Employee ownership accountability competitive advantage: Precor drives organizational change

Lynn Takaki

Lynn Takaki is Vice President of Human Resources, Precor Inc., Woodville, Washington, USA. www.precor.com

Abstract Purpose It is well recognized that fast-growing companies can outpace their systems and infrastructure. Similarly, rapidly growing companies can outgrow their corporate culture. This case study aims to address training that replaces an established yet outgrown corporate culture with a dynamic culture suitable for the growing organization. Design/methodology/approach Global tness equipment leader Precor has achieved cultural change through a strategy founded in increasing and rewarding personal accountability for results. Through training, Precor established direct connections between each employee and the corporations nancial performance. A system of ongoing communications and rewards supports the change over time. The process included institutionalized and depth delivery of company-wide communications, performance management processes, and reward-and-recognition programs. Findings Through training, an organization can successfully transition individuals and departments to embrace a culture of personal ownership, accountability and reward. Financial benets also accrue: since Precor committed to organizational change, corporate revenues have increased by more than 50 percent, and protability is up more than 200 percent. Practical implications Management can institutionalize a culture of personal ownership and accountability that generates superior nancial results. Originality/value Human resources and training executives interested in signicantly increasing their organizations business results can gain insight into building employee accountability and individual links and ownership of their companys results. Keywords Management accountability, Employee accountability, Organizational culture, Employee involvement Paper type Case study

Precor has a history of entrepreneurial success, but we werent satised with staying in place. Our ability to step up to the next level, to achieve our objectives and potential, required that we transform our culture to focus on a results-oriented, high performance culture. We needed to put in place a structure that articulates what we were trying to achieve to put the entire team on the same page, dene our culture and enroll our employees to be part of that (Paul Byrne, Precor president).

Moving from small to big

A $200 million US-based manufacturer and marketer of premium tness equipment, Precor celebrates its 25th anniversary in 2005. Operating under several ownership groups since its inception, Precor in late 2002 became part of Helsinki-based holding company Amer Sports. Today, Precor employs 750 people in subsidiaries or reporting companies in the USA, Germany, Spain, Japan, Benelux, China and the UK.

DOI 10.1108/00197850510593755

VOL. 37 NO. 3 2005, pp. 145-149, Q Emerald Group Publishing Limited, ISSN 0019-7858

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The Precor story is one of growth, change and transformation of a company that originated in a garage, and is entering its early adult years. From the outside, the Precor story appears to be one of progressive evolution and development. Whats less apparent is that as Precor entered its third decade with big business goals, the company in many ways was operating as a small business. Externally there was evidence of great change, including a stair-stepping series of line expansions and market growth in the 1980s and 1990s. Further, a major initiative in the late 1990s by Precors former parent, Illinois Tool Works (ITW), transformed Precor manufacturing into a world-class lean manufacturing operation. A global leader in lean manufacturing, ITW pared Precor manufacturing to core activities through outsourcing, workforce reduction, and investment in production technology and processes. Entering 2000, Precor had nely tuned its production operations, and generated an unprecedented string of double-digit increases in annual revenues and protability. New leadership also began outlining a vision for Precor that extended beyond traditional tness equipment, to a total product offering of products and services leveraging technology.

Recognizing the need for change

As Precor senior management assessed resources to achieve the aggressive total product vision, the divide between Precors world-class assembly-test-ship operations, and a surrounding culture of complacency clinging to small-company ways became more dened. Despite world-class operations practices, the Precor culture was characterized by a focus on effort, not results, and lack of rigor and process. Management recognized that to achieve its total product vision, it was necessary that Precor displace the reigning culture through training to establish new structures and processes. Fortunately, as a mid-sized company with few enterprise-wide processes or initiatives that impede change, corporate change at Precor could be achieved relatively rapidly. Also, there were no major functional or organizational divisions to be bridged between Precor human resources, and training and development groups. With few institutional impediments, programs that fostered employee performance could be relatively easy to integrate, and systems that rewarded and recognized recruiting, hiring and training could be tied together seamlessly.

Focusing on people, processes and products

Precor operations had established and mastered core competencies assemble, test and ship. Now Precor management applied an organization-wide focus to people, processes and products, beginning with an initiative to build accountability and ownership within every Precor employee. While the concept of individual and organizational accountability seems basic, Precor management was surprised to discover that few employees were aware of specic results or goals the company had committed to deliver. Further, even those who did recognize general objectives of revenue, prot and service were unable to articulate how their individual role and performance related to corporate results in any way. Its a common issue, similar to the way the public approaches weight loss, one of the tness industrys key objectives. Countless consumers grasp the idea that they want to lose weight, but one of the tness industrys other primary challenges is instilling in consumers the discipline and behaviors necessary to lose weight.

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 . . . Even those who did recognize general objectives of revenue, prot and service were unable to articulate how their individual role and performance related to corporate results in any way.

Similarly, it was essential that Precor formalize a framework of behaviors and processes that drive personal accountability, and establish the direct connection between an individuals performance and Precors success in accomplishing its corporate objectives.

People: setting a corner-stone of accountability: it all started with senior management

During the fall of 2001, Precors executive team made a commitment to a cultural change and alignment needed at Precor to achieve our growth plans. To crystallize the connection between employee performance and organizational success, Precor introduced a cornerstone in the system and structure of the OZ Principlew Getting Results Through Individual and Organizational Accountability, a training program provided by Partners in Leadership. The executive team began by strategizing content and principles in leading and sustaining an accountability initiative. As a beginning, Precors management team graded the company on the four main behavioral areas that dene accountability See It, Own It, Solve It, and Do It, and found that we averaged a C to D minus. Nor surprisingly, the Precor team committed to improving the grades. The rst action step was to identify the big picture, results to focus on, and the language and actions to create the experiences that would generate the beliefs desired in Precor employees of the future basically, the methodology for achieving results. Actually, Precors team had good cause for excuses that would justify less-than-optimal performance at this time. ITW, Precors parent company, had placed Precor on the sales block, thrusting the company into the unknown. Also, Precors single largest customer had led for bankruptcy, resulting in a scramble to rebuild the Precor dealer network as well as a multi-million dollar write-off against the bottom line. However, management held rm to the beliefs of a no-excuses approach, and ultimate accountability. Senior management continued to stress continuous improvement in Precor products and services, and building the tradition of quality, innovation, and customer focus through great people. Managements attitude was exemplied by Precor president Paul Byrnes introductory remarks at Precors January 2003 all-employee kickoff meeting: The worlds a mess, the economy is slow and the weather is bad. We are simply not going to accept any of those old excuses anymore.

Training reinforces strategy

Training was rolled out to cross-functional groups in all technical professional positions, followed by programs tailored for eld sales, and international ofces. Oz Principlew models of See It, Own It, Solve It, Do It the Steps to Accountability models were introduced adopted as the denition and measurement of success. In a very short time, a common language was established, and employees could identify when they were being accountable, or staying Above the Line, and when they fell Below the Line, with behaviors that can lead to a spiral of deferral, denial, blame and turf-guarding.

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In addition to building the case for change and creating a culture of accountability, the Precor senior management team developed strategies for content and principles to extend and sustain changes in the organization. Systems to improve employee communications, recognize ownership for results, and support and reinforce accountability throughout the company were created, or revised to align with the new framework of organizational values. Additionally, building new skill sets took on a major focus, beginning with a company-wide training program on basic business nance and strategies. Through a simulation/game-playing training program created by Paradigm Learning, teams of employees tried their hand at buying and running a company. In training sessions in which Precor employees manufactured and delivered products, they also confronted a variety of business challenges presented by suppliers, customers, banks and customers. They also experienced every aspect of the nancial process, from collecting receivables and paying bills to making decisions that illustrated business principles such as cash ow, return on equity and cost of good sold. Though this role-playing process, Precor dramatically increased employee understanding from a CFOs perspective, featuring skill sets valued by management, and reinforcing how each individuals performance impacts the bottom line.

Process: attacking a casual culture

In addition to processes that build new skill sets throughout the enterprise, Precor also was determined to establish process practices and supporting systems to maintain Precor momentum in personal accountability, nancial awareness and project management. Among the most important processes was that each Precor division developed and institutionalized clear, performance-based success factors, then established structured reviews assessing individual performance against specic performance metrics. In some cases, performance review formats conicted with Precors intent to focus on results, not effort. For example, in areas such as teamwork and communication, the review format was altered from focusing on whether an employee possessed a skill, to how well the skill was used to achieve goals, with 80 percent of a review sections values assigned to goals and goal achievement, not capability. A similar performance-management process was developed for work-group performance, with well-dened and visible performance targets reviewed monthly. To reinforce the new structure, Precor established internal communications that link the employee to the bottom line, including monthly Precors senior management team reports to the entire company, highlighting Precor performance in key revenue, operations, customer satisfaction and protability metrics. Also, on a quarterly basis, Precors senior management team sits down with the entire employee base in open meetings in which no business-related subject or question is taboo. Additionally, monthly Dials on the Dashboard e-mails and handouts to every Precor employee recap the companys performance. As a division of a publicly-held company, Precor cant present monthly nancial performance in advance of quarterly nancial reports. Even so, by communicating performance as percentages above or below plan, the Dials provide a performance score card that all can understand. Eagerly anticipated by everyone from production line workers to executive managers, the Dials portray Precor performance against plan in sales by division, customer satisfaction, safety, inventory management, on-time delivery, and most importantly, protability. Accompanied by a narrative analysis written by Precor president Paul Byrne, the Dials are closely followed within Precor with its tradition of aggressive prot sharing, Precor employees have become extremely attuned to nuances revealed in Dials reporting.

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 While organizational change advanced, it was inevitable that in some cases change would encounter pockets of denial or resistance particularly in areas that had experienced the greatest success.

A similar structure was developed for work-group performance, with well-dened and visible performance targets reviewed monthly. Additionally, Precor continues to focus on building nancial skills and individual awareness of ones impact on the bottom line.

A rm hand in xing what isnt broken

An underlying issue increasingly became evident as Precor change initiatives were implemented: most Precor employees understood that Precor was by no means broken prior to the change initiative. In fact, throughout its history, Precor had been successful especially so over the last decade. While organizational change advanced, it was inevitable that in some cases change would encounter pockets of denial or resistance particularly in areas that had experienced the greatest success. At Precor, senior management applied a rm hand to implement change. Through direct communications and fair yet uncompromising personnel decisions, Precor senior management demonstrated that change was mandatory not only for Precors success, but the success of individual Precor employees. Management also came to recognize that good training is not a management perq, and professional training was essential to universal acceptance of change although management often holds that professional training is appropriate for mid-range managers and above, while investments in training the rank-and-le often are considered a tough decision. Last, Precor was rm in its commitment to set the roots of the culture of accountability deeply through systems that support, manage and maintain change in the organization, ranging from publicly rewarding positive behaviors, to fostering results-based personal performance reviews, and reinforcing the connection between individual performance and organizational results.

The real story: the results

The results are impressive, including institutionalized and in-depth delivery of company-wide communications, performance management processes, and reward-and-recognition programs. Individual, departmental and company goals are well dened and aligned with corporate objectives. Precor has transformed from a casual culture to a no excuses culture of personal ownership and accountability. Prior to the initiative, individuals within Precor collectively self-graded the company at a C 2 to D level on key accountability principles of See it, Own it, Solve it, Do it. A little more than a year later, the self-rated score was B . Perhaps most importantly, the benets are visible in the bottom line: in the three years since Precor management committed to organizational change, Precor revenues have increased more than 50 percent, with protability up more than 200 percent.

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