Replicating Best Practices to Turn Around Profitability

Replicating Best Practices to Turn Around Profitability

25-Aug-2016 Rick Tucci Download

Case Study Preview: For organizations with "like" operating units spread across broad geographical areas, the big challenge is closing the performance gap between best versus poor performing units. Facing a severe profitability shortfall, the CEO of a national food products distributor implemented to an innovative "global AND local" approach to "replicating" best practices across operations to turn around profits and boost employee engagement at the same time.

In the food service industry, being a big player requires widely dispersed distribution facilities capable of delivering customized orders to restaurants, hotels, schools, health care facilities, institutional food service operations, and the like, 24/7 every day of the year. The challenge is making money in a game of razor thin profit margins where small errors add up to big losses.

For one of the largest food service distributors in North America, a newly appointed CEO inherited a mid-year profit shortfall that defied an easy solution. As she explained, "I came into an organization with a well-developed, proven playbook for controlling costs and maximizing profit margins coupled with a history of local autonomy and entrepreneurial spirit. My challenge was figuring out how to get everyone using best practices without crushing a culture that was a cornerstone of the company's success."

My challenge was figuring out how to get everyone using best practices without crushing a culture that was a cornerstone of the company's success.

The "Global AND Local" Model for Best Practices Adoption

Based on her experience in a prior leadership role, the CEO turned to Leap Technologies for help. She had worked with Leap in the past and had experience with their rapid improvement methods. As she noted, "I thought of Leap immediately because I wanted to attack the problem by empowering our local leaders and employees, while also installing greater precision and discipline into the organization."

At the CEO's request, Leap facilitated an initial meeting to introduce top leaders to its rapid strategy execution model for turning around performance. The approach Leap recommended called for engaging the organization at all levels in a 90-day "Global AND Local" Rapid Improvement Campaign involving the following steps:

  • Align leaders on turnaround improvement goals and establish a scorecard of critical key performance indicators to track progress.
  • Engage internal process and system experts to confirm (and document where needed) proven "global" practices for improving performance across operating units and develop an associated menu of standard project assignments for improving "local" performance.
  • Train operating unit leaders in Leap's proven, reliable Rapid Action process and launch teams to improve performance. Allow each unit to select their areas of improvement, but hold them accountable for using best practice roadmaps and following the prescribed team process.
  • Monitor progress on a weekly basis, share learning, and clear obstacles to solution implementation.
  • Report on solutions implemented, roll-up results achieved, capture lessons learned, and recognize local teams.

The aggressive 90-day timeline of the Rapid Improvement Campaign reflects one of Leap's core learnings about rapid improvement: Motivation for change and improvement is highly perishable at the frontlines. Leap's experience with hundreds of performance turnaround initiatives demonstrates that quickly converting "talk to action" at every organization level builds confidence and encourages additional effort above and beyond normal expectations " critical factors for accelerating versus simply managing change in distributed organizations.

Jumpstarting Rapid Improvement

With the senior leadership team on board, Leap worked with the company's internal change resources to design a three-day Leadership Jumpstart Event to kick-off the company-wide profitability turnaround campaign. Leadership Jumpstart is Leap's team engagement toolkit for quickly aligning leadership teams for faster strategy execution.

Fifty plus leaders representing the corporate staff and each of the company's 45 operating units convened at the company's headquarters to plan the 90-day Profitability Turnaround Rapid Improvement Campaign. Working in cross-organizational sub-teams, leaders completed a series of activities to build consensus on critical factors driving profitability, identify best practices already in place for achieving and sustaining profitability, and prioritize the critical few key performance indicators for monitoring performance and taking the right action. The Jumpstart Event also confirmed commitment to launching 60-day Rapid Action teams to attack profitability issues at the local level.

To effectively and efficiently manage more than 30 projects across the continent, Leap trained eight regional support resources to operate as team coaches and equipped them with Leap's Rapid Action Toolkit. Rapid Action is Leap's flagship product for ensuring results from small improvement teams. The "all in one" design of the toolkit (including meeting guides, templates, supplies, etc.) facilitates rapid team launch with minimal upfront training. Teams learn as they solve problems and implement solutions.

Rapid Action fit hand-in-glove to the challenge of balancing local autonomy with standardization of operating practices. Local operating units were charged with the same overall mandate: Improve margins and reduce cost. Yet each local team had the opportunity to brainstorm ideas for improving profitability based on local experience. Once the ideas with the best potential for results were agreed to, the team was introduced to the best practice roadmaps to be applied and improved upon to achieve results as quickly as possible. This "pull versus push" approach is key to faster adoption of best practices because it develops greater ownership at the frontlines where results are created.


Rapid Action for "Global AND Local" Strategy Execution

36

teams deployed across 45 districts

368

employees engaged

168

total solutions implemented

$10M

annualized profit improvement

Following Rapid Action training, the coaches went to work launching four to six Rapid Action teams within a regional market. Each Rapid Action team was supported by a local manager and designated team leader who was given responsibility for guiding the team after the launch meeting. According to one Rapid Action team leader, "Using the team kit made my job much easier. Everything needed to run a successful team meeting is included in that box. You can't help be successful if you follow the process and use the tools."

Using the team kit made my job much easier. Everything needed to run a successful team meeting is included in that box. You can't help be successful if you follow the process and use the tools.

Within 60 days, 36 local Rapid Action teams had implemented more than 160 specific profit improvement actions. Sample solutions included:

  • Redesigned credit memos to eliminate inconsistencies and better meet the needs of Sales, Finance, Inventory Control, and Procurement. Annualized Savings: $65,000.
  • Improved freight cost recoveries by bringing the in-bound logistics function in-house. Annualized Savings: $53,700.
  • Improved the routing process to reduce the number of "small drop" deliveries. Annualized Savings: $330,000.

In total, profitability improvements reported by the Rapid Action teams exceeded $10M on an annualized basis, providing the turnaround needed to meet the current year budget shortfall. Reflecting on the performance of the 60-day Rapid Action teams under his watch, one of the coaches remarked, "I would say that 90% of the actions implemented by my teams used the Best Practice Roadmaps in some way. But the real key to success was allowing the teams to develop their own ideas to create local ownership and excitement. We got above and beyond effort because employees could see management was listening to their ideas and recognizing their efforts."

I would say that 90% of the actions implemented by my teams used the Best Practice Roadmaps in some way. But the real key to success was allowing the teams to develop their own ideas to create local ownership and excitement. We got above and beyond effort because employees could see management was listening to their ideas and recognizing their efforts.

For the CEO, the strategy of trusting local execution while requiring discipline to a standard process reflected application of what Leap refers to as "Replication Competency" a key competitive advantage for organizations with distributed operations. Organizations endowed with Replication Competency recognize the difference between global knowledge and local ownership. Leveraging global knowledge begins with aligning leaders on the practices that have a proven track record of success across operations. Putting global best practices to work requires recognition and respect for the fact that nothing changes in distributed operations without local ownership.

For this food services provider with far flung operations, Replication Competency is a skill it continues to execute to achieve strategic goals with better speed and greater "stickiness" of results.


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