In November 2011, Fred Meijer died.  Mr. Meijer was an innovative pioneer in the grocery business.  He created "one stop shopping", where his customers could not only buy groceries but hardware supplies, garden items, clothes, etc.  I have been a customer for over 30 years and I have always found Meijer stores to be clean, well stocked, and the Meijer Associates very friendly, well-trained and helpful.

Dr. Carl Frost--the great Scanlon teacher--worked with Fred Meijer.  Meijer never became a long term client of Dr. Frost and Meijer stores were not "Scanlon" but Dr. Frost did have an influence on Mr. Meijer.

They met one day in Mr. Meijer's ofice. They were both discussing the Scanlon Principles and the need for every employee to know "the right job and how to do the job right."  They discussed the importance of training all workers to be able to perform their jobs.

Mr. Meijer brought up the position of "bagger" a low skilled job in the grocery industry and argued that it didn't make sense to invest in training for such a job.  As they were talking Mr. Meijer was called out of his office to placate an irate customer.  It seems that a bagger had put a carton of eggs in the bottom of a bag and then put heavier items on top.  The eggs broke and the entire contents of the bag were ruined.  The customer had wasted her time shopping, Meijer had to replace all the ruined items.  There was a cost to not training baggers.

Today the hot topic in the business press is innovation.  Even popular magazines carry articles about the most innovative products of the year.  Everyone is looking for the next iphone.  However, for most organizations product innovation is not a real option.  Every grocery store carries pretty much the same items as every other grocery store.  They have to innovate in other areas.  For Meijer it was a different core process "One stop shopping."   However, it usually takes at least two innovative practices for a business to make it.  One stop shopping would not have worked without innovative customer service to support it.  Meijer learned not to put all his innovation eggs in one basket if he wanted to succeed. He trained his baggers.

Innovation is important but confusing.  Most innovation planners forget the importance of including everyone in the challenge of innovation.  Baggers have a role.  All front-line workers have a role.  As they serve their customers they often hear first what the customer wants and needs.  Since many innovations are first brought to an organization by their customers it just makes sense to teach Associates how to listen for these cues.  Also, every Associate is also a customer somewhere else.  They often bring ideas to work on how to do things better.  They know where there are unmet customer needs.  It is much harder for a competitor to copy innovative service, than it is to copy products.

Scanlon Associates have saved millions in cost saving ideas.  They have created products that have generated millions in sales and created new industries.  They are able to do this because they understand the reality of their business or organization and there is a system in every Scanlon organization for encouraging the generation and capturing of ideas.  A Scanlon Plan is an "Enabling Process" that supports all the other forms of innovation.

Because most workers aren't included in innovation planning or training I created for the Scanlon Network the first (and only) "Innovation Simulation" to allow everyone in an organization to learn about innovation and to enjoy innovating together in a four hour workshop. It has been used successfully in organizations like 3M to teach the basic principles of innovation.  If you would like to learn more about the Simulation please contact me.

I have also written an Innovation White Paper that you can download to learn what Innovative organizations like Southwest, 3M, Herman Miller and others do to encourage innovation.  You can download it by clicking here.

Questions to Ponder

1) How do you involve all Associates in Innovation?

2) How do you train for Innovation?

3) What forms of Innovation does your business practice other than product innovation?

As this blog is being written the SEC has recently filed a suit against the former Executives of mortgage giants Freddie Mac and Fannie Mae.  The SEC alledges that they defrauded investors.

In 2007, Fannie Mae CEO Daniel Mudd received $12.2 million in compensation.  He earned $990,000 in base salary and a $2.3 million bonus and a $9 million long term incentive bonus.

 At Freddie Mac CEO Richard Syron pocketed $19.8 million even though the investors lost half their stock value during this time.

How could anyone design such a ridiculous warped incentive system?  As a former compensation professional those in the profession knew that Executive Compensation was the practice area where you could get rich.   The systems are designed to pay the people who hire the consultants.

Lessons from the Scanlon Plan

Lesson 1, It is a myth that CEO's have to make 110 times the average salary to get good CEO's

CEO's have hard jobs.  A good CEO will make or break a company.  However, it is a myth that to get good talent they have to be paid 110times the wages of the typical employee.  At Herman Miller the DePrees built the company and volunteered to not be paid more than 30 times the wages of the lowest paid employee.

Lesson 2, Protect the Employee

Don't put pay at risk.  Pay a decent base wage.  People will develop a life style based on their total compensation.  When a bonus becomes too important you can get unwanted behaviors.  People will manipulate or game the system to maintain their earning power.  This may have happened at Freddie and Fannie.  Scanlon bonus systems are usually no more than 6% of base wages.

Lesson 3, Protect the Investor

No one should receive a bonus if the investors are losing their shirts.  Mr. Syron should not have received any bonus when the investors had lost half the value of their stock.  Scanlon Bonus Systems have a variety of mechanisms to protect the investor.  It can be as simple as a performance gate.  No one gets a bonus until the investors get a certain return.

Lesson 4, Protect the Customer

A large retailer paid a performance bonus to the mechanics in their auto repair shops for every job they performed.  The found out that the mechanics were repairing things that were not broken in order to earn the bonus.  The retailer was fined and suffered tremendous ill will from their customers when their customers found out they had been cheated.  Scanlon Bonus systems have quality and customer satisfaction metrics to protect customers.

Lesson 5, Protect Teamwork

During the days of piece work compensation systems, employees were paid for what they could individually produce.  These systems created havoc with teamwork and quality and most have been discontinued.  Today we work in teams and performance of the team is more important than the performance of any individual.  Bonus systems that reward a few individuals at the expense of everyone else sow ill will.  Imagine what could have been done at Freddie and Fannie if the 32 million they spent on two Executives had been used to encourage performance throughout the organization.  Scanlon organizations get a 127% return on their bonuses.  Freddie and Fannie would be in much better shape, the housing crisis would not be as bad, and the SEC could be doing some other work.

Max Depree, Business Hall of Fame bestselling author, Scanlon Steward and former CEO of Herman Miller wrote,

The first job of a leader is to define reality.

The last is to say Thank-You

In between he should be a servant and a debtor.

A friend of mine during our college days landed the perfect summer job tending bar at a resort in Northern Michigan.  The resort was so exclusive you had to take a horse drawn carriage to your cottage from the gate where the guard kept out the hoi-polloi.

He told me he had never met so many unhappy people in his life.  He said all they did was complain all day.  Despite all they had, they lacked a grateful spirit.

I've learned to avoid anyone who claims to be "a self-made" man.  While I have known many people who have succeeded by hard work against the odds, none of them were self-made.  They all at least had a mother who labored to bring them into the world.  We all in some way stand on the shoulders of others.  Someone in the distant past created the language I am using.  Someone more recent created the computer I am using.  We owe a lot to the scientists who created the vaccinations that make us healthy, the farmers who grow our food, the soldiers who protect us, the construction workers who build the roads we drive on, the teachers who taught us to read and write, the environmentalists who protect our planet, etc. In politics and in business we seem to be suffering from an epidemic of those who have much but who lack any spirit of gratitude.  They complain about the taxes they pay and the workers who produce the goods and services they depend on.  We need a return to a grateful spirit of thanks.

Dr. Mitch Rabkin when CEO of Beth Israel Hospital would require his Harvard trained interns to spend a day working in the hospital as a Janitor.  He would then ask them "what was it like to wear a different uniform?"  A Janitor has an important role in a hospital.  S/he helps to keep patients healthy.  Dr. Rabkin wanted his Physicians to have a grateful spirit for those who labor with a mop.

Questions to Ponder-Personally, Professionally and Organizationally

1. For what are you truly grateful?  What can you do to show your thanks?
2. How do you thank those who make you successful in your job or profession?
3. As a leader how do you thank those in your organization?