People Management- Formula for Success

If a HR manager of any organisation is thinking of jumping onto the team-based-management bandwagon, they should first take heed of the lesson many chief executives have learned the hard way: they must give their employees a solid incentive for making teams work and teach them the skills they'll need to earn those incentives.

Take the case of this hypothetical company, Damodaran Industries. The HR manager Sushil Rao had enough foresight to do both: giving incentives and teaching new skills. When he first took the step to help restructure his company, which makes seating and table products for private aircraft, Sushil made an unusual proposal to employees: teams would be paid 25% of sales on the specific product they made, and they would distribute those revenues among their members as they saw fit. They would be responsible for hiring, scheduling, customer service, quality, and even their own cash flow.

That first year, Sushil tried the new system on just one team, promising employees that they would not earn less than they had the previous year. As it turned out, average annual wages increased three-fold. Once employees began to see that if they worked more effectively as a team they would make more money, they had enthusiasm for working in this new way, and they made a commitment to learning. The following year, four more teams were organised similarly.

Indeed, learning was critical to the new system's success. Sushil, who has a background in organisational design, developed his own training programme to teach employees effective communication, team-building skills, and business processes. Employees were required to attend 13 hours of training every quarter for a full year.

Sushil supplemented the training with team coaching. He also made assessments of teams' weaknesses, often suggesting that a particular team repeat a training session. Team leaders were required to put in even more training time, attending three-hour courses at a local community college on hiring, time management, and cash flow.

The training and coaching have paid off. While costs per employee have remained steady, sales were up 50% last year, and the company's margins are at about 20% -- twice the industry standard.

Ref: TheManageMentor