Less Is More: How Great Companies Use Productivity - Hardcover

A Simple BIG Objective

In the absence of a simple BIG objective to act as a unifying force, no leader or manager can hope to make a company more productive.
-Bill Zollars, CEO, Yellow Freight

Before committing even one word to paper, as I led my research team to begin the initial work of identifying a group of the world's most productive companies and figuring out how they do what they do, I'd have never guessed-not in a million years-what the theme would turn out to be for this opening chapter.

After all, the book was intended as a collection of the tactics employed by these firms to be more efficient than other businesses, proving the proposition that Less Is More. I'd imagined getting right into things with machine gun staccato . . . bang, they do this, bang, bang, they do that, bang, bang, bang!

Then a big discovery went boom and got in the way of my plans. Here it is: In productive companies, the culture is the strategy.

As I crisscrossed the United States and traveled the world, hanging out with the customers, workers, managers and leaders of companies where less is more, a single indisputable fact kept confronting me:

Unlike other companies, productive companies know the difference between tactics and strategy.

That difference is the foundation that allows them to stay focused and build remarkable companies. They have institutionalized their strategy.

There's a lot of bang, bang, bang stuff in the chapters to follow but, as a result of our exhaustive research, I'm convinced that a company will never become truly productive unless the management can learn to nail down the differences between strategy and tactics and allow the strategy to become the culture.

Strategy du Jour

If you keep your ears open on airplanes, at business meetings and in boardrooms, you'll hear the word "strategy" tossed around so frequently as to render it meaningless. It seems everyone has a strategy for this, a strategy for that, a strategy for everything from dealing with the kids to buying a new laptop to handling the boss . . . and yep, one for being more productive. And how many people do you know who have climbed the corporate ladder because management (or human resources) identified them as "strategic thinkers"? What's even more alarming is the frequency with which companies discard one "strategy" for another in the name of being flexible. Grasping at tactic after tactic, trying this and trying that and incorrectly labeling everything they attempt as a "strategy," most companies cloud the climate, confuse the troops and do the opposite of what it takes to be productive. Productive companies keep everything clear and simple-everything including strategy.

As I came to the end of my in-depth interviews with the CEOs of the companies covered in this book, I was struck by the fact that each shared this in common; the ownership of and fierce loyalty to a very simple big objective. The big objective was the strategy and it became the culture; everything else was tactics on how to achieve it.

All of these leaders vigorously prevent anyone from mucking up their drive for productivity with some strategy du jour or the latest alphabet-soup management theory.

Imagine for a moment the power of everyone in your organization-whether a ten-employee restaurant or a thirty-thousand-worker transportation company-knowing and striving to achieve a simple big objective.

While having everyone in a company share this simple BIG objective might seem to be simply common sense, as the age-old maxim goes, the most common thing about common sense . . . is how uncommon it is.

So what are these strategies-these BIG objectives-that are held so firmly by the leaders of some of the most productive businesses in the world?

NOPE! It's Not That Vision Thing Again

People who have survived the mission and vision thing give a knowing grin and agree that most of those grandiose statements are fit only to be framed on the wall of the reception area, put on the cover of the annual report and talked about with the head honcho to show you're on the team. They definitely are not ideas anybody would actually try to carry out to get the job done better. Unfortunately, lofty mission and vision statements, like all the other empty promises too many companies make, have a rich history of not being worth squat.

The real grunt work involved in building a productive company doesn't happen in the boardroom or executive offices; it's done on the shop floor, in the offices, on the factory line, on the retail sales floor and in the field. The very people who have the ability to make a business more productive have "been there, seen that, done that" with the vision thing.

The Power of a Simple BIG Objective

One company that's a poster child for productivity, Lantech, based in Louisville, Kentucky, discovered the need for a simple BIG objective the hard way. The traditional means for a company to ready their product for shipment involve putting the individual units in boxes, putting lots of little boxes together to make a big box, then wrapping these big boxes in plastic sheeting and sending them through a heated tunnel to form a weatherproof shrink-wrap. When the big boxes come out of the tunnel, they're stacked on a pallet for forklifting onto a truck or railcar.

During the U.S. energy crisis of the 1970s, Lantech founder and chairman Pat Lancaster came up with the idea of wrapping pallets of boxes tightly with strong plastic from a continuous roll. (Picture wrapping a rubber band around your fingers a number of times.) The process meant no more need for shrink-wrap heating, which translated into significant energy savings. Patenting this process and equipment designs, the company spent the 1980s making money hand over fist. Lantech was (excuse the pun) on a roll. Today it's the world leader in stretch wrappers, palletizers and conveyor systems.

That's the bright side of the story but there was a dark side, as well. By Lancaster's admission the company wasn't doing a very good job in a lot of areas. "Quality and customer service were poor, the factory was inefficient, but there was so much demand that we just kept doing things the same old way." Until one day in 1990. "After arguments all the way to the Supreme Court," he says, "we lost our patent protection and overnight everything changed. We had to admit to ourselves that we'd been selling wheelbarrows and been pretty arrogant about it. All of a sudden everybody else could sell the same wheelbarrow. It would no longer be enough to say we didn't suck worse than our competition." Pat Lancaster realized in the dark of night and in the bright light of day that the company's free ride had ended. Unless he could dramatically reduce inventories, improve product quality, deliver superior customer service and become more productive, the days of Lantech as a company were numbered.

During the next ten years, Lantech tripled sales without increasing staff, slashed the time it took to build a single machine from five weeks to eleven hours(!), and increased productivity 1 percent a month for the entire time period-all because of one man's focus.

Pat Lancaster's simple BIG objective was to become the most efficient and productive manufacturing plant on the planet and do things better than they'd ever been done.

What? A Company More Productive Than Wal-Mart? Where?

In 1982, New Zealander Stephen Tindall founded The Warehouse, a single-location discount store in Auckland. Fast-forward twenty years and you'll find this publicly traded chain of two hundred stores across New Zealand and Australia outperforming America's Wal-Mart in every metric of productivity. While Wal-Mart puts 3.3 pennies of each sales dollar to the bottom line, The Warehouse puts 6.6. And while Wal-Mart achieves a stunning 24 percent return on equity, The Warehouse smokes them with a killer 40 percent.

At first glance you might think the success of The Warehouse is about technology, but dig deeper and you'll learn it all began and continues to exist because of a powerful simple BIG objective.

In 1982 Tindall, working for another department store, was on a buying trip to the United States and was accompanying a vendor on a supply run to a suburban New Jersey shopping center. When he saw his first suburban discount store, a light went off and he rushed home to New Zealand to quit his job and open his own store. He took his entire life savings of forty thousand dollars, rented a large old industrial-area warehouse-hence the name-and plopped down thirty thousand dollars of his start-up capital for two computerized checkout terminals. If you're wondering, as I did, where he came up with the money to stock merchandise, you'll understand why he needed the two terminals.

Tindall saw he wouldn't have money for inventory so he went to all the companies he knew that had goods sitting in their own warehouses and offered a proposition. "Put your goods in my warehouse and I'll sell them for you," he pitched prospective vendors, arguing that the stuff wasn't doing them any good sitting unsold where it was. Then, brandishing his computerized inventory and checkout system, he promised to pay them weekly for whatever he sold. The caveat was that if he didn't sell it he could return it, eventually earning him the nickname "Sell-or-Return Stephen."

"Since the day we opened the doors in our first store," Tindall says, "this company has been an enterprise where people come first." But when Tindall says the words, the needle on the B.S. meter doesn't budge. You instinctively know he's telling the truth and want to hear more.

"Look," he continues, sounding a bit like a modern-day Robin Hood, "New Zealand, where we began, is a small island nation and much of what we sell has to be imported. As a result of manufacturers, manufacturers' reps, importers and their agents all taking their markups, the New Zealand consumer was constantly getting screwed and people ended up paying far too much for the goods they purchased." He quickly showed he'd found a better way. "As soon as I'd proven that my concept for The Warehouse would work, I immediately began applying for licenses to become a direct importer in as many categories as I was able. Do you know the thrill," he asks, "of being able to sell a set of luggage for one-quarter of the department store's price and still end up with a higher margin than theirs?" Tindall chuckles and says, "Now, that's real fun."

But Tindall becomes his most emphatic when he proclaims, "It's not as much about selling merchandise as it is about empowering people and giving the common working person the same choices that the wealthy always had. That's the reason this company exists!"

Today, with his billion-dollar personal fortune, Stephen Tindall can dress, drive and do as he pleases. And he does, with a seventeen-dollar sport watch because "I swim every day and it's a great watch in the water," driving a Volkswagen because "I really like the shape" and living in a modest house he and his wife bought years ago. "Why do we need more house?" he asks.

Originally, the research team had a hypothesis that people heading highly productive companies might be personally thrifty (or cheap) and that their abhorrence of waste was in some part responsible for the creation of efficient enterprises. That's not what we found.

Instead, we found people who conduct their personal lives in harmony with the stated BIG objective. When I pushed Stephen Tindall on the issue of whether personal thrift is a precursor of productivity, he said, "I don't think so." But he added, "It would be pretty silly of me to run a company for the benefit of the common man and ask everyone around me to do the same if I weren't one myself, don't you think?"

"Thanks for Calling Yellow, Have a Nice Day"

When Bill Zollars was recruited from Ryder Trucks in the late nineties to become CEO of Yellow Freight, a Fortune 500 company, he found a troubled business that had stumbled badly since deregulation of the trucking industry. What disturbed him most was discovering that the company was very inwardly focused and had no measurements of customer satisfaction. Seeing that the company was coming off three years of extremely poor performances made worse by a strike and losses, Zollars recognized he would need to operate in turnaround mode.

Like Lantech, Yellow Freight had been buffeted by government regulation. Zollars recalls that in the regulated environment where Yellow had prospered, companies never had to worry about strategies or customers. "If you needed more money, you just sent out a letter that said, 'Hey, I need a price increase,' and you got it. The business had become completely commoditized and the company that got the business was the last one in with a load of doughnuts or free tickets to a ballgame."

The effects of deregulation were entirely predictable, Zollars says. Lots of new people came in with great ideas, they opened new companies and raised the bar, so that many of the existing businesses couldn't compete and eventually went bust. Industry analysts, he says, were forecasting Yellow Freight's eventual demise. "The question I got asked most frequently when I got here," Zollars told me with a grin, "was whether we'd be around in a couple of years."

So what had Zollars spotted as clues he could use to keep that from happening? From his early days at the company, he noticed, "When people would ask someone who worked for Yellow what the company did, they'd respond by saying it was in the long-haul LTL trucking business." (LTL, or less than truckload, describes a carrier that specializes in shipments under a certain weight, combining shipments from several customers to make up each full truckload.)

Even today, Zollars fumes as he remembers. "Where's the pride and potential in being in the long-haul LTL trucking business? Not only are you putting yourself in a box, you're putting yourself in a really little box."

His answer to the many dilemmas facing the company was a strategy, a simple BIG objective. "We are not in the long-haul LTL trucking business," he commanded. Contrasting Yellow with two major competitors, he told his people, "We're going to get out of the trucking business and into the service business. And from now on, instead of wasting our time comparing ourselves to Roadway and Consolidated Freight, we're going to compare ourselves to Starbucks."

Starbucks! That's picking a successful model to emulate.

You've probably heard the remark that if the railroad companies had understood they weren't in the rail business but in the business of transporting people and goods, the airlines today would have names like Union Pacific or Santa Fe. Zollars instinctively understood the distinction.

Today he argues that until you get the "people thing" right, no amount of technology can make you more productive. "Look," he says, "we spend as much as eighty million dollars annually on technology, but it won't do a damn bit of good and make us more productive if the people using it don't get it.

"During my first week on the job," he told me, "I...