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Managing the Journey

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INC.: It sounds easy enough with something like vending machines. But what happens with bigger issues like quality?

STAYER: I wouldn't give up the quality stuff until they got good at the vending machines. I don't like chaos; we did a little bit at a time. In the letter I first wrote to employees, I talked about thousands of little steps, acknowledging that we're going to make lots of mistakes along the way, and that anytime we've made a mistake, we're going to fix it.

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INC.: When you visualize the ideal company, you say, "I want, I want, I want." Why should employees care what you want as long as they are doing their jobs?

STAYER: The only reason is if it is in their best interest.

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INC.: So the first thing you changed was the compensation system. Rather than across-the-board annual raises, you started to pay for performance and added a bonus pool of 28% of the profits. What were you trying to accomplish?

STAYER: In the best of all worlds we wanted people worrying about being productive, wanting to be better performers. Second, we wanted not to have to worry about how many people we had. You want performance, so you say, We're not going to pay people equally. You'd like everyone's compensation to go down when the business doesn't do well, too, but it's hard to take salary away from people. So you make the bonus a portion of people's compensation. The average now is up to about 6% to 7% of compensation, but our target is to get it to 10% to 20%. We make a pool of dollars, generated by profits, that's going to be divided. Everyone understands that if we've got more people and we don't add profits, the bonus isn't going to go up. So adding profits with fewer people is everyone's job now. Do you think we have a problem with automation? Where do you think our productivity gains come from? They come from people understanding that it's in their best interest.

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INC.: Starting the change with people's paychecks must have created a lot of concern about just how that money was going to be divided.

STAYER: There was a lot of concern. I said, "Look, guys, you've got to work it out. You're concerned about all these things, fine. We'll sit down and work on how we do this."

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INC.: It's your pot to divide?

STAYER: It's your pot to divide. But it's got to add up to a couple of basics. It can't be equal for everybody. It's got to reward performance for individuals and teams because it's better performance that is going to make a difference in the size of the pot.

The key thing is not to design this in a vacuum. Get people together and say, "These are the things we need to reward; figure out how to do it." If I get them to design it, I get them to make it work and to understand the underlying issues. The real role of the CEO is to generate productive conversations about what performance ought to look like.

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INC.: How is that different from the traditional role of the CEO?

STAYER: The traditional role is as chief decision maker and strategist, at the top of the hierarchy, away from the day-to-day. Your role is to think. Their role is to do. But the key is not to have a strategic vision; ideas are a dime a dozen. The key is being able to execute. That means a lot of people have to line up in a row wanting to do whatever it takes. You don't have time to baby them or bludgeon them. They just have to do it. So your role is to make sure people see it's in their own best interest to do that.

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INC.: Isn't it faster to issue orders than to have a team of people come to a consensus?

STAYER: At one time it probably was, when life was simpler. But today it takes so many people working together to make anything happen. How do you issue orders when you've got 78 different departments who have to come together all at once? If you issue orders, you're telling people, Don't think; just do. But if you've got 1,000 people, you've got 1,000 minds. And if you issue orders from the top, you're using only 3 of them, or 2, or one. That's stupid.

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INC.: But what if I want the decisions made fast. Can you do fast?

STAYER: We do very fast, much faster than the average because we don't have to have all the information flow up to the guy on top. Do you know how much time and effort it takes to get all that information up there? Do you know how many decisions are made poorly from that level?

There's a lot of ego in saying, I am the guy who has to make the decision because I know better. I was there. I know.

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INC.: Companies all over the country are trying the team concept and hitting the same roadblocks. How do you keep teams on track? How do you reward for new products? How do you decide how much spending authority to give them? How do you resolve disputes within a team?

STAYER: Most companies that try teams are trying to graft new limbs onto a cadaver. The management concept is no longer appropriate. So the team is like a fleck of gold in a cesspool.

The only reason you set up a team is to accomplish something, right? So give the team work -- make sure that every person on that team is really concerned about that work and doing it well. Move the ownership and responsibility toward where it needs to be, at the point of action. If they're concerned, you don't have to do another thing; they'll get it done. But if you don't do that, I don't care how many systems, how much structure, how many newsletters, PCs, electronic systems, whatever else you have, it ain't gonna work.

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INC.: Aren't you abdicating all your responsibility?

STAYER: Not at all. I'm keeping the major responsibility, which is to make people great performers. The conventional wisdom says that I have to control them, I have to follow up on them, I have to have them reporting to me. But my job is to set it up so I can coach them to become great performers.

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INC.: What if they don't set the performance standards you want?

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