“What impact are you having when you put bonus programs into play? Is it a negative impact—is one department benefiting but another department suffering because of that?” That’s the question PQ Systems’ President Beth Savage poses in the video above.
Beth explains how profit sharing, for PQ Systems, has been effective in cultivating ownership and teamwork across the company. “I would just ask other business owners…how can you really have your whole organization performing at top level?” adds Beth.
Moving away from incentives or a structure that encourages internal competition can be a shift in approach for many business owners. Mark Thompson, an Aileron Business Advisor explains that competition itself is not necessarily detrimental, but competition within a firm can be.
“The best place for competition is with the entire team of the organization competing to improve prior results – competing to improve the work itself,” says Mark. “Competing department to department, or employee to employee, often invites negative energy into the organization.”
“When there is pressure to compete internally, employees tend to be less likely to share information. This can become a barrier to trust. As a result, the business is set up to be less efficient and collaborative, which impacts productivity for the entire business.”
Challenge the Status Quo
In contrast, if a department is able to work together in order to find productivity gains, that’s when value is produced for the organization.
When team members seek to improve productivity and value in this way, the competition is simply against the status quo of the organization. It’s a mindset based in improving how things are done, sharing information, and working more collaboratively. With a high degree of commitment to optimizing the organization, team members will find opportunities to innovate, reduce costs, and increase productivity and growth.
“If the team is able to do what it takes to produce a dollar's worth of value for 80 cents compared to last year, then they are winning the competition, and they are making productivity gains, together,” says Mark. This approach helps because employees are in the “competition” to challenge the status quo collectively, and the team doesn’t win unless the entire organization wins.
Support Your Direction with Controls
Competing against the status quo is one way to optimize an organization. Another part of optimizing an organization are using organizational controls.
“Controls are like a missile guidance system,” says Clay Mathile in his book Run Your Business, Don’t Let It Run You: Learning and Living Professional Management. Clay is former CEO and owner of The Iams Company, which sold to Procter & Gamble for $2.3 billion in 1999. He is the founder and Chairman of the Board of Aileron.
“Before a missile is even launched, the destination has been determined. In knowing the destination, the missile guidance system can be programmed to alert the missile when it begins to stray. You can aim for what you see as your business’s final destination, but you need to have controls in place that will alert you when the business begins to go off course,” he writes.
Use Control Charts to Stay on Course
A control chart is a useful tool to alert business leaders when parts of the organization can be improved. Specifically, control charts help to demonstrate how a process is behaving within the business, says Matt Savage, Product Manager at PQ Systems: “Control charts help you to avoid reacting to common (or normal) variation and signal when to react to anomalies (or unusual) variation.”
A control chart shows you how the process is expected to run, if left alone, and signals you when to take action. This helps leaders to know how productivity is being impacted across the organization. It also helps employees have tools to optimize what they are working on.
“At PQ Systems, we use control charts in our sales, support, accounting and other systems. By tracking the number of outbound and inbound calls, length of time on calls, number of contacts each period, as well as other inputs, we can monitor trends and set realistic expectations for individuals and the department as a whole.”
Matt says that it’s also common for individuals to take it upon themselves to chart the metrics that are important to them. “You won’t find our accountant presenting net income this month compared to last month. Instead, net income is shown on a control chart this month compared to the previous 24 or 36 months,” he explains.
One of the biggest benefits of control charts is that subjectivity is minimized and decisions are based on the data, explains Matt. “The voice of the process tells you what is occurring. When changes are made to the system in order to improve, the control chart will tell you how the process is behaving after the change so you can determine the impact.”
Photo Courtesy of Aileron
This article contains content excerpts taken directly from Run Your Business, Don’t Let It Run You: Learning and Living Professional Management by Clay Mathile.
