Johnsonville Sausage Co. a wholesale producer of sausage products based in the small rural town of Johnsonville, Wisconsin, has grown from “a family home with a store front…[to a business that experienced] $50 million [in sales] in 1985…[and has grown to] a business of well over 500 employees” (case 1).
Originally a retail based operation founded in 1945, the company decided to focus the efforts of its wholesale operations in 1965, with Ralph Stayer’s return from Notre Dame, where he had completed a bachelor’s degree in business. At this time, Ralph, who was officially named president of the company in 1978, and his father “took a long hard look” (case 1) at the company’s retail and wholesale endeavors and made the decision to “focus their efforts on building this [the wholesale] segment of the business”, because it looked the most promising.
The decision to concentrate on building the wholesale segment of the business and the aftermath that has been experienced by the company can be separated into two distinguishable periods:
· First, the initial transition from a predominately retail oriented firm to that of producing primarily for wholesale endeavors.
· Second, the transition period that was designed to better utilize the growth that the company had experienced, since its founding as a wholesale producer.
These periods differ primarily, because the first one accounts for the development of the conflict that the firm would experience and the second accounts for the corrective measures that were implemented. The conflict that arose within the company developed from:
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· A lack of vision
· An ineffective organizational structure
· Highly repetitive tasks
· A lack of employee participation in the company decision making process
· Low job satisfaction
These issues, however, are not all the problems that developed with Johnsonville Sausage, but they did contribute to the failing efforts of the first period to create an environment that people saw as a “means to their ends” (case 6).
In the beginning there was never a verbalization of a vision that “articulate[d] a realistic, credible, attractive vision of the future…which [would grow] out of and improve” (Robbins 330) upon Johnsonville Sausage prior to the transformation to wholesale. This seems to be a crucial mistake by Ralph in the initial transformation of the company, because it failed to “create the enthusiasm that people have for sporting events and other leisure activities [that] brings energy and commitment to the workplace” (Robbins 330).
And, not having the enthusiasm or the commitment of the employees led to people that had previously enjoyed their jobs to being careless and general morale to be “just even with the national average.
Visionary leadership would have been an effective tool in this initial stage. This is because the company, already putting the employees that it already had through a transition that may not easily be understood or justified, would have been able to counteract both of these issues using it as a tool. Also, because Johnsonville did not seek to have a high rate of turnover by its employees it would have produced an environment that new employees would enter that already had a future plan established. This neocharismatic style of leadership would have accomplished this, by stressing symbolic and emotional appealing, achieving extraordinary follower commitment, and providing leadership that would relate to the average person (Robbins 327).
Not having an articulated vision was further complicated by Ralph running “the business from the sausage stuffer” (case 4), because it created an ineffective organizational structure. The formal network of communication that was created was awkward, because it confined the entire firm to conduct its activities within the confines of a formal small-group network. This is because Ralph, making all the day-to-day decisions for the entire company acted as a “central conduit for all the group’s communication”, which, while facilitating the effective emergence of Ralph as the leader, would further lower member satisfaction. The ex tent to which Ralph’s autonomy extended even extending into the realm of research and development, where it was R&D was never “formally delineated in the organization; [instead] Ralph worked on his own ideas” (case 13).
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This facilitation of communication ineffective in the long run, because it creates channels that provide communication between individuals and groups with the leader, without providing effective communication between the different groups. It does, however, provide fast speed, high accuracy, and the effective emergence as a leader (Robbins 291), but its effectiveness on the company as a whole, however, was voided because of its artificially large number. This is because “the most effective teams are neither very small (under four of five members) or very large (over a dozen) (Robbins 266).
Also, it failed to exploit the benefit that large groups have to offer regarding the ability to gain “diverse input”, because of the autonomy possessed by Ralph (Robbins 234).
This type of group being implemented from the time that Ralph obtained the authority to make the day-to-day decisions and not being specified as a temporary or task-specific contributed to the awkwardness of the situation. It caused the five-stage group-development model to not being realized in its entirety, during this initial period. The group had been formed “by a great deal of uncertainty” that was created by the lack of the firm’s new objectives being clearly stated. The storming stage, where “members accept the group…but resist the constraints that group imposes on individuality”, was alleviated to an extent, because there was no “conflict over who…controlled the group. The third stage of norming, where the group structure solidifies and the group assimilates a common set of expectations of what defines correct behavior”, however, was never completed to the point where it led to the stage of performing, because the group failed to ever become “fully functional” (Robbins 219).
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Therefore, the last stage of adjourning “concerned with wrapping up activities rather than task performance” was obviously never realized.
The ineffectiveness of the company’s infrastructure was further complicated by the high repetitiveness of the employees’ tasks. Ralph relayed one incident where he had “hired someone early on, who was very competent…then…it struck him that he was a soldier, carrying out orders” (case 4).
And, even with repeated attempts to get the employee to take on more responsibility, Ralph found that the employee couldn’t; Ralph had “beaten the independence out of him”. Even though Ralph’s assumption that his management style was responsible, “motivating individuals in these jobs can be made easier through careful selection” (Robbins 207), which suggests that the task itself also contributed to his observation.
The lack of employee involvement was created and furthered the conflict and low satisfaction of the employees. Job satisfaction the “general attitude toward one’s job”, while even with the national average, is distorted with the acknowledgement that the “quality of the product was slipping” (case 4).
This is because for the general attitude to have gone down to the national average, it originally had to be above it. And, that “people [previously] seemed to enjoy their jobs and [had] taken pride in their work…people now being careless…and bad product now making its way into the market” shows that there, in fact, was low satisfaction experienced by employees.
With the acknowledgement that the organizational structure that Ralph had been implementing, however, came the creation of the Johnsonville Philosophy and the empowerment of the company’s employees. This change in philosophy’s first step was “getting together and deciding what our ends are” (case 6).
Not only were the objectives decided upon cohesive and revolved around performance, but they also were now articulated. This created an environment, in which the company’s vision was now knowingly dependent upon the performance of “an organization where everyone is an entrepreneur.
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Teams with “increased communication demands, conflicts to be managed and meetings to run” (Robbins 263), however, aren’t always the answer, but in this case the creation of effective teams were. The key components that make up an effective team “can be summed up into four general categories…first work design, second team composition, third the resources and other contextual influences that make teams effective, fourth process variables that influence effectiveness” (Robbins 263).
And, with the new philosophy, these were now all issues that could be addressed.
The work design category “includes such variables as freedom and autonomy, the opportunity to utilize different skills and talents…[and a plethora of other characteristics] that enhance member motivation and increase team effectiveness. The first move to accomplish a more motivating work design was the elimination of a traditional supervisor that was replaced with “a designated lead person” (case 8).
This created teams that were designated to a specific function instead of an entire business. And, within the organization of these teams, a worker proposed solution to help eliminate the monotony of the assembly line work was implemented that allowed the workers to “organize the line as they saw fit” (case 8).
This allowed for the alternating of specific jobs within any given function that “broadened the scope of workers’ knowledge and skills” (case 8), and it also extended between specific lines as well. One worker described this new system by saying, “Some days we do stuffing or packing a favor and some days they help us out. If we spent our time fighting one another, we’d never get any work done.” (Case 8)
This shows that this new approach was helping to create cohesion within the various groups that helps to create a more efficient company, while still keeping productivity a priority. In fact, the daily production schedule that required extensive tradeoffs that often required “areas to work at less than peak performance”, so that others could work more efficiently shows how complicated the production process was. But, it also shows that with an increased “sense of responsibility and ownership over the work” (Robbins 264) this was now a complication that made the work more interesting and added to the work design.
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The work design aspect was not isolated to only the jobs that were already traditionally completed by the employees. In fact, it extended into testing samples from the previous day’s production that served as a tool to generate worker discussion that was meant to brainstorm and discuss how the product could be improved. Also, “two to three line workers from each area” were involved in evaluating the manufacturing performance against the allocated budget that would coordinate with sale and accounting to develop budgets and forecasts for the company’s next fiscal year. Workers were now able to participate in the purchasing of new capital, by submitting proposals for particular equipment that they felt would contribute to the quality of their performance and its efficiency. The extent to which their new responsibilities stretched was even found in owning problems. This was accomplished by the line workers accounting to the customers for complaints that stemmed from their particular involvement in the displeasure that they experienced.
The new work design also created a pipeline that empowered the employees themselves to have a positive effect upon the composition of the groups, to which they were subjected. This also fit with the new philosophy that recognized that work is a large part of the employees’ lives (case 6).
In this methodology, also an employee suggested idea, the “workers [would] interview prospective hires.
This is an effective tool regarding team composition, because it serves to bring together like abilities, personalities, flexibility, and preference (Robbins 264-266).
And, these factors are especially important to task-oriented groups, where “people vary in their tolerance for ambiguity” (Robbins 207).
The employees were also involved in the training and orientation programs that were designed for the new hires. This further promoted cohesion within the composition of the groups that the new hires entered.
The hiring process further deviated from many normal hiring practices of other companies with the addition of vision type questions of potential hires. These questions which included “Why do you want to work for Johnsonville, What would you like to be doing in five years” and other questions that would show responses that would indicate specific personality traits. And, teams composed of “highly extraversion, agreeableness, conscientiousness, and emotional stability”, according to the definitions applied to these traits through the Big-Five personality model, being regarded as having more productive performance shows the importance of these traits (Robbins 265).
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With a cohesive composition, the contextual concerns, which are the “resources [and leadership] outside the group” that are necessary to sustain it, can be accounted for (Robbins 267).
The leadership and structure of the teams being headed by team leaders and composed of similar individuals, in fact, had allowed workers to develop “new ideas for organizing the work and for new equipment that would make them more productive” (case 8).
The contextual influence of performance evaluation and rewards systems also under went changes during this time period that sought to reward performance as well as group based contributions (Robbins 267), with the introduction of a “company performance share (CPS)” (case 12).
And, while employees that had seemed to embrace the transition the greatest enjoying the ability to take on new responsibilities, whereas those who had not sought new responsibilities were less enthusiastic, “people had began to question” how decisions would effect CPS.
The common threads of a visionary leadership and employee empowerment are found to be just as influential in the final category related to team effectiveness, which is process. Specific goals had been established through the combined efforts of the entire company, common purposes led to the lines helping each other out, new hires and designated team leaders displayed efficacy, and conflict levels and social loafing are all issues that were addressed to a large extent by the introduction of the new philosophy. Also, with the methods for hiring that had been implemented the challenge of turning individuals into team players was not an extreme point of conflict.
The participative management that had allowed “subordinates to share a significant degree of decision making power” (Robbins 194) that is in part responsible for the emergence of effective teams, was reinforced by the changes in management that Ralph had made. This is because his new style of management sought to “delegate his responsibility and develop the capability of his people to work together…to the extent that his [the managers] job virtually disappears” (case 5).
This was a change from running the company from the shop floor that, instead, sought to “achieve goals through other people” (Robbins 2).
This helped to empower employees. And, by allowing employees to take responsibility they were also able to make correct decisions and contribute to the development of the company, thereby further causing employees to make it their own.
To help accomplish the implementation of the new philosophy Ralph brought in people that could handle the type of responsibility that it required. This structure involved bringing in new people to the three key positions that reported to him. Bob Salzwedel, managed finance functions, Russ Wiverstad, who was responsible for managing manufacturing organizations, and Mike Roller, who was responsible for sales and marketing. And, Ralph’s dedication to the firm’s new philosophy was further displayed with Mike and Russ being hired after the unsuccessful attempts of the two previously hired individuals.
This new structure led to Ralph being able to make the transition from being a merely effective leader to being a successful one (Robbins 6).
In fact, Russ commenting on the transformation of the changes that Ralph had made said,
“When I joined the company, Ralph was making all the day-to-day operating decisions…It took a little while for Ralph to develop trust and confidence in my abilities, but once he did, he delegated a lot of responsibility to me…it’s my job to keep him informed, not his job to ask me the right questions…Ralph didn’t have to delegate. He was doing it out of choice.” (Case 8)
And, this emerging structure was further solidified with Russ delegating to his subordinates, which led to “the budgeting and planning that used to be done by the vice president…now coming from the shop floor” (case 8).
The compensation structure further solidified the new philosophy by a policy of no across-the-board wage increases. Initially the workers had been paid strictly on an hourly basis equal to the local average. However, with the new compensation structure, workers would only receive increases “for an increase in responsibility” (case 11).
According to the expectancy theory, which focuses on three relationships; 1. Effort-performance, 2. Performance-reward, 3. Rewards-personal goals, suggests that the firm’s decision to provide compensation in this manner was correct. The effort of the workers could lead to increased responsibilities, the increased responsibilities could lead to financial rewards, and that could lead to the realization of (Robbins 172) “compensation [being] the bottom line of the company not profit” (case 6).
The extent to which Ralph was willing to protect the philosophy of the company that had initially been opposed by many of the employees, however, had created a business that experienced its greatest growth after the new philosophy’s implementation. And, by 1985 the company had grown to over $50 million in sales, with the return on equity growing from 18% to 27%. It was now a business that not only enjoyed an outstanding reputation but a market share that had grown from 7% to that of 46% in the greater Milwaukee area. It had also expanded to “Iowa, Indiana, Illinois, Minnesota, and several other neighboring states” (case 3).
However, during the period when there was no articulated plan that coordinated the growth that Johnsonville Sausage experienced, the quality of the product had gone down, the satisfaction of the employees had diminished, and had even caused Ralph to “feel uncomfortable with the business”. However, with the creation of the Johnsonville philosophy and the empowerment of the employees the company experienced a more efficient and substantial growth, once it had been implemented. Employees had taken on more responsibility and they were beginning to enjoy their jobs again. Ralph was also similarly effected by the new method of running the business.
The empowerment of the “line” employees and the management structure that empowered them was a crucial turning point in both the quality of the product and the quality of the work. It was crucial because it had created an environment where employees could own their work and the company. Therefore, the efforts to improve the company should be regarded as efforts to improve their own lives.
And, because both product quality and employee satisfaction had been declining before the new Johnsonville philosophy had been implemented, suggests that to not continue implementing the participative-management that developed as a result would be bad for the company. Not only would it make the company’s changes seem trivial, it would also be detrimental to the future of the company. This is because the vision that was articulated to the employees, which portrays them as contributing members of the firm and not just its means to acquire profit would be undercut.
The rational decision-making model consists of six steps; 1. Define the problem, 2. Identify the decision criteria, 3. Allocate weights to the criteria, 4. Develop alternatives, 5. Evaluate the alternatives, 6. Select the best alternative. The problem, with which Ralph was faced, was the decision to take over the Palmer Sausage mid-western plant. The decision criteria are identified in the Johnsonville philosophy.
Therefore, the best option available would be to retain the participative-management style and allow the employees to have a voice in the decision. This way the empowerment of the employees could be retained. This will also keep the decision regardless of the outcome consistent with the philosophy that was previously laid out, where profit is the means to an end and not vice-versa (case 6).
This is because in the Johnsonville philosophy the weights regarding the criterion that should be evaluated places the priority with the employees.
To implement the existing infrastructure also has many other benefits. Many of which will be found in the ability to exploit the brainstorming abilities of all the different groups that have been formed collectively. The brainstorming that has previously been experienced has contributed to the purchasing of new equipment and new methods of production. Also, they have contributed the higher satisfaction that has been experienced by the workers’ satisfaction.
It also not only has benefits that will further solidify the infrastructure that exists, but it will be relatively easy to implement, because of the existence of the communication channels that already exist in this infrastructure. Through these channels that the firm has developed workers that have already conducted complex financial analyses and contributed to budget and sales organization and forecasting (case 9).
Furthermore, in the last business plan the company collectively decided that they did not desire to “push private label business over 15%…[so that they would not experience it] competing for capital with the rest of the business. This shows that the workers have already developed the skills that will be necessary to formulate a well thought out decision and its justification.
If the empowerment of the employees or the vision is lost, then, not only will the existing organization be subjected to conflict that will arise from actions that contradict the philosophy, it will make it even more difficult to rebuild any loss of employee morale. The company also already running at a very high capacity would also be forced to push up plans that the company did not yet desire to engage in. Therefore, the employees being designated the company in the vision should be allowed to have an influence in the company’s future.
Bibliography
Fundamentals of Selling
Charles M. Futrell
