Knee-jerk policies hurt the bottom line

by Onno van Ewyk

Ever thought about the real impact of corporate policies on employee behaviour and the bottom line? Most company policies develop and entrench themselves over time and are rarely examined. These written and unwritten rules of behaviour most often start as knee-jerk reactions to day-to-day problems and linger for years affecting customer relationships, employee morale, product quality and general productivity.

For example, the General Manager sees a grime-covered production worker in the reception area and issues an edict that public areas are out of bounds to all production personnel. The result is that communication suffers, workers begin to resent management and cooperation drops. An executive demands a new office, for all sorts of good-sounding reasons, so to placate other executives a whole pecking order of office sizes is created with the result that power and authority begin to be equated with office size, desk size and proximity to a window, rather than expertise.

To counter the effects of such ad-hoc policy-making, companies need to systematically review their current policies and ask one key question - how do they help to better meet customer needs? If this question cannot be answered, or the response is weak and indirect, then the sensible course is to do away with the policy.

Agricultural equipment manufacturer John Deere in the US took this approach and came up with new policies which appeared radical at first, but proved to be good common sense once implemented. For example, they challenged their traditional policy of keeping production staff on the shop floor and trained a group of assembly-line workers to launch a new product range. The workers' intimate knowledge of the products proved to be a major benefit as they toured the country making presentations and talking to farmers. They also came back with valuable and practical feedback for improving customer service and fixing quality problems.

Probably the most striking example of the benefits of a considered approach to policy-making comes from the British motorcycle manufacturer Triumph. To encourage the best possible climate within the 300 employee-strong company, it adopts a "single status" policy. This means that all employees from the Managing Director down share the same cafeteria, there are no reserved parking spaces except for customers and other visitors, 'front office' staff work the same day-shift hours and have the same breaks as the factory staff, and managers all work at the same sized desks in a common open plan area.

To ensure that management identifies closely with customers, Triumph has a policy of only hiring people for management roles who are active motorcyclists. And to encourage all employees to identify closely with the company's products, it maintains a large fleet motorcycles which can be booked for use by any employee. When they return the bike they complete an evaluation form and this feedback contributes directly to improving products and boosting sales.

Triumph has also carefully developed its policies for handling dealer relationships. Dealers are treated as customers, and care is taken to support them and avoid undermining them in any way. If a Triumph employee wishes to buy a motorcycle at an employee-discount, this must be done through an authorised dealer. The factory pays a subsidy direct to the dealer who gets both the sale and the full retail price.

The value of these policies is reflected directly in the bottom line. Since the brand was re-launched in 1991 (the Triumph name was bought by a new company after the original Triumph company ceased trading in the early eighties), annual production has increased from a standing start to 8500 in 1994, with 13-14000 motorcycles planned to be built in 1995. Sales are running at 87% of production which effectively means Triumph's motorcycles are selling as fast as they are made.

The lesson for other companies is to take an in-depth look at their policies to re-assess their impact and effectiveness. For larger companies this means a formal programme to identify what their written and unwritten policies are, assess their value in terms of customer benefit, and to judge whether or not the expected positive outcomes are outweighed by unwanted side-effects.

7/10/94

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This is one of a series of articles written by Phil Cohen and Onno van Ewyk, HCi . Most of the articles were also published in the Australian Financial Review. This article may be reproduced only with the permission of HCi Consulting (email HCi ). Copyright HCi, 1993-1998.