Getting to team.

After a decade of financial maneuvering and restructuring, a competitive advantage in the 1990s can only come from one untapped source: the workforce. CEOs are rethinking how to empower people with a shared vision of their businesses' future. The trouble is that not enough CEOs are following

Particularly in these tough economic times, the malaise is well known to American CEOs: Costs outstrip productivity, downsizing follows, and an anxietypagued workforce effectively stymies innovation and quality improvement. In a knee-jerk response, many boards seek a fire-breathing Patton to slap some life into the troops and rally them on the force of his charisma.

But nowadays--finding that frequently, the iron fist may only continue the downward spiral--many troubled companies are turning to more collegial, team-based management. This approach to dealing with human capital isn't entirely new: It has seen many incarnations as "decentralization," and appears also under the guises of participative management and worker empowerment. The aim is to push decision-making authority farther down the management rank and give employees broader responsibilities. When its work--as some particpants in this month's CE roundtable testify--the payoff is motivated employees, improved quality and lower costs--usually derved as companies jettison layers of unneccessary middle managers.

Success stories abound. In the early going, manufacturing concerns took the lead. At Georgia-Pacific in Alanta, teams erased an annual $25,000 charge to have sawdust removed from the lumber mill --actually turning a profit by selling the debris to local nurseries to use as mulch. An employee team at GM, meeting during a holiday shutdown, noticed that fans in a vehicle painting area were running non-stop. They shut down at certain periods, a move that saved $160,000 in energy costs and improved paints job by reducing dust circulated by the fans. Service companies, too, have followed suit. At United Airlines, for example, a team helped redesign circuitry in faulty galley elevators that caused delays on 747 jets.

To be sure, the team era is rife with casualties. Roundtable participant Ray Smith, chairman and CEO at Bell Atlantic, claims 15 percent of his worker had their competitive edges terminally dulled by the company's years as a monopoly. Most of them are gone now, he says, the victims of downsizing, attrition, and wrenching cultural peer-set performance limits and managers who gripe that they are being stripped of their responsibilities. And almost by definition, central to the success of team is the need to attract skilled employees. How to do that in an era marked by shifting demographics and sliding skills?

Some participants at our teamwork roundtable at New York's Mark Hotel say the answer is to tie employees' fortunes to those of the company through pay for performance. Another tack may aim to instill in employees the same concerns as public shareholders.

Training may also ease the transition to team: Mario Antoci, chief executive at American Savings Bank in Irvine, CA, notes: "Most of our supervisiors were used to being policemen. We had to teach them how to be leader." Moreover, some chief executives are finding they must assume roles as team cheerleader and chief communicator' "We spend probably ten times the amount of money today communicating with employees than we did four years ago," says Bell Atlantic's Smith. For many chiefs, that means initiating open-door policies, newsletter communications and pep talks with those on the front lines.

Lots of CEOs talk team. But those who've successfully made the jump remain a minority. Will there be large-scale successes to match those of the early corporate leaders? The answer will determine whether team is a sleigh-of-band by those in dire straits or a true antidote for flagging production growth.

BABY BELLS AND BOILED FROGS

Raymond W. Smith (Bell Atlantic): We tell a story in our company called "The Story of the Boiled Frog." I'm not sure where the tale came from, but it's not so terrible that I can't talk about it at a lunch table.

The notion is that if you take a frog and bounce him in a pan of boiling water, the frog will immediately jump out, and might be singed, but will be intact. But if you put the same frog in a pan of lukewarm water, and you bring it up to boil one degree per hour, the frog will not only not leap out at the time that it's about to die, but the frog will stay there and, in some degree of comfort not sensing the gradual temperature change, allow itself to be boiled.

We find ourselves as managers of a former monopoly constantly in the position of being the boiled frog. The temperature is rising around us and, in fact, we are either unaware of it or quite comfortable. So we had a splash of boiling water thrown on us in 1984 when the courts broke up the old Bell System. That forced us to step back and look at what we were and what we might be.

I only say that because I don't want you to think that we have this special insight that caused us to begin this process almost eight years ago. It was an extraordinary incident that allowed us to reexamine ourselves.

My epiphany came shortly thereafter when we succeeded in breaking ourselves away and creating an independent company. We discovered that, in order to survive in the long run, we were going to have to change our product provisioning process. In fact, we were going to have to reorganize and totally reform every process that existed in the company or we would be a sad-sack, gray-windowed company.

We began to compare ourselve agianst other companies that had gone through similar traumas--some because of deregualtion, some because of an introduction of legitimate competition, such as in the computer and automobile companies. There almost seemed to be a direct parallel to what was going to happen to us.

In order to reform ourselves, we had to determine what the processes were, who the customers were, who the employees were, what were our conventions, and what were the requirements of each one of those groups. We began to realize that we did not understand this large business--at which time, comprised some 85,000 employees--well enough to be able to describe a legitimate reformation.

What we found was rather frightening. We found that the residue that was left over from 110 years of being a monopoly had prevented us from becoming a high-performance team. In fact, we were parochial, selfish, turf-minded, indifferent bureaucrats, dedicated to a thousand goals and not one. Dedicated not to each other, but pitted against each other. That internal competition was more of a common occurrence than cooperation.

As the old Bell System, we were like a football team that went out on the field every Saturday with wonderful equipment and athletes, and we won every game, 100 to nothing. We caught every pass, we recovered every fumble, and we scored virtually at will. The only thing that we didn't have was opposition on the other side of the scrimmage line. We just rushed up and down the field every Saturday and said at the end, recalling the nursery rhyme "Little Jack Horner," "What a good boy am I."

People had to find some ways to distinguish themselves in this kind of an activity, and since there was no one "outside," they distinguished themselves by competing on against another. Such activity became institutionalized in the company to the point that the only competition was inside. It almost became impossible for the individuals to think of anything outside the company long after competition came into play.

The problem was in the very assumptions that we made about our corporate reality. Those assumptions were not only slightly off the mark, they were totally counterproductive to any kind of reasonable teamwork.

My idea of a high-performance team is an aircraft carrier landing jet planes at 300 miles an hour, at night, in a raging sea. There are 140 people on the deck of the carrier who have various jobs, and their goal is clear: to land the planes safely, to make sure that the equipment is not damaged, that the pilots are in and out, and that the operation comes off without a hitch.

On that ship, there is not one person-- from the very top to the bottom--who doesn't know what the goal is and doesn't accept it and understand it and believe it. There isn't one person on that deck who doesn't see a bolt or a piece of metal on the deck as a major promblem, and if it means removing that debris immediately, he will do so. The captain and the men act as an organic whole when they land that aircraft on the deck. They are a high-performance team.

We at Bell Atlantic did not behave that way. Our people did not know what the superordinate goal was. They didn't know how their particular functions fit in. We also found they believed that if they met their objectives, they fulfilled their total obligation to the corporation. If that objective happened to reflect reality and served the customer, it was a total coincidence. If it didn't, there was no obligation on the part of the individual to say, "By the way, I have met my objective, but it is a stupid objective, and it really results in not very good service to the customer." Or, I really believe that the objective should be higher. Or, by the way, I don't even think this function is required."

We had to revise the conventions of how we went about doing things. We also discovered that not one of our training programs, in any way, addressed the idea of customer service. So we put together the conventions of a high-performance business team. We got together 65,000 people over a two-year period and spent 2.5 million training hours revising our work methods. We compiled conventions of behavior: We called them The Bell Atlantic Way. It was our first stab at a team approach. We said, "This is how really good teams behave."

The conventions have been in effect for two years. Everyboby in the company knows what's expected. But not everybody conforms automatically. There's more to the team process than just whipping up new conventions. There are also training requirements.

At Bell Atlantic, management's level of involvement in the team approach is quite substantial. Daily, we need to reinforce team in every one of the structures of the business as well as the interactions of the people. Team involves the basic interactions between individuals that allows them to communicate. The approach allows them to have team success. It convinces them that the only successes are team successes. There are no individual successes in a real team. Team management allows them to change themselves and the structures of the corporation. And it permits them to participate in what they think is a great adventure.

About half of the people in our company now have incorporate some aspect of this in their daily behavior. Probably another 35 percent are doing a very good faking job. And 15 percent are constitutionally opposed because they think, as one man said, "This is a woman's way of running a business." Believe it or not, it's no macho. Macho means you go out and you tell that goddamned marketing department that they're the ones that screwed up, and don't talk to me about teamwork, because I am sick and tired of this lovey-dovey stuff.

Arnold Pollard (CE): When you're building a team that's more effective, more efficient, leaner and meaner, and more competitive, there's no avoiding the fact that some downizing is required. That's got to create a hell of a morale problem. How did you deal with that situation?

Smith: The way we dealt with it is we told our employees the truth. We told them right from the beginning in 1985 that we had 27,000 managers, and that we were somehow going to have to run the company with 15,000 of them. We were going to have to do that by becoming more efficient. We added that we would try to maintain reasonable opportunity at the same time. You must tell people straight out what your plans are. Communication is key. We spend probably ten times the amount of money today communicating with employees than we did our years ago.

Now, I can't do this personally with all 80,000 employees. We had to create a cadre of people who commumicate. We have what we call the 900, who are totally equipped to answer questions about everything we're trying to do as a corporation. We have 900 people who more or less can do that as well as I can or as well as my president can. They are the key communicators.

KEEP THE LINES OPEN

Frank V. Cahouet (Mellon Bank): Being able to maintain that level of enthusiasm and commitment and willingness to accept change is intrinsically tied to communication. That's why I started writing to the employees at home. Not at their workstation, but at home, so that their spouse or family would hear the message. After all, these are their careers we're talking about, and they've got families tied into it. We found that as a very useful way to communicate.

Smith: We have a full-fledged media plan to deal with that. You have to have a media plan for communicating in any large company. But, of course, our cadre of 900 remains key.

Samuel A. McCullough (Meridian Bancorp): Communications within the organization is where we continually try to improve. I have a program in my company called "Just Dial Sam." I set aside two hours a month, on a special phone line, and anybody in the organization may call me, on any issue, or problem, or anything they want to talk about. It's been an incredibly valuable way to get good ideas about what they think.

Albert A. Cardone (Empire Blue Cross & Blue Shield): I've been going through this communications process myself. One of the probems I ran into is that some of the people you most need to talk to are key members of upper management. If you're not careful, they can almost hold you hostage by virtue of their technical skill and their experience. When you bring about--or try to bring about--a cultural change of this type, some people are just not attitudinally suited to do it. And you can't fire them all.

Smith: Some of us have tried that and found out that it's painful.

Cardone: How did you get 900 employees to buy in? That's a big number. If you've got some sour apples in there, and they're communicating the wrong thing, it's deadly.

Smith: We have fired some people who would not go along with us. Four years ago, I had a manager come to me and complain about his own people who didn't seem to understand things. I asked him, "Why are you telling me this? You don't tell me other failures." He said, "But they don't seem to understand what the hell's going on around here." I said, "Who do they work for?" He answered, "Well, me," I said, "Doesn't that make them your responsibility?" Managers must know that getting out the message is a part of their responsibility, and it is as important as making sales or whatever is their traditional function. Once that sinks into their mindsets, then the managers start to behave at least a little better. But if they don't buy into the team approach, it'll never work.

As one guy said: "Let me tell you why I don't do my job the 'Bell Atlantic Way.' If my project, the new 908 are code in New Jersey, goes ove A plus, you guys will be carrying me around. Whether I do it the damned Bell Atlantic Way or not, they'll all wink and say, 'You didn't do that real well, but you're still a hero.' "He was saying that was the message conveyed by managers-- including some senior managers--down through the line. Conveying the team message has to be a part of the job. If it isn't, then people will behave accordingly.

We found about 10 to 15 percent of the people just immediately latched on and said, "My God, this is great. This is what I've been looking for all my life." Then I told you about the 15 percent that are hopeless. But most of the people in the middle are looking for very strong clues that they're really going to be rewarded for meeting the team criteria.

Bernard J. Kennedy (National Fuel Gas): One of the greatest teachers who ever lived came along about 2,000 years ago. At last count, his message--the Gospel--has given rise to about 1,350 different interpretations. How do you preach the Gospel without heresy? Do you sit down and write your Sunday sermon and get it out? I don't care how good 900 people are, you're going to get variations on the theme.

Smith: We have compiled every one our major corporate themes--and there are 28 of them--into the form of what we call a copy platform. The copy platform in two parts sums up each theme in about a paragraph. In the next stage, it provides a bit more detail--roughly about a page and a half. That's what our holy writ is. That means for questions or problems regarding a particular aspect of the business, such as quality, employees can refer to the platform. That's what we teach. It doesn't have to be exactly word-for-word, but you've got to have the same discipline inside the company as we do when we attempt to change attitudes outside through an advertising agency.

Kennedy: Can you really achieve that? Somebody once said that the way modern television would handle Moses coming down from Mount Sinai with the Ten Commandments is that the anchorman would say, "Can you give us the Big Three?" [Laughter.] There's a serious point to be made there. That is: The attention span of today's work force is that long.

Smith: I don't think the employee attention span is any different now than it was when I started 33 years ago. Back then, we didn't give a good crap what the people at the top of the company said. We were trying to figure out where we were going to be able to gain our stripes and where we'd get stars and how we could deal with our peers and how we could move up.

Kennedy: But that attitude hasn't gone away, has it?

Smith: Oh, no. But we tell employees they can move up by being good team members. Ultimately, everyone wants to advance their own career first.

VIGOR AND VITALITY

George Cobbe (Hewlett-Packard Canada): What methods do you use to maintain your management's vitality? After all, motivation is absolutely necessary to implement this kind of transition.

Smith: We're subject to exactly the same kinf of recidivism as everybody else. It's really up to the coaches to keep up the players' enthusiasm. Easily half of our people meet regularly with a coach. That means, "Let's go to the cafeteria, or let's have lunch. Let me ask you a question, or let me point something out to you." When you really work with your coach, it makes you feel as though you're part of something good.

Warren Alpert (Warren Equities): But your basic thesis is: "I'm going to lose my job, but I ought to feel better about it." If you were in that position, there's no way you would accept any communications. You'd say, "they're going to can me." What's the moral of the story? The moral is: See to it that you don't get canned.

Smith: Yes, the ultimate moral of the story is to meet your own career objectives. And that means moving up the line. Or getting a betterjob, or working closer to your home.

STEP BY STEP

William J. White (Bell & Howell): One of the rules of thumb that I've heard is that to implement a cultural change like this, it's going to take about one year per level of the organization. Is there a way to speed that up?

Smith: I've not heard that rule of thumb, but that doesn't sound bad. One of the things that we've done in the last seven years is to speed up the process by eliminating two levels, so we saved two years. But it's still at least a 10-year job for a company our size. So we're more than halfway through the process

The only way to make sure you're not wasting time on the other levels is to get the top level committed first. I'm not talking about our so-called 900. In our case, worldwide, there are about 60 people who are the top. One key: Make sure these executives are committed to team management and that they really believe in it. If you have anyone in that top level who doesn't, they will present an excuse for others in the organization not to do this silly thing. Others will have reason to just wait and see how new management approach turns out. A negative comment by one of the top-level executives will precipitate 150 comments on the next level. Nail down that top deck first. We did not initially succeed at that. I thought I had that, but I just had very good actors. The necessary mid-course correction cost us easily a year and a half.

Pollard: How do you guage employees' reponse to team?

Smith: Well, there is a very easy test. You say to the person, "I ran into some things in your department that I think you want to know." In other words, you're going to tell him that it's not working the way you want. If that person says, "Oh, I want to hear about that, they're committed. If they say, "Hey, wait a second, you make one goddamned trip to Pennsylvania, and I hear the bad stuff. I've been working very hard"--if they act in the least defensive-- they're not committed, they're just going through the motions. If you talk to an entrepreneur or an owner, and you say, "Hey, I saw a problem in the operation," they respond, "What is it? I want to fix the thing right away." But if you talk to a bureaucrat, he says, "Hey, you're talking like the cup's half empty instead of half full. When so I get credit? It's a very easy test, but I didn't know that three years ago.

TO MARKET, TO MARKET

Cobbe: When we made similar efforts at Hewlett-Packard, one of the main areas we focused on was time-to-market. Time-to-market means to us simply that the company gets a new invention to market at the time the first customer is ready to pay for it.

We've gone through all kinds of stages of decentralization and centralization. However, the overall trend from the company's beginning is to move more assets, enhance our capabilities, and position more people closer to customers throughout the world.

We've always dealth with R&D from what we call "the next-bench syndrome." Under the approach, engineers look at the next bench for ideas or solutions to their particular problems. These are usually technical situations, but I think the next-bench syndrome also applies to a broader concept of who the customer is.

We spend about 11 percent of our revenue on R&D. Fifty percent of the revenue this year will come from products we introduced within the last two years. Three years ago, 50 percent of revenue came from products we introduced within the last three years. Time-to-market is really playing into our plan. Time-to-market and what we call break-even time. Break-even time to us the time that it takes for the revenue to equal the R&D investment. So that concept and time-to-market are the two fundamental drivers for our investments in all R&D in softwear, hardware, system, and other products.

Another important factor is that we are the largest supplier of instrumentation to the Japanese market. Our market share has been stable in most recent years. In fact, last year I think it grew. It's very important for us to be successful in Japan at this point in time. Twenty years from now, our focus might be the Soviet Union. But for now, we have to be successful in the Japanese marketplace. If we can do that, we think that we can be successful in any marketplace in the world.

Another major driver for us is the communications and information movement around the world, driven, in turn, by electronic technology. When you go home at night, you sit in your front room, you turn on the television, and you see something happening in real time. You may not make a decision based on what you see, but you're thinking about it and creating decisions. You go to work the next day, and you may change something in your company. That feedback system is a major driver in our world, and it certainly is a driver for the products that we produce.

Finally, a major driver to consider is the continuously increasing rate of change in global economic issues. Productivity improvements are absolutely necessary for our survival. Customer connections--that includes partnership and customer satisfaction--have to become tighter.

Adaptability on the part of management, and at all levels in the company, is required to make this work. Additionally, it requires parallel thinking, parallel actions, on the part of everyone in an organization. If you can figure out how to get problems solved by breaking them into pieces that can be run parallel, then you're moving in the right direction.

Obviously, this applies to team of all types, starting with the top management team. We try to develop parallel teams linked as closely as we can to the "customers." I'll put customer in quotes, because the customer becomes, in a sense, a partner. We're working a lot on partnership. Partnership doesn't neccessarily mean getting an order. We like to get orders, but partnership requires a lot more understanding of how to add value to your productivity, and how value chains are lengthened.

If you get parallel teams working hard, and you equip them with technology tools, that implies improving their communication. Then, ask the question: "Who is the customer to that team that's involved in bringing a product to market?" We use a diagram in our quality program that puts a customer on the left-hand side of the page. There are a bunch of lines that represent the distance between the customer and various levels of the organization. These are transaction lines across work groups. Looking from the point at which you've satisfied the customer, up through the transaction, is a way to understand how complicated a process it is to solve a customer's problem.

Meanwhile' you can apply that technique to almost any aspect of customer service. We use it a lot with our R&D organizations to help them understand who the customer is. A customer may be a person inside the company that fits in a customer chain to get to the real paying customer. We want people, particularly customers, to understand their role in that chain.

In the old days, the R&D department used to throw the product over the transom to the sales department. Obviously, that's no longer satisfactory. Products are connected to the customer in an ever-tightening loop. Continuous improvement in mentality has to be in all aspects of the company--particularly as that mentality relates to time-to-market. You've got to continuously determine how to improve things if you are going to achieve total quality.

TOTAL INNOVATION

T. Quinn Spitzer JR. (Kepner Tregoe): We're working with a large Japanese company that believes the next level beyond total quality is something they call total innovation. They strongly believe that innovation and creativity are a team effort that occurs when ideas are exhanged. But problem solving tends to be a team effort, whereas creativity and innovation tend to be individual efforts. Is there any way to reconcile those concepts?

Cobbe: It's not really fair to say that teams don't come up with creative solutions to problems, although most of the credit must go to the individual who first thinks of the idea. The team environment triggers creativity, but ultimately it's an individual who comes up with the idea.

Roy Serpa (Instamelt System): Wouldn't one example of that be a jazz band where you have improvisation done by each performer? Everybody supports the presentation, but yet, at each point every player has an opportunity to improvise with the support of the others.

Cobb: That's a great analogy.

White: As we work towards more concurrent or parallel processing--particularly in design and production engineering--we're worried that we're going to have to empower people. We've got to let them do it and trust them. If you have the right amount of communication going on--and some standard language, standard rules, and certainly a shared corporate vision-- the program should work.

Richard Previte (Advanced Micro Devices): Have you been able to construct cross-functional teams such that they violate the hierarchy and successfully meet customers' needs?

Cobbe: Yes and no. Certainly, we've tackled the problem within the business gruops. That would be our measurement products as opposed to our computational products. However, we're still not all that strong as far as computer instrumentation is concerned, bedcause the tehnology and everything else that's involved is a little more complicated.

Thomas Haggai (IGA): In terms of what you observed as "violating the hierarchy," did you have as large a task as Ray Smith at Bell Atlantic? It seems your situation wouldn't be as rigid as his. Violating the hierarchy it self would alost be a sacrilegious with your bunch, would it not?

Cobbe: We were fortunate in that we inherited the foresight of Bill Hewlett and Dave Packard. They've always felt strongly about teams. Probably 70 percent of our workforce is university-educated people. We've got a highly intelligent workforce that has demanded along the way to be empowered and to be allowed to use its own creativity. Otherwise, if that wasn't happening, the employees would leave. So empowerment always has been partof our system to some extent.

Haggai: Another question: This whole word, empowerment, is sort of getting out of hand. There are always people-- just as those Ray managed at Bell Atlantic--who neither want to be empowered nor should be. In your company, probably the vast majority want to be empowered: That's one of the things that attracts them to Hewlett-Packard. But don't we have to be a little careful that we don't neglect those people who just want to come in, work eight hours a day, and go home?

Norman Blake USF&G): Not necessarily. People don't work just to have a job. Everybody strives for meaning in what they do beyond just a paycheck. I don't want to get too philosophical, but I really do believe that people want to feel that they're doing something important, regardless of what their job may be. If they can do that, then their sense of self-worth is tied to how well the company does. The Japanese make that link-up extremely well.

Serpa: Yes, but you're both also touching on something else. Over the last 20 or 30 years, we have discouraged many individuals especially the lower levels--from feeling tied to the company. Many of them have been forced by poor management to say, "I'm going to do my job and go home and forget about it."

Smith: The mistake many people make with empowerment is that they don't define it well enough. Empowerment doesn't mean that you now can go do whatever you want. You've got to have a shared vision of a product or job. In order to get to team, your plan has got to be in sufficient texture and detials so that we know what it is. But objectives shouldn't be so tight that you don't have room to move. Once we have a shared vision, then we can empower people. Very ordinary people have shown us extraordinary creativity and great ideas. The damndest things have come out of the team approach.

Blake: Motivating employees to really aparticipate is the key to getting to team. Unfortunately, executing this approach has proven to be not that simple and at times nettlesome. We have put aside piecemeal changes and have approached participating as an integrated, transformational effort.

Early on in the process, we formed a task force of employees drawn from a diagonal slice of the organization. It served as a kind of executive committee for change, with plenty of elbow room for decision making. The taskforce and the subteams that evolved had key responsibility for analyzing issues and making recommendations. To ensure free and open dicussion, senior managers were not included. The task force modeled the team-based behavior we sought to achieve, and made the turnaround "ours" and not just "theirs."

As a result, the employees really achieved a sense of owenership. But the thing to keep in mind when you instill that sense of ownership is the tremendous obligation it requires on the part of management. Once our employees made that commitment, they needed to be reassured that we in management were committed to this plan as well. Going into the task force, they asked me, "If I give you these ideas, are you going to put them aside as a nice study that we'll talk about later, or are you going to bhe accountable for implementing some of the ideas?" I promised them I would be accountable.

They've become a sort of board of directors for me, in that what they propose we will generally act on. If we don't act on it, I have an obligation to report back to them the reason why. And we'll have arguments about why we didn't act on a recommendation.

Richard M. Clarke (AKZO America): All employees want the leadership to be accountable. As CEOs, we owe it to our employees to be visible, to be honest, and to be accountable for whatever we're asking our employees to do.

Blake: This strategy has proven to be very effective. So far, based on recommendations of the employee task force, we realize gross savings of $116 million. People have become really excited by the effectiveness of the task force, and they take great pride in the fact that they had a hand in reaching our goals.

MEASURING TEAMWORK

Richard Measelle (Arthur Andersen): We often refer to measurement as an important ingredient in change. How much have you had to revamp your standards of measurement in implementing changes?

Cobbe: We like to think of ourselves as a measurement company, but it took our Japanese friends to hit us between the eyes to understand what it takes to deal with processes. This is one of the cultural differences between dealing in the Pacific Rim versus here.

We are hip shooters. We don't ,like to spend time and energy gathering information and measuring things. That's work, very hard work. We like to be fast moving, and we'll make decisions on the fly.

The Japanese sit back, and they gather ungodly amounts of data. We used to pooh-pooh that in our organization in Japan. We used to say, "God, what are you wasting time doing that for?" The simple fact is they're measuring what is causing things to happen in proccesses. They're gathering information from which they can make decisions on how to improve the process. It took us 10 years to deal with that.

Smith: I don't think it's really the accounting so much as the compensation plans that have caused that kind of short-term thinking. What's got to take place is for U.S. businesses to implement compensation plans that take into consideration longer process times. There is some movement in that direction, but it's really slow. A lot of people think about quaterly results, because they are rewarded for quarterly results.

BUTCHER THE HOGS AND SHOOT THE COWS

Ervin J. LeCoque (Seaquist Group): We spend a lot of time considering how to properly compensate top and middle managers, but what about those at the bottom? How do we motivate them through compensation? I recently read a survey that revealed only 13 percent of U.S. workers believe they will personally benefit from improved company performance. That contrasts with 93 percent of Japanese who believe they will. It's interesting: When a company in Japan moves up and down the profit scale, the variance in the top executive pay is less than the variance in the employees' pay. In sum we have to put our money where our mouth is.

Smith: There's an old story that say's that the hog will not butcher itself. We're in a conundrum of that sort with our workers: They're being asked to perform a certain amount of self-butchering. The ony way to resolve the dilemma is institute some form of profit sharing at every level. Cahouet: When I came to Mellon, we had what they espoused as profit sharing. But we lost money the first year I was there, so I retreated from the policy. They said: "That's not right; you're supposed to pay it regardless of whether you earn money or not." We have to avoid that situation, but I have no problem with true profit sharing.

Smith: One of the things that we found early on, when we started listening to people, was that they resented certain types of treatment. We talked about salaries, but there are other kinds of elitist practice in the corporation that keep people apart. Car spaces, and other seemingly mundane things. We found out that senior executives not only got a car, but we got one and a half spaces. There was an inordinate resentment at this. So we have closed down every executive dining rooom, and we've eliminated extra spaces, and everybody pays for parking. We're unwinding those perquisites as fast as we can. But now the bureaucracy's hiding them.

Cahouet: We pay our managers more than we pay our nonmanagers. We pay people whoreally are achieving something-- those who are stretching and working 60 hours a week or whatever--more than we pay our people who work 40 hours a week. We keep driving home that you've got something out there to reach for, and we try to drive out the sameness that is so typical of our industry. Most people in the company who are real achievers get paid differrently than the people who work normal hours.

Kennedy: A lot of the resentment at the lower levels comes from the perks that the upper levels get. So instead of paying upper levels in perks, we should give it to them in the form of cash that's tied to performance. Sometimes the perks have to stay because we take advantage of some tax structures. That enables us to give senior officers what they want.

Obviously, we can't tailor everything to their specific needs. But it makes no difference whether youn give them the country membership in the form of cash or in the form of membership. You have to make sure that that's the thing people reach for, and that's what motivates them. Maybe he wants a sports car. He doesn't want the same old Buick that is the company's car.

Blake: There's no question that we have to stop alienating employees at all levels. They have to feel that they're really part of the team. It's got to get to the point where your employees feel that it's okay to shoot every sacred cow they can find.

I told my employees, "If I catch you not shooting a sacred cow that I know about, it's going to reflect on you. You owe a debt to your peers. You are their representative, and you represent their future."