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Get to Gemba if you want freedom!
Get to Gemba if you want freedom!
See if you can figure this puzzler out'
Two companies in the same market are about to go head-to-head, competing for identical customers with virtually the same product.
One has revenues of billions of dollars and is well-recognized as one of the top brands in the world with 100,000 employees.
The challenger has 30 employees, relies on donations to support itself and depends almost entirely on volunteers to help build the product.
I'm sure you've already guessed that David wins this battle against Goliath but do you know who David is in this scenario? You'll be shocked to find out. You'll also be surprised to learn how you too can beat the goliaths ' and free yourself from your business ' using a little known Japanese philosophy called Gemba'
First, the battle of battles was over who could win the encyclopedia market as the digital revolution took off.
Bill Gates wanted to win desperately and spent nearly two decades building Encarta to create the world's first electronic encyclopedia.
But in 2009, Microsoft finally raised a white flag after spending hundreds of millions of dollars and capturing only 1.27% of the online encyclopedia traffic on the web.
The champ? Wikipedia.org.
With relatively few employees and some donations it created the world's largest online encyclopedia from scratch thanks to the generosity of volunteers. As a result, Wikipedia captures 97% of all online encyclopedia traffic. That's 97% vs. Microsoft Encarta's tiny 1.27%!
Here's the question: Why did Wikipedia with only volunteers beat Microsoft with its army of employees and cadre of resources?
Pay wasn't a factor. Microsoft has produced nearly 12,000 millionaires but it couldn't compete with Wikipedia's volunteers. In fact, those who are rewarded with the most pay often perform the worst.
It makes you think twice about paying for performance.
In a study, Daniel Ariely, a professor of behavioral economics at Duke University and author of Predictably Irrational, proved this in three experiments. He and three other professors asked participants to assemble puzzles and play memory games while throwing tennis balls at a target.
They promised one-third of them one day's pay if they performed well. Another third were promised two weeks pay. The last third could earn a full five months pay. (The study was conducted in India where the cost of living is low so don't go rushing to participate!)
Which do you think performed the best? Or the worst? The big bonus group ' those who could earn the most ' performed worst of all. The low- and medium-bonus groups performed the same.
They've since replicated the results at MIT in a separate study with under-graduate students. 'Dangling a very big carrot led to poorer performance,' Ariely says.
So if pay isn't a leading factor in performance what is?
The most successful leaders who have been able to create high-performing cultures found it in Gemba. It's a Japanese term that means 'the real place' or 'the place where truth can be found.' If you seek solutions to problems take some time to be quiet and just listen what's going on around you and see it for yourself.
If you want to really see what's going on, go to Gemba. If you want to find real solutions, go to Gemba.
In my research talking with thousands of business owners and in my own experience with clients I've found that those who went to Gemba made profound changes in their organizations. As a result, they found there are 3 primary performance drivers:
1. Play to your strengths
2. Create a path of ascension
3. Lead with a purpose
Notice pay is NOT in the top three! The volunteers at Wikipedia had a passion for creating a great product ' and it was so important to them that pay didn't matter. Don't misunderstand me. Pay is indeed important ' but there are other things (the top 3 are listed above) that matter more. I'll even show you how create a high-performing culture with our new Performance Driver Launcher. More in a moment...
When you tap into those 3 performance drivers you no longer have a staff of employees, you have what I call a Freedom Team ' people who are driven to do more than just what's required in their job description. As a result, you no longer have to be involved in the day-to-day operations of the business so you can work on the business ' not in it. You're free from your business!
Are you getting 1.5x return on your employees?
What you're looking for is a 1.5 to 1. What does that mean? For about 20% of your employees you pay for a day and you get a half day's work. For a majority of people ' about 60% -- you pay for a day's work and get a day's work. But for the other 20% you pay for a day's work and you one get one and one-half times that in return in terms of performance and productivity.
The big question is how do you do that? The secret: Go to Gemba. That's where you'll find your answers.
One of our clients, Daniel Ely, did just that. When he stopped and took some time to see what was really going on he discovered his business was nothing like what he had envisioned.
I'll never forget when I asked Daniel to draw his organizational chart and show how it really operated. It was like spokes on a wheel. He was in the center of his business and reporting lines extended to all his managers and employers. Everything had to go through him to get done!
As a result, nothing was getting done. Managers were frustrated because they couldn't make decisions on their own. Employees were always waiting for approval. And Daniel couldn't step into his office without everyone pouring in asking him questions.
Things had to change, and he knew it. So we began by determining his strengths and weaknesses as well as those of his managers and employees. Next, we allocated job responsibilities based on what each person did best beginning with Daniel. Play to your strengths and compensate for your weaknesses. Employees were empowered to do the work they exceled at, and he trusted them to get it done. As a result, Daniel was able to take a 4-month leave of absence to travel and never worried about his business while he was away. And now he doesn't come in until noon every day.
Next, create a path of ascension (the second of 3 primary performance drivers).
Employees who perform at the highest levels understand where they can possibly move up in the organization and how to get there. One of the best examples is another client, Nick's Pizza & Pub. I’ve talked about Nick Sarillo’s amazing story in past articles but after talking with my friend Rudy Miick, who is brilliant and also works with Nick, I wanted to share with you a couple important insights that came from our conversation…
"Hey, when are you going to give yourself a raise?"
Starting work on day one is different at Nick’s. Why? Every employee is told from the first day they can create their own level of pay and their own job assignments. But first they ALL must know how to make pizza Nick’s way – it is a pizza restaurant after all! From there, it’s up to each employee to determine their future.
They simply have to receive training to become certified. If they want to learn how to make sandwiches or salads or even become mentors and train others, they have to become certified. Receive 3 certifications and employees get a $1.50 raise and red or black hat. Nick pays roughly the industry average except in the heart of the restaurant – the kitchen – where he pays slightly more. The more jobs they can perform, the more they can earn. And employees thrive!
He’s turned the tables. So now he’s the one asking his employees, “Hey, when are you going to give yourself a raise?” Imagine that. No one is asking you, “When am I going to get a pay increase?” Instead, you’re asking them. It’s up to them. Wouldn’t it be great if you could say the same thing wih your employees?
The third performance driver is leading with a purpose. Nick even calls his restaurant business, “Pizza with a Purpose.” What does that mean? Nick’s is more than just a community restaurant, it’s a restaurant that genuinely serves the community.
Most employees are students. So every quarter when report cards come out, he pays $50 for every A his employees get. If they get 5 A’s, they get $250! That’s another $1,000 a student can earn during the school year!! And if they letter in a sport, that’s another $50.
He also holds regular benefits for families who have fallen on hard times. He leaves it up to the team to determine who benefits – not an ad agency or a marketing company. All the profits from that day’s work are donated to the family. In one case, they surprised a woman with the money so she could pay the medical bills for her daughter who suffered a brain aneurism. Employees will often donate all their tips too.
Miick calls it conscience capitalism. “When he goes out of his way to support the community it’s not just because he’s benevolent. Part of that comes back to him tenfold. Imagine if the students are getting straight A’s and they’re getting $50 for every A. What would that do for your life and your community?” Miick says.
By the way, you may recall that Nick’s Pizza & Pub was almost forced to shut down due to over-expansion, a major road construction project and the recession. But it was the community that helped him. Once they heard about his plight, sales soared week after week. Previous employees came back to volunteer working shifts for NO PAY! And I’m happy to report that just before Christmas, the bank agreed to restructure his loan so he could continue to serve the community.
As you can see, dangling a big carrot does NOT increase performance. Want real solutions? Go to Gemba. Listen deeply and don’t just listen to the management books where you may fall for conventional wisdom. So the question for you is this: What are you doing to drive performance other than simply offering bonuses or raises?
To help get you started, download ourPerformance Driver Launcher.
Always taking you from where you are to where you want to go,