The new book my colleagues helped me write about Hawley Martin’s system of Continuous Improvement Marketing called HM 360 can now be purchased online. Amazon is offering the Kindle edition free beginning today (Aug 5, 2015) and continuing through Sunday August 9 as part of a promotion.
The system we describe involves scorecards on which goals to be achieved are set, and it includes action registers that hold the feet to the fire of those responsible for reaching those goals.
No wonder the system works so well.
Without question, one thing is true in just about any business. You get what you measure and what you pay for. When people’s jobs and livelihoods depend on something getting done, it almost always gets done. That’s why it’s important to keep score in order to know whether goals are being reached, and to hand out rewards to employees when they are. If you are in charge, you might want to consider tying a percentage of each employee’s compensation to achieving specific goals.
An top executive I once worked with, former Chairman and CEO of Imation Corporation William (Bill) T. Monahan, told me about a compensation plan he and his team implemented to get people focused on reducing waste. At the time, his company was deep in debt and cash was scarce. One strategy Bill and his team came up with was to pay employees for performance—to set goals and to tie the compensation of individuals to the achievement of those goals. The only question was how to do it.
After some trial and error, he and his team decided to set goals based on the amount of cash each individual was able to generate or conserve since the possibility of running out of operating cash was the biggest issue the business faced at the time.
This was something everyone understood. As Ben Franklin wrote more than two centuries ago, “a penny saved is a penny earned,” so if you spent less, if you use less in the way of resources, you end up with more cash in the bank. If you increase productivity, you generate cash. If you reduce capital expenses, you conserve cash. If you work only on financially sound projects, you generate cash.
Everyone in Bill’s company got the message. If they reached their individual cash target, they got a bonus. This gave them clear and straightforward goals and unambiguous actions they could take to achieve them. Yield goals varied by products based on what Bill and his team thought could and must be achieved. All people needed to do was ask themselves questions such as how much do I spend on supplies and materials and what waste can I eliminate?
Production wasn’t the only place money could be saved. In other areas of the business, people asked themselves such questions as how much do I spend on meetings, travel, or any activity in the company that requires someone to write a check? What do I now waste that could be reused, which would mean that check wouldn’t have to be written? In other words, how can I economize?
Everyone except the CEO and the CFO, who were totally corporate, had some percentage of their bonus incentive based on the cash saved or generated by the business unit they were part of.
This approach worked. Many factors went into the turnaround of Imation that Bill led, but focusing everyone on waste reduction and cash generation played a major role. Over a five year period the company went from half a billion in debt all the way to debt free and half a billion in cash—an amazing one billion dollar turnaround.
Setting goals, keeping score, and tracking progress works. When that’s done right, everyone knows what needs to do for the company in general to succeed, and what he or she needs to do to succeed personally. The two are inextricably linked. That’s just one facet of the system described in our new book, CONTINUOUS IMPROVEMENT MARKETING.