Chapter 6, attracting human assets to your organization
Attracting talented people is easy once your Selection, Development and Motivation systems are in place and working well.
- Robert Bluett, Founder, People Plus
The story: How to turn a bad political and economic situation into a golden opportunity.
I was asked to join a team that worked for a company that had bought a cement manufacturing company in Sri Lanka. That was in the mid-1990s. Until then, the company had been state-owned and trying unsuccessfully to compete with other businesses that were importing cement instead of making it.
Our team’s objective was to improve the company’s performance, focusing not only on achieving a return on investment for shareholders but also on the needs of our other stakeholders.
The cement-manufacturing company already had the basic documents that stated their vision, mission statement, strategic plan (business plan), key objectives and core values. What was urgently needed was to translate these into an HR strategy, then to help management carry it out.
As we faced the challenge of setting up and implementing our strategy for the cement company, the socio-political environment in this region had become very unstable. Companies all around us were facing more or less severe industrial relations problems.
One of our neighbours (a soft-drinks business) was trying to consolidate two of its factories: an old, out-of-date one and a new, much more modern one. The people in charge had expected this move to be welcomed because it was going to create better working conditions for everyone, but instead, they found themselves having to deal with a three-week strike. The old and new factories were two kilometres apart, and even though part of the management deal was that employees from the old factory would be compensated for travel and other related expenses, the employees of both factories went on strike.
During the same period, a nearby steel manufacturer had a similar experience – but this time the strike lasted six weeks! As you can imagine, those of us who were in charge of turning the cement company around were worried, to put it mildly.
From our initial investigation of the way the cement business was run, it was obvious that their people-production costs were unusually high. We had to start managing these before the company could even begin to be competitive. This meant reducing the number of employees and increasing the productivity of those that remained.
At the start of our task, there were 2,723 employees. Using other, similar companies as a yardstick we estimated that this one could run on 263 employees, but finally settled on keeping approximately 700 people.
When we announced to the Board of Directors that we intended to reduce the company payroll by 2,000 people, they were afraid a magnitude wave of riots to happen. What actually happened was that not only did we all survive the experience unharmed, but we ended up creating a very strong company brand.
But this was not a quick fix – it was a carefully planned two-year process.
Searching for a solution
In our first monthly report to the executive committee, we presented the status quo: the number of employees we had, their cost to the company, and how many man-hours and man-dollars it took to produce one ton of cement. Then we drew up a plan to reduce these costs over time, in line with our projected spending.
Setting the goal and making a plan to achieve it
In this case, we had 2,732 employees. Our goal was 700. We had a few ideas about how to achieve this objective, but we also needed to know, at regular intervals, whether we were on the right track. So we set milestones at six months, one year, 18 months and two years.
We started by identifying the high-potential employees we wanted to keep at all costs, and made them the best offers they had ever had. But we still had to make three-quarters of the workforce redundant!
The backdrop to all this was the civil war in Sri Lanka. The heart of the cement company was its factory, on the northwest coast at Puttalam. Its raw material – limestone – came from a quarry in the same region, 30 km to the north.
At that time, the northern part of the country was the war zone – the further north you went, the deeper you found yourself in Tamil Tigers territory. The Tigers’ stronghold was in Jaffna, at the northernmost tip of the island.
Because of this situation, for many years it had been impossible to deliver goods to the northern regions, including cement. Occasionally, small suppliers tried to deliver 50 kg sacks of cement, but these were frequently confiscated by either the Sri Lankan police or the Tigers. The result was that the entire northern region was starved of building materials. Until then the company had been selling all of its cement to buyers in the south.
Strategy: a solution that goes beyond the company itself
Looking at the employees we needed to make redundant, we focused on those who came from the north-eastern provinces, and called for volunteers who would be interested in setting up small businesses there. These small businesses would stock and sell our company’s products. We reasoned that employees from this region would have the local knowledge and contacts necessary to be able to open up a market for high-quality cement at a reasonable price. We chose the northeast because in terms of guerilla action this was the quietest region in the cement-starved north.
Our small business program offered the following incentives: those who signed up would be able to buy the company’s products at a wholesale price that was guaranteed to be 0.05% lower than anywhere else in the country for the first six months. After that, the preferential price would slowly be phased out. At the same time, they would receive financial help and training in business ownership.
Eight employees were interested.
To support them in this enterprise, we teamed up with a large national bank and a small business development centre. As part of the severance package, the company invested a certain sum of money with the bank. The bank then gave loans to our would-be entrepreneurs at very competitive rates, using the invested money as collateral. The development centre provided the training and support the former employees needed to start up and run a small company, and undertook to accompany them step by step.
In the second monthly report, we reported on progress to date. The eight new entrepreneurs had made a faltering start, but it was a start.
The first eight people to start their own businesses were relatively successful: every one of them made more money than they had to work for the cement company – up to ten times more!
Their success met the criteria we had set up for judging our small-business venture:
people living in an area that was starved of building materials now had access to a quality product
our former employees were better off.
And thanks to the reduction in staff numbers at the factory, which was able to reduce overall costs dramatically, the company was able to offer its high-potential people better salaries. Four of the five key stakeholders benefited directly from this initiative: customers, staff, suppliers and society in general.
The second phase: letting our successes do the talking
Acceptance of our new entrepreneurs and their product was gradual, as Tamils and Sri Lankans alike realized there was now a regular supply of good quality cement at a reasonable price. The turning point came when one of the Tamil entrepreneurs returned to the factory driving a 4x4, which in those days was unheard of. This was an outward sign of wealth that the average Tamil had given up hope of ever attaining.
As the remaining employees started to realize there were no dirty tricks hidden in the offer, there was a rush to join the business-creation program. And this time people had their own ideas about the kind of businesses they wanted to run! For each of these proposed ventures, feasibility and viability were checked out by the development centre, and if approved, the new entrepreneurs went through the same training and support process as the first wave.
The businesses they started in this phase included:
a bakery supplying the canteen with bread
farms that supplied fruit and vegetables
transport companies to deliver the goods
other transport companies that provided a shuttle service for people
a clothing factory to supply the company with overalls.
This phase also went well, but it took much longer than the first phase because of the number of people involved, not to mention the diversity of products and services. In this phase, too, all the employees who wanted to become entrepreneurs made more money running their new businesses than they had when working for the company.
In our monthly HR reports we were able to show that:
our costs were constantly being reduced;
thanks to training, employee performance was improving;
the quality of our product had improved – and we were selling more of it.
We had begun to recruit high-potential candidates for strategic positions in the company, and these people were already making a difference. Maintenance figures had improved, with more preventative maintenance being done, which meant fewer costly breakdowns. Productivity was up, partly as a result of the new equipment we were able to buy with the savings we had made by reducing overall costs.
Costs down, productivity up … it all looked too good to be true! The company was even closing the gap on the importers.
No doubt the better equipment and systems had made a difference, but the main factor in all areas of improvement was the quality of the people we now had.
The victory lap
The next phase was to encourage former employees to create businesses that were not even in the company’s immediate vicinity, or not directly related to its product. This too, went well, with ex-employees earning more money than they ever had before.
By the end of the employee-reduction exercise, we had helped create 183 companies, which were owned, run or staffed by most of our 2,000 former employees.
The acid test of the whole undertaking came after two and a half years, when the company wanted to buy the railway line between the factory and the quarry. People from surrounding villages, wanting to protect what they called a National Asset, lay down on the railway line in protest and refused to let any trains go by.
Our former employees, of their own accord, went out and talked to the villagers, telling them that the company was an excellent employer and a good corporate citizen, and worthy of support.
They, not the company’s representatives, convinced the villagers that the purchase of the railway line was not against their interests, and should be welcomed.
That’s company brand!
From the company’s point of view
In the end, we had reduced our employee numbers by 70% and strengthened our company brand at the same time. We had identified our high-potential people, made them offers they couldn’t refuse and promoted them to key positions. In short, we had given a lot of time and energy to the five critical aspects of Agile Management: attracting, selecting, developing, motivating and retaining people, and the results had exceeded our most optimistic projections.
From the wider point of view
Our investment in new businesses run by our former employees created value for an entire region that had been economically depressed by the civil war.
Society in general was better off with these new businesses to serve and employ them, and the improvements we’d made in the cement-production process dramatically reduced air pollution by reducing the amount of cement dust coming out of the factory chimneys.
Now all five stakeholders were better off, even the environment.
The final word
To get the results you want, you need to remember this:
Actions speak louder than words.
In the short term, people may believe what you say you will do, but if you don’t walk the talk, they will only remember what you said you would do, but did not do! (Or conversely, they will remember the things you promised you would never do, but went ahead and did anyway.) In the medium- to long-term, they will know you are not to be trusted.
Only when your company follows through with its promises will it start to attract and retain the kind of people you want. This is a broader and more holistic approach to business than merely focusing on the bottom line.
Copyright © 2018 Robert Bluett
All rights reserved. No part of this book or publication may be reproduced in any form or by any electronic or mechanical means including information storage and retrieval systems, without permission in writing from the author.
Publisher: People Plus (peopleplusco.com)
Third Edition: 2020
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