Clever Geek Handbook
17 February 2026

Supply Chain Optimization

Recommendation

Authors Charles C. Poirier and Stephen E. Reiter envision a trip down your supply chain like an effortless sail on calm seas. Your organization can reach this placid efficiency, they explain, by forming partnerships with suppliers and others in your business network. But the authors don’t ask you to take their word; instead they present detailed case studies of companies that have implemented supply-chain optimization strategies and reaped prodigious benefits. The book’s only flaw is its style. It is densely written and often weighed down by prose as murky as a rural delivery system and twice as difficult to penetrate. But GetAbstract.com recommends that business owners, corporate managers, executives and logisticians of all levels take the time required to patiently excavate the practical and pragmatic information that lies within.

Take-Aways

  • The supply chain is the path your products take from concept to your customers.
  • All businesses are under pressure to make their supply chains more efficient.
  • Supply chain optimization is essential to accomplishing this goal.
  • With supply chain optimization, you break down the boundaries that have separated supply chain participants from one another.
  • To begin, analyze your entire process, from initial supply to ultimate consumption, so you can identify goals and avoid pitfalls.
  • Optimization is a joint effort of manufacturers, suppliers, distributors and retailers.
  • Companies achieve optimization by forming partnerships with these parties.
  • These partnerships are a win-win situation for all involved.
  • By partnering, small firms reap benefits previously available only to larger companies.
  • Partnering helps all parties solve problems and meet current market needs.

Summary

The Supply Chain

A supply chain is the journey your products or services take from concept and creation through delivery to your customers’ outlets and, finally, into the hands of your ultimate consumers.

Today, businesses are under extreme pressure to find new and more effective ways for their products and services to traverse the supply chain. Supply chain optimization is essential to accomplishing this goal, because it breaks down the boundaries that have traditionally separated supply chain participants from one another. That separation has fractionalized each participant’s earning power, so by breaking down those boundaries, you can increase your earnings.

“No force can stop the drive by retailers to try to extract every potential saving from the supply system.”

When you analyze your entire supply chain process, from manufacture to consumption, you can identify your goals, avoid pitfalls and implement a focused optimizing plan. You want to mobilize a joint effort and focus the resources of your suppliers, manufacturers, distributors and retailers on initiatives that seem to have good potential. Many companies are already using the methods suggested here to achieve supply chain optimization, including Proctor and Gamble, Baxter Healthcare Corporation, Packaging Corporation of America and Dominick’s.

“Not all customers are equally important to the future.”

By establishing partnerships and forming groups that can compete with the volume leverage of large companies, superstores, and warehouse stores, smaller companies can reap benefits typically only available to larger companies. When these groups analyze their shared supply chain and pool their resources, they can find hidden savings to protect their profit margins and remain competitive.

“Only by incessantly chasing every possible avenue of process improvement and seeking any beneficial enhancement to quality, productivity, cost and customer satisfaction can companies hope to survive into the next century.”

The supply chain network is always evolving. Its historical evolution has already led to such ideas as efficient consumer response (ECR), continuous replenishment process (CRP), electric data interchange (EDI) and other replenishment and quick-response methods. Use these concepts throughout your organization to achieve supply chain optimization. You must move from a buyer-versus-seller philosophy to one in which the supply chain network endeavors to build a supply system with a united, organizational purpose. The typical "let’s only worry about our company’s way of doing business" that drives much of supply chain management today is simply not effective.

The "Interenterprise" Solution

The "interenterprise" solution unites everyone in the supply chain in a four-step model, which has superseded the typical three-step model. The three-step model included only the manufacturer, distributor and retail outlets. Today’s four-step model adds a new dimension: the suppliers’ relationship with the manufacturers or the primary suppliers’ relationship with a servicing supplier. The interenterprise solution addresses the organizations and transactions you must scrutinize before you can optimize your supply chain. You must look at your entire supply network. Don’t neglect the importance of establishing partnerships with all the constituencies that affect your intended end result. You want to achieve an error-free, low-cost, low-inventory system that is electronically linked as completely as possible and that completely satisfies the ultimate consumer.

Partnering Creates Improvement

By partnering, you can form a network that focuses on optimization across your supply chain. Partnering efforts across supply networks typically realize these improvements:

  • Inventory reductions of 40% to 60% result from working out communications systems and just-in-time deliveries that reduce the need for safety stocks.
  • Inventory turns of five to seven increase to 25 to 30 because the supply chain achieves more pull-through of demanded products with lower inventories and fewer stock-outs.
  • Cycle-time improvements of 50% to 60% result from collectively mapping and analyzing flowcharts, creating new ideas and bringing these innovations to commercial realization. The largest factor in this improvement is eliminating steps that do not add value.
  • Sales and market share increase by 45% to 55%, as a result of creating the most responsive system and inducing the final consumer to shop the network.
  • Profit improvements of 15% to 30% are achieved through improved process designs that eliminate waste and reduce costs.
  • Customer relations improve 20% to 40% as you respond to customers who identify their true supply needs.
“Reengineering will threaten the livelihood of many of those doing the work.”

You can overcome the many obstacles that get in the way of creating and maintaining working partnerships across your full supply chain. These conflicts usually start with one party’s flawed perception of the value of good relationships among those in the same supply chain. These perceptions are based on a lack of trust, a necessary ingredient in making any alliance function. Everyone needs to adopt the perception that partnering will work if every entity involved applies mutual resources for everyone’s mutual benefit. Anything less than that perception will doom the parties to short-term maneuvering by buyers and sellers, with no real improvement in the competitive advantage of partnering in the supply network.

Effective Partnering Techniques

The partnering techniques that work the best don’t have to be complex. National Semiconductor of Santa Clara, Calif., worked with a supplier of silicon wafers, Siltec, to cut expenses. Fortune magazine writer Shawn Tully reported, "At National’s plant in South Portland, Maine, workers on the loading dock used to discard the expensive plastic cassettes that silicon wafers arrived in. Now a giant box sits on the loading dock, already inscribed with the address of Siltec’s plant in Salem, Oregon. As workers unload the wafers, they chuck the cassettes into the box. When the box is full, a driver from UPS carts it off to be returned to Siltec, which passes the resulting savings along to National - more than $300,000 a year."

“Downsizing has become such a natural element in the lexicon of management control that hardly a firm has avoided being restructured.”

Tully also notes that AT&T’s purchasing chief, Daniel Carroll, calls for helping key suppliers "manufacture more efficiently and thereby hold down prices." That is the so-called win-win situation for AT&T. In the spirit of partnering, AT&T allows these suppliers to have "a share of the savings," and that’s a win for the suppliers. Jack Barry, a former purchasing specialist with Electronic Data Systems Corporation’s A.T. Kearney consulting division, sees a promising future for those in partnering relationships. He says, "As we move to a seller’s market, companies win by treating suppliers not as adversaries but partners."

“Partnering starts with a prioritized list of objectives that creates the strategies and actions needed to accomplish these objectives.”

Whirlpool found itself under a short time constraint as it prepared to present a new line of refrigerators to Sears, one of its major customers. To extricate itself, Whirlpool got the help of a software supplier. Together they made a presentation that used virtual reality techniques to demonstrate the new line of refrigerators on a computer network. "The buyers at Sears were regaled with a show on the interactive computer network they were watching that took them into a kitchen to use the innovative features contained in the new line of products."

“As with most management concepts, reengineering is not a magic pill.”

The basic purpose of customer partnering is to find the best way to meet current market needs.

Advanced Partnering Techniques

Successful advanced partnering techniques include the following:

  • Share valuable engineering and design talent - Focus on projects that have a clearly defined market advantage. This kind of sharing, which goes beyond the typical electronic linkages available through computer-aided systems, also includes joint identification of development and improvement projects and the assignment of joint resources to work out innovative and saleable solutions. The automobile industry is becoming quite adept at using supplier talent to design and engineer features on new cars.
  • The most skilled trainer from any participating organization can conduct joint training sessions for everyone - With combined planning, material covered can include problem solving, the latest business planning techniques, skills applied to planning and scheduling tools, and the use of logistics capabilities. A larger group shares the cost of the sessions. Partners develop techniques to share the valuable resources and knowledge that result as they search for beneficial opportunities. The Atlanta Consulting Group stands out as an organization that effectively conducts these sessions.
  • Executives should take an overview that focuses on joint practices that could benefit both parties. The supplier and the customer can arrange briefing sessions about the best practices they have observed and used.
  • Under the conditions of advanced partnering, the firms can quickly set up a test to find the real benefits of an idea - Companies generally avoid pilot studies that are intended to test improvement ideas because they are difficult to establish and arrange. But partners can make joint investments in focused facilities or specialized equipment. The partners share the cost of the new machinery and the savings from the new results. For example, partnering efforts can focus on improving packaging costs. This might lead to an investment in cutting-edge machines that increase packaging speed and efficiency to a new level, double or triple the previous "Best Performances."
  • Your firm can set up experiments using qualified third-party organizations to test new technologies or systems - For example, firms can enter partnering arrangements as part of trying to make their supply chains more effective by finding and adopting improved electronic data exchange techniques. Some of these arrangements allow the supplier and the customer to engage third parties who have hardware and software knowledge plus the ability to plan and equip test sites. This enables the partners to test a wide variety of potential enhancements.

Redesigned Logistics Networks

Companies that have applied these new approaches and have redesigned their logistics networks have an advantage over those who are still struggling to catch up with the fast-paced business world. Companies with redesigned networks can find more logistical advantages by using new techniques, information technology and partnering concepts to meet shifting customer demands. The questions that will dominate supply-chain logistics in the future include:

  • How can you achieve standardization and simplification in an environment that is increasingly complex, both structurally and operationally?
  • How can you negate years of operating under the win-lose mentality that hinders progress toward more effective systems? How can you create networks built on trust and mutual benefits?
  • What structure can companies use to manage their logistics systems in the face of increased demand for speed, accuracy and the quickest possible responses?
  • How can companies shift those who manage logistics away from shipping and transportation and toward a more holistic approach that includes forecasting, purchasing, planning and selective outsourcing of services?
The one factor of paramount importance to the retailers with whom we have had discussions is that manufacturers and distributors should have the correct priorities."

You need to answer these questions and many others as your company analyzes its supply systems. Logistics play a key role in these systems, and will become the major catalyst as you work to establish partnerships along your supply chain.

About the Authors

Charles C. Poirier is a partner in the National Supply Chain Practice of Computer Science Corporation. He is the author of Business Partnering for Continuous Improvement and Avoiding the Pitfalls of Total Quality Management Stephen E. Reiter is a partner in the National Consumer Goods Practice of Computer Sciences Corporation, focusing on information technology.

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Supply Chain Optimization

Book Supply Chain Optimization

Building the Strongest Total Business Network

Berrett-Koehler,
 


17 February 2026

When Smart People Work for Dumb Bosses

Recommendation

You would be hard-pressed to find a more honest book about business and the often short sighted, un-productive, arbitrary, and just plain stupid decisions made by "dumb" managers and leaders. William and Kathleen Lundin articulately challenge the absurdities of corporate culture and the workplace. In this landmark book, they define "dumb" quite broadly: it applies to the stupid, the egomaniacal, the dictatorial, the scheming, the manipulative, and even the abusive. First-person accounts from leaders and employees illustrate the authors’ journey through the epidemic dumbness of corporate structure, decision-making, and practice. The authors thoroughly and truthfully present these problems, analyze their impact, and offer remedies. However, their conclusions often clearly indicate that if you are mired in a consistently, terminally dumb workplace, leaving is usually your best option. Don’t let the juvenile look of the volume throw you. BooksInShort.com recommends this book to everyone with a job: it’s that good, like a sharp-witted social commentary delivered by keen observers.

Take-Aways

  • In the workplace, the "leader-follower" relationship can be very dysfunctional on many levels.
  • Dumb bosses are defined as those who are stupid, selfish, insensitive, shortsighted, dictatorial, manipulative, and even abusive.
  • The longer smart employees stay in dysfunctional environments, the more their perceptions of reality become skewed, and make them susceptible to getting "dumbed down."
  • Dumbness is inherent in the corporate structure and the culture of most companies.
  • Corporations believe that this system works for them.
  • Small companies often have small jerks as bosses. Big companies have dumb bosses who’ve grown into big jerks.
  • Loyalty to one’s employer is harder to kick than a drug habit.
  • Employees must leave chronically difficult or abusive workplaces.
  • Many employees stay and "survive" at dysfunctional companies, always under extreme stress, because they believe they have no other option.
  • Unmasking dumbness is politically dangerous.

Summary

The Leader-Follower Relationship

In the workplace, and in the inherent structure and culture of any corporation, the "leader-follower" (boss-subordinate) relationship can be very dysfunctional on many levels. Employees are often smarter than their bosses and have a better grasp of reality and better solutions. But, these same employees are put in the position of supporting their managers’ dumb behavior.

“Never expect the truth when you start a new job. The only question is how much are you being lied to, not if you are being lied to.”

Bosses can be manipulative, petty, arbitrary, authoritarian, cruel, and downright abusive. Employees often stay for years and years in these horrible situations. They hang around out of company loyalty, the need for a paycheck, and the fear that they will not find work elsewhere that meets their other needs (salary level, benefits, etc.). People also stay because they have been broken down by negativity or abuse, and have become willing participants in their own victimhood.

“By the time a dumb boss recognizes there is a problem, there’s no way such superficial solutions can address what’s really wrong.”

The truth is that "the dysfunction of smart people working for dumb bosses has short-range corporate survival value, and therefore corporations will continue to encourage this dysfunctional relationship." Smart people continue to work for dumb, even abusive, bosses because ultimately it "works" in the short run. In other words, "that’s the way the corporations like it." The longer the smart employees stay in the dysfunctional environment, the more their perceptions of reality become skewed. "Employees start to buy the company line." As once-smart employees get "dumbed down," a smooth operation emerges over time. But, it’s not a well-run company, it’s merely "a workable harmony of mediocrity." For most employees, the realities are alarming:

  • If you’re okay with continuing to work for a dumb boss, it could be because you’ve grown accustomed to it and have been numbed by the daily abuse.
  • If you hate your boss, but love the company, and stay in spite of how frustrating or awful it is to work for your boss, you’re not a victim - you’re a willing participant in the situation.
  • If you’re a constant whistle-blower, and the company tolerates this, they’re getting more from you than you realize. So, you’re not actually winning: you’re losing.
“Studies report that companies earn higher profits when employees have fun, feel secure, and are respected. One would think that companies would want to embrace such enlightened management.”

A boss’ free exercise or abuse of authority has more of a negative affect on employees’ emotions than the individuals or society ever acknowledge. So, remember, if you act "tough," and protect your emotions, dumb bosses and dysfunctional companies will be less inclined and less able, to take advantage of you, professionally or personally. A dumb boss’ negative energy can drag you down. To keep from being emotionally damaged, remember that the boss is the one with the problem - nothing is wrong with you or how you perform your job.

“Dumbness has affected everything from...the sinking of the Titanic, the loss of the automotive market to Japanese care manufacturers, the rejection of the xerographic process by Kodak, to the ValuJet crash.”

Abusive dumb bosses will steal your accomplishments and do their best to steal your self-respect too. When things are bad, resist the urge to be complacent or to stay for the paycheck. There are other jobs in the world. However, it can be worth staying - at least for a little while - in a job that provides you with a great opportunity to learn or to advance. This is true if the boss is only dumb, but not abusive or controlling. If you are largely unsupervised, or if the boss doesn’t interfere with you, you can "become as smart or dumb as you please."

“The truth is that the dysfunction of smart people working for dumb bosses has short-range corporate survival value, and therefore corporations will continue to encourage this dysfunctional relationship.”

Ultimately, most dumb bosses are recognized as such by the top command. For instance, the careers of selfish bosses are always in danger because their peers hate them, top executives don’t trust them, and subordinates want revenge. Corporations often have a vested interest in keeping the environment dysfunctional. If you feel pulled into corporate politics or feel like you are being dragged against your will into submissive behavior to authoritarian bosses, it isn’t just your imagination. It’s management’s way of letting you know who has the power.

“To err in the face of contradictory evidence, the usual kind of business dumbness, is a form of evil. The workplace is composed of the innocent error and the willfully stupid deed.”

Often dumb bosses actually prevent their employees from doing their jobs. That’s part of a power play and can be the first sign that the boss is looking for ways to give you a bad review. Then, the boss can feel justified in firing you or preventing your promotion. The dumb boss may do this out of jealousy or out of the thrill of having the power to control someone else.

Truly Dumb Organizations

Every kind of company can be dysfunctional and can harbor plenty of dumb bosses, but stupid management is more obvious, and more unforgivable, particularly when it occurs in the healthcare industry. When profit is medicine’s only measure of quality, lives are literally jeopardized.

“Unmasking dumbness is just too politically dangerous. As long as an organization functions well enough, the wise don’t make waves. If you were to take such a functioning system apart (the former Soviet Union is a good example), the result would be chaos. Company profits are the only measure of success.”

Since dumbness in the handling of employees is an epidemic throughout our economy, why would you expect the handling of patients to be different? "Managed care - in other words, medicine - has finally become a true reflection of today’s organizational values. How can we think it can really be fixed when we haven’t yet fixed airline safety, when drug company researchers fabricate results, and when education isn’t educating? The values that permit all those atrocities to happen are what need fixing. Dumbness at the top!"

“Managed care, a kind of medical apartheid, has fathered many examples of the dysfunctional organization.”

Adapting to a dumb leader in a dumb corporation is like being the fox in the hunt: you may be quick, clever, and nimble, but you’ll still be dead when it’s over.

Dumbness and Corporate Culture

Only a gullible organization will try to imitate another company’s culture. Many companies do so out of being desperate for a fast route to success. In addition to trying to mimic another company, they may also become attached to dumb fads sold to them by consultants. Small companies often have small jerks as bosses. Big companies have dumb bosses who’ve grown into big jerks. The more there is at stake - money, power, or prestige - the worse an inherently dumb boss is going to be.

“In a truly dumb organization, everyone’s wrong except the people at the top. Employees’ feelings don’t really matter. Job insecurity, in spite of strong economic numbers, is felt at all levels. There is little trust. Stress is high. Loyalty is minimal.”

Unfortunately, loyalty to one’s employer can be harder to kick than a drug habit. For many people, this loyalty is akin to patriotism. "Love your country, love your company used to be a strong family value." Corporate loyalty has been taught to children by their parents for generations. While employees are so concerned with being loyal to their companies, in today’s culture, most companies have no loyalty to their employees. They are loyal only to the bottom line. They may profess loyalty, but that’s just to induce good morale. It isn’t real when put to the test.

“People tell of finding themselves part of systems so stupidly managed that no procedure could ever make it right.”

Believe it or not, your first job should be with a dumb leader who has created an awful corporate culture. That’s the best way for you to learn to be a not-dumb boss. "You become smart studying dumb culture on the job, up close and personally." You just don’t want to stay there very long, just long enough to figure out how stupid the place is. When you see an unresolvable struggle between smart employees and a dumb boss, it’s time to go.

“Shared visions, in spite of all the hype, are not possible until people step into one another’s shoes.”

Dumbness exists on many levels and in many varieties. Some dumb bosses are just stupid. Others are stupid and abusive. Sometimes, the volume of dumbness depends on the company’s size. "Big dumb" is when there are buffers between the idiots at the top and everyone else below. "Little dumb" is when most of the employees work directly for the jerk at the top. This doesn’t refer to the size of the stupidity, but to how directly employees have to interact with the top idiot, given the size of the firm.

Usually, dumbness is simply the result of egos run amok. That goes for all varieties of dumbness, from the stupid to the evil. Leaders who promote incompetent people often do it for their own ego’s needs. That allows them to feel smarter than everyone around them, and they don’t have to worry that their subordinates will ever get their jobs.

Faces of Dumbness

Sometimes dumbness is a group problem. "Teams can be collectively dumb even when their members are individually smart." What causes dumb teams? Ironically, industry might be more productive if it told employees that they are forbidden to form teams. Tell people not to do something and they will work passionately to do exactly what they’ve been forbidden to do. This often surprises leaders, who don’t take human nature into sufficient account when they rely on teams to do things. It’s a wonder that any teams succeed. Team members are always fighting their individual ambivalent feelings and the company’s ever-changing expectations. When you are in a group, "The need to protect one’s job collides with a sincere desire to help the organization."

Employees should cooperate with one another for their own good, and good leaders can motivate employees to want to cooperate. Unfortunately, cooperation usually is not the main value of those in power, who always need to be placated. Organizations have become so autocratic, and so arrogant, that if they don’t change they will ultimately fail. To improve, organizations must care about quality. However, they must be healthy, and not dysfunctional, to generate true, realistic quality information.

The impact of dumbness doesn’t matter just when people work together. It even matters when people work with machines. So, what happens?

  • A dumb (unmotivated or untrained) employee working with a smart (self-correcting) machine can still produce junk.
  • A smart (creative, self-activated) person working on a dumb (error-prone) machine can still produce wonders.
  • A dumb employee working with a dumb machine will always produce junk.
  • A smart employee working with a smart machine will always produce wonders.

Change and Learning

"To lead positive organizational change, managers must instill trust among employees before taking them through the frightening world of the newer technologies." The world is constantly changing, therefore, so is everything connected to business. Change brings the needs for education. Under dumb bosses, employees usually stop learning. You can’t run a successful company with leaders who don’t like employees and don’t care whether or not they are still learning. If employees aren’t constantly learning, the company will grow stagnant.

Lessons of Survival

Employees are fearful and unhappy. They work in ruthless and often demeaning and abusive cooperate environments. Smart bosses and dumb bosses both know that employees will stick around for a very long time, despite the terrible environment, because they think they have to. Employees at dumb companies learn "how to survive for longer periods and how to maneuver around the undertow. Those are necessary skills when you’re under siege." They are surviving, but they aren’t growing.

About the Authors

William Lundin, Ph.D., and Kathleen Lundin are cofounders of Worklife Productions, a consulting/training practice that serves corporations of every size. Widely recognized for their straight-talking approach to workplace problems, they have trained managers for companies such as Ameritech, Hewlett Packard, Saturn, Harley Davidson, Sun Microsystems, Johnson Hill Press, M&M, Mars, and many others. They are also the authors of The Healing Manger, Building Positive Relationships at Work, Working with Difficult People, and Three Values of Leadership. They are based in Whitewater, Wisconsin.

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When Smart People Work for Dumb Bosses

Book When Smart People Work for Dumb Bosses

How to Survive in a Crazy and Dysfunctional Workplace

McGraw-Hill,
 


17 February 2026

Rewarding Teams

Recommendation

When you want to encourage a project team, you have to do more than cheer, "Go, Team, Go!" Authors Glenn Parker, Jerry McAdams and David Zielinski show you how. They provide examples of how today’s top companies use the three most important reward systems for teams - recognition plans, project team incentives and organizational unit incentives. They include 27 detailed case studies to show how these companies designed and implemented their systems. They consider difficult issues that affect the reward process, such as how to deal with under-performing team members. At times the writing seems academic, though the text, charts and summary lists are generally clear. BooksInShort suggests this book for anyone who is in charge of employee rewards and compensation. The book may seem a little dry, but its message is juicy: Just the right combination of perks, pay and programming can mean lots more to a team than just cheers.

Take-Aways

  • For effective team development, provide teams with a reward and recognition system that fosters collaboration.
  • Your organizational culture - including your symbols, rituals, stories, myths and heroes - should support teamwork.
  • Consider compensation and benefits as the cost of doing business.
  • Other rewards include competency-based rewards or individual performance incentives.
  • The three major plans that reward teamwork are recognition plans, project team incentives and organizational unit incentives.
  • Recognition plans follow a particular behavior.
  • Project sponsors usually create project team incentives to reward employees for achieving specific objective goals.
  • An organizational unit incentive encourages teamwork.
  • Organizational unit incentives make all levels of managers accountable for the people in their area of responsibility.
  • Use a mix of team-based recognition and incentive rewards.

Summary

The Development of Teams

Companies are using different types of teams for different purposes, including cross-functional teams, self-directed teams, ad hoc project teams, process-improvement teams, management teams and many others. Typically, teams are created because someone thinks a collaborative approach will be more effective.

“Organizational unit incentives can be the most powerful reward plan type to support a culture of teamwork. They can make a business strategy come alive.”

In most organizations, as each team forms, a sponsor helps organize the members. Then, the sponsor orients key stakeholders and chooses the team leader. Then either the sponsor or the leader selects the team members. They first assemble at the launch meeting where the sponsor or "champion" presents the team’s vision, along with information on management’s expectations and the team’s level of empowerment or authority. Then, the team prepares objectives and a plan that aligns with the goal or vision.

“Team building, coaching, facilitation, informal recognition, exhortation and good intentions can only take you so far. At a certain point teams come up against a variety of environmental obstacles. The key to moving forward is to ensure that all organizational systems are aligned in support of teams.”

During the start-up phase, the company provides the team with training on such skills as group dynamics, team norms, problem solving and decision making. Most teams get off to a fast start and quickly move to address the problem or opportunity they were created to confront, since the initial power, freedom and management support energizes them. As a result, teams generally achieve some early victories during this initial "forming" stage.

“One of the keys to success in improving organizational performance is to ensure that reward plans reinforce the desired culture, or at least attempt to reduce the gap between the existing and desired culture.”

However, after this initial honeymoon, team members often experience letdowns, negative reactions and performance plateaus in what is sometimes called the "storming" stage. As a result, dissatisfaction and cynicism can grow. The team must address these issues quickly so they don’t undermine its ability to act effectively. Team members must assess their progress to date, think about how to improve and create a plan for what to do next. After establishing norms for how to proceed (the "norming" stage), most teams achieve a peak, sometimes called the "zone" where everything seems to function well.

“The number and visibility of recognition plans says a lot about an organization’s culture. The more dynamic and meaningful the plans, the more appreciated employees feel.”

Nevertheless, this zone, too, eventually dissolves and feelings of teamwork decline. Team members may feel management still is handling them with command-and-control methods or valuing the lone individual rather than the team. In short, they feel a lack of rewards or support for their teamwork, so if effective teamwork continues, it does so despite management’s reward or recognition program.

Meaningful Team Rewards

The usual methods of supporting teams through team building, coaching, facilitation and informal recognition are only part of what you need to keep team performance high. Teams need the support of all the systems in your organization, including your information, performance management, training and rewards systems.

“Sustaining high-performing teams requires an organizational environment and systems designed to support and champion teamwork.”

Give teams timely, accurate information, including team-directed learning rather than individual skill training. Include specific team behaviors in your evaluations and adapt your reward and recognition system to foster collaboration. Acknowledge individual contributions, but primarily recognize "strong team players." Your organizational culture - including your symbols, rituals, stories, myths and heroes - needs to support teamwork, since a team-based strategy won’t work well if your culture is individually-oriented and competitive.

“You cannot have a strategy that emphasizes teamwork and a structure that encourages collaboration that is not supported by the organization’s relevant systems. Some such systems are the following: information, performance management, training and rewards.”

Unfortunately, meaningful team rewards are often the missing link. Not enough is done to support team rewards, resulting in an eventual decline in team morale and performance. Work toward overall alignment between your reward and recognition systems, your training approaches, your communications and your performance measurements.

“Improving where you’re headed requires understanding where you currently stand.”

To determine how to improve, start by understanding where you are now. Examine your current reward system, communications and performance feedback, and training and development. Your goal should be to create an integrated program that maximizes your gains from "human capital" and, of course, improves your bottom line.

The Six Types of Reward Plans

Six types of reward plans are available to you, but only three specifically offer recognition and incentives for teams and the organizational unit as a whole. The six types of plans are:

  1. Compensation and benefits - These entitlements are a cost of doing business. They focus on rewarding individuals, so you attract employees and keep the good ones.
  2. Special reward plans based on competencies - These plans acknowledge individual contributions according to how well employees fulfill their responsibilities, share their expertise or bring to bear any special business or financial competency.
  3. Individual incentives - These incentives, which include such things as sales commission plans, reward achievement of a certain performance or result.
  4. Recognition plans - These plans can apply to individuals, teams or permanent work groups. Unlike an incentive, recognition follows a particular result. Most recognition plans celebrate organizational objectives, reinforce outstanding individual or team performance, recognize years of service or reinforce desired behaviors or activities.
  5. Project team incentives - Usually, these plans are created by a team’s sponsor or champion. They generally base their award schedule on achieving a specific objective. Typically, these measures involve reaching a project milestone, completing a project or adding a certain measure of value, such as reducing turnaround time on customer requests. Don’t tie financial incentives to milestones, since milestones can change for good reasons, such as technological advances. Instead, use recognition after the fact.
  6. Organizational unit incentives - These rewards cover a complete organizational unit, such as the whole company, division or work group. These incentives can be the most powerful of all the reward plans in terms of supporting a culture of teamwork in your company. This approach is powerful because it involves most of your employees, it pays out only when the improvement occurs and it follows results rather than activities. You can also change the incentive as the needs of your business change. Additionally, the incentives make managers at all levels accountable for the accomplishments of the people in their area of responsibility.
“The objective is to create an integrated portfolio of practices that makes maximum use of human capital to improve business performance.”

Consider using a mix of reward plans based on the needs of your business. Whatever plan you choose, effective implementation depends upon:

  • Gaining management ownership at all levels.
  • Rolling out the plan and operating it as a business strategy, including telling employees what you are measuring and regularly getting their feedback about the plan.
  • Assessing the effectiveness of the plan, generally through a quarterly performance review, and making adjustments as necessary.

In the Trenches, Part One: Recognition Plans at Work

Companies that use recognition plans include Chase Manhattan, the Markem Corporation, Merck Pharmaceuticals, Operations Management International (OMN) and Ralston Purina Pet Products.

“The reinforcement model is an easy way to look at your reward plan options. It begins with the organization’s objectives and desired culture.”

Chase Manhattan’s Service Star recognition program is based on peer-to-peer recognition. It recognizes employees at three performance levels - the Service Star, All-Star and SuperStar. Any Chase employee can recognize another employee at the Service Star level by nominating a colleague or teammate who provides outstanding cooperation, support and commitment. The All-Star Award is a $750 cash award given at the end of each quarter to employees who receive three Silver Stars within 12 months. It also can go to employees who perform one extraordinary action, such as taking an extra step to benefit a customer or another employee. The top level SuperStar award is given each year to an employee who has already received an All-Star recognition, such a teller who acted on her intuition to prevent an elderly customer being defrauded by her private nurse.

“Most basic compensation and benefit plans should be viewed as nothing more than entitlements - a cost of doing business, a part of the employment agreement between employee and employer. They focus on the individual, and their objective is to attract and, with luck, retain employees.”

At Ralston Purina Company, the recognition program involves both non-cash awards and public recognition, which link to team and individual sales achievements. The customer development group (CDG) in the Western Region offers a series of awards to its five-to-10-member sales account teams. Their highest honor, the Best of Breed award, recognizes excellent contributions to the success of CDG West and overall customer development. The Top Dog award recognizes teammates for outstanding accomplishments that help the team meet its goals. The Bulldog Award goes to individual team members who show perseverance and tenacity, such as in completing a key project or closing an important sale.

In the Trenches, Part Two: Project Team Incentives

Companies that use project team incentives include Great Plains Software, Community Health Care, Bayer Corporation, Lotus Development Company and Utilicorp United.

“The critical distinction between recognition and incentive plans is certainty. Recognition is after-the-fact, awarded after behavior is exhibited or results accomplished.”

The Bayer Corporation has a non-cash program, The President’s Achievement Awards, which recognizes exemplary project teamwork and spreads recognition throughout the organization’s 11 divisions. Project and organizational unit teams can nominate themselves but they have to meet some basic criteria, such as successfully completing a series of continuous improvement activities. The company’s second plan, Productivity Plus, offers a cash component. When a team improves an area such as cost reduction or safety, it gets a percentage of the amount the company saves through that improvement.

“Project team incentive plans usually have some combination of these basic measures: project milestones, project completion and value added.”

The Lotus Development Company ties bonuses for a team’s core members to their project deadlines. The company also recognizes small supporting teams that enable the core project team to implement its improvements in the field. It uses cash bonuses from $200 to $1,000 per team member, plus a team plaque and a celebratory party.

In the Trenches, Part Three: Group Incentives

Companies that use organizational unit or group incentives include Rockwell Automation, Mid-States Technical Staffing Services, Ameritech Internal Audit Services, Texas Guaranteed Student Loan Corporation, RR Donnelly & Sons, the American Society of Composers, Authors and Publishers, Technology and Manufacturing, Inc., Acme Inc. and Food Processing and Packaging, Inc.

These companies are part of a growing trend toward use of incentive plans for organizational units. This is a response to the growing challenge of continually building shareholder value, while also being responsive to increasing evidence that employees are a company’s only real "sustainable competitive advantage." Such incentives tie the activities of employees more closely to the company’s strategic business goals. Ideally, when you use these incentive plans, you give your employees a new voice and a stake in the success of your company. For example, Rockwell Automation set up a Critical Success Measures Incentive Plan or CSMIP to link employee performance with business performance at the business unit level.

The Consortium for Alternative Reward Strategies (CARS) studied the effect of organizational unit incentives. Four studies conducted between 1989 and 1999 showed that these plans paid for themselves twice over through a 200% gross return on payouts.

About the Authors

Glenn Parker is a consultant who has worked with pharmaceutical companies, telecommunication organizations, manufacturers, service businesses and health care providers to create and sustain high performing teams, team players and team-based systems. He is the author of Team Players and Teamwork. Jerry McAdams is the national practice leader of rewards and recognition systems for Watson Wyatt Worldwide and the co-director of the nonprofit Consortium for Alternative Reward Strategy Research. David Zielinski is a business journalist who has covered human resources, organizational development and business management for more than 10 years.

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