Participative Management Design Improves a Multi-Production Facility

The Situation

QuietFlex Manufacturing had a problem. Productivity and morale needed to be improved, and one department was in conflict amongst themselves and with the company. Meetings were disintegrating into arguments over emotional issues, rather than yielding constructive discussions toward solving production problems and improving the workplace. Workers tended to bring nonspecific complaints to management, making resolution difficult, even though CEO Dan Daniel’s priority was to create a thriving work environment. These miscommunications caused workers in one department to question their confidence in the company’s leadership.  

The Task

Mr. Daniel wanted to help the QuietFlex Manufacturing employees be satisfied and challenged in their jobs, and feel important to the company’s overall success. He required an approach to “shift the focus from emotional issues to factual issues that I could do something about,” and look forward to “increase the production rate and decrease the amount of physical labor so our employees felt that the job had more value.” QuietFlex Manufacturing needed to move quickly to continue competitive production, and make plans to avoid a recurrence of the situation. Mr. Daniel wanted to bring everyone together around a set of common goals, reduce stress and physical labor, and find new ways to solve problems into the future.

Mr. Daniel had attended a Caridas Consulting International (business consultant) workshop about using Participative Management Design to build individual involvement in company success, “It was a good seminar for strategic executives, but I initially questioned how well it would work on the plant floor.” He contacted CCI to tailor a program for QuietFlex. Mr. Daniel sought an approach in which all stakeholders could win. He valued the talents and skills of his people and wanted to bring out those strengths to build internal capability. He knew CCI specialized in improving performance and productivity through people. The task was to improve the quantity and quality of production, increase morale, and improve communications to manage problems effectively over the long term.

Implementation

Mr. Daniel was eager for solutions that would work for everyone at QuietFlex Manufacturing. He had been intrigued by CCI’s participative management strategies, and knew that such an approach made sense for his company. The best solutions arise from the daily needs of work, and the best-informed people are those who are doing the work. Participative Design calls for change in the location of responsibility, so the people doing the work initiate the changes. People are encouraged to be self-managing, though not autonomous. Managers provide redesign guidelines, so that everyone contributes to the process and develops reasonable expectations for change. Mr. Daniel was eager to see how Participative Management could both address the employees’ needs and improve the bottom line at QuietFlex Manufacturing.

The company’s opening Participative Design sessions required two days for each shift. Caridas Consulting helped participants define and evaluate their current work process and make suggestions for improvement. Definite aspects of the fabrication process were not supple; Caridas Consulting helped the workforce to focus proactively and positively on what could be transformed. Initially, Participative Management Redesign sessions were difficult because people were not convinced there would be any real change. As they saw their suggestions being implemented, people began to improve their productivity and commitment to the company, as well as their own expectations and morale. Plans created within this collaborative framework earned the commitment of everyone on board. Staff were excited to put in force the work redesigns of their own creation. They became innovative problem-solvers, and as issues arose, they found the initiative to create solutions. Caridas Consulting carries out Participative Management follow-up meetings with each department every 6 months.

CCI recognized that positive business results could not be sustained and company-wide improvements would not be complete without guaranteeing their successful delivery. QuietFlex management understood that it was necessary to mend employee relationships without delay. Superior communication and conflict resolution skills have made the plant environment favorable to the introduction and implementation of new ideas. Now QuietFlex keeps employee relations strong by helping managers be quality communicators. Caridas Consulting business consultants helped managers develop:

• basic communication skills, with an emphasis on genuineness, positive regard, and empathy
• conflict prevention and resolution skills

Immediate feedback from top managers shows these skills gives them a sense of interdependent control and improves their relations with employees. The managers are eager to further develop their communication skills and build on their initial accomplishments.

After a Successful Intervention

Mr. Daniel informs the conditions at QuietFlex has considerably improved. Workers in one department have been able to increase production from 2500 lbs per hour to 4000 lbs, and continue to progress. In the meantime, scrap and reject have been reduced dramatically. Safety has significantly improved, ever since the work redesign. People’s ability to participate has greatly improved the speed and quality of production. Mr. Daniel says the workers at all echelon of QuietFlex are satisfied with the outcome. There are “more pounds being pushed out the door, and we redesigned the pay structure so there are incentives to reduce scrap and waste further, and improve product quality. Employee earnings are already up by 30%. Our employees can produce more and not be as tired.” The company results have been significant and keeps on improving.

By including Participative Management methods at QuietFlex Manufacturing, workers have been given a part in resolving potential company challenges. Participative Management Design has “given the managers a way to deal with specific issues. Now they know to ask the employees to really define the problem and what they think the solution should be.” Mr. Daniel is pleased CCI helped QuietFlex both increase quality production and communicate with their workers. “I ask everyone to bring me solutions with their problems,” he says.

Caridas Consulting also worked in the most troublesome area of the plant. He “threw Caridas Consulting into the lion’s den,” by requesting them to facilitate a faction of employees so discontented, and extremely distant from administration, where they had invited the union to intervene on their behalf. Similar to the glass plant, CCI facilitated the duct workers to create comprehensive outline of the work flow and identify their challenges. The workers proposed a set of solutions, and the management responded by detailing the changes they were willing to make, and setting a timetable for implementation. Now that most of the changes have been implemented, productivity is up over 30%; because compensation is tied to productivity, morale and pay for this group has also improved substantially. Caridas Consulting unlocked the doorways of communication connecting management and the workers, transforming the urgent issues and designing a structure for upcoming problem-solving.

Mr. Daniel is now a believer; the results at QuietFlex prove that Participative Management Design is a flexible and comprehensive model that can be used across industries and at all levels. The workers at QuietFlex have raised the quality and rate of production, and greater productivity means higher wages. They have learned to innovate solutions. Participative Management Design has helped all the people at QuietFlex Manufacturing reach their individual and common goals, and provided them with a framework for continued success.

 Caridas Consulting International (management consultant-business)

Can you use this kind of improvement in your portfolio companies?

· Telecom – Increased revenue by 33% in 7 months

· Manufacturing – Improved productivity by 62% in three months

· Aerospace – Reduced cost by 20% in 6 months

· Financial Services – Increased Sales by 20% in 3 months

· Construction – Reduced costs by 20% in 6 months

· Healthcare – Increased Patient Satisfaction (10%) & Reduced Staff Turnover (36%) in 6 months

These are just a few recent results that a change to participative based management has allowed companies to achieve.

The use of Participative Management tools in your portfolio companies quickly increase bottom line results.   Benefits to the Portfolio Manager include:

1) Leveraging an asset that few companies utilize effectively – human capital.

2) Dramatically increasing performance in portfolio companies.

3) Measuring and improving employee commitment, motivation, and other lead indicators which directly impact your bottom-line.

“Private Equity needs to create sustainable and fundamental value beyond financial engineering” – World Economic Forum 2008

Traditional financial engineering and improved technology will only get you so far.  Utilize an untapped resource in your portfolio companies — human capital.Conventional management models will realize typical operational ability and may not take advantage of organizational resources.  As Boston Consulting Group experts Heino Meerkatt and Heinrich Liechtenstein advise,“ . . . [Private-Equity firms] should prepare all their portfolio companies for a long and deep recession, focusing on operational improvements. As the peak-performing private-equity companies have demonstrated, operational value formation contains the solution empowering success in this economy.   This will be the most critical differentiator in today’s recession, especially for the 50 percent of private-equity firms that are hovering between survival and extinction.”

Experts agree that in order to achieve excellence in the workplace, creativity and innovation are critical. 

“The key to survival and success does not lie in the rational quantitative approaches, but rather in a commitment to irrational, difficult to measure things like people, quality, creativity, innovation, and developing the flexibility to meet changing conditions” – Tom Peters and Bob Waterman

Peters and Waterman tell us we need to look beyond traditional metrics and harness intangible resources such as human commitment, motivation and trust. These intangibles (lead indicators) impact our tangible business results (lag indicators).Until just recently it was determined too intricate to monitor and calculate intangibles.  However, even the National Accounting Standards Board( NASB) recommends that metrics for intangibles appear on financial reports.

At hand is a demonstrated practice that makes best use of tangible and intangible assets.  We call it the “secret sauce,” it is very distinct from other management models because it utilizes tools and methods focused on human performance – a frequently overlooked factor that directly impacts the bottom line. Using strategic management tools, forward-thinking businesses obtain fast and powerful results.Rather than the carrot and stick method or taking a laissez faire approach this method provides a stable foundation that is easy and productive. Participative Management make optimum use of an organization’s human capital by providing people in the workplace innovative tools that allow them to increase company performance.Moreover, it imbues a sense of ownership amongst employees, which elicits worker dedication and fervor.

Motivation the Catalyst in Profit Formula – National Underwriter

John C. Bower, executive vice-president of Fidelity Union Life, noted, “a motivated workforce is essential strategy for enhancing company profits.  Highly motivated employees have a tendency to be more productive, which enhances profitability . . . Companies with the productivity edge usually outperform their competition.”

Recent Scholarly Work Supports These Critical Principles:

Improving Business Failure Prediction: Benchmarking Financial Models with Human and Social Capital –Journal of Private Equity 2009

“Research on entrepreneurship and firm performance indicates that human and social capital has emerged with strong predictive ability for business continuation.”

As little as 1/3 to ½ of most companies’ stock market value is accountable for today by hard assets such as , property, plant and equipment. The growing share of value lies in intangible assets—Harvard Business Review 1998

We are moving from the Information Age to the Intellectual Age according to Richard Barrett (management consultant-business). Prosperity creation will progressively derive from the enhancement in value of intangibles. Examples of intangibles are human motivation, commitment, and trust.

In the recent article, “Human Capital Formation and Foreign Direct Investment in Foreign Countries” Koji Miyamoto writes:

“One of the characteristics of rich industrial economies is the availability of a workforce with a high level of human capital. . . [L]ong time series trends in educational attainment and economic growth during the last century indicate that [Human Resource Development] and economic prosperity went hand in hand.”

“Private Equity Companies need better management practices in their portfolio companies –“ World Economic Forum 2008

During this recession Private Equity firms will have to hold on to their portfolio companies longer and adapt their business models to accommodate the downturn.  Private Equity firms can adapt their business models by focusing on improving operational performance and internal capabilities for sustained long-term results. 

Caridas Consulting International (management consultant-business)