Business
K&N Management’s Baldrige Journey
K&N Management was named a recipient of the 2010 Baldrige Award, the second food services company to win the Award—and it learned many of its best practices from the first food services company to win the Award. You can read about K&N Management at its Web site here.
The company owns four Rudy’s Country Store & Bar-B-Q stores and three Mighty Fine Burgers, Fries and Shakes, all in or around the city of Austin, Texas. Co-owners Brian Nolen and Ken Schiller started the company in 1993 after a successful partnership in the insurance industry. They went into the restaurant business because they liked the idea of a business where you could distinguish yourself from your competitors—which they have certainly done:
- Gross profit exceeds the industry standard
- Overall guest satisfaction ratings of 4.7 exceed the best competitor’s rating of 4.0
- Order accuracy rate of nearly 100% compared to the industry average of 87%
- A 92% record of passing health department inspections compared to 86% for competitors
- Food costs as a percent of sales 3% below those of similar restaurants
- Turnover rates better than the industry averages
- Absentee rate slightly more than 1% exceeds the 3.5% of benchmarked organizations
K&N Management’s search for excellence led them to Pal’s Sudden Service, which…
4Jan2011 | Steve George | 0 comments | ContinuedSharing the Wealth
“The most successful companies I’ve gotten to know understand that they create the most value when people at every level share in the value they help to create.”
This is the central argument Bill Taylor makes for “Why Nobody Wins Unless Everybody Wins” (HBR, December 7, 2010). His argument happens to be timely with the national debate over tax cuts for millionaires. I’ve railed in previous articles about excessive executive compensation (here, here, and here), which makes those who are not executives cynical about the real value of what they are doing. I also recently read that U.S. companies are now holding onto something like $37 trillion in profits, presumably waiting for the right moment when the recession lets up and they feel free to invest again.
All three of these factors—more of our income gains going to the top one-tenth of one percent than the bottom 60%, executive compensation hundreds of times more than average salaries, and leaders hoarding profits—are key factors in our current economic decline. Study after study has shown that tax cuts for the rich do almost nothing to add jobs: The wealthy just save or invest their extra dough. Tax cuts for everyone else go right back into…
8Dec2010 | Steve George | 0 comments | ContinuedFirst Engineering & Architectural Firm Wins Baldrige Award
With the announcement of the 2010 Baldrige Award recipients, Freese and Nichols became the first engineering and architectural firm to win the Award. A Texas-based consulting company, Freese and Nichols has 449 employees and annual revenues of $80 million. It works primarily on major public projects across Texas.
According to its profile (available here), Freese and Nichols aims to do one thing extremely well: Be the very best at client service, resulting in long-term mutually beneficial relationships. The data suggest it is succeeding: It has retained 71% of its clients for more than ten years and 42% for more than 30 years. Its ability to build relationships with its customers helped it grow revenue by 12 to 16% a year for the past four years, well above the industry benchmark.
Other stellar results include:
- Several honors for being a “best place to work”
- Recipient of one to three gold medals for engineering excellence from the Texas Council of Engineering Companies every year for the past five years
- Workforce satisfaction at or above 4.6 on a 5-point scale for the past three years
- Recognition for having strong ethics
- A “catch-ball” process to cascade strategic plans throughout the company
- Volunteer hours for Freese and Nichols employees totaled nearly 7,000 in…
The New Pro-Business Mentality
There are a lot of politicians hitting the airwaves with their “pro-business” mantra that usually includes reducing regulations, eliminating the minimum wage, and cutting corporate taxes. But, as Seth Godin so eloquently points out, what may have been pro-business in the past has little to do with what is best for business in the 21st century. (“What does ‘pro-business’ mean?” Seth Godin’s Blog, October 13, 2010)
That old-school pro-business mindset is more like pro-factory, but factories in the U.S. business world represent a fraction of all the business that’s being done, especially since so many factory jobs have been sent overseas. “It turns out that factory thinking is part of a race to the bottom,” writes Godin, “to be the cheapest, the easiest place to pollute, the workforce that will take what it can get.”
Godin offers a new set of pro-business strategies that sound like a much better fit for business today:
- “Investing in training the workforce to solve interesting problems so they can work at just about any job.
- Maintaining infrastructure, safety, and civil rights so we can create a community where talented people and the entrepreneurs who hire them (two groups that can live wherever they choose) would choose to live there.
- Rewarding and…
Failure of Business Leadership
Baldrige is a big-picture model that addresses all of the elements in a management system. As someone wrote, all organizations function as a system, whether or not they are managed as one. As Deming and Juran noted, 80% or more of the problems an organization faces are problems with the system. Since the organization’s leaders are responsible for the system, 80% or more of the problems their organizations encounter are leadership problems.
The problems American businesses are currently facing are leadership problems and no group owns more responsibility for leading us into those problems than the Chamber of Commerce. Robert L. Borosage, president of the Institute for America’s Future, summed up the issue very well:
9Sep2010 | Steve George | 0 comments | Continued“This country is struggling to respond to the worst downturn since the Great Depression, a direct result of the failed conservative policies that the Chamber of Commerce has advocated for decades. Over the last decade, we lost one in three manufacturing jobs. Inequality reached gilded age levels. CEOs and bankers pocketed million dollar bonuses while cooking the books and gambling on exotic securities, inflating the housing bubble until it burst. Health insurance companies kept a stranglehold on a health care system that costs twice as much as…
The Remedy for ROA Flatlining
TThe average return on assets of U.S. companies has steadily fallen to almost one quarter of what it was in 1965, and the trend line approaches zero in 2020. ROA is a measure of how profitable a company is and how efficient management is at using its assets to generate income.
The decline in ROA has occurred despite steady improvements in labor productivity, which have occurred despite stagnant wages for the labor. As a result, businesses have been paying no more for an increasingly productive workforce, which pretty much eliminates wage control and productivity as factors in improving ROA.
So how can leaders reverse the trend?
John Hagel III and John Seely Brown address this issue in “Six Fundamental Shifts in the Way We Work” (HBR, August 17, 2010). The six shifts they mention are:
- Management practices and corporate institutions are fundamentally broken. Most have not yet figured out how to compete more successfully.
- The source of value creation is shifting from your stock of knowledge to the flow of knowledge, and most executives lag in understanding what this means for their companies.
- Management innovation is not enough: Institutional innovation, exemplified by China’s open production and design models and India’s open distribution models, are needed.
- A new kind…
Ready to Go Big
The results speak for themselves:
- Same store sales have grown for 24 years
- Market share has grown for 24 years
- Service speeds four times faster than competitors
- Order accuracy at least ten times better than the closest competitor
- Employee turnover half the industry average
Pal’s Sudden Service has accomplished all of this with what may be the ugliest store design in fast-food history—and it may be coming to a major thoroughfare near you. Pal’s was recently named one of Restaurant Business magazine’s “Future 50,” which are restaurant chains that have proven their concepts, are fast growing, and are getting ready to go big.
Pal’s key concept is a management system based on the Baldrige model. The restaurant chain won the Baldrige Award in 2001. It established the Business Excellence Institute to share its best practices with other organizations, and those lessons aren’t just for food service companies. More than 50 nonprofit organizations and government agencies have taken the training BEI offers, which once again demonstrates the universality of Baldrige principles. You can learn more about Pal’s BEI by clicking here.
Pal’s did its first Baldrige assessment in 1995. As I’ve seen with other organizations, the first assessment often produces profound insights, and the same was true for Pal’s. “From…
29Jul2010 | Steve George | 0 comments | Continued
