"The largest cost in business is not labor, material, or overhead… it's unnecessary complexity."
Who said that? I did. I use it almost every time I'm asked to speak to industry groups, and even last week to a bunch of almost disturbingly smart CalPoly students. The students immediately understood, the business executives often don't.
Now we hear of another industry that is embracing time standards, looking for savings in one area while ignoring the impact in others. And most notably ignoring the unnecessary complexity all around them, thanks to the blinders of pathetic leadership.
Daniel A. Gunther has good reason to keep his checkout line moving at the Meijer Inc. store north of Detroit. A clock starts ticking the instant he scans a customer's first item, and it doesn't shut off until his register spits out a receipt. Each week, he gets scored. If he falls below 95% of the baseline score too many times, the 185-store megastore chain, based in Walker, Mich., is likely to bounce him to a lower-paying job, or fire him.
At least 14 major chains have sought bankruptcy protection over the past 12 months, and many others are struggling. With nearly all of them under the gun to cut costs and improve profit margins, "labor-waste elimination" systems like the one used by Meijer are sweeping the industry.
Now where have we heard of this before?
The approach is rooted in the time-motion theories of Frederick Taylor from the early 20th century, which were used to break down tasks into units to determine the maximum work a person could do. Harold B. Maynard, the company's founder, began his career in 1924 as a time-study engineer at Westinghouse, then formed his own company. For 70 years, that company worked primarily for manufacturers. In 2000, after demand from manufacturing industries declined, the company shifted into retail.
Of course it declined in manufacturing because factory managers woke up and realized that it didn't work. Sure, direct labor might become more efficient, but at what cost?
Interviews with cashiers at 16 Meijer stores suggest that its system has spurred many to hurry up — and has dialed up stress levels along the way. Mr. Gunther, who is 22 years old, says he recently told a longtime customer that he couldn't chat with her anymore during checkout because he was being timed. "I was told to get people in and out," he says. Other cashiers say they avoid eye contact with shoppers and generally hurry along older or infirm customers who might take longer to unload carts and count money.
Worker stress goes up, customer service goes down. Contrast that with the philosophy of Saishunkan, the cosmetics company in Japan that I wrote about a couple weeks ago. They go the extra mile to engage the customer, as happy customers both create sales and create ideas for improvement. But how about some more examples of the impact of a focus on labor productivity:
Linda Long, 58, who shops at the Okemos store weekly, says of the cashiers: "Everybody is under stress. They are not as friendly. I know elderly people have a hard time making change because you lose your ability to feel. They're so rushed at checkout that they don't want to come here."
So you're losing the elderly customer base. That's some nice brand image, not to mention lost sales.
Customers at several Michigan stores said managers appeared to be opening fewer checkout lines than before, relying on faster-moving cashiers and self-checkout systems to pick up the slack. "I do notice that the cashiers go a little faster, but it doesn't necessarily matter because there aren't that many cashiers," says Melissa Shoe, 20, a regular shopper at the Lansing store.
Faster cashiers, but the customer experience suffers as there are fewer cashiers. Don't forget, the purpose of an organization is to create value from the perspective of the customer…
At Bob's Stores, a Northeastern clothing and footwear chain, the software revealed that shaving one extra second from the checkout process for each shopper would produce $15,000 in annual labor savings across its 34 stores, according to Kevin Campbell, assistant vice president for store operations.
How does that $15,000 compare to the lost sales from customers that used to appreciate a more friendly attitude, or the improvement suggestions that used to be created by interaction between the cashiers and the customers? I bet one small suggestion could offset that $15,000 pretty easily.
Two shoppers interviewed in front of the Okemos store said they were told by cashiers that they were being timed. "There was one particular cashier that was in so much of a hurry," recalls Ms. Long, the regular customer at that store. "And he was saying, 'When you're afraid you're going to lose your job, you're going to make more mistakes.' "
Saving a second by adding a mistake will wipe out $15,000 pretty quick as well.
Ms. Barry, the DeWitt cashier, who says her weekly score usually hits or exceeds the baseline, admits to using a few tricks to improve her times. She makes heavy use of the register's "suspend button," which stops the clock. The system detects when remote scanning guns are used, automatically allowing slightly more time to scan big items that stay in the cart. Ms. Barry sometimes uses the remote scanner for nonbulky merchandise.
Gaming the system always happens when there are unreasonable requirements.
This myopic nonsense needs to stop, and the absurdity of Taylorism put in the grave once and for all.