How A Human-Centered Workplace Survived A Crisis, And Thrived After
How to survive a major crisis in an organization? How to thrive after? These are relevant, even crucial, questions. Especially today. Recently, I found valuable answers to these questions, as I was developing a case study for our Online Academy. This case is about Panelfisa, a NER Group company.
In the summer of 2010...
Panelfisa, in the Basque Country, is a manufacturer of fastening elements (like screws and bolts) for the domestic appliance and automotive industries. Structured as a cooperative, it employs about 80 staff, and exports to 20+ countries worldwide.
But efficiency levels are low. Quality problems are regular. And serious delivery problems cost lots of money on emergency transport.
Plus, there is little communication between the office and the factory floor. Unsurprisingly, employee morale is deteriorating rapidly.
Failed improvement projects
It’s not that they didn’t see the need for improvement. Indeed, they tried for years to improve the situation. Or, as then General Manager Satur Ormazabal described it:
“We had always seen the need to undertake improvements, and since 2000 we had attempted to use such tools as 5S, continuous improvement and scorecards. We even developed a strategic plan with an external consultant for the period 2008-2012, including the participation of the Board of Directors.
Despite all this, we kept operating as a traditional company with a classic organization chart. That is, operational power was shared between a few people at the top of the pyramid. And none of them encroached on the area of another. There were many meetings, but few real changes were made.” (Adapted from source.)
On June 16, 2010, Ormazabal attended a conference where Koldo Saratxaga, founder of K2K, spoke and explained his philosophy of progressive ways of working called the ‘new style of relations’ (NER). He also talked about the NER Group of around 20 progressive companies in the Basque region that had adopted this philosophy.
TTT Goiko is one of these. At the same conference, its president, Xabier Berasategi shared his experience of adopting the NER philosophy. TTT Goiko is no stranger to Ormazabal. It just so happens that they are an important partner of Panelfisa – providing them with heat treatment of their products.
Inspired by Saratxaga and Berasategi’s talks, a visit to the TTT Goiko factory is set up by Ormazabal. Soon after, Ormazabal and his leadership team visit two other NER Group organizations (Ekin and Lancor) to learn from their experiences with the unique NER philosophy.
Call in the cavalry
The leaders of Panelfisa are all pleasantly surprised by what they see and learn during these visits. Now aware of the responsibilities and risks involved in such a transformation journey, they are convinced similar radical change is needed at Panelfisa.
So they agree to bring Saratxaga and his K2K team on board to guide their own transformation. But that is easier said than done.
Because before Saratxaga and his team can start a transformation journey, they must first check some prerequisites, to ensure the entire organization, not just its leadership, is dedicated to adopting the NER philosophy.
Saratxaga and his team believe the entire organization must be committed to change, and all employees must be inspired, as much as the leadership is, to make the change. So, in November 2010 Ormazabal calls a special meeting with all staff of the organization.
There, the leadership group shares their view of the NER philosophy and their desire to adopt it. They have organized a trip to NER Organizations Ekin and Lancor. And anyone at Panelfisa who is interested in learning about these companies can join the trip. Half of the employees (41) sign up for the trip. They want see the NER philosophy in action with their own eyes.
Vote collectively for change
Another meeting is then organized for December 14, 2010 for all members, including the ownership of the organization. This time they will vote whether or not to adopt the NER philosophy.
All members cast their vote, anonymously. The result is unanimous. 100% of the votes are in favour of adopting the NER philosophy. A decision to embark on a transformation journey is easily made. When the results are announced, spontaneous applause fills the room. This is the spark they all needed.
How A Human-Centered Workplace Survived A Crisis. And Thrived After.
Starting the change
They strike while the iron is hot. Saratxaga and his team act quickly. On January 3, 2011, they start the change process, and follow some distinctive steps.
1. Collect feelings, dreams and fears
They begin by meeting all Panelfisa employees one by one to ‘collect their feelings, dreams and fears.’ In the process, Saratxaga and his team get to know all Panelfisa people, and their concerns.
This also helps them to discover the strengths and the weaknesses of the organization. This takes about 40 days.
2. Change the organizational structure
Next, they radically change the company’s organization structure. The hierarchy becomes a thing of the past. It makes way for a networked structure of 12 teams.
These self-managing teams are highly autonomous. Equally important, there is no longer a hierarchy between them. And each team elects its own representatives.
All teams have different functions:
- There are 3 customer teams. These are in direct contact with Panelfisa customers, and responsible for a geographical area.
- There are 6 client line teams. These teams are directly responsible for producing Panelfisa products.
- There is 1 support team. This team supports the customer and client line teams in back-office areas like IT, administration, people, legal and finance.
- There is 1 commitment team. This is the team that consists of representatives of all the customer and client line teams.
- There is 1 steering team. This team consists of the General Coordinator (Ormazabal) and representatives of all other teams.
3. Change the reward structure
Not only is the organization radically changed, the reward structure gets a major update as well. Salary levels are reduced from 14 to 8, and salaries are raised by an average of 6.15%, to take place over three years.
4. Introduce performance transparency
Saratxaga and his team introduce ‘operating statements’ that are distributed to each team monthly. In this statement, each team can see how the organization is performing on variables like fixed costs, sales, gross margins and cash flow.
These statements allow teams to see how their contribution affects the performance of the organization. They can now decide for themselves how best to contribute to the whole.
Saratxaga and his team makes sure everyone understands the concepts and variables laid out in the operating statements by explaining them in depth—and repeating if needed.
5. Introduce a new business rhythm
They also introduce a clear daily, weekly and monthly business rhythm:
Daily coordination meetings
Each morning a coordination meeting is held between representatives of all client line teams. They meet for about 15 minutes to update each other on their team’s status.
And they discuss things related to problems, incidents, breakdowns, customer complaints, suppliers, etc. This enables teams to help each other when they need it.
Weekly commitment meetings
Weekly commitment meetings are held on Monday. During these, representatives of the customer and client line teams meet to discuss deliveries (commitments) that need to be made that week and the week after.
During these ‘commitment meetings’ representatives of the customer teams provide all relevant information about their customers to the other teams. Only by sharing this information regularly and transparently can the other teams know what commitments they must make to fulfil the demands of each customer.
Each week, planning is done to honour these commitments. This is based on availability and efficiency levels that team representatives think they can achieve.
Monthly steering meetings
Representatives of all teams meet monthly during steering meetings. However, these meetings are open to any member of the organization who cares to join.
Monthly performance statements take center stage. Each representative explains results obtained compared to objectives set the previous month, and relevant decisions are made.
By radically changing its way of working to a human-centered philosophy, Panelfisa successfully survives its crisis. And more importantly, they still thrive today.
Then on February 14, 2011, they start the new organization overnight! Obviously, this is not easy for anyone.
Ormazabal writes: "This style forces us to listen and talk much more, and ultimately to relate more and better. This is not easy. This style is extremely uncomfortable for people who like to have control or feel important through knowledge that they do not share with anyone. In the end, if they do not adapt, some of them end up leaving.” (adapted from source)
Nevertheless, the positive signs of the transformation start to appear quickly and don’t disappear later. The results speak for themself:
- Within a year, average daily production has improved from €33,000 to €52,000.
- Within 6 months, the delivery service has reached almost 100% and average time to complete an order is cut back to 0.5 days.
- In the first-year, sales grew by 9%, in the second by 29%, and in the third by 20%.
Problems of the past were finally dealt with. By radically changing its way of working to a human-centered philosophy, Panelfisa successfully survives its crisis. And more importantly, they still thrive today.
Learn more on Panelfisa and other pioneers through our soon-to-be-launched Online Academy. More info here.
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Be the first rebel to reply.
“It was like being with a parent that didn’t really want us”, says CEO of GE Appliances, Kevin Nolan. He explained: “The one hope everyone had was that Haier bought us because they wanted us, and we were curious to find out what that would mean”. 4 years later, we visited to find out how GEA was doing. Getting to talk to them was harder than we thought: “Our managers and executives are currently working on the assembly lines.” They are doing what!?
There are many examples of self-management on the Corporate Rebels Bucket List, all of which have very few layers of management, if any, and they are mostly highly successful. So this raises the question “If this is such a good way of organising work, why isn’t everyone doing it?”.
After writing up the business case of NER Group for our Online Academy, I read Jack Stack and Bo Burlingham's classic about their transformation of SRC Holdings, called 'The Great Game of Business'. I was struck by the similarities between the two.