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The Employee Ownership Report

NewsletterConcisely written for leaders in employee ownership companies and for service providers in the field, the NCEO's bimonthly newsletter, the Employee Ownership Report, is the most efficient way to stay informed about legal issues, current events, best practices, breaking research, management approaches, and communications ideas for employee ownership companies.

Available exclusively to NCEO members, the Employee Ownership Report is delivered in hard copy and all issues back to 1997 are available in the members-only area of the Web site.

Nonmembers are invited to read the sample article below from the current issue of the newsletter. Every time a new issue appears, the sample article on this page will be replaced by one from the new issue. Join online for only $90 to receive the Employee Ownership Report and all our other membership benefits.

You also can read a sample issue of the entire newsletter (July-August 2011).

Sample Article from the March-April 2014 Issue:

Translating Goals into Metrics

Dean M. Schroeder, PhD

Not long ago we were working with the managing director of a medium-sized company who was frustrated with his employee idea system. He was having to deal with ideas that he thought were totally irrelevant. The latest one: Have five different types of peanut butter available in the employee canteen. "What does this have to do with improving the company?" he complained. "I didn't even know there were five different types of peanut butter." Ideas should focus on the company's key strategic goals. But these goals also need to be translated into terms that employees can drive forward with their ideas.

Eighty percent of a company's improvement potential is locked up in the creativity and ideas of its front-line people. Companies that are good at unlocking this potential typically implement as many as 50 ideas per employee per year and, as a result, are able to achieve exceptional performance year after year as they improve at rapid rates and are much more agile than competitors.

One of the many benefits we hope to get through employee ownership is engaged employees who are willing to share these ideas. However, while listening to employees' ideas is conceptually simple, there is a lot to know about idea management, much of which is counterintuitive. In this article we will focus on one part of idea management, that of translating high-level goals into specific actionable metrics at the front-line level.

The leaders in most employee-owned companies do a good job of sharing goals with employees on a regular basis. But are these goals translated into metrics employees can act on with their ideas? Strategic goals such as "Increase market share to 8 percent" or "Lower operating costs to 40 percent of net revenue" have limited meaning at the front-line level. To be truly useful they must be disaggregated and articulated in ways that help focus front-line ideas.

We came across a good example of the power of properly translated goals into front-line metrics at a mediumsized electronics retail chain in Portugal. The CEO was concerned that most of the ideas that were coming in through his company's idea system were of little value. While our analysis confirmed this, we also found one area where this was not the case. It turned out that the manager of the central warehouse took the CEO's goals of high productivity, excellent customer service, and efficient use of capital and translated them into metrics that his warehouse workers could affect with their ideas:

The manager posted the performance on these metrics weekly as a way to focus his team's ideas. Besides, he pointed out, keeping score added a bit of challenge and fun.

Because of these clear goals, employees had implemented hundreds of small ideas that had dramatically improved the warehouse's performance. For example, at one point, the employees had been issued handheld scanners that wirelessly communicated with the central computer. The original purpose of the scanners had been to ease the process of checking inventory in and out, by eliminating the need to use a scanner that was tethered to the terminal on the loading dock. But when the employees discovered the scanners were programmable, they came up with many ideas to increase the scanners' capability. Now, they can be used, from anywhere in the warehouse, to change inventory locations in the system and to instantaneously display the contents of a box, a shelf, or even an entire bay by simply scanning its bar code. The employees also programmed the scanners to display optimal order-picking routes for each order.

As a result of all these ideas, in just one year the warehouse was able to double the number of orders it shipped without adding any employees, reduce the number of orders filled incorrectly or shipped late by more than 90 percent, and increase inventory turnover by 30 percent. In addition, the time required to take monthly inventory was cut by 80 percent.

When we shared this example with the CEO, he smiled and told us of an idea that he had recently received from the warehouse team. The idea had also given the warehouse manager a chance to recognize his team's exceptional idea performance. An employee suggested mounting a large flat-screen TV in the warehouse tuned to the sports channel, so people could monitor games of their favorite teams and keep up with the latest soccer scores. The problem was, the suggester admitted, that whenever there were important matches, workers (even nonsmoking ones) were taking long smoking breaks to sit outside and listen to car radios during critical periods in the games. He suggested that a large flat-screen television in a central location would actually save time and improve productivity by eliminating the need for employees to surreptitiously leave the building to check on scores. The CEO joked to us, "With this group, I only hope the TV screen was big enough!"