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Kindle Notes & Highlights
Patterson was a perpetual beginner. He bought NCR without knowing much of anything about manufacturing—except that he wanted to improve every business owner’s operations. From his experiences, he took what he knew to be right and paid no attention to convention.
He surrounded himself with the greatest talent, then he unlocked their fullest potential with training and incentives. He was able to get every one of his workers to think like owners, through his profit-sharing plan.
Patterson was always looking to improve production, so he made sure that every employee had a voice in improving the manufacturing operations.
Once the challenge of convincing manufacturers to work directly with Marks & Spencer was overcome, the company now had the system and relationships in place to experiment with these new technologies and to teach their manufacturers how to use them in production. As Simon Marks later stated, “We came to regard ourselves as a kind of technical laboratory. We felt it was one of our functions to provide our suppliers with expert technical information about the new materials and processes which the advance in technology was making available.”8
He was able to combine an appreciation for science and technology with an industry that had never cared to utilize it,
Bring discoveries from other industries
We were determined not to join in the annual lament of company chairmen about the rising operating and overhead costs.
There will always be kvetching about how hard things are. We don't have to join them.
An awful lot of what we did at FedMart was counterintuitive to people who were in the merchandising business at that time . . . Many retailers look at an item and say, “I’m selling this for ten bucks. How can I sell it for eleven?” We look at it and say, “How can we get it to nine bucks?” And then, “How can we get it to eight?” It is contrary to the thinking of a retailer, which is to see how much more profit you can get out of it. But once you start doing that, it’s like heroin. - Jim Sinegal, Fortune 2006
As a lawyer, he thought of the retailer’s relationship with the customer as more of a fiduciary one, and stated, “You are the fiduciary of the customer. You’ve got to give before you get. If you get something for a lower price, pass on the savings.”8
Price’s belief was that customers were more sensitive to the price of goods than to selection.
Price made it a mission to keep advertising to a minimum at Price Club. Costco has been running the same way, and it not only has grown through unsolicited customer testimonials but also has garnered significant unsolicited media coverage over the years.
If you can't afford the variable cost of advertising, make it a fixed cost by getting media coveragge and customers talking.
And what probably happened here, obviously, is this guy [Les Schwab] did one hell of a lot of things right. And among the things that he must have done right is he must have harnessed what Mankiw calls the superpower of incentives. He must have a very clever incentive structure driving his people. And a clever personnel selection system, etc. And he must be pretty good at advertising. Which he is. He’s an artist. So, he had to get a wave in Japanese tire invasion, the Japanese being as successful as they were. And then a talented fanatic had to get a hell of a lot of things right, and keep
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The success of any business is directly correlated to its ability to motivate its people through clever systems and incentives.
Wow, if this isn't useful, I don't know what is.
Quality incentives are only good if the growth opportunity for the company is present and significant.
TO ALL STORES . . . If a bright, young, ambitious man joins our company and wants to make our company his career, does he do it because he likes Norm Nelson and wants to help Nom, Gordy, or Bob, or Denny? Do you men think that some little fairy sent you this man just to help you build your bonus? Do you think that this man is going to work ten hours per day, miss meals, have ungodly hours at home, just to help you build your stores? Do you think this man is going to work for low pay, year after year, just so that you can build your profit share contract into a nice fat nest egg??? No, I don’t
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Early on, it was apparent that Les Schwab’s motivation was not to get rich but to provide opportunities for young people to become successful, as he had done in the beginning.
One highly successful system Schwab created was the Honor Carrier program, which helped to increase the Bulletin’s circulation significantly. The program incentivized newspaper carriers to acquire new customers, provide impeccable service (no more than four complaints about missed papers per month), and collect and keep financial records about their routes. There were three levels that each carrier could achieve: one-, two-, or three-star honor carrier.
Les Schwab, Pride in Performance
#booklist
Problems create opportunity. The solution to a problem is . . . common sense, open communication, complete honesty, and the desire to help your fellow man become a successful person. —Les Schwab, Pride in Performance
The desire to help others succeed can be a powerful force. Les Schwab was a master at creating an atmosphere for others to succeed through clever programs. Les always told his managers to make all their people successful, because he believed that the way a company treated employees would directly affect how employees would treat the customer.
Declines in profitability immediately affected non-manager employees’ cash bonuses, and once that was wiped out, the trust contributions would be affected. Employees had a tangible result for poor performance.
This has been helpful at WBG as well.
employees were given educational material with their cash bonus. These communications helped employees understand, in simple terms, all of the details of their profit sharing, including their share of the pot and their amount paid into the trust.
Conventional wisdom in business is to give corporate executives large paychecks and to pay grunt workers much lower wages. At Les Schwab Tire Centers, the highest overall pay packages, including bonuses, went not to Les Schwab or other executives but to the people who really mattered, the store managers. Les wanted store managers and their workers to continue to make more and more money, because that would indicate that the company was doing better in terms of revenues and profits.
Compensation should go where there's the most to gain. Do most executives change that much?
A common theme among intelligent fanatics is that they operate their businesses with a decentralized model. Workers are given autonomy to run their operation as if it were their own business. Authority and autonomy promote a feeling of control and self-worth that is intrinsically valuable to employees.
The big thing that is going to hit you right between the eyes is that “WE EXPECT YOU TO RUN THE STORE.” You are on your own, and you will sink or swim according to your abilities.
Setting the expectation that they'll have to figure it out is a big deal. Nothing clarifies responsibility like a comp pla. You pay for what you value.
Les Schwab and other intelligent fanatics, however, believe that decision making is best executed at the lowest level. Store employees, not the office workers, are the individuals with perfect knowledge of the situation.
To Schwab, the main job of the office is to provide motivation, to create programs that make it possible for employees to be successful, and to track and communicate how well stores are doing.
Get clear on the money tasks. Then do whatever it takes for the people doing the money tasks to succeed.
The company had an open book policy, and employees were able to get practically any information they wanted about the company, including total company profits, employee salaries, and so forth.
This could be a neat idea
Les also employed a clear communication path with all employees, through his company bulletins. Additionally, he created policies to help educate and motivate employees.
I wonder what kind of regular training I can do here.
Les Schwab also communicated other lessons to employees through his bulletins. One of the more notable lessons on the problems of discounting and low profit margins was illustrated through the “Poor George” story. The story simply conveyed the difficulty of operating with price discounts of 5% to 10%.
Crazy! This is the same conversation I've had many times with Cameron.
Six Tires, No Plan
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Incentives at Discount Tire were similarly generous. Halle paid managers a base salary while also giving them 10% of the first $200,000 in earnings and 20% of every dollar in earnings above $200,000. Like Schwab employees, Discount Tire managers had no cap on their earnings. Also similar was the program of hiring within the company, where everyone started out as part-time tire technicians. Full responsibility was given to store managers and, interestingly, Halle had a similar goal of providing young people with opportunities to become successful through expansion.
know that Les Schwab grew his company from approximately $100,000 in revenues in 1952 to $1 billion in revenues in 1999. That would be a 21.6% compounded annual growth rate.
Seems like Intelligent Fanatics generally compound at ~20%
Following Braniff’s announcement, Southwest put a two-page advertisement in Houston and Dallas newspapers, with the caption “Nobody’s going to shoot Southwest Airlines out of the sky for a lousy $13.” The ad went on to describe that Southwest was giving customers a choice: customers could choose to pay the reduced $13 fare, or they could pay the normal fare of $26 and receive a complimentary fifth of Chivas Regal scotch, Crown Royal Canadian whisky, or Smirnoff vodka. Nondrinkers would receive a complimentary leather bucket.
An ad with great premiums can be powerful.
With only three planes and many scheduled flights, peers in the industry thought it would be impossible to maintain the schedule. Fortunately, Southwest’s ground operations guru, Bill Franklin, stepped up to the plate and said that it was possible to maintain the schedule if the company kept the three planes en route and minimized plane turnarounds to ten minutes or less.
Somebody has got to do the crazy math.
He believed that a Boeing 737 could be turned in ten minutes or less, and the workers at Southwest were too new and inexperienced to know any different.
Giving confidence in a process is a big deal.
The Container Store has fostered employees who have been, and continue to be, more productive than average employees, and this has led to better customer relations. Tindell says he pays anywhere from 50% to 100% more for every employee and gets about two to three times more productivity out of them. Tindell also says that The Container Store has a 10% employee turnover rate, compared to the retail industry average of 100%.
Wow. That's awesome. We need performance compensation plans where employes can earn 50-100% more than the average for their kind of work and do most of it on performance.
She said that positions and titles signify absolutely nothing. They’re just adornments; they don’t represent the substance of anybody .
Southwest could get clever, simple, cost-effective solutions from its employees because those employees thought and acted like owners. Employees also possessed copious amounts of curiosity, a characteristic sought by Southwest’s hiring team.
How do I screen for curiosity and taking responsibility for a problem?
To get employees to think and act like owners, management aligned employees with Southwest’s actual owners, both fiscally and intellectually.
Profit sharing and responsibility. The shorter the feedback loop on both of these, the better
Planning and corporate layers dilute customer service, increasing the time needed to find a solution. Not every decision will be perfect, so Kelleher has been a big proponent of the motto “Ready, fire, aim.”
“If we think small, we’ll grow big, but if we think like we’re big, we’ll grow smaller.”7
Herb Kelleher
Despite my overpromising and underproducing, people showed support and continued to reiterate, “It’s okay to make mistakes; that’s how you learn.”
Herb Kelleher wanted employees to take risks; however, Southwest as a whole never took big financial risks.
The best risks to take are the emotional ones. Those are the risks that feel loudest, but the big, quiet financial ones actually are the most important.
he created a culture that focused on communication within Southwest and with the outside world. Kelleher was able to distill complex ideas into comprehensible information that every employee, regardless of position or intelligence, could understand.
Most of the big ideas boil down to common sense anyways.
Southwest employees were encouraged to create the same type of simple, effective communication. The employee communications department produces the corporate newsletter LUV Lines, which clearly communicates complex issues, such as how valuable each customer interaction is to the company as a whole and how important every employee’s efforts are to the company.
Intelligent fanatics are teachers to every stakeholder.
A true sign of an intelligent fanatic–led organization is that the business continues to outperform even after the intelligent fanatic has fully exited the business.
He would spend a large part of his time—roughly two months out of the year—in direct communication with QuikTrip employees.
Chester said, “Without fail, each year we learned something important from a question or comment voiced by a single employee.”2
Because of different personalities and experiences, we handle employees differently and I would not try to teach one set method. I would just say that we cannot tolerate obnoxious, oppressive, abusive, tyrannical despots (assholes).
