How to Exploit Empowerment in Making Strategies

Johnsonville foods empowers employees for involvement in strategy

At Johnsonville foods, a firm in the forefront of the movement to spread responsibility for strategic management thought the organizations; employees on the factory floor play a key role in shaping and carrying out the firm’s strategies. Johnsonville foods CEO, Ralph Stayer, were approached by a major food retailer about producing sausages the retailer would market under a private label. Stayer ’s initial reaction was to say no, reasoning that the extra work would overload his plant and his workers. But before actually tuning down the contract, he discussed the matter with the firm’s 200 production workers, a routine practice at Johnsonville foods.

In teams of twenty, all the workers were asked to weigh the potential benefits of and drawbacks to accepting the proposed contract. The most important potential benefit was that the added production would result in economies of scale that would lower costs. This coupled with the higher volume, would raise company profits, and because every worker at Johnsonville foods was on a bonus system linked to company profits, all employees stood to gain. The drawbacks to and risks of the new contract centered around the argument that the tremendous increase in volume would overstress the factory and the workforce, and overall quality would slip. If this happened, not only would the company lose the new contract; it would also have jeopardized its relationship with its existing customers.

After ten days of deliberation, ‘the teams reported back:’ we can do it’. Their analysis showed that after working seven day weeks in the short run, they could eventually expand their hourly production output, and the workload would level off. The teams then divided up to address specific challenges such as what new machinery would be required, how many and what sort of people should be hired, and how production would be scheduled. One team discovered how volume could be increased by 40% while holding cost increase to only 20%. Another group designed new equipment and performed a discounted cash flow analysis to back up its requests for capital. Such issues as these would traditionally have been assigned to managers far away from a factory floor.

In the end, the Johnsonville foods employees’ strategic plans for expansion were successful. Productivity rose 50% after the firm took on the new contract. Since then, sales have continued to rise at twice the rate of payroll expenses as employees continue to find more efficient ways of doing things. CEO Stayer is sold on the ability of his workforce to help make strategic decisions and then make those decisions work.

‘If I had tried to implement this from above, we would have lost the whole business…. The past debacle of ordering change and watching it fall to occur showed me my limitation. I had come to realize that I didn’t really control the performance of people at Johnsonville foods, that as a manager, I really didn’t manage people. They managed themselves. But I did manage the context…. Contextual factors with the ability to shape the way people think and what they expect.’- This was the thinking of a great CEO before allowing it to be accomplished by the bottom level people in the organization.