As the meeting began the following morning, Greg bypassed pleasantries and got right to the point. “I would understand completely if you asked me to step down as President of Cosmetics Products, Susan. In fact I’ve contemplated resigning so that you could bring in someone else.”

“Get those thoughts out of your head right now, Greg. I hired you because I have confidence in you. You accepted the job knowing full well that there were deep problems in the business. You didn’t cause Blackstone to stop doing business with Cosmetics Products. Problems like these aren’t created overnight, and they certainly aren’t corrected overnight. First things first, however. I spoke with Roger Winchester after you told me of Kari’s decision to leave the company. He told me about your talking with him and asking for his perspective and advice. Greg, that’s a sign of a real leader, and it’s one of the reasons I hired you. But the reason I called Roger was to talk about someone on his staff, a Regional Sales Manager by the name of Alexandra Templeton. We’ve been planning to promote her for some time. This looks to me like the perfect opportunity. I’m personally concerned that if we pass up this chance to move her in behind Kari, we might lose her also. I want you to talk with her, but the decision is yours. If you see a good fit, we could move her quickly. Roger does a great job with succession planning and has her replacement ready to step in. Alex already knows your channels. She knows many of your key customers in her region, and in most of the other regions as well since we’ve been moving her around over the past couple years.”

“That sounds really promising, Susan. I have a lot of faith in Roger’s judgment as well as in yours. If you and Roger say Alexandra is good, I have no reason to doubt that. I did have a great session with Roger the other day, and I expect to tap his knowledge a good deal more in the future. I’ll talk with Alexandra today or tomorrow. She could save us lots of time in filling the job and in getting up to speed. I expect my Sales and Marketing Directors will be fine with the move also. I’ve talked with both of them recently, and neither one anticipates a promotion.”

“Just let me know what you decide, Greg, and we’ll either make the announcement or come up with ‘Plan B.’ Now, let’s get down to your development! I’ve been investing heavily in your education; what have you been learning?”

“I’m glad . . . no, I should say that I’m thankful, Susan, that you consider the last few months an investment in me. I’ve never worked harder, but I haven’t thought of it as education. Put in that context, however, I’ve learned a lot. I’ve learned there are apparent cross-functional interdependencies in the business that I don’t understand. To be perfectly honest, until recently I had no idea that those interdependencies even exist.

“I’ve learned that what I already know about running a business from, essentially, a Sales and Marketing perspective seems to be getting in my way in coming up with new approaches to solving my problems. I keep trying variations of what’s worked for me in the past, but it’s not working here. I know that I can’t just tweak our current business model and get the results we need. And I also know that I don’t have the answers to the problems or a clear vision of what the new business model should be. Roger was on target when he told me that if I thought I had all the answers, I probably didn’t even understand the questions. I still don’t have the answers, but I am beginning to get a sense of the questions. In short, I think I am beginning to know what I don’t know.” Susan smiled.

“One of many reasons I hired you, Greg, is because you have an ability to look at problems differently and to apply what you learn. Based on what you just told me, I think I just got a phenomenal return on my investment in your education. You are one of the smartest guys I know. To hear you admit that you don’t know the answers, or even the right questions, makes you even smarter than I thought. Many people in your shoes would try to bluff their way through this situation or use brute force to improve results. That approach can work for a while, but it won’t provide any sustained results. People burn out and create no lasting effect. In fact, the changes made with that approach usually result in even bigger problems. I sense that you were headed down that road for a while with the decisions you were making, but now I see you looking for a better way. Learning that gives you a master’s degree in corporate leadership in my book. In your search for that better way, you’ll earn yourself a doctorate.” Greg began to relax a little.

“You’re giving me far too much credit for not knowing what to do next! We’re still facing a potential business disaster. I still believe that some of the moves we’ve made to date will pay dividends, but nothing close to what we need.”

“You’re wrong about my giving you too much credit, Greg,” said Susan. “You should know by now that I don’t give credit unless it’s earned. My assessment is that you are now becoming free of your business history and are eager to learn. You might not realize how important that is on our journey, but I do. As far as business results go, you’ve taken some crucial steps. You’ll have David managing the entire supply chain and working far better with the others on your leadership team. With Tony out of the picture, I expect that you’ll have a much stronger and far more creative team. If you do bring in Alexandra, she’ll provide some new perspectives as well. On reflection, I think you had a bunch of people who had painted themselves into corners and could no longer be objective or open in their relationships with each other. You’ve radically altered that dynamic. While you’ve freed yourself from your own history, you’ve also freed your Leadership Team from its history as well. Don’t forget, too, that you upped the ante for everyone on that team by firing Tony. You gave each of them a personal reason to become more effective.

“I’d suggest that you now give them some room to learn how to work together and to run the business for you while you work on developing a new vision and direction for Cosmetics Products. You’ve been pressing them pretty hard. Now would be a good time to back off a bit and take a fresh look at the problems and at the business. I’ve learned that no matter the problem, someone, somewhere, has solved it before. Talking with Roger was a good move. I would also recommend looking for new ideas outside the company. Make some contacts with other business leaders, even people outside our industry. See what they are dealing with and how they think about their businesses. Their products might look different, but somehow I suspect their problems just might be similar to ours.” Susan paused, and then continued.

“Ease up on yourself, Greg. You still have my complete confidence. Let me know your plans in a week or so for gathering those new perspectives but relax tonight and don’t lose sight of your number one priority. Spend the evening with Penny, not with your problems!” Greg did just that.

The next morning Greg dropped in on Roger to learn more about Alexandra Templeton. Her record was impressive and Roger’s assessment nothing short of glowing. Greg knew that Alexandra would be in the office that day and made arrangements to meet with her before lunch. Alexandra arrived at Greg’s office promptly at the scheduled meeting time.

Greg learned that she was a personal friend of Kari, knew some of Cosmetics Products’ war stories, and knew about Sales and Marketing’s poor relationship with Manufacturing. He grilled her on her sales and marketing knowledge and experience and was impressed, especially with the examples she shared of getting results through effective cross-functional supply chain teams. He could already envision a great fit with the others on his team, and decided she was the right person for the job. He spoke first with Roger, and could see no reason for delaying her promotion.

“You’ve made a great choice, Greg. I hate to lose Alexandra, but it’s right for her and it’s absolutely right for Cosmetics Products. Kari was strong in that role. Her departure represents a great loss for the company, but your business hasn’t been growing. Kari and her Marketing and Sales teams failed in their responsibility of building that business, so perhaps the change isn’t all bad news. I think Alexandra has at least as much potential as Kari, and probably more. You’ll find that she’ll settle in quickly and work well with her peers even though she is a new VP. She’s good at collaborating and in coming up with win-win solutions.

“Let’s call Susan and tell her of our decision. Then we’ll call Alexandra and give her the good news. I think we should make the formal announcement tomorrow. We can make this a very quick move, but, if you agree, I’d like to keep her in Home Products for a week. Her replacement reports directly to her and is ready to take over, but I think he’ll be more comfortable if we give them a week to make the transition.” Greg made a mental note to have Cynthia update his organization chart to reflect the loss of Tony and Kari, and the addition of Alexandra to his staff [Figure 5.1].

As Greg was about to leave, Roger motioned for him to stay. “I have another idea for you, Greg.” Roger said. “It’s the idea I had when we last talked, but I wanted to check my notes and think more about it. A couple years ago, my Supply Chain VP invited me to an Effective Management, Inc. Business Excellence seminar. He wanted both of us to learn a little more about integrating business processes and about principles and best practices involved in managing supply chains. This particular seminar included some guest speakers who had worked with Effective Management and who had made the transition to what is called ‘Capable Planning and Control.’ That’s a key step toward achieving Effective Management’s ‘Class A Business Excellence’ certification.

Greg interrupted, “Class A? I’ve never heard of it.” Roger responded.

“I’m still learning more of the details myself, Greg, but it’s the zenith of business performance achieved by running a business with excellence at all levels and in all functions. It means you meet some very rigorous performance standards and consistently achieve at least upper quartile business results in your industry. When you achieve this level of performance, Effective Management’s recognition is called Class A Business Excellence certification.

“A better question might be, ‘just what is business excellence?’” Roger continued. “There are published definitions and models from lots of companies and academics. Many of them look convincing, but most of them shy away from being definitive. They’re theoretical, and depend a good deal on interpretation by the reader. But as an executive I need to know what excellent performance looks like, and I need to recognize the areas where Home Products falls short against best practices. If I can understand both of those things, I’ll have a pretty good idea what to do next. Effective Management has put some flesh on the bones of their model, some understandable descriptions, based on their personal experience of best practice applications in a whole range of companies. They accumulated this information into what is called their Class A Checklist for Business Excellence. They’ve published credible Checklists since back in the 1970s. As the performance high bar gets raised over the years, they regularly update their Checklist with tougher standards and expectations. The latest Checklist provides a worthwhile challenge. When you meet those standards and expectations, you become a truly business excellent company and consistently operate in the upper quartile of your industry at a minimum. That’s what they call Class A. I’ll give you an example. One of the tougher performance expectations that got my attention was 99.5 percent customer service. How’s that for a minimum customer service target?”

“Absolutely beyond comprehension, and also unattainable! I could never keep enough inventory to do that.” said Greg without hesitation.

“That was my exact reaction too, until I thought more about it. Let’s not talk about how to do that yet, but let me challenge your thinking. What customer service level do you think is needed for Cosmetics Products to succeed?”

“Well, Roger, given where we are today, I’d say 95 percent on time in full would be spectacular!”

“Okay then, how many orders a day do you handle, Greg?”

“About two to three hundred as I remember.”

“So at 95 percent customer service performance, you would fail to meet the expectations of 10 to 15 customers each day. You would fail to meet the expectations of one out of every 20 customers. Is that what you mean by spectacular?”

“Not when you say it that way! I should have recognized that.”

“Don’t feel alone, Greg. Most managers and executives talk about 95 percent as good performance. But it’s only relatively ‘good’ performance if your competition is delivering 85 percent of its orders in full and on time.

“Guess you can add me to the list of ‘most managers’! A few minutes ago I thought 95 percent was spectacular; I didn’t look at it as failing one of every twenty customers. Looks like you just raised the bar on me. What else should I think about differently?

“I only mentioned customer orders for the paying customers. You also need to apply that thinking internally in Cosmetics Products. Apply the thinking to manufacturing and purchase orders as well.” Greg looked a bit perplexed by that challenge, but nodded.

“But let me go back to customer service for a minute. The competition in my Home Products market hasn’t been sitting still. Five years ago if I delivered 90 percent performance, I was at the top of the tree. But now, my competitors are routinely hitting 95 percent, and my customers are asking why I can’t do that well, or better. That’s why I began thinking about all this.

“So since 95 percent is ‘unacceptable’ to my customers, using your word, I started thinking about getting to 99.5 percent performance, meaning one failure in two hundred orders. Frankly, even that’s not brilliant, is it? But I can grow my market share significantly if I get that performance level cost effectively, and grow even more if I can lower costs and prices at the same time!

“Greg, I’m not knocking 95 percent performance, especially when it’s achieved at lower cost through Capable Planning and Control. It’s a sign that the supply chain and the management processes are working together adequately. Lots of companies starting out with poor or costly customer service would consider 95 percent customer service a great achievement. But it can’t be the end of the journey, can it? There has to be more.

“That’s why I was interested in getting input from Effective Management; I wanted to hear what they were saying and hear what other industry executives were saying. I wanted to learn to do something different, to create a new paradigm, in order to get different results. As my friend, Kelly, who worked for a high-tech company in Colorado once said to me, ‘If you do what you’ve always done, you’ll get what you’ve always gotten.’ I could then, but can’t any longer afford to get what I’ve always gotten.” Roger moved to his sideboard and poured them each a cup of coffee. This would take some time now that Greg was engaged.

“I attended that Effective Management Supply Chain Seminar I mentioned earlier. They talked about a top management process called Integrated Business Management that goes beyond Sales and Operations Planning. I used to delude myself into believing that we ran S&OP in Home Products. We didn’t. We simply held what was at best a forecast and production volumes information meeting that the planners attended once a month. Integrated Business Management, as I began to learn about it, sounded more like a powerful way to manage and direct a business. They talked a good deal about Class A Business Excellence as defined in their latest Checklist and about how Integrated Business Management tied together all the business processes. I listened to the presentations and talked with people from different businesses and industries. Slowly it all began to make sense. I picked up a copy of the Checklist a few weeks ago. I’ve been going through it, not reading cover to cover, but looking through it to get a flavor of what this all means. At first the scope of Class A Business Excellence seemed daunting to me, but I’ve already learned that you have to approach Class A as a journey, in defined steps called milestones, which are based on your company’s competitive priorities. My priority, like yours, is to get control of my internal supply chain and customer service. The ‘Capable Planning and Control Class A Milestone’ addresses that challenge and is also one of the first milestones that many companies undertake.

“Just listening to Effective Management presenters and some guest speakers helped me begin to understand what I could do in Home Products. One of the speakers at the seminar, Glen Smithers from Holwarth Engineering, could have been talking about Home Products. He talked about transforming Holwarth to achieve leadership in their markets using ‘Class A’ business processes and best practices. He also talked about the benefits from their first implementation success in Capable Planning and Control. He said that Effective Management presented them a Class A Milestone Award as independent confirmation of their success. For Holwarth it was top priority to get their supply chain in control, improve costs, and increase customer service results above 95 percent. With the help of an Effective Management Diagnostic Assessment to start the ball rolling, Holwarth went on to study the ‘Class A Checklist’ in order to understand business excellence standards, at a macro level, for their business processes and results. After identifying their obvious gaps during the Diagnostic Assessment, they asked the coaches from Effective Management to help them define an action plan to meet their strategic objective of becoming the leader in their industry segment. They are following Effective Management’s ‘proven path’ methodology to achieve their objectives.

“Glen walked into a real mess when he became Chairman of Holwarth. But by the time he retired, Holwarth had made a huge improvement to their bottom line through a series of Class A Milestones; the company’s stock price increase reflected that improvement. To say he is an advocate of Holwarth’s Class A journey would be a gross understatement; he was the driving force After they got control of the supply chain and customer service, they kept going. They implemented a series of additional milestones addressing specific business objectives and, along the way, used approaches and techniques such as Lean, Six Sigma, and Agile to drive continuous improvement of their results. Glen’s address at that Seminar was inspirational. He caused me to do a lot of thinking about the state of affairs here in Home Products.”

“I can tell that you were hooked by these guys, Roger, as I would be if I could see a way to control my supply chain and improve customer service. What happened next?”

“Unfortunately my enthusiasm didn’t translate into action. Our results at that time were meeting our commitments, so we didn’t give it much priority. We already had a long list of other projects underway. Despite serious nonstop browbeating by my Supply Chain VP, I decided against taking on that additional initiative. I simply didn’t think we could handle much more change at the time. Since then, I’ve had second thoughts about that decision. I now believe there could be significant benefit for Home Products, and undoubtedly even more in your division, given what you’ve told me. So I’m now toying with launching a Class A journey. Better late than never, as they say.”

“Roger, if I could come up with an effective solution to my customer service problem, and start to regain market share I’d start now! But I’m still skeptical about using consultants.”

Roger nodded, “I can only imagine the pressure you’re under. But I know you could get some important insights, and direction from Effective Management.”

“That almost sounded like, ‘Trust me, I’m a consultant.’” They both laughed.

“Listen, Greg, here’s what I’m saying. I was very busy, and was under pressure from Amalgamated’s leadership, although not as much as you, to increase Home Products’ contribution to the company. But I still invested a day in attending that seminar. Over the years, I’ve learned that in our positions, we can’t possibly know everything. Yet the quality of our decisions is directly proportional to the knowledge and information available to us. We must have and rely on trustworthy people, processes, and supporting technology to provide that knowledge.”

That comment took Greg a different direction. “I suppose an ERP system falls into what you call ‘supporting technology.’ Roger, my people tell me that our ERP system doesn’t support the Cosmetics business; in fact it appears that they only use it to store information and record decisions made outside the system.”

“I’ve heard the same story from my people, but they’ve got it wrong. An ERP system does exactly what you tell it to do and only what you tell it to do. If you tell it to do the right things, that’s what it’ll do. If you tell it the wrong things to do, well, guess what it’ll do! I’ve talked with a good many CEOs about this. I know that Amalgamated’s ERP software is being used successfully by some pretty big players out there. Interestingly, the most successful users are those who have made it a part of a Capable Planning and Control implementation. I’m convinced the ERP system is not our problem. There’s something we and our people are missing, and we had better get to the bottom of it.” Greg was very thoughtful; Roger’s forceful response struck some familiar chords in his mind. Roger continued more gently.

“The challenge we have as leaders of our businesses is to determine what we need to learn and to do ourselves, and what others on our staff need to do for us. As Presidents we create and drive business goals and strategies; that’s where we are accountable. Of course, we must manage the business from the top, put good people in the right places and provide leadership for the whole business, especially during periods of major change. We have lots of good managers to help us manage the business, but we own leadership. To succeed, we need to develop our strengths in areas like creating a vision of the future, creating business strategies and, even more importantly, driving those strategies into the operating plans to achieve them. As Joel Barker once said, ‘vision without action is called dreaming.’ Management alone can’t make the organization move toward our vision. Leadership can, and must, lead.” Greg nodded in acknowledgment.

“Greg, you don’t have to do what I’m thinking of doing with Effective Management. Let me give you some case studies that might be helpful to you. These are copies of what I collected from Effective Management. You can read about companies like Holwarth that implemented Class A processes in various areas of the business. Most are not all the way to Class A yet, but the case studies are a quick read and could be great preparation for attending an Effective Management seminar. Here’s a flyer I received last week. The seminar is designed for executives interested in implementing best practices to achieve business performance improvements. And who doesn’t need that? I’ve personally worked with one of the presenters in the past and can vouch for her effectiveness. I know it’s short notice, but I would recommend that you attend with your Supply Chain VP. It certainly meets your objective of getting fresh perspectives from outside the industry.” Greg thought in silence for a bit. Roger could almost hear the gears turning.

“What you’ve said, Roger, has helped me make a decision. David, my Supply Chain VP, has also been prompting me to learn more. Fortunately, you’re both pushing me in the same direction. You’ve piqued my interest and the timing is right for me. I’ll talk with David and see if we can attend together. Once again, I appreciate your ideas, your coaching, and your just being there as a sounding board for me. And thanks for the case studies, Roger. I’ll have a look at them tonight.”

Greg talked about the upcoming seminar with David Simpson when he returned to the office. David was surprised and excited about the opportunity to attend with Greg. He had heard good reports about the company hosting the seminar. But of even greater importance to David was that Greg was showing real interest in learning about the business process improvements David had been advocating. They both cleared their schedules for the event, and Cynthia made their travel arrangements. Greg and David would fly to Orlando the following Monday afternoon. David reviewed the agenda and liked what he saw. He was excited also about the opportunity to see what he could learn from the other companies attending.

Greg read the case studies that evening. He found them straightforward but disappointing in that the improvement steps reported by the companies seemed to be nothing more than applied common sense. That made him reflect for a few minutes on just how uncommon ‘common sense’ seemed to be in Cosmetics Products. From talking with many people in the business, he knew that Cosmetics Products already appeared to be doing some of the things described in the case studies. How effectively they were being done was an entirely different question.

When he talked about his day with Penny, she also encouraged him to attend the seminar. “Despite your reservations,” she said, “if you keep an open mind, you’ll learn something useful.” Greg was not convinced of that, but he trusted Penny’s judgment.

Greg was beginning to look forward to the seminar but was skeptical about how much he could learn from someone outside the cosmetics industry. At the least, he rationalized, he could learn about issues people in other companies were facing and how they were dealing with them. He would take fresh perspectives and ideas wherever he could get them.