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Pinnacle Brands A Strike Puts Employees Up To Bat

June 1, 1996
Related Topics: Downsizing, Motivating Employees, Workforce Planning, Featured Article
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Are you American? Then you must love baseball. And you probably still wince a bit at the debacle of 1994, when those on-field heroes, the boys of summer, packed up their gear and headed home. The strike hit us hard. Most Americans were beyond bitterwe felt robbed, cheated out of our national pastime. There was no joy in Mudville, nor any other baseball-loving town.

If you think the average Joe was upset, consider the organizations linked to baseballbecause it's not just a national pastime, it's a national business. Take, for instance, trading-card companies. When baseball shut down, so did a huge chunk of their sales. Smaller card companies literally went bankrupt. Larger ones survived, but only after huge headcount slashes.

Of the top five trading-card manufacturers, only one got through the strike with no layoffsPinnacle Brands Inc. It did so by issuing an intriguing challenge to its employees: If they could devise new ways to replace the $40 million of lost trading card revenue, they would keep their jobs. Pinnacle's workforce emerged from the strike victorious with a sales jump of 80% in two years. In a season without heroes on the baseball field, these employees became heroes on the business field.

One strike can mean you're out (of business).
It was a tense spring at Pinnacle Brands. Each day the murmurs of a 1994 strike grew stronger, so did employees' fears. At that time, baseball cards represented 65% of Pinnacle's business. "Here we were getting ready for what could be a no-baseball season," remembers Carlo Frappolli, vice president of HR. "When the stars aren't hitting home runs and aren't pitching no-hitters, people don't want to buy their cards. Everyone was nervous."

Frappolli and Chairman & CEO Jerry Meyer began discussing what-ifs. A strike would all but nullify the company's need for 190 full-time employees. However, both Meyer and Frappolli strongly believed workers should be viewed as revenue producers, not expense items. Unlike executives at many companies, their first reaction wasn't to lay people off. Pinnacle's regard for its workforce is reflected in the company's operating philosophies, four of which directly address the employer-employee relationship:

  • Treat all employees with dignity and respect
  • Deliver good news with grace
  • Deliver bad news quickly and with brutal honesty
  • Reward for results, not efforts.

In the first week of July, the strike ceased to be a rumor. Soon, the season was canceled. There was no good news to deliver, but the remaining three operating principles were about to come into play. Upon the official declaration of the season as null and void, Meyer convoked employees for a meeting. He delivered two messages. First, he quickly and honestly explained to employees that the company had just hit a dangerously rough patch. It was sink-or-swim time. Second and most important, he delivered the game plan: "He told the folks, 'I'm not going to save your jobs. You're going to save your jobs. You know what you can change and what you can do differently,'" says Frappolli.

Carolyn Corbin, founder of the Center for the 21st Century in Dallas, a think tank on future socioeconomic issues, believes Pinnacle's approach should serve as a role model for companies going through similar crises. "Very few companies take that risk," she says. "But in a way, it's not a risk at all because it puts the responsibility on the people to 'pay for themselves.' The [emphasis] isn't cash flow anymore, it's people flow: People will have to be generating, directly or indirectly, revenue for their keep or they can't stay."

The majority of Pinnacle employees remained wary at first, particularly the production people, who'd been subjected to continual cyclical layoffs under the company's former owner. Carol Anderson, an executive assistant in the finance division, recalls the workforce jitters: "Everybody sort of said, 'Uh-oh, what does this mean to us?' I think everybody went home that night a little nervous. But I thought we should give it a shot. At least it was we'd all sink or swim together, not just lay off people."

Meyer and Frappolli provided encouragement by setting up opportunities for employees to gather in informal teams and discuss ideas. Teams were deliberately cross-departmental. For instance, if employees had a new-product idea, a team would include someone from the creative end, a person from photography, people from marketing and finance. This gave employees insight into each step of a process so they didn't get blindsided halfway into a plan because they lacked the necessary perspective. It wasn't long before some amazing ideas started floating past supervisors' desks.

Pinnacle has a winning season.
One of the very first bright ideas came not from the COO or CFO, but someone just as in tune with the company's operationsPinnacle's custodian. She came to Frappolli with a simple observation: The company spent approximately $50,000 a year on refrigerated sodas and bottled waters for every conference room and most executive offices, as well as personalized cups to boot. "So we stopped that," says Frappolli. "If executives feel they need to have sodas, they should go out and buy them themselves. That idea came from someone who sweeps the floors."

As soon as an employee's suggestion proved useful, Pinnacle immediately recognized him or her by printing out a big colorful poster with the person's name on it and many thanks. Some employees were spotted for a dinner with a spouse or friend at any Dallas restaurant of their choice. Others got round-trip airfare to visit nearby cities. "We tried to personalize it," says Frappolli. "Maybe we'd get them a signed football if they were a player's big fan. We tried to give things that mean something to that person."

Another simple but effective idea came in response to a newly developing area. Pinnacle had begun making pogs for Frito-Lay's division in Mexico; a 3-D pog went into every bag of chips. To understate it, the item was popular. The introduction of pogs spurred sales from 40 million bags of chips a week to 80 millionand there's only 50 million people in all of Mexico. Problem was, the orders were growing so exponentially, Pinnacle couldn't keep up. In danger of losing the contract, a manufacturing supervisor set his carpentryyes, carpentryskills to work. On his own time, he made a "shaker table." The homemade contraption literally shakes the pogs as they come onto a ramp so they shoot down different avenues, allowing more workers to pack them. It increased Pinnacle's production capacity by tenfoldthe company shipped over a billion pogs that summer. "If you looked at this table, you'd think your 10-year-old could have made it," says Frappolli. "But it's a good idea and no one had thought of it. It let us hit the order."

Employees were encouraged not just to concentrate on their own areas, but also to think outside the box. A public relations manager, for instance, was looking at the 1996 Olympics with dollar bills in his eyes. He'd been to previous Olympics and had seen how well pins had sold. He contacted one of the few companies licensed to sell Olympic pins in Atlanta, a company that lacked the distribution channels Pinnacle had established. Now that company makes the pins and Pinnacle distributes them. The venture brought in almost $20 million in revenue.

Throughout the process, Pinnacle struggled against formalizing it too much. Employees would contact either Frappolli or their supervisors with ideas. "I found from my days at large companies that programs can bog you down," says Frappolli. "With us it's if you've got a good idea that will work, let's do it. Let's quantify savings so we know it works and then reward that employee." How did the company know if an idea would work? It grabbed all the stakeholders and asked them if it was worth trying. The company tried to emphasize the positive. Maybe the first idea wasn't a home run, but if employees remained encouraged, they might hit the next one out of the ballpark.

One of the employees who scored big was Anderson. As an employee in the finance department, she was privy to the exorbitant costs of trademark searches. Every time the company came up with a new name for a trading card, it had to pay a trademark attorney to do a search to make sure it hadn't been trademarked. Anderson decided to create a database for Pinnacle, to track what trademarks it owned and which ones it had searched in the past. Although she had no training in legal or intellectual-property issues, she wasn't afraid to ask a lot of questions. Anderson worked to set up the systemat home and on weekends, even on lunch breaksfor almost three months before it was up and running. It has saved more than $100,000.

Toward the close of '94, there still hadn't been even a peep about layoffs. Employees were revitalized. "Each day and each week and each month they saw we weren't laying people off and our competition wassome were laying off half their workforces, shutting entire plants down," says Frappolli. "They saw we weren't doing any of that and it really built some steam."

Pinnacle was lucky it had a tough and energized workforce, because it wasn't in the clear until fall 1995. Baseball sales are strong this spring, however, and the company is breathing a collective sigh of relief. But the message remains clearjust because we're bouncing back doesn't mean we should relax. Keep the ideas coming. Says Corbin: "What Pinnacle has done is to tell employees, 'Keep justifying your job. Earn your keep if you want to stay here.' Rather than the organization choosing who stays and who goes, the people themselves choose through their actions. What Pinnacle is doing is the most honest, empowering thing it can do."

Anderson says employees are still at itshe herself is exploring a new database. She gives much of the credit to the Pinnacle culture. "It's an atmosphere in which you can take on as much responsibility as you want," Anderson says. "If you were to leave Pinnacleand I have no intention of doing soyou could honestly look your employer in the face and say, 'I can do anything you throw at me.'"

Truly mutual admirers, Frappolli says a lot of the credit goes to the Pinnacle workforcea uniquely excellent group of people. "I think it would be dangerous to say that this is a template that could work across America," he says. "You need special kinds of people who believe in themselves and understand that they control their own destiny. These employees know that if they deliver results they're going to have a job and if they don't they might not. They prefer to bet on themselves rather than having a company take care of them."

Pinnacle's mission statement is "to provide unexpected delight in everything we do." In its rally against layoffs, the company certainly provided unexpected delight to a business community jaded by "unavoidable" downsizings. When the crowds cheer to the crack of the bat this week, we should reserve a portion of the adulation for the heroes off the field.

Personnel Journal, June 1996, Vol. 75, No. 6, pp. 71-74.

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