Games Companies Play
Got some specific goals you want to achieve? Worried about lack of focus among your employees? Numbers not quite where you'd like them to be? For the solutions to those and other vexing managerial problems, maybe you should join the scores of companies that are playing to win
I love a good game -- tennis, say, or softball. After hours. On the weekend. I don't usually think of "game" and "business" in the same mental breath, except maybe on company-picnic day.
But here I am, out in the business world, just doing my job, and I keep running into companies that say they're, well, playing games.
I'm not talking bowling leagues or golf tournaments here. I file that kind of game in the company-picnic category. Nor am I referring to the grab bag of sales competitions, suggestion programs, and employee-of-the-month contests that clutter up so many businesses. Those are tired old games in which a few people win and everybody else loses. Managers persist in thinking they're good for morale.
But a lot of companies are playing another kind of game entirely these days. And you may find, as I did, that this game playing shakes up -- not to say, transforms -- some pretty basic notions about how to run a company.
Here's the idea.
Most of us conceive of "business" and "management" in simple-enough terms. A business is an organization with a mission, sort of like an army. (You've seen the books about Genghis Khan and the rest as model business leaders.) Managers map out the strategies and command the troops.
Well, say the game players, forget all that stuff. And think of business not as war but as a game.
Think of it as a game, moreover, in which the players aren't just a company's top executives but every blessed employee on the payroll. After all, doesn't everybody in a business have a stake in winning -- in making money and growing? And isn't everybody's livelihood at risk if the company loses?
Start thinking this way, and you begin to see the job of management a little differently.
Say your company has a problem. Maybe inventory accuracy is way low. Maybe warranty costs or overhead are way high. The usual managerial reaction would do the U.S. Army proud. Send out memos. Hold high-level meetings. Berate -- or fire up -- the troops to do better.
The game players, by contrast, just set up a game designed to change the situation. It has an easily measurable goal -- "95% accuracy by the end of the year," for example. It has rules that everybody understands. At the end there's some kind of payoff for a win.
Or say you just want employees to remember and keep on remembering the importance of preserving cash or boosting gross margins or maybe just recording a profit at the end of a month. No problem, say the game players. Teach everybody to track those numbers. Show employees how what they do affects the figures. Then put up a big scoreboard and watch what happens. Oh, yes -- pass out bonuses if employees hit monthly or quarterly targets.
The effect of such measures is electric. Like competitors in any contest, people lie awake nights figuring out ways to win. "They do all the work!" exclaims Steve Wilson, president of Mid-States Technical Staffing Services, smiling broadly. "I don't have to be responsible for everything anymore."
I know -- you're worried about those scoreboards. You share the Great Terror of Games, which is that the key numbers in your company will somehow leak out to -- and benefit -- the competition. Oddly, that fear disturbs the sleep of game players such as Wilson not one whit. "Let 'em find out," says Wilson, a no-nonsense West Point graduate. "We think our numbers would scare the crap out of competitors."
If you have a sense of d√Čj√ vu by now, it may be because the idea of game playing didn't appear out of thin air. This magazine first wrote about Springfield Remanufacturing Corp. (SRC) and its Great Game of Business several years ago. We've revisited SRC and other game players periodically. Many of those others model themselves after SRC.
What's catching me by surprise this time around, though, are the sheer numbers. We talked with 50 or 60 game-playing companies over the past couple of months. We stopped for lack of time, not for lack of names.
We found them, moreover, in all sorts of industries. The sophisticated fund-raising experts at Share Systems Inc., ensconced in Boston-area offices a mile from Harvard University, may not have much in common with the operators of the die-casting machines at Pace Industries' Cast-Tech Division, in rural Monroe City, Mo. Never mind -- both groups of employees can tell you exactly what they have to do to make money in their business and exactly how they're faring in their current monthly or quarterly game.
What makes games work? Chief executives who are (or who once were) athletes like to use sports analogies. They invoke the pride of a great performance and conjure up visions of Olympic-style efforts.
Maybe they're right. But in my view, games get people working hard and smart, mostly because they transform the workplace in two critical ways.
First: in a game, everybody's on the same side -- against the competition.
Most workplaces are shot through with divisions. Hourly versus salaried. Technical versus sales. Accounting versus everybody else. People jockey for position, point the finger, gossip, and politick. A well-designed game, tied directly to a company's performance on key numbers, cuts through all that mess. Everybody wants to win. People have to help one another to do so. Ask for some cooperation and you're not so likely to hear the phrase (as one Pace employee put it), "That ain't my stinkin' job."
Second: in a game, people set their own goals. They may need advice and guidance. They don't need marching orders. Look at the little parable of work and bowling to the left. It speaks volumes.
What's most interesting about the games, of course, isn't the general precepts, it's the details. So on the following pages you'll find a whole array of them. How the games came into being. What they were designed to accomplish. How well they've worked in practice.
After you've read them, see if the words game and business don't have a little more in common than you thought.
Problem: Dissension in the ranks.
Company: Mid-States Technical Staffing Services Inc., in Davenport, Ia. (now a subsidiary of AccuStaff Inc.). Contract engineering services and computer-design work. Employees (excluding contract engineers): 31. Projected 1994 revenues: $6 million.
Company founder Steve Wilson had the problem every CEO dreads: factions. Mid-States Technical had grown fast, making the Inc. 500 list in 1991. Then it hit a slump, jeopardizing jobs and torpedoing morale. One group of employees remained loyal to Wilson. Another group got the idea that he was ripping Mid-States off. It would have been a neat trick, considering the books were open to anyone's inspection. But the renegades just figured that Wilson kept two sets, one for show and one for real -- and besides, nobody understood the financials, anyway. So resentment grew. "We almost self-destructed from within," acknowledges the CEO.
Finally Wilson bit the bullet and fired the disgruntled employees. But now he needed some way to prevent mistrust from spreading again. His solution: teach everyone to understand the income statement, line by line, and to take responsibility for budget items. Peg bonuses to earnings targets. Then Wilson added a little twist.
Game: Fill the buckets. Forget the calendar, he told employees: every time we hit $75,000 in net earnings, we'll pay a bonus. Wilson dubbed his system the Bucket Plan, figuring that hitting each $75,000 target was like filling up a bucket with profits. He added a couple of rules. The first buckets in a year pay less than later ones, so there's an incentive to keep filling them up. And if year-to-date sales are at least 25% above last year's whenever a bucket is filled, that bucket's bonus doubles. Wilson implemented his plan in 1993.
Light dawned slowly. "At first employees thought, 'Great, I don't have to wait till Christmas for my bonus,' " recalls sales manager David McCracken. "But when we paid out the second one, two months after the first, that's when they figured they had some control over it."
Control indeed. Now, says Wilson, employees watch weekly budget and income numbers like hawks, and move heaven and earth if they think they're falling behind plans or have a chance to fill an extra bucket. Salespeople -- paid a base salary and bonus, no commission -- help one another out instead of hoarding customers. Office workers, each of whom has responsibility for certain expense lines, find other departments eager to cooperate in cutting spending. So attentive are employees to the financials that a few of McCracken's salespeople have even devised a spreadsheet to predict when the next bucket will be filled.
Results: Wilson points to high morale and low turnover at Mid-States, but the numbers he likes best are these:
1992 1993 1994 (estimated)
Revenue growth 0% 40% 18%
Return on sales 6.7% 10.6% 11.3%
(after bonus)* * *
Company: Share Systems Inc., in Somerville, Mass. Telephone fund-raising for nonprofits and political campaigns. Employees: 36 staff; 120 callers. Projected 1994 revenues: $5 million.
Last fall, Share Systems found itself in a pickle. Expecting sales to grow sharply, the company had boosted its payroll and had dangled the prospect of fat bonuses before its employees. Then a couple of key clients fell through, and Share found itself oozing red ink. "It was an unqualified disaster," recalls Evan Grossman, chief operating officer. "We came nowhere near our goals." By October, Share was $140,000 in the red.
Grossman thought he and the other managers could turn the business around in the fourth quarter, October through December, thereby salvaging the year. The key: boosting the number of hours spent calling on behalf of the company's existing clients. Like many service businesses, Share makes its money on billable hours; once the fixed costs are paid, margins on additional calls are high. But telephone fund-raising is high-stress work, so most employees are on the job less than full-time. Making them work longer hours isn't an option, either, if only because it would inevitably add to Share's already-substantial turnover rate.
Game: Hit the challenge targets. Grossman had begun to distribute Share's profit-and-loss statement (P&L) to employees, but there had been no time for financial training. So rather than tying a reward directly to profitability, he figured out the number of calling hours needed for a turnaround. Hit that target, he told employees, and you'll be rewarded -- extra vacation for part-timers, a cash bonus for full-timers. And, oh yes -- if the profit comes in at above $40,000 for the year, we'll divvy up 20% of the extra among everybody.
As the game began, scoreboards went up in the calling area: Hours called last night. Total hours called so far this month. Callers began staying an additional 15 minutes one day, a half-hour the next. They urged their colleagues to work extra, too. Managers watched calling-station utilization more closely -- making sure, for example, they had backups for callers who missed a shift. By November Grossman thought Share would be marginally profitable for the year. By December he could see the outcome was far better than he had expected.
Results: Share went from a $140,000 loss to a $70,000 profit -- a $210,000 turnaround in only three months. But it isn't just the profit, says Grossman. It's the fact that employees had fun: "People started saying, 'OK, so when's the next game?' " This year he has put in place a yearlong challenge with a bonus payable quarterly if the company is profitable. In the first quarter of 1994 Share made $90,000 on revenues of roughly $1 million -- and divided up some $28,000 in bonuses.
Problem: Threat of shutdown.
Company: Pace Industries Inc., Cast-Tech Division, in Monroe City, Mo. Manufacturer of die-cast aluminum parts. Employees: 312. Projected 1994 revenues: $25 million (Inc. estimate).
No one was saying anything explicit back in 1992, but everyone in Monroe City could sense the danger. Pace Industries, out of Fayetteville, Ark., had taken the die-casting plant over from its former owner, then in bankruptcy, and had invested a substantial sum in it. But the factory was losing a ton of money, and it was clear Pace wouldn't hold on forever.
When Andy Crowder took over as plant manager, in December 1992, he explained the situation to the employees and experimented with some quality-management techniques. Then he chanced on The Great Game of Business, by Jack Stack, and attended an SRC seminar. (See page 5.) Soon he was convening regular weekly meetings of his management staff, assigning them line-item budget responsibility (which they had never had), and walking them through the P&L (which they had never seen). He also made an offer. As plant manager, he was entitled to a bonus of 2% of the factory's gross profits. If the plant began making money, he'd be willing to divide that bonus up any way the other managers saw fit.
Game: You name it. Today games are everywhere at Pace, though some of what Pace people call "games" might go under a rubric like "team-based continuous improvement" elsewhere. One team came up with a system to cut costs by eliminating unnecessary paperwork. Another began a cardboard-recycling program, saving nearly $1,700 a month in hauling expenses. Two other games -- scrap reduction and inventory accuracy -- involve the whole plant: if workers meet a monthly goal, each gets a modest bonus. Scoreboards around the plant track their progress.
But the big game -- the Great Game of Business, Pace-style -- is to make money. The managers, you see, voted to take Crowder's 2% of gross profits and split it equally among every man and woman in the factory. The bonus is paid quarterly. Monthly meetings, complete with a copy of the P&L for every employee, bring everyone up-to-date on progress toward the quarterly payouts. The information keeps people focused on their common purpose. Workers testify that departments cooperate with one another -- they didn't in the past -- and that individuals volunteer ideas as never before. The game "makes them more aware of how everything they do affects the business," says Sam Kunce, a setup man.
Results: Scrap rates cut by 50% in just six months. Inventory accuracy (measuring the correspondence between physical inventory and what's recorded on the books) up from 54% to nearly 90%. Profits? Crowder declines to name a figure but calls them "healthy." The last quarterly payout: $183 per person.
Then there are the intangibles, mostly the fact that the plant is not out of business. "I feel secure in my position here and secure in this place," says Kunce.* * *
Problem: Growth. Or maybe chaos.
Company: Marketing Services by Vectra Inc., in Columbus, Ohio. Marketing services, including printing and mailing. Employees: 125. Projected 1994 revenues: $21 million.
Founder Craig Taylor -- height six feet, 10 inches -- former captain of the Ohio State University basketball squad, is a fiercely competitive CEO. "Go hard or go home" reads the slogan he has pasted on Vectra's walls. But the hard-driving, fast-growth culture Taylor instilled in his company sometimes lacked order. Inventory control, for example, was a constant problem. "We just didn't have the systems in place to manage it," sighs Taylor's wife, Mimi, director of associate services.
Taylor had always tried to tell employees what was going on: "If you think everybody is on the same team, then you should share the information about why people have to do what they have to do to be successful."
His friends at other companies thought he was nuts. "I took a lot of heat from people," he says. But he plowed ahead, experimenting and reading and comparing notes with other game players, and in December 1992 he offered his employees a deal.
Game: Personal goals; company goals. Back then, Taylor had 54 employees, and he gave them a choice. They could have a 5% average wage hike and a chance at a $200,000 bonus pool. Or they could have no wage hike and play for a pool that was twice as big. The bonus would be pegged to four targets -- sales, operating expenses, inventory accuracy, and the current ratio, each one weighted according to its importance to the company. But employees wouldn't get anything unless they also hit a series of individual goals, agreed upon with company managers. The vote was 48 to 6. No raise. Bigger bonus pool.
Looking back on 1993, Taylor winces. The expense and current-ratio targets, tracked on the big company scoreboard and reviewed in regular weekly meetings, were too ambitious. "You had people being negative -- 'See, they're going to screw us." Desperate for at least a partial win, he pushed hard to meet the inventory-accuracy goal and the sales goal. ("If it moved, we took it.") When the results were in, Vectra employees had won on those goals and lost on the others, thereby gaining only half the bonus pool. Even so, most did better than if they had taken the raise.
This time around -- 1994 -- each department at Vectra elected a rep to decide on the game, with a new game slated to begin every six months. Individual goals were set in teams and reviewed by Vectra managers. (Press operators might commit to "no do-overs"; a human-resources staffer to developing a new training program.) Company goals for the first half of the year related to sales growth, inventory accuracy, return on assets (ROA), and customer satisfaction. If employees won, they stood to get a bonus of between 15% and 25% of salary.
Results: Vectra hit three of the four goals, missing only ROA. Employees won't be getting a full bonus, but they won't do too badly, either. As for Taylor, he's a pretty happy competitor. Sales are up, and the company is in the black.
Research assistance for this article was provided by Bo Burlingham, Brendan Case, and Phaedra Hise.
IF BOWLING WERE BUSINESS . . .
Work is a lot like bowling, except there's a guy called a supervisor who stands in front of the pins with a curtain.
He can see the pins, but the bowler can't. The bowler throws the ball, hears something, and says, "How'd I do?" The supervisor says, "Change your grip."
The bowler says, "But how did I do?"
The supervisor says, "Move your foot." The bowler changes his grip and moves his foot and throws another ball.
He hears the pins fall and asks, "How am I doing?"
"Don't worry about it. We've got a review coming up in six months. We'll let you know then."
-- Charles A. Coonradt, The Game of Work
Want to start playing games tomorrow? Think first, say game players, about whether you're prepared to reveal the numbers that make games into something more than trivial exercises in employee manipulation. But if you are, it isn't hard to get started:
Heating-system manufacturer Heatway Inc. ($6.5 million in revenues, 48 employees, in Springfield, Mo.) sponsors "Guess-the-Gross" contests. "We circulate a form like a racing form at the start of every month," explains Dan Chiles, one of two brothers who run the company. "At the bottom is a tip sheet -- last month's gross, this month's gross last year, our forecasts, what's on the projections we give the bank." The winner gets $25 -- but the real purpose is "focusing people's attention on the bottom line," says co-owner Mike Chiles.
Consumer-product distributor Manco Inc. ($100 million in revenues, 190 employees, in Westlake, Ohio) is running a game called Formula 10. On its face it's no more than an elaborate employee-suggestion system: propose a way of saving sales or administrative costs and get a little plaque. But the name reflects a critical goal, which is to get Manco's selling, general, and administrative expenses down below 10% of sales. The Achilles' heel of competitors, explains company president Tom Corbo, is their high overhead levels. Manco's is low -- and Formula 10 is "our secret weapon" to lower it still further.
Missouri Home Care ($7 million in revenues, 450 home-care workers and 70 staff employees, in Rolla, Mo.) attacks its huge workers' compensation liability with not one game but a series of games. Game #1, a while ago: prize drawings for workers who stayed injury free. Game #2, ongoing: managers go into the homes of randomly selected clients with a safety checklist; workers get a $50 bonus for achieving a 100% score on the safety procedures. Game #3, still on the drawing board: some sort of bingo, with safety issues on every square. "It's very important to keep the games fresh," says CEO Margaret Cossette.
Zingerman's, a delicatessen that sells everything from homemade chopped liver to imported clotted cream ($7 million in revenues, 150 employees, in Ann Arbor, Mich.), recently ran a game called "30/30 gets you 60." The objective: exceed sales projections for the month; hold labor costs to budget. If sales rose by $30,000 (that's the first 30), the company would divvy up 30% of the gain among employees, giving them $60 apiece. Alas, the employees didn't win: the labor-cost goal turned out to be too ambitious. But losing didn't dampen too many spirits. Employees are now drawing up a new profit-sharing plan, and cofounder Ari Weinzweig is teaching a class in basic deli finance.
Southwest Airlines ($2.3 billion in revenues, 15,833 employees nationwide, headquartered in Dallas) shares more information than most big companies: chairman Herb Kelleher's quarterly letters to employees describe the big picture, and weekly updates give detailed reports on costs. To get employees focused on the information, the airline recently sent out cards with a quiz on costs. Employees filled out the answers, sent in the cards, and thereby entered a drawing for free trips. "We really didn't care where they got the answers from," explains Ann Rhoades, the airline's "vice-president of people." "We just wanted them to understand the costs."
Bill Palmer, CEO of a cabinetry company called Commercial Casework ($5 million in revenues, 70 employees, in Fremont, Calif.), describes the effect of one seemingly trivial managerial move. In the past the company had budgeted a certain number of labor hours for each step of a job but had never told employees what the budget was. A few months ago Palmer began posting those labor-budget numbers on the bulletin board. "Rather than someone telling them, 'Hey, we want you to build this table as fast as you can,' we were saying, 'We have 40 hours in the estimate.' "
Before the change, Commercial Casework's jobs averaged 6% over budget. Afterward, they averaged 2% under budget, an 8% swing.
OK, SO DON'T CALL IT A GAME
Published Image Inc., in Boston, doesn't use the word. "It's not a game," declares Nancy Cohen, senior vice-president of the $4.5-million, 26-employee newsletter-publishing company.
Fine. But Published Image does have teams (with captains), coaches (instead of managers), and scoreboards (by which team members monitor their progress), all of which may indicate that the essence of game playing lies not in the word but in the concept. For Published Image, at any rate, it's a whole new way of doing business.
Last year, says founder Eric Gershman, the booming young company was in danger of growing itself to death. Newsletters-in-process moved laboriously from edit to art to production, hitting bottlenecks along the way. "People were working till one or two in the morning -- but they were often sitting around waiting for other departments to do their jobs." The CEO decided drastic measures were in order.
In September Gershman gathered his employees together and told them to say good-bye to the old company. Henceforth, they would be working in teams -- "little Published Images," as the boss put it. They would be responsible for their own clients' newsletters, start to finish.
Today teams with names like Quality Matters essentially run their own businesses. A team salesperson lines up clients. Team operations people produce the product. Scoreboards in each team's area track numbers such as quarterly sales. A recently installed bonus system, pegged partly to sales and partly to quality scores, offers employees a "win" of up to 40% of salary. When a team reaches a certain level of output, it splits -- and junior people on the old team can move into more senior positions on the new.
Since the changeover, says Gershman, earnings are up 35%, and the company's own customer-satisfaction measures are up 78%. But don't call it a game -- even though the Quality Matters team will soon be installing a new, larger scoreboard.
GRANDDADDY OF GAMES
The lights dim. The action starts. But this isn't a sport, it's business -- the Great Game of Business, as practiced by Springfield Remanufacturing Corp. (SRC), the midsize Missouri company that may be having more effect on American management than any 10 of the nation's business schools have.
Go back to 1983. SRC is a struggling division of International Harvester (now Navistar). Jack Stack and the division's 12 other managers arrange to buy it out. But then Stack and the doughty dozen realize they own a factory with a doubtful future and a mountain of debt. "What else could we do?" asks Stack rhetorically. "We had to teach people how to make money."
Thus was born, over time, the Great Game -- fathered by Stack and mothered by necessity.
The Game is partly a compensation system: hefty bonuses for all are pegged to whatever financial goals are most critical in a given year. (This year most divisions have set targets for operating income and at least one other figure.) But it's mostly an elaborate system of business education, teaching employees to understand -- and take responsibility for -- the numbers that govern SRC's financial health every week and every month. Engine remanufacturing, Stack likes to point out, is a brutally competitive business, and SRC aims to be the low-cost producer. "At the staff meetings we find out if we are or we aren't."
The meetings -- dubbed the Great Huddle by Stack -- take place every other Wednesday at 8 a.m. Some 35 or 40 managers and employees representing SRC's business units and departments gather around a U-shaped table. The lights go down. A spreadsheet is projected onto a big screen. Then: action. The Heavy Duty division calls out its sales and costs for the two-week period just ended, along with anticipated numbers for the weeks to come. Automotive goes next, then on down the table.
As every unit reports, controller Sydney Moore pops the figures into a laptop, updating the big spreadsheet. Stack and the others watch the ever-changing bottom lines with practiced eyes, noting problems and parceling out responsibilities. By the end of the meeting complete financials will be printed out, and unit reps will take them back for distribution and discussion. Will next meeting's numbers be on target? That's now up to the players -- the employees -- in every department. They know the score.
By now more than 1,200 managers from companies large and small have watched SRC's system in action, thanks to regular training seminars sponsored by the company. (Yes, they let you sit in on a Huddle.) Many thousands more have read Stack's book The Great Game of Business (Doubleday-Currency). And if imitation is the sincerest form of flattery, plenty of companies -- including some on these pages -- are sincere flatterers of SRC.
UP TO SPEED
How can I play these games you're talking about? They presume some financial literacy -- and my employees wouldn't know a balance sheet from a balanced diet.
Join the club. Virtually none of the game players started out with more than a couple of certified public accountants, M.B.A.'s, and other financial sophisticates on their payrolls. But they did find some effective and even entertaining ways of teaching employees the basics of business. Some tips:
Create a fictional company. The financial-education classes at Foldcraft, a restaurant-seating manufacturer in Kenyon, Minn., started a mythical chocolate-chip-cookie company -- and enjoyed instructor and chief operating officer Chuck Mayhew's home-baked cookies at the end. Bill Palmer of Commercial Casework leads employees through a little book called The Yo-Yo Company, published by Springfield Remanufacturing Corp. (800-FUN2PLAY).
Use those old classroom standbys, audiovisual aids. Video Arts (800-553-0091) produces a number of financial-education videos including an expensive but funny one called The Balance Sheet Barrier, starring British comedian John Cleese. Root Learning (419-874-0077) creates visual displays that help communicate complex information in easy-to-understand formats.
Bring in outside help. In its Accounting Game, Educational Discoveries (303-786-8100) sponsors daylong classes in basic accounting, complete with plenty of hoopla to demystify the subject. It will customize a program for your company, too. The Business Center (615-675-2275) also offers a customized training program that teaches employees the "basics of business."
Play a game. Intel Corp.'s Embedded Microcontroller Division (EMD) in Phoenix bought a business-training game called Profit & Cash (800-883-GAME) and set up an 11-week contest. Some 80 people (in teams of four) played the game, says Intel's Jeanette Hendrych. "People were very competitive! When one team really got ahead, another wanted to audit its score sheets. And some teams started to benchmark with others -- which is what we need to do in business."