Arrow Electronics has grown in leaps and bounds since its inception as a retailer of radio equipment. Expanding into semiconductors and electronic components, Arrow has been the worl’s largest distributor with a swaggering $6 billion in sales. The CEO, Stephen Kaufman, felt that execution of the Company’s strategy was an important aspect of a CEO’s job. Finding the right jobs for the right people and motivating them for effective execution of the strategy. He felt that the major strategy issues require periodic attention while human resources issues require daily attention. Kaufman took a lot of efforts in building a talented sales force and felt that the people were their main asset. Relationship with Customers and suppliers was dependent on personal relationships.
For salespeople commission was an important criteria. If the market slowed down and the commissions went down, they would start looking at another distributor.
Thursday, October 23, 2008
Thursday, October 16, 2008
Nordstrom - Discord among Unions
From a debutante as a shoe –retailer, Nordstrom has come a long way from its humble beginnings. With a track sales volume that was almost double the industry standards, and a diversification into apparels and accessories, Nordstrom enjoyed the highest profit margin in the industry. It was distinctly clear that the customer-service was the back-bone of this highly productive company. The liitle feats of the customer-service personnel , way out of their expected job schedule went a long way to boost customer-service. Its innovative commission system of sales per hour was acclaimed as an effective strategy. But critics feel otherwise. The salespeople had to put in their entire working hours and more to account for the target sales and yet have to find time to run errands for customers. This was leading to high pressure contrary to being a motivation. Promoting within the Company also increased experience in the Company. The management also endorsed a decentralized system of operations which was highly prone to misuse. The peer pressure and group recognition although encouraged the employees they eventually did lead to a lot of pressure and sometimes led to sharking, stealing sales credits. The Sales performance of the employees could be tracked by an automated process which enabled comparison with others and also aided in estimating their performance related to their targets.
Inspite of its commendable reputation Nordstrom got caught up in a whirlwind of complaints, union allegations, and lawsuits. Some of the concerns were that the Company coerced the employees to work “off the clock” without being paid. The employees had to run errands for the customers which were not paid for. The Washington State Department of Labor & Industries did an investigation and concluded that the allegations were true and the Company had to back-pay the employees.
The management tried to improve the existing system and recapture its lost glory by initiating procedural changes. Employees had to indicate the extra hours worked. This was again criticized because the Company had to maintain the hours. The Nordstrom stockholders filed lawsuits against the Company for financial losses incurred because the Company failed to disclose their labor problems and the early claims for unpaid work.
The employee grievances only prove that the management had severe flaws and would ultimately lead to detioration of the Company’s honor.
Tuesday, October 14, 2008
SMC -Beyond the realms of Functional Silos
With an impressive history of the founder, Dr.Winthrop, being a pioneer in the development of specialty chemicals for the pharmaceutical industry, one would anticipate that the sales growth would be in leaps and bounds. With the leadership of Tompkins, stability and maturity grew but the growth in sales was disappointing. With the entry of Carl Burke, came a whirlwind of action. Although the Company was acclaimed for its products, their liason with the biotech and generic companies was trailing behind. Burke’s study revealed that marketing and product development exhibited potential for growth. Finance and Administration needed more attention, especially in areas of Customer Service and Personnel. Burke formed the leadership team to focus on key strategic and organizational issues. Burke’s research led him to believe that the lack of vitality in the team could be attributed to the deficiencies in the system given the ratings and high pay awarded to almost everyone.
Laura Wells, an independent consultant with expertise in executive and organizational assessments was called to give her report. Her assessment comprised of psychological interview, observation and test data. She also insisted on being included in the team meetings as that would aid in her behavioural analysis. After extensive analysis, Laura’s report consisted of many useful revelations on the strategic and organizational level. The inefficacy of the members of the leadership team to stray beyond the confines of their “functional silos” was pointed out. Carl decided to split the sales force, marketing and product development for Pharmaceuticals, Biotech and Generics, which was an intelligent move.
The Vice Presidents of the various disciplines were tested for their cognitive and intellectual functions. Their strengths and weaknesses were analyzed and their career background was studied. For every key person in the leadership team, a summary was construed based on this study. This enabled Burke to assign work based on their skills and their abilities.
Laura Wells, an independent consultant with expertise in executive and organizational assessments was called to give her report. Her assessment comprised of psychological interview, observation and test data. She also insisted on being included in the team meetings as that would aid in her behavioural analysis. After extensive analysis, Laura’s report consisted of many useful revelations on the strategic and organizational level. The inefficacy of the members of the leadership team to stray beyond the confines of their “functional silos” was pointed out. Carl decided to split the sales force, marketing and product development for Pharmaceuticals, Biotech and Generics, which was an intelligent move.
The Vice Presidents of the various disciplines were tested for their cognitive and intellectual functions. Their strengths and weaknesses were analyzed and their career background was studied. For every key person in the leadership team, a summary was construed based on this study. This enabled Burke to assign work based on their skills and their abilities.
Wednesday, October 8, 2008
SAS – A break from the norms
SAS (Statistical Analysis Software) Institute, with a track-record of being the largest private Software firm raises many an eyebrow on its ability to stay a cut above the rest especially considering the fact that thriving in a highly competitive industry such as software development is no trivial accomplishment. With a sprawling 200 acre campus that reminds one of a picnic retreat, an extensive customer base unparalleled reputation and many accolades to its credit, SAS has distinctively carved a niche for itself. A study of its management practices and philosophy led to the revelation of several interesting facts contributing to its success.
Jim Goodnight, the founder of SAS Institute has steered the development process toward a customer focussed one and this has been attributed as a key factor in the success. He has been known to reiterate on listening to customers and giving them the software they want. The Company has an annual ballot surveying the preferences of the customers which are tabulated and considered during implementation of new features. Customer feedbacks from user group conferences also play a vital role in determining the product development process. The Company has an active publications program in which it publishes the work of non-SAS employees again breaking the industry norms. Its approach in selling is again unique. As opposed to other companies which would resort to selling a software product and then selling upgrades on a regular basis, SAS offers a trial period, and then with the annual license offers free upgrades. The level of integration and the range of product line is a huge contributing factor.
The Company spends 30% of its revenue on Research and Development in sharp contrast to the industry average of 15% SAS is knowledge-based business with the constant need to evolve keeping with the current trends and therefore acquiring and retaining talent is essential.
The principles of management are simple yet outstanding. The first principle is to treat everone fairly and equally. The company maintains an egalitarian approach. Every employee has a private office as the company believes that when its employees are taken care of, the company is taken care of. The second principle is based on intrinsic motivation and focussing on coaching and mentoring rather than controlling and monitoring. The third principle is to think long-term. The fourth principle is based on bottom-up decision making. There are no specific growth goals.
SAS has an enviable reputation of being a great place to work leverages its recruiting efforts.The huge number of applicants when a job is posted speaks for itself.
The work culture is based on co-operation, teamwork and mutual respect. There is emphasis on internal promotion and employee referral. Although stock options are not offered, bonuses are offered based on the reports from managers. The general philosophy is to deemphasize financial incentives as a source of motivation. Commission culture is considered high pressure and do not contribute to long-term relationships. The Company encourages collective orientation rather than competition. The sales team is customer driven and not focussed on short-term results.
The Company offers generous employee benefits and a comfortable work environment giving the employees a sense of belonging. Employees have a 35 hour week, a 7,500 medical facility, child care, gym just to mention a few. The company also sells plots at subsidised rates for employees. The Company is firm on doing everything inhouse and follows the policy “if you want something done right, own it and control it. Outsourcing is not resorted unless circumstances are unavoidable. Most of the technical training is also done in-house. The Organizational structure is impressive in the sense, for a company this vast, there are only 4 levels. The Company has an open door policy and communication normally is at one level below the CEO. Performance is considered a relationship not an infrastructure. There is a lot of movement within the company and employees are free to move to different department that suit their skills and expertise.
In an industry where the growing trend is to outsource to reduce costs, SAS stands out in the fact there is little or no outsourcing. It also varies in the fact that incentives and stock options are not encouraged.
Jim Goodnight, the founder of SAS Institute has steered the development process toward a customer focussed one and this has been attributed as a key factor in the success. He has been known to reiterate on listening to customers and giving them the software they want. The Company has an annual ballot surveying the preferences of the customers which are tabulated and considered during implementation of new features. Customer feedbacks from user group conferences also play a vital role in determining the product development process. The Company has an active publications program in which it publishes the work of non-SAS employees again breaking the industry norms. Its approach in selling is again unique. As opposed to other companies which would resort to selling a software product and then selling upgrades on a regular basis, SAS offers a trial period, and then with the annual license offers free upgrades. The level of integration and the range of product line is a huge contributing factor.
The Company spends 30% of its revenue on Research and Development in sharp contrast to the industry average of 15% SAS is knowledge-based business with the constant need to evolve keeping with the current trends and therefore acquiring and retaining talent is essential.
The principles of management are simple yet outstanding. The first principle is to treat everone fairly and equally. The company maintains an egalitarian approach. Every employee has a private office as the company believes that when its employees are taken care of, the company is taken care of. The second principle is based on intrinsic motivation and focussing on coaching and mentoring rather than controlling and monitoring. The third principle is to think long-term. The fourth principle is based on bottom-up decision making. There are no specific growth goals.
SAS has an enviable reputation of being a great place to work leverages its recruiting efforts.The huge number of applicants when a job is posted speaks for itself.
The work culture is based on co-operation, teamwork and mutual respect. There is emphasis on internal promotion and employee referral. Although stock options are not offered, bonuses are offered based on the reports from managers. The general philosophy is to deemphasize financial incentives as a source of motivation. Commission culture is considered high pressure and do not contribute to long-term relationships. The Company encourages collective orientation rather than competition. The sales team is customer driven and not focussed on short-term results.
The Company offers generous employee benefits and a comfortable work environment giving the employees a sense of belonging. Employees have a 35 hour week, a 7,500 medical facility, child care, gym just to mention a few. The company also sells plots at subsidised rates for employees. The Company is firm on doing everything inhouse and follows the policy “if you want something done right, own it and control it. Outsourcing is not resorted unless circumstances are unavoidable. Most of the technical training is also done in-house. The Organizational structure is impressive in the sense, for a company this vast, there are only 4 levels. The Company has an open door policy and communication normally is at one level below the CEO. Performance is considered a relationship not an infrastructure. There is a lot of movement within the company and employees are free to move to different department that suit their skills and expertise.
In an industry where the growing trend is to outsource to reduce costs, SAS stands out in the fact there is little or no outsourcing. It also varies in the fact that incentives and stock options are not encouraged.
Thursday, October 2, 2008
Southwest Airlines - A trendsetter in People management
The advent of the airline industry brought with it unprecedented competition with companies worlwide vying to stay in the forefront. Southwest Airlines was one of the most successful ones surpassing its competitors with its strategical implementation of low fares, few flights and frequent service model. With the increasing number of mushrooming companies basking in the glory of Southwest Airlines unabashedly following its trend, it was a challenge for Southwest to sustain its leading edge.
Initially construed to deliver quality service at low-cost, maintaining the no – frills pattern, Southwest had a tough bargain when there were attempts to cause legal hurdles. This led to the advertising campaign “Make Love, Not war” and Southwest was referred to as the “LOVE” airline. Its emphasis on point-to-point routes without the traditional hub and spoke system, use of underutilized airports and fuel-efficient 737s has been a major contributing factor. There is no first or business class. The flights within a state are priced the same. No meals are offered on-flight and there is no assigned seating.
In addition to the low-cost model, Southwest attributed its success to its successful management of people and human resource pratices. It encouraged employees to identify with others at the company, deliver great service and have fun. Southwest’s productivity stems from its efficient workforce. The 15 minute turnaround is an incredible implementation of cost-effective measures. The work culture is so unconventional that even pilots clean the aircraft or load bags if needed. Employees are made sure they are comfortable and treated as internal customers. The Company’s CEO, Herb Kelleher is highly credited for extracting the best from his employees. The catch phrase at Southwest “work is important…don’t spoil it with seriousness” implies how employees are motivated to be more productive. In addition to the parties and celebrations, employees are constantly appreciated. Officers and directors spend a day working in a frontline job to show their appreciation. The Human Resources department renamed as the People department reinstates the importance for the employees growth thus accounting for the profitability of the company.
The recruiting is highly selective and the emphasis is on peer recruiting to ensure a proper fit. Involving customers in interviewing new flight attendants is an innovative trend. The entire interview process is focussed on positive attitude and teamwork. Even the applicants who are rejected in the interviews have a better experience than when they are hired by some companies. Instead of offering referral bonuses, employees get a free space-available pass for referring prospective candidates.
Training is also an integral part of the Southwest work culture. The training is again oriented towards customer service keeping with the company’s goals and objectives. An intersting part of the training is what is called “The Climb” that lasts for over two days when the employees who participate live together and this emotional contact is believed to foster change that would aid in a positive change at the work environment. Southwest does not offer tuition reimbursement or encourage outside training.
The remuneration is initially low and the progression increases with seniority. Pilots and flight attendants get paid by the trip thus motivating them to take more trips. Empoyees after their first year of tenure are benefited by the profit sharing plan. They can also take advantage of the discounted stock purchase plan. The conservative hiring policies have led to a young workforce with women representing all levels. The Company has never had a layoff. The ‘Catastrophe fund’ raises money for fellow employees and further encourages team spirit.
In comparison, most of the airline companies are characterized by poor labour relations and management. The study narrates how American Airline attendants rolled back wages to help in adverse conditions and how Continental lite escaped bankruptcy. Customer complaints, mishandled baggage and other issues are prevalent in most other companies. The study reiterates the fact that the company’s best interests are vested in the people and when they are effectively managed, productivity is high yielding the anticipated results.
Initially construed to deliver quality service at low-cost, maintaining the no – frills pattern, Southwest had a tough bargain when there were attempts to cause legal hurdles. This led to the advertising campaign “Make Love, Not war” and Southwest was referred to as the “LOVE” airline. Its emphasis on point-to-point routes without the traditional hub and spoke system, use of underutilized airports and fuel-efficient 737s has been a major contributing factor. There is no first or business class. The flights within a state are priced the same. No meals are offered on-flight and there is no assigned seating.
In addition to the low-cost model, Southwest attributed its success to its successful management of people and human resource pratices. It encouraged employees to identify with others at the company, deliver great service and have fun. Southwest’s productivity stems from its efficient workforce. The 15 minute turnaround is an incredible implementation of cost-effective measures. The work culture is so unconventional that even pilots clean the aircraft or load bags if needed. Employees are made sure they are comfortable and treated as internal customers. The Company’s CEO, Herb Kelleher is highly credited for extracting the best from his employees. The catch phrase at Southwest “work is important…don’t spoil it with seriousness” implies how employees are motivated to be more productive. In addition to the parties and celebrations, employees are constantly appreciated. Officers and directors spend a day working in a frontline job to show their appreciation. The Human Resources department renamed as the People department reinstates the importance for the employees growth thus accounting for the profitability of the company.
The recruiting is highly selective and the emphasis is on peer recruiting to ensure a proper fit. Involving customers in interviewing new flight attendants is an innovative trend. The entire interview process is focussed on positive attitude and teamwork. Even the applicants who are rejected in the interviews have a better experience than when they are hired by some companies. Instead of offering referral bonuses, employees get a free space-available pass for referring prospective candidates.
Training is also an integral part of the Southwest work culture. The training is again oriented towards customer service keeping with the company’s goals and objectives. An intersting part of the training is what is called “The Climb” that lasts for over two days when the employees who participate live together and this emotional contact is believed to foster change that would aid in a positive change at the work environment. Southwest does not offer tuition reimbursement or encourage outside training.
The remuneration is initially low and the progression increases with seniority. Pilots and flight attendants get paid by the trip thus motivating them to take more trips. Empoyees after their first year of tenure are benefited by the profit sharing plan. They can also take advantage of the discounted stock purchase plan. The conservative hiring policies have led to a young workforce with women representing all levels. The Company has never had a layoff. The ‘Catastrophe fund’ raises money for fellow employees and further encourages team spirit.
In comparison, most of the airline companies are characterized by poor labour relations and management. The study narrates how American Airline attendants rolled back wages to help in adverse conditions and how Continental lite escaped bankruptcy. Customer complaints, mishandled baggage and other issues are prevalent in most other companies. The study reiterates the fact that the company’s best interests are vested in the people and when they are effectively managed, productivity is high yielding the anticipated results.
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