The Great Game of Business – Chapter 9 (part 17 of 17)

Chapter 9 – The Great Huddle 

            THE NINTH HIGHER LAW IS: If Nobody Pays Attention, People Stop Caring.

OUR GREAT HUDDLES TELL PEOPLE WE CARE. WE SEND THE MESSAGE OUT EVERY WEEK – WE WANT TO KNOW WHAT YOU’RE DOING.

 If you want to watch the Great Game of Business in action, come to one of our weekly staff meetings. They start at 9:00am every Wednesday in the conference room of our building on Division Street in Springfield.

What we are all anticipating is the weekly ritual of calculating the score. This is where we learn how we are doing on our Stop-Gooter bonus goals. We figure it out right there in the conference room. People come to the meeting with the latest numbers from their departments. For every entry in the Income Statement, someone has a number representing the most accurate, up-to-date assessment his or her team can make as to what the entry will be when the month closes. … we go around the room, and people announce their numbers, while everybody else scribbles them down on the scorekeeping forms – really, blank income statements. There are “oohs” and “aahs” and good-natured digs. We can all see how the reported numbers differ from the ones in the game plan, which are printed on one side of the form, and from those given in the last meeting, which we’ve written down on the previous week’s form.

There is bravado. There is daring. There is trepidation. … When we finish, the chief financial officer announces the tally: our income (or losses) before taxes for the month, assuming these numbers hold up. Then we move on to the other news.

What’s going on here 

The Wednesday meeting is the focal point for everything we do at SRC. … That’s why we sometimes refer to it as the Great Huddle.

WHEN WE COME OUT OF THE MEETING, WE CAN SEE THE WHOLE FIELD BEFORE US. WE KNOW WHO IS WHERE, AND HOW THE GAME IS UNFOLDING, AND WHAT EACH OF US HAS TO DO TO MAKE SURE WE KEEP MOVING CLOSER TO THE GOAL LINE.

As with any meeting, however, the real payoff comes from what happens before and afterthe Huddle. … From the Huddle, the numbers flow back to the rest of the company in a series of follow-up sessions held over the next couple of days. Within thirty-six hours, virtually everybody in the company has the latest information about where we stand and what we have to do to improve the score, and people are using that knowledge in their individual jobs. … One way or another, they are moving in the right direction and in the same direction.

This is the Great Game of Business. This is how we play it, week in, week out. … Above all, this is how we drive ignorance form the workplace, teach people how to make money, and show them why that’s important.

COMMUNICATION IS ONE OF THE MOST DIFFICULT CHALLENGES IN ANY BUSINESS, BECAUSE PEOPLE HEAR WHAT THEY WANT TO HEAR. 

If they don’t hear anything, they speculate. … Show me a company without regular staff meetings, and I’ll show you a company with a rumor mill.

Bad staff meetings are better than none at all – but not much. … the major problem with most staff meetings: the boss is the only one communicating. Those meetings waste everybody’s time, including yours if you’re the boss. … Instead of teamwork, you will get ignorance and suspicion. The barriers will go up.

Bear in mind that I am talking here about the regular staff meetings that companies use for internal communication. Every company will have all kinds of other meetings, and some of them won’t be part of a process involving anyone except the participants. But the regular staff meetings belongs in a category by itself, because it plays a special role. It’s most important function is to build the organization. It should be drawing the company together. … It should be unifying people around common values and goals.

Games are build around cycles, or rather cycles within cycles. … The Great Game of Business is also built around cycles. The way we play it, there is a cycle each week, every month, every quarter, and every year. We tend to think of each weekly cycle as a separate game, conisisting of four distinct stages.

The Great Huddle is the first stage of the game.

The second stagecomes on Wednesday afternoon and Thursday, when the people in the Huddle return to their departments and go over the numbers with the other members of their respective teams. … These follow-up meetings are more like “Chalk Talks.”

In the third stage of the game, the players go back on the field and run the plays they’ve discussed in the Chalk Talks.

The fourth stagebegins shortly before the next Great Huddle. By then, the score has changed, but the changes may not be readily apparent. The managers need to study and identify them, and they need to do the scoring. … On Tuesday afternoon and early Wednesday morning, there is another series of meetings, sort of pre-Huddle Huddles, at which the managers of a department get together and revise their estimates from the previous week. … At 9:00am on Wednesday, the are back at the conference room, ready to recalculate the score and start another game.

We go through this cycle four or five times per month. … After the month closes, the accounting department pulls together the actual numbers and distributes the monthly financial statements. From that, we can see how close each of us came on our final estimates, and how the various teams performed. Meanwhile, we have already begun the next monthly cycle.

Of course, any game is more fun if the stakes keep rising as you go along. That happens from week to week, as we get closer to the end of the month. It also happens from month to month, thanks to the bonus program. … Remember, we’ve designed the bonus program so that

  • We’re going after a bigger percentage of the total annual bonus in each succeeding quarter, and
  • We always have a shot at any portion of the bonus we’ve missed in a previous quarter

As a result, the stakes keep rising from quarter to quarter, the excitement continues to build, and everybody stays involved right up to the end of the year. That gives us an annual game as well.

What makes it all possible is the communications system centered around the weekly meetings.

WHEN EVERYBODY FOLLOWS THE ACTION, EVERYBODY IS READY TO PLAY.

Tips for having truly great huddles, and getting the most out of them

If you want to play the Game the way we do, you clearly need some sort of system like this one to draw people into the action. That doesn’t’ mean you need one just like ours. … Companies are as diverse as people, and nothing is more distinctive than the way you communicate. You have to develop a language and a style with which you and your people feel comfortable, that fits your personality as a business. … Let me offer some lessons that we have learned over the years and that you may find useful as well

  • Keep It Regular and On Time
  • Hold It Frequently Enough to Stay in Control of the Numbers
  • Put a Name and a Face on Every Line in the Income Statement
  • Invite Anyone with Something to Contribute
  • Have a Fixed Format, But Don’t Be Boring

I usually start the meeting with a few brief comments designed to set the tone and establish a theme. … Then we go around the room twice. The first time we do the Income Statement. … When we finish, we know how we are doing on our pretax profit goal.

Then we do another circuit during which people report any news or other information they feel the group would want to hear – new customers, important milestones, industry awards, fishing results, golf results, individual accomplishments, whatever.

Meanwhile, the chief financial officer is quickly putting together a Cash-Flow Statement, using the numbers that people have just announced. We need that to see how we are doing on our Balance-Sheet goal. (The Cash-Flow Statement shows us how much cash we have, how much we are generating, and where it is going – all of which will help determine whether or not we hit our Balance-Sheet targets.) When we get to the CFO on our second pass around the room, we take out another scorecard, this one a blank Cash-Flow Statement. He announces the numbers and we fill them in. … If we are near the end of the quarter, the CFO will also distribute a handout showing where we stood as of the last meeting and what we would have to do to hit our targets. That’s to avoid any agonizing near misses in the future. If we’re .01 percent short of our target, there is always someone who can find $1000 worth of savings and push us over the top.

  • Be a Leader, Not a Boss
  • Make Sure the Numbers Get Out

Never forget: what happens after the Huddle is more important than what happens in it. The whole exercise is a big waste of time if the information stays with the people in the room. That’s why we put so much emphasis on the “Chalk Talks.”

  • Insist That People Write It Down 

THE WEEKLY SCORECARD

In the early years, we did the projected monthly Income Statement on a blackboard in our conference room. … We still take the same basic approach, but now we have printed scorecards, which we modify from time to time as the company changes and as we get ideas for improvements.

  1. Sales Projections– Every week, someone from the sales department estimates what our sales will be for the next six months.
  2. Plan– This column comes straight out of the annual game plan. These are the numbers that we forecasted we would be generating in each category for this month.
  3. Maple/Willow/Marshfield/Newstream– These are four different businesses owned and operated by SRC.
  4. Sales– We don’t record a sale until the order is shipped, and we deduct orders that come back.
  5. Standard Cost-of-Goods Sold – We simply multiply Net Sales Shipments by the standard from the annual game plan.
  6. Gross Standard Income – When we deduct Standard CoGS from Net Sales Shipments, we get Gross Standard Income.
  7. Memo: Inventory Receipts– Inventory is a Balance-Sheet item, but we note it here partly because we want to keep an eye on it, and also because we need it to do the Cash-Flow Statement later in the meeting.
  8. Manufacturing Variances – In the real world, you seldom hit your standards on the nose. When you miss, you create a “variance,” that is, the difference between the actual cost and the standard cost.
  9. Contribution Margin – This tells us the actual gross profit we made on these products. We calculate it by deducting the Total Manufacturing Variances from the Gross Standard Income.
  10. Expenses – These are all the operating expenses not directly associated with actually manufacturing products.
  11. Operating Income – You calculate it by subtracting Expenses from the Contribution Margin
  12. Nonoperating Income/Expense – In our case, we are talking mainly about income from our subsidiaries and interest paid on debt.
  13. Income from Continuing Operations – When you deduct Nonoperating Expenses from Operating Income, you get Income from Continuing Operations. That would be the same as pretax income, except that we have a program to dispose of excess inventory.
  14. Inventory Disposal Program
  15. Income (Loss) Before Taxes
  16. PBT % Month – That’s our pretax profit margin for the month.
  17. PBT % Cum – Our cumulative profit before taxes for the year to date. Remember, a margin above 5 percent pushes us into bonus territory.

How to Lead with an Open Book

            KNOW WHEN TO PUSH, WHEN TO HUG, WHEN TO CHEER, WHEN TO BOO, AND WHEN TO KICK PEOPLE IN THE BUTT

            THE FINANCIALS GIVE YOU A DIFFERENT PERSPECTIVE ON PROBLEMS; THEY ALLOW YOU TO LET THEM DEVELOP, OR EVEN WORSEN, IN ORDER TO GET A THOROUGH SENSE OF WHAT’S GOING WRONG.

            THE NUMBERS PROTECT ME FROM PARANOIA