Army Lessons That Apply to Small Business
Lieutenant General William G. Pagonis might have rested on his laurels and retired in 1993, when he capped his 29-year Army career as the logistical chief of the first Gulf War. The 18-month stint earned him kudos from the Allied Forces commander Norman Schwarzkopf, whose memoir saluted Pagonis as the "logistical wizard" of the war.
But Pagonis decided to apply his wizardry to shake up logistics at Sears Roebuck & Co. As executive vice president of supply-chain management from 1993 to 2004, he was a key architect of the giant retailer's storied financial turnaround in those years. Most recently, Pagonis helps manage two small family businesses: a 50-employee Uno Chicago Grill pizza franchise that he owns with his son, Robert; and a seven-employee horse ranch in Evans City, Pennsylvania, that he and his wife, Cheri, own.
A lecturer and consultant on supply chain management, Pagonis is the author of the 1992 book, Moving Mountains: Lessons in Leadership and Logistics from the Gulf War.
Recently contributing writer Joseph Rosenbloom interviewed Pagonis about the logistics lessons he learned from his time at the Army and Sears, all of which can be applied to small businesses (like the ones he runs with his son and wife).
At 5-feet-6 ½ you're a head shorter than the stereotypical general—Norman Schwarzkopf, for example. Was your lack of vertical stature a disadvantage in the Army, or in business?
Not at all. It's performance. It's how well you do. It's how well you present yourself, and can you get people to do what you want them to do and go that extra mile? That's where the leadership part comes in.
In the military, what is at the core of effective leadership?
What they teach you in the military is, number one, take care of your troops and train them, and the job will get done. It's a mission-team-type effort. Even if people don't care about each other, they are going to come together, especially if they're in combat. In the civilian sector, you've got to motivate people, and you've got to make sure that they work as a team.
What did you take from your experience in the Army to improve supply chain management at Sears?
As in the Gulf War, I was the single point of contact for the supply chain. The first year we saved over $100 million right to the bottom line without firing anybody. The average turnover rate at Sears was, like 50 percent to 60 percent, a year. My turnover rate was 10 percent.
How did you achieve such impressive results?
When I was the single point of contact for the Sears supply chain, I could consolidate. I could coordinate. In Columbus, Ohio, we had about eight distribution centers. I was able to form a team there. If one facility needed troops there in a peak period, we could transfer from another facility. When the heads of all the distribution centers were reporting to one person, there was greater coordination. If we needed to transfer people from one site to another, we could do it more easily.
How did you cut employee turnover so dramatically?
I tried to make sure people had fun in their jobs, that they understood what the mission was. Families are so important. I would not see anybody at Sears after 5:30 in the afternoon.
I used to tell people, "You have a wedding anniversary and you have to leave at 3 o'clock, send your subordinate. And if you train your subordinate properly, it shouldn't be a problem." I would also use management tools: stand-up meetings and 3x5 cards. People would send me short, concise 3x5 cards by email with updates, concerns, and other operational information.
You insist on stand-up meetings?
About four days a week I had a stand-up meeting at Sears every morning at 8 o'clock. It didn’t last more than 15 to 20 minutes. Everyone was represented from the supply chain: transportation, warehousing and so on. I'd go around the room, and I'd get a quick update of what happened the day before, and what was going to be happening that day. All people in the room shared the information, and that's critical in the supply chain.
Why not let people sit down?
When you sit down, a meeting goes for over an hour or an hour and a half, and you lose everybody. When people are standing, they talk faster or they say I don't have anything to add. I did have a sit-down meeting once a week to cover ups and downs: What happened great for the week, what didn't happen well. And if it didn't happen, what did you do to fix it?
And why are 3x5 cards such a big deal?
If you have a 20 or 30-page report, nobody reads it. If you're working for me, I ask that your reports fit on a 3x5 index card. If it's longer than the front and back of a 3x5 card—and I do have index card formats for email—I won't read it. And I tell my managers I won't read it.
But in your book you said that you preferred 3x5 cards to email, in part, because of their anonymity.
I did, because remember in those days we didn't have laptops or other ready ways to access email. Today, I do everything on email and just keep a 3x5 card format.
But email doesn't allow for the anonymity that you built into your memo-flow system in the Army.
It doesn't. But at Sears I had a negative-free environment. People were not afraid to tell anybody that something was screwed up. Bosses were not allowed to stop bad news from coming to me. If they did, they got in big trouble with me.
Since the merger of Sears and Kmart in 2005, the consolidated company has hit the skids, despite the fixes you left in place. What happened?
I think they made a mistake of not finding the right people to lead Sears. There are a lot of great practices that are still in use. In the supply chain operations, they're still functioning with 3x5 cards. Some people still do the stand-up meetings. Their product mix is what's killing them.
You explained your belief in the virtues of email, but you've also stressed the importance of top executives having person-to-person contact with their employees.
One of my greatest strengths, when people were briefing me, was telling in a minute whether they really believed in what they were saying. But you can work over emails and never meet somebody for years. I think leaders of the future will have to figure out how to compensate for the lack of face-to-face contact.
Do your military methods apply to small companies?
Starting in December and continuing this year, I did a consulting job for a trucking company that had 25 employees. I used the same principles of 3x5 cards and stand-up meetings. Sales went up, and the company was more productive.
Has it been humbling to involve yourself in businesses as small as your son's restaurant and your wife's ranch?
It has been a dose of reality. Everybody doesn't feel as strongly as you do that they want to make money for the company and save costs. You see that the guys mucking out the stall could care less about turning the horses out and grooming them. You're paying minimum wage. He just wants to do his job and go home at 5 o'clock. Being down in the trenches again reminds me how critical it is to understand that everybody doesn't have the same desires and wants as the boss.
It has also been interesting because I now work with both my wife and and my son. They'll talk to employees one on one. I call it sensing sessions. My son will bring in three servers, two bartenders, and two busboys. He'll take thirty minutes. He'll have each of them write down on a piece of paper three ups and three downs about the operations. For the downs, he'll ask, "How can you fix it?" It’s amazing what kind of feedback he's getting.