Model team-based management company still struggles with the complexities of its system.
Lauded by business gurus as a time-tested model of team-based management, XEL Communications swears by that now-trendy concept -- and still struggles with its complexities every hour of every day
In the mid-1980s, not long after Bill Sanko and his partners had engineered the buyout, they could see that their fledgling telecommunications-equipment company was struggling.
Granted, the numbers weren't so bad. XEL Communications Inc., as they had christened the new business, was selling a lot of custom circuit boards to GTE Corp., its former parent. It was making money. But Sanko, a longtime GTE executive who took the entrepreneurial plunge at age 44, knew he'd be foolish to depend too heavily on his ex-employer. He needed to sell more to the Baby Bells, and to big industrial customers that operated their own phone systems.
Talk about David and his slingshot. In most such forays, the 180-employee company would be up against the likes of Northern Telecom and AT&T. XEL's only hope was agility. Lightning turnaround of orders, quicker than any big company could manage. Speedy response to customer needs. All done with close attention to cost. The low bidder in a competitive situation didn't necessarily get the job, Sanko knew. The high bidder didn't have a prayer.
Fleetness of foot, unhappily, was just what XEL lacked. Costs weren't exactly rock-bottom, either.
On the shop floor, for example, cycle time -- the period from start of production to finished goods -- was about eight weeks. That left customers disgruntled and tied up money in inventory. The company's chain of command, moreover, had scarcely changed since the GTE days. Line workers reported to supervisors, who reported to unit or departmental managers, who reported on up the ladder to Sanko and a crew of top executives. Every rung added time and expense. "If a hardware engineer needed some software help, he'd go to his manager," Sanko says. "The manager would say, 'Go write it up.' Then the hardware manager would take the software manager to lunch and talk about it."
Sanko fretted, talked with his partners, fretted some more. "We needed everybody in the building thinking and contributing about how we could better satisfy our customers, how we could improve quality, how we could reduce costs," says the chief executive. Soon XEL began the kind of top-to-bottom transformation that numerous U.S. companies have attempted in the past decade.
First came the vision statement, crafted by Sanko and colleagues with the help of a consultant. That turned out to include the pregnant clause "we will be an organization where each of us is a self-manager." Next, manufacturing vice-president John Puckett redesigned the plant for cellular production, with groups of workers building whole families of circuit boards. Finally, Sanko and Puckett decided to set up self-managing teams, then a hot new concept, and brought back their consultant to help them get started. By 1988 the teams had been established -- and the supervisory and support staff reduced by 30%.
Today, five years later, XEL has rebuilt itself around those teams so thoroughly that the Association for Manufacturing Excellence recently chose the company as one of four to be featured in a video on team-based management. Dozens of visitors, from companies such as Hewlett-Packard, have trooped through XEL's Aurora, Colo., factory.
What they see is striking. Snappily colored banners hang from the plant's high ceiling to mark each team's work area. Charts on the wall track attendance, on-time deliveries, and the other variables by which the teams gauge their performance. Diagrams indicate who on a team is responsible for tasks such as scheduling.
Every week, the schedulers meet with Puckett to review what needs to be built. The teams meet daily, nearly always without a boss, to plan their part in that agenda. Longer meetings, called as necessary, take up topics such as vacation planning or recurring production problems. Once a quarter each team makes a formal presentation to management on what it has and hasn't accomplished. Overheads, with fancy charts, are de rigueur.
And the numbers are right where Sanko had hoped they would be. Since the advent of teams, XEL's cost of assembly has dropped 25%. Inventory has been cut by half; quality levels have risen 30%. The company's all-important cycle time has plummeted from eight weeks to four days and is still falling. Sales have swelled to an estimated $25 million this year, up from $17 million in 1992.
A success story? Sure. But XEL is also something much more complex and interesting, which is to say a company that has learned lessons about teams not viewed in any video or taught in any text. The consultant did his job fine, years ago. But there is much that no consultant knows -- and that XEL, from its experience, now does.
If you're thinking about taking the plunge into teams, here's a compendium of conclusions that you, too, are likely to come to.
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Tasks like adding new people get harder, not easier.
Face it: though CEOs love to complain, bringing on new hourly employees just isn't that tough in traditional companies. A manager or human-resources professional chooses candidates. A supervisor tells them what to do and helps them get started. Add teams, however, and the process gets messy. "Staffing up is probably five times harder with self-directed work teams," sighs Julie Rich, XEL's human-resources vice-president and one of Sanko's original partners.
Part of the problem is hiring itself: If you want people to work together well, you'd better involve the team in choosing candidates. In slack periods, that's no problem. But when a company is growing, who has time? Then too, traditional companies need look only for the requisite technical expertise and work habits, while teams need skills like the ability to handle confrontations. "We ask applicants, 'If you had a problem with someone, how would you deal with it?" reports Ernie Gauna, an assembler with a process team called Catch the Wave. Some candidates handle such questions poorly. Others decide they don't really want to work for a company that poses them.
