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Managing the Journey

Interview with CEO Ralph Stayer on the eight-year process of revamping his management style.

Ralph Stayer of Johnsonville Foods, on the eight-year process of revamping his management style

It started with a six-page letter chief executive Ralph C. Stayer wrote to the employees of Johnsonville Sausage in 1982.

Things were going to change at the Sheboygan Falls, Wis., manufacturer, Stayer, now 47, told them. He was committed to helping his employees learn how to work smarter so they'd become the best paid in the industry. To get their attention, Stayer enclosed a $200 check in each letter, the first of many bonuses he hoped they'd be able to earn as they took the thousands of little steps necessary to fix what was wrong with the business.

On its own, the letter marked a modest change. But that new compensation system was just the first step in an eight-year journey that would transform the company into a national management model celebrated in magazines and on television, making Stayer a celebrity of sorts.

Stayer had worked on the slaughtering line at Johnsonville during summers in high school and college. He had studied business and finance at Notre Dame, the first in his family to earn a degree, and had joined the company, founded by his parents in 1945, upon graduation. It was small, with $1 million in sales from a few retail stores, but Stayer had plans -- "to make money and build the business," he recalls. With his parents' blessing and help, he broke off the manufacturing and wholesale sides of the company in 1968, leaving the retail end under his parents' control. Over the years he pushed sales up until they reached $15 million by 1982.

But the CEO wasn't happy. Quality and productivity were slipping. So Stayer started asking questions about himself and the company, and about who should do what. Inspired by Lee Thayer, a communications professor in the humanities department at the University of Wisconsin, Stayer decided to turn Johnsonville into a new kind of organization, one step at a time, by pushing decisions and responsibilities down the hierarchy, destroying the conventional management structure along the way, and inventing its replacement on the fly.

Today the company, now called Johnsonville Foods Inc., is one of those rare places where empowerment and teamwork go beyond mere rhetoric. There are no general raises; all employees are paid for performance, with a regular pool of profits divided among them. Sales have gone from 1982's $15 million to an estimated $130 million today, and the company's share of the Milwaukee-area market has gone from 7% to 40%. Productivity has increased between 200% and 300%. Stayer has moved gradually out of direct day-to-day responsibility at the company over the past four years. He has started a pasta business with more than $10 million in sales and has launched a consulting career, teaching others the lessons he learned at Johnsonville -- a process he calls Managing the Journey of Change.

This fall INC. writers Leslie Brokaw and Curtis Hartman talked with Stayer about the past eight years, a time of continual change for him and his company.

* * *

INC.: Let's start back in 1982. Your company was doing $15 million a year, up 150% since '77, with profits holding strong. That sounds like most CEOs' picture of paradise.
STAYER: That's one way to look at it. Or you could look at it and say, My God, this business isn't healthy. Forget what the numbers look like. People don't care.

* * *

INC.: Do you remember any specific moment when that realization hit you?
STAYER: It was a bunch of little things, like walking around seeing equipment being dropped and seeing people talking in the aisles, not committed at all. Then I ran an employee-attitude survey, and we came out absolutely average. Here we were this rapidly growing company; I thought everyone should be excited. But the only one who was excited was me.

I wanted them to care, but at the same time I didn't understand why they should. What the heck, I owned the business. Why would anybody care as much as I do? I was a good boss, friendly, I knew all the names, but we were there to make sausage and to make money for me.

* * *

INC.: But the company was growing and making money. What did you think you'd get out of people caring more?
STAYER: I could see such a gap between what we could be and what we were. The quality wasn't anywhere near as good as I wanted it to be. Second, I wasn't having any fun. I was a baby-sitter for all my executives. I had to get them together to solve their problems.

Do you know what causes frustration? It isn't problems. You get those all the time. What causes frustration is knowing that 20 years from now, nothing will have changed. Crap is just going to keep coming down, and you'll be there shuffling through it. It was terrible. We were doing all kinds of stuff, and I couldn't see any improvement at all. If anything, our productivity was going down.

* * *

INC.: What sort of "stuff" were you doing?
STAYER: Oh, modern management techniques, more organization and supervision. Long before quality circles were popular, I started meeting with groups of people and asking them their problems -- so I could solve them. I hired a quality control person with a lab and put in a quality program with lots of controls -- and quality got worse, not better. I hired a human resources person with responsibility for training, monitoring, and systems, and I put in more supervision, but things still didn't get better.

The quality control person says, "We need more QC people, so we can check more." The manufacturing person says, "We need more supervision; set a pace line." They couldn't sell me on it. We'd added more supervision, and we still couldn't get the job done. There had to be something different. I was ready for it.

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