12.8 End-of-Topic Case: The Quest for Purchasing Innovation at Gold Rocks

It was 5:00 am on a crisp spring morning in the Nevada desert. Michael Brockhaus, Director of Materials Management at Gold Rocks, rolled out of bed. He was up, even though the sun wasn’t. This morning he would put in his first 10-mile run of the year. He would also cogitate the next step in his quest to drive purchasing innovation at Gold Rocks. Running helped him work off stress and think clearly about problems at work. In October, Michael would run his third marathon. He hoped for a summer of profound thinking—and progress.

Two years ago, Michael had moved to the desert. He had been recruited to lead Gold Rocks’ materials management organization to a higher level of execution and innovation. He hadn’t, however, expected the pushback from his new team. Despite intensifying competition, the team seemed content with business as usual. The team approached every little thing very reactively. Their resistance to innovation and teamwork caught him by surprise. He had misjudged the corrosive influence of constant cost cutting on Gold Rocks’ decision-making culture. Simply put, he had inherited a caustic culture. To cope, Michael had taken up distance running. Change would be slow and tedious, kind of like training for a marathon.

Leading Cultural Revolution

As Michael finished stretching, he started thinking about the past two years. From the outset, Michael focused on cultivating a culture of inclusion and innovation. He invited everyone in the materials group to embrace personal responsibility for getting the group to best-in-class status. To unleash the wealth of creativity and experience within the materials group, Michael knew he would need to build a bridge to a new culture—one that emphasized a disciplined commitment to learning and improved performance. From experience, he knew the bridge would be built on three pillars: Leadership, goal setting, and teamwork. Michael hoped his enthusiasm and confidence would be contagious.

Leadership

Michael’s first step was to model his leadership mantra: Leaders help others go where they could not or would not go on their own. To be an effective mentor, he needed to . . .

• Share his vision

• Clearly communicate expectations

• Enhance team member skills through targeted training

• Implement consistent and fair performance measurement

• Align incentives to instill innovation

His goal had been simple: Get the right people in the right place and then get out of their way so that they are free to make good things happen.

Even before Michael had begun the cultural transformation, he knew there would be some fallout. People who possess a desire and an ability to learn thrive within this type of empowered, accountable environment. They contribute the ideas and the energy needed for constant innovation. However, the personal responsibility required in this setting almost always led some team members to self-select out, opting for a less demanding workplace.

Goal Setting

Getting people to step up sometimes required that people look backward. From the beginning, Michael had invited his team to look “backward from the future.” Over and over, Michael asked, “Where do we need to be in the future to be successful?” His follow-up invitation was simple: “Let’s look backward from this perspective and figure out where we are now and how we are going to get to where we want to go.”

Michael had felt confident that if he could get everyone to focus on identifying critical success factors and setting the goals to achieve them, innovation and change would happen without coercion. Simply put, his people would stop looking at change as a threat. They would begin to see change as an opportunity to excel. The good news: Christine, a long-time Gold Rocks employee, got on board quickly. She created a meme that was now posted on every whiteboard in the materials management department: “We don’t accept mediocrity; we set goals.”

To give goal setting an organizational home, Michael had launched two programs:

1. Best Practices Initiative. The best practices initiative was simple. Michael invited team members to identify key activities that would raise performance in their areas, find a best-in-class company, and figure out what that company did that Gold Rocks could emulate. As team members identified key activities, they took on responsibility for setting appropriate performance goals and then aggressively benchmarked progress toward those goals. Over the past 18 months, members of the materials management team had tackled the following.

   • Procurement card implementation

   • Supplier review and analysis

   • Supply base rationalization

   • Supply chain partnering

2. Performance Tracker. The performance tracker took goal setting down to the individual level. Workers met with immediate supervisors in a coaching setting to identify the competencies the worker needed to excel. The two then jointly assessed the worker’s current performance, identifying what the worker did well and where the worker needed to improve. Annual goals were then set and milestone timelines identified.

   Quarterly reviews provided the opportunity to discuss progress and allocate resources to enable goal achievement. Michael knew that the performance tracker would introduce a new level of employee vulnerability. Setting stretch goals always did. To allay concerns, he taught two core principles.

   • Learn and Go On. Another Michael mantra was, “Don’t punish people for trying to do good things.” If people set stretch goals and try new things, they are going to fail. To punish them for failure guarantees they won’t take the next risk. Michael stressed, “We need to learn and go on.” Team members had quickly learned that during their reviews with Michael, he would ask, “What did you learn?”

   • Help Your Team Succeed. To promote real risk taking and high levels of learning, Michael knew that his team leaders needed to genuinely invest in their team members’ success. If a worker was struggling to achieve goals, managers were expected to meet with them more frequently—on a weekly basis if necessary. Michael’s message: “We don’t give up on people unless they give up on themselves.” The team had learned that most people get on track to enjoy higher levels of achievement and success.

Accountability and Recognition

Goal-setting raises the bar on expectations. So Michael made sure expectations were clearly communicated so everyone knew where the materials group was headed. They also needed to grasp the role they were expected to play to move the team forward. To promote excellence without fear, Michael put in place programs to balance accountability and recognition.

• The Monthly Report. Each team lead was tasked with delivering a monthly report, which Michael carefully evaluated, highlighting key areas of concern and success. He returned the marked-up report to the team leads within 48 hours. Team leads were expected to respond to the concerns and requests for clarification before the week’s end. The monthly report cadence kept communication clear, constant, and focused on goal achievement. One result: People started to take greater responsibility for the success of the materials group.

• The Monthly Celebration. Michael had put in place a program where peers nominate peers for recognition based on their accomplishments and contributions. Each month, the team gathered for a mini celebration. The result: Specific achievements were identified and recognized, keeping successes in sight. Camaraderie also increased. People started taking more interest in each other’s goals and jobs. Team members were encouraged to nominate colleagues from other departments and from outside suppliers.

Taking the Next Step

Breathing heavily, Michael started his final 50-meter kick. He liked to finish strong. Ten seconds later he passed the wagon wheel that marked the 10-mile point. He slowed and bent deeply, hands on his knees and sweat dripping from his forehead. After three deep breaths, he started his cooldown routine. During his run, Michael had carefully thought through the past 18 months. He had lost some sleep during that time because of both late nights at work and a little insomnia. But, he also had to smile. The team had come a long way. The culture was no longer caustic. But it wasn’t yet creative. He wondered, “What comes next? How can I structure our work to make innovation part of our everyday thinking and behavior?” He was open to any and all ideas, but he didn’t have a big budget to make the next step an easy one.

Questions

1. What do you think of the three pillars that comprise Michael’s bridge to culture change? Which aspects of this process could you easily emulate? Which are harder to implement? Why?

2. How would you suggest Michael proceed? What type of initiative or program can he implement to help drive continuous improvement in execution and performance?