Wednesday, 13 July 2016

Gloves on the Boardroom Table

John Kotter reports a great story, about non-confrontational management in his 2002 book, The Heart of Change, as related by Jon Stegner.

In "Gloves on the Boardroom Table", Jon tells the story of his approach to showing his organisation that a problem exists (2002, pp. 29-30):
"We had a problem with our whole purchasing process. I was convinced that a great deal of money was being wasted and would continue to be wasted into the future, and that we didn’t even know how much money was being thrown away. I thought we had an opportunity to drive down purchasing costs not by 2 percent but by something in the order of $1 billion over the next five years. A change this big meant a big shift in the process. This would not be possible, however, unless many people, especially in top management, saw the opportunity, which for the most part they did not. So nothing was happening.
"To get a sense of the magnitude of the problem, I asked one of our summer students to do a small study of how much we pay for the different kinds of gloves used in our factories and how many different gloves we buy. I chose one item to keep it simple, something all the plants use and something we can all easily relate to.
"When the student completed the project, she reported that our factories were purchasing 424 different kinds of gloves! Four hundred and twenty four. Every factory had their own supplier and their own negotiated price. The same glove could cost $5 at one factory and $17 at another. Five dollars or even $17 may not seem like much money, but we buy a lot of gloves, and this was just one example of our purchasing problem. When I examined what she had found, even I couldn’t believe how bad it was.
"The student was able to collect a sample of every one of the 424 gloves. She tagged each one with the price on it and the factory it was used in. Then she sorted the bags by division in the firm and type of glove.
"We gathered them all up and put them in our boardroom one day.
"Then we invited all the division presidents to come visit the room. What they saw was a large, expensive table, normally clean or with a few papers, now stacked high with gloves. Each of our executives stared at this display for a minute. Then each said something like, 'We buy all these different kinds of gloves?' Well, as a matter of fact, yes we do. 'Really?' Yes, really. Then they walked around the table. Most, I think, were looking for the gloves that their factories were using.
"They could see the prices. They looked at two gloves that seemed exactly alike, yet one was marked $3.22 and the other $10.55.
"It’s a rare event when these people don’t have anything to say. But that day, they just stood with their mouths gaping.
"This demonstration quickly gained notoriety. The gloves became part of a traveling road show. They went to every division. They went to dozens of plants. Many, many people had the opportunity to look at the stacks of gloves. The road show reinforced at every level of the
organization a sense of 'this is how bad it is'.
"Through more research, again done quickly and inexpensively by one of our students, we discovered what some of our competitors were doing. The 'competitive benchmarking' was added to the road show. As a result, we were given a mandate for change. People would
say 'We must act now', which of course we did, and saved a great deal of money that could be used in much more sensible ways.
"Even today, people still talk about the glove story."


Because Jon let the company's senior management team self-discover, the pile of gloves told the story far more eloquently than PowerPoint and graphs would have done.

It was also not confrontational. The senior management team was in the right frame of mind - curiosity, not defence - to ask the right questions.

Jon's approach did not divide them into an 'us' and 'them', but helped them work as a team to improve their procurement processes.



Sam
  • Reference:  Kotter, John & Cohen, Dan S. (2002). The Heart of Change. USA: Harvard Business School Press (pp. 29-30).

No comments :

Post a Comment