e., do your homework.

“No toleration for brilliant jerks” Smart but difficult to work for managers are not retained.

In the first few pages they surprisingly go out of their way to harpoon Enron’s value statement that was displayed in Enron’s lobby: Integrity, Communication, Respect, Excellence.

It is unusual for a company’s culture to be a written document. Although one of the world’s most successful companies – Wal-Mart – publishes a statement of culture.

By comparison, in my fifteen years at Emerson Electric Co. there was none and one was never discussed. We all understood the culture and the company’s values. It was exactly the same as Netflix’s emphasis throughout its culture statement: “Performance” and “Strategic Focus”.

Netflix acknowledges that they know they are not perfect but continue to work toward achieving their goals by stating in the culture document: “We are getting better” “We keep improving our culture as we grow. We get better at seeking excellence.” This certainly gives credibility to the constructive perspective that supports Netflix’s statement of culture are.

However, Netflix does make mistakes. One major error was this year’s decision to separate its DVD service from its Internet streaming service. Three weeks after the spin off decision was announced, Netflix reversed itself and decided to not spin off its DVD service. It decided to keep both services under one name and one Web site.

The positives:

● The quick realization of a mistake with the reversal decision being made just three weeks after it was announced. (It took Coca Cola three months to reverse its New Coke decision.)

● A candid admission that a mistake was made and that hubris was a factor.

● The 60% price increase. It may make the mistake fade quickly, if it sticks, as it will have a significantly favorable impact on profitability.

The negatives:

● Contrary to its culture statement on Judgment, thorough homework for this decision was not completed.

● The admission that hubris played a big role.

● Can the company recover? Will competition capitalize on the error? Will customers accept the 60% price increase? Will Netflix record Net Losses in 2012?

Click on this link for Netflix's culture document.