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1994 Managing Change Optimas Award ProfileBRL.L. Bean Inc

July 1, 1995
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Related Topics: Total Quality Management, Managing Change, Featured Article
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Customers of L.L. Bean know that they're the boss. They can order hunting equipment 24-hours a day. They can request fishing poles to arrive, via Federal Express, within two days — at no extra charge. And they can return broken car racks after years of use.

Indeed, the Maine-based mail-order company has a reputation for superior customer service. It's a reputation that dates back to 1912 when founder Leon Leonwood Bean made good on nearly an entire shipment of hunting shoes that came back to him unstitched.

It was this reputation that prompted Leon Gorman, grandson of Bean and current chairman of L.L. Bean, to apply for the Malcolm Baldrige National Quality Award in the service category in 1988, the first year out. He proclaimed that despite the outcome, Bean "will be under a great deal of pressure to renew and enhance our quality improvement efforts to make sure we live up to our reputation." The organization came close to winning — it was one of two companies that qualified for a site visit — but no award was given that year in the service category.

Bean used feedback from the Baldrige committee to carry out Gorman's desire to renew and enhance the company's quality improvement efforts. It embarked on a total quality management process that would lead it first through changes in people management and later through process revisal. HR at the company not only has managed the TQM process, but the changes that have gone along with it. In fact, HR has become the Total Quality in Human Resources department. And although the company already has experienced increased profitability, improved return on sales and return on equity, it's only halfway through the process.

Feedback helps Bean redefine total quality.
The Baldrige experience prompted Bean to take a hard look at its culture as it relates to quality. The award committee had been impressed with Bean's customer-service levels, citing them as "world class." However, it told the company that it wasn't getting customer satisfaction in a productive way. It had been satisfying customers through a guarantee-based approach to quality. Indeed, "We really pioneered the no-questions-asked guarantee," says Robert Peixotto, vice president, total quality and human resources.

The Baldrige committee told Bean that, rather than relying on its guarantee, it should be ensuring that things happen right the first time. For example, legend has it that a customer-service representative in Freeport once strapped a canoe on his car and drove it to a customer in New York who had ordered one for a hunting trip he was leaving on the next morning. Although this certainly was a demonstration of exemplary customer service, it also served as a sign that something was wrong. Had the canoe arrived in time in the first place, there would have been no need for heroics.

The other advice that the Baldrige committee gave to Bean was that the company needed to have more employee involvement. This came as a surprise. "We had for a long time prided ourselves on employee involvement, doing attitude surveys and climate studies," says Peixotto. "We did quality circles back 10 years ago when they first came out." Certainly, the employee who delivered the canoe 300 miles away was involved.

But Peixotto says Bean learned that these things constituted only token involvement. "We didn't understand the whole concept, letting people really take responsibility for quality in their work," he says. "We had been a fairly traditional hierarchical organization in which decision making occurred at a high level."

To truly live up to its reputation as a high-quality service organization, then, Bean needed to embrace the concepts outlined by the Baldrige committee and put them into practice. Taking the committee's two suggestions for improvement, the company developed a definition for the total quality process it would pursue: "Total quality involves managing an enterprise to maximize customer satisfaction in the most efficient and effective way possible by totally involving people in improving the way work is done." In short, Bean's upper management looked at total quality as the way you involve people and the way that you improve processes.

Because it's a service organization, the company determined that, after training the work force on general TQ concepts, it must begin making changes by focusing on the employee involvement piece. "Quality for us doesn't happen on a production line, but every time you call up one of our phone centers and talk to a customer representative," says Peixotto. "That interaction is where quality really happens for Bean."

The goal of HR during this process would be to change the infrastructure of the company to support that customer interaction. Bean had to ensure that the frontline, customer-contact employees were knowledgeable and empowered, and that they were well supported by management. In fact, because it would be the managers who would empower their employees, HR concentrated on changing their role in the organization first.

Managers use employee input on total quality to become coaches and developers.
Bean spent approximately 10 months familiarizing its then-3,000 workers with total quality and what it meant for Bean. All salaried individuals in the organization received three days of TQ training and all hourly workers received one day. "We started with the senior level and we rolled the training on down through the organization so that each level within the company was well versed and able to support total quality as the next level learned about it," Peixotto says.

After everyone was trained, HR enlisted nearly 70 people within the organization to begin putting their knowledge into action. The department created seven quality action teams, comprising eight to 10 workers from across levels and functions in the organization. HR team leaders solicited the help of line managers and employee-relations specialists to identify people who not only would have an interest in serving on a team but also would easily be able to speak up around individuals from different organizational levels.

Once formed, the teams worked simultaneously on projects to bring about change. Although they each worked independently, the teams drew upon each other's work. One of these teams set out to define a total quality manager for Bean. "We had never done this at Bean before," says Peixotto. "We basically had taken our best doers and promoted them into management roles." In these positions, they continued doing. To support the newly defined quality organization, however, the team determined that the role of manager had to change to one of a coach and developer.

Another cross-level, cross-functional quality action team incorporated this new definition into the management learning program it was developing. The ensuing program is set up so that once a month more than 150 of Bean's highest level managers, including the president, sit down and discuss what being a manager in a total quality environment means. "It isn't really training," says Peixotto, "although we do some of that. It's more of a facilitated discussion about what employees need from us as managers and how total quality is changing the management game."

Some of the topics that have been addressed during these discussions are rewards and recognition, measuring employee involvement and team development. Occasionally, the company brings in guest speakers to talk on topics such as learning organizations.

Nick Sampson, manager of customer service and operations for the company's retail store in Freeport, says that the sessions provide a consistent message, one that says "when you're talking about creating measurable goals, this is how we do it at L.L. Bean, this is what we expect."

To ensure consistency, another quality team created a feedback instrument for managers. The team first determined nine dimensions of a total quality climate, which are that it needs to be:

  • Aspiring and focused
  • Ethical and compassionate
  • Customer focused and aligned
  • Effective and efficient
  • Challenging and empowering
  • Open and innovating
  • Objective
  • Rewarding and developing
  • Team oriented.

The group then incorporated these dimensions of quality into a Feedback For Improvement survey that would be used as a development tool for managers. For each dimension, the team listed statements for which employees answer to which degree they agree, disagree or are neutral to the statement. For example, under the "aspiring and focused" dimension is the statement, "I clearly know what's expected of me and what the major priorities are." Other statements: "I receive regular coaching and counseling that helps me improve my performance in my work unit," and "My supervisor helps me anticipate and solve problems."

Each statement is worth up to seven points, with strongly disagree scoring one point, and strongly agree scoring seven points. The scores are then averaged together.

The managers take these surveys and hold feedback forums with the people who filled them out. In a room together, the manager and his or her people (and sometimes a facilitator per the manager's discretion), discuss the answers and determine issues that need to be addressed. "We sit down and work out plans and goals to improve the scores, maintain the scores or maybe even in some cases drop the scores if they're too high and hindering other scores from becoming higher," Sampson says.

The company asks managers to develop three action plans for improving their scores. For example, during a feedback forum in 1992 involving Sampson and his staff, one of the issues discussed was that workers don't always understand initiatives or priorities. The action plan decided on by the group for Sampson was to clarify the customer-service department role and purpose and communicate better what and why an initiative has been taken. Says Sampson: "Just to focus on [the scores] brings us to the conscious state of saying, 'let's discuss how we do our work.' "

Results of the feedback survey and forum are then folded into the managers' performance plans. A quality action team actually revised the performance review system to account for this. In replace of the old system that listed a series of projects managers had to accomplish during the next year or specific numbers he or she had to reach, the new system reviews four different areas. One is operational responsibilities, which basically encompasses what the old reviews used to. The second element reviews how well the manager is performing his or her role. A manager's supervisor assesses this in three ways. One is by looking at feedback survey scores. Actually, supervisors don't look at specific scores but improvements in scores. "We've learned that there are certain functions within the company in which it's easier to get higher scores," Peixotto says. Therefore, the company rates managers based on their rate of improvement instead.

Supervisors also engage in a method called One-Over-One for evaluating the effectiveness of managers below them. Basically, what this means is that they annually talk with the managers' subordinates about their career development, the climate in their area and what types of things they need from their manager that either they are or aren't getting. "If you think of an employee as a customer of a manager's management, we're asking the customers of the managers how they're doing," Peixotto says.

Finally, managers' reviewers run through a list of questions, such as, "Has the manager hired good people? Is the unit more capable than it was a year ago? Do people seem to know what they're supposed to do?"

The third piece of a manager's performance review evaluates their total quality behaviors or impact on climate. Their bosses pose the managers such questions as, "What are you doing as an individual to help support the company's move toward a total quality workplace? Are you participating in improvement efforts? And, are you providing and receiving feedback well?"

The final part of the review system looks at the learning activities the manager has received in the last year and the developmental steps that need to be taken in the upcoming year. "That was a major change in the way we held people accountable for their work," says Peixotto. "It wasn't just hitting the numbers anymore. It was how you got there, the approach that you used and whether or not you participated in improvement."

Because the company has a pay-for-performance system, managers' salaries are affected by the results of their reviews. Also, the company bases promotional decisions on performance as defined in the total quality climate.

With the aid of Thomas Rand, president of Management Research Group, Bean used the FFI survey to compare the traits of effective managers within the total quality environment with those previously considered effective. Rand and Bean looked at the management practice and style of more than 100 managers (a manager in this case is defined as anyone who supervises three or more people).

Using Rand's company's Management Effectiveness Analysis, Bean discovered that effective managers in the quality climate shared similar traits. Most were clear about expectations and defined accountability. They were involving, participative and empowering with their staffs, although most still took on the role of boss and were identified as being in charge. Effective managers had high performance standards, were creative and resourceful, open to change, and strategic. They also were more persuasive than less efficient managers, serving as advocates. They were high on feedback and addressed conflict.

In its analysis, Bean identified successful managers as creative, open to change and strategic. They were high on feedback and addressed conflict.

Peixotto says that the feedback generated from this and the FFI survey has proven to be powerful, allowing for conversation to occur that probably should have happened years ago. More than that, however, they have been successful at turning managers into the coaches and developers that they need to be for a quality environment. By changing their role, they have in turn created an empowered work force.

Employees embrace total quality and initiative.
Take the manufacturing division for example. Peixotto recently talked with a footwear manufacturing manager who, in the face of tremendous productivity pressures, had managed to spend a large amount of money on training. The manager told the HR professional that it was simple. He explained: One day he shut down one of the production lines and spent the morning teaching employees how a shoe is costed — something the workers had never been told. He explained to them what each of the various operations involved in making the shoes entails, and they learned about the costs of those operations and the materials that go into the costing of a shoe.

In the afternoon, he took the employees out onto the floor and asked them to show him ways the company could save money based on what they'd just learned in the morning. The employees found enough savings that day to pay for all the training conducted in that department all year.

The manufacturing department actually has deployed total quality the most effectively in the company, says Peixotto. A few years ago, it was losing money, and nobody wanted to work there. Recently, however, it won the Maine state quality award, called the Margaret J. Smith award. Also, the department's costs of poor quality have gone down 47%, and its factory defects have been decreased by 10 times. Return on assets has improved 223%. "What's really made the difference is employee involvement more than anything else," Peixotto says.

In the total quality climate, employees who see a place for improvement can make the necessary change on the spot. Employees who work on manufacturing the camp moccasin, for example, made a simple adjustment on a glue machine that has resulted in tremendous savings. They observed the process of the shoes going together and noticed that when glue is squirted on the sole to affix it to the leather uppers before stitching, an excess amount spills over that must be wiped off in the final stages of production. By reducing the amount of glue that comes out, they've not only cut down on waste, but have eliminated a step in the production process.

"We've worked very hard at trying to create a climate where employees can take responsibility for quality and make improvements where they see them," Peixotto says. For that reason, Bean consciously decided not to have a suggestion system. "That's a prop," he says.

Instead, the company consistently offers support and learning that enables employees to take initiative. Recently, for example, management asked the workers from Bean's retail store in Freeport who stock shelves to trade jobs with the workers in the distribution center who pick the store orders. The employees are customers of each other.

From the job-swap experience, the workers simplified a process that no one had questioned before. Here's how they formerly worked together: The stockers would place orders with the distribution center for items running low in the store. Pickers at the distribution center would gather those items on rolling carts, have them packed in boxes and loaded onto trucks. When the items arrived at the store, stockers had to unload them, unwrap them and put them on rolling carts to take them to the shelves. When the workers saw both sides of the process, they realized there really was no reason for packaging the items. Now, the pickers simply roll the carts holding items directly onto trucks so that stockers can roll them right off. Each customer more efficiently serves the other.

Employees such as these who take initiative are rewarded through recognition programs put in place to support the total quality efforts. The company allots each major line area a budget to be used specifically by managers to pay for recognition awards. The company gives out few cash awards, opting instead for symbolic awards, such as dinners out or Bean merchandise. Currently, the company is spending approximately half a million dollars a year for this program.

In 1989, Bean instigated the Bean's Best Awards. According to Peixotto, this is the company's highest form of recognition. All regular or temporary employees, or teams of employees, hourly or salaried, are eligible for the award (last year, one out of every three employees in the company served on some sort of work team). Workers can nominate co-workers, bosses or subordinates. A cross-level, cross-functional group of employees determines winners based on the following criteria, which are tied to total quality:

  • Provide exceptional customer service — internal or external
  • Have innovative ideas
  • Standout as role models
  • Are experts at what they do
  • Manage people exceptionally well.

Winners are honored at an awards ceremony in August with their families in attendance. "It's a big deal," Peixotto says. "It's like the Academy Awards night." Winners are treated to a lobster bake, have photos taken and even are congratulated via planes flying overhead. They receive glass pyramid awards and L.L. Bean merchandise, including a pair of Bean Boots with life-time resoling.

Last year, more than 650 nominations of individuals and teams were made. Of those, only two teams and six individuals received awards. "Employees hold this Bean's Best Award in high regard," Peixotto says. "They're selective. They really cut through all the politics and ask, 'who are standout role models here, who live the values of the organization?' "

He adds that those people who are singled out as Bean's Best place a high value on winning the award. For this reason, the award has served as a valuable tool in supporting the total quality climate.

One tool that Peixotto admits needs some work to align with the total quality environment is L.L. Bean's compensation plan. Bean did install a pay-for-performance system as a consequence of changes in management performance. However, Peixotto says that the human resources staff is just beginning to address the team-based aspect of the business by looking at such systems as skill-based pay.

Human resources' role in quality management expands.
The Total Quality in Human Resources department itself is changing to fulfill its function as a catalyst for total quality, a function spelled out in the department's mission statement. Although the managing of total quality wasn't originally assigned to the human resources staff (it started off as a special small function reporting to the president, then aligned with operations for a while and with strategic planning for a short time), human resources became a natural place for it to settle.

"We're looked upon by the organization as being the owners of everything that supports total quality," Peixotto says. "Total quality itself is owned by the employees, but all the support systems for it belong to the total quality in human resources department."

The last three years the department has spent changing the infrastructure of the company to support total quality behaviors — instigating the role revision for managers, creating a climate for empowerment and setting up support systems, such as feedback forums and recognition programs. Now it's moving into managing the change that will result from process improvement.

The company has slated four major process improvement initiatives for this year alone. "When you change these processes, the big name of the game is managing change because it's going to create a tremendous amount of change in the organization," Peixotto says. "One of the things we're focusing on in the human resources department is increasing our effectiveness at helping people understand their processes and being able to cope with the level of change that we're creating."

To do this, human resources is re-engineering from being functionally organized to being more customer organized. It's moving the strength of the department out of human resources offices and into customer areas by setting up service teams to support each area. The service teams represent the breadth of the expertise that the department brings together. They offer process improvement, health and safety, employee relations, training and so forth. But it's all decentralized.

In addition, the department has created a resource center, which provides the expertise to support the service teams. "We're just moving to that organization now," Peixotto says. "We're [not quite] where we need to be to support the massive changes that we're unleashing on L.L. Bean."

Nevertheless, the Total Quality in Human Resources department has made tremendous strides thus far. In a recent Feedback For Improvement survey, only 36 out of 3,000 Bean employees disagreed in any way with the statement, "I feel strongly committed to L.L. Bean and its goals."

The fact that Bean began its TQ process with people issues is key. "Bean is about people and respect for people," Peixotto says. "This is a way of respecting the talents within the organization. A lot of companies see people as the problem. We saw people as part of the solution."

And those people have contributed greatly. When the company started its TQM process, it had been experiencing flat sales for a couple of years. Since that time, return on sales, which the company uses as the barometer of productivity, has increased 80%. Moreover, returns for quality are down 25%, lost-time injuries have decreased 40% and work-in-pro-gress cycle time has improved 332%, from more than three weeks to less than four days.

Perhaps the organization's most significant accomplishment, however, is that through the people involvement in total quality processes, L.L. Bean hasn't in any way tarnished its reputation for superior customer service. In fact, it has polished it by adding internal customers to the list of satisfied customers — job satisfaction, as measured by the Feedback For Improvement process, is up 12-1/2%. And from the outside, not much has changed. Customers still receive Bean's no-questions-asked guarantee — if necessary. However, it's less frequently necessary.

Pesonnel Journal, July 1994, Vol. 73, No. 7, pp. 72-83.

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