Morning meeting at the factory
Among the mind-boggling array of problems facing Europe is the lagging performance of the private sector. As shown in Figure 1 below, all but two of the most valuable European firms are growing their market capitalization more slowly than the average S&P 500 company.
This is the first in a series of articles that will take a look at the efforts under way to improve performance of large European firms, including what it takes to be successful in the digital age. The series begins with Michelin, the venerable French tire-making firm that was created in 1889. It employs 125,000 workers and currently has a market capitalization of US$20 billion.
Autonomous Management 0f Performance At Michelin
In the mid-2000s, Michelin found that it was losing market share and that the corporate-wide change program to improve productivity through standardized processes, tools, dashboards, and performance audits it had introduced was failing to deliver results.
Humanocracy by Gary Hamel and Michele Zanini (HBRP, 2020)
In 2012, Michelin began exploring another way. Bertrand Ballarin, the manager of Michelin’s Shanghai plant, was asked to become Michelin’s head of industrial relations. There, he conceived and implemented a program called responsabilisation, involving “autonomous management of performance and progress.” It is described in detail by Gary Hamel and Michele Zanini in their wonderful book, Humanocracy: Creating Organizations as Amazing as the People Inside Them (HBRP, 2018)
Ballarin launched the program by visiting the factories, and appealing to local managers and teams. “By October 2012,” the authors report, “Ballarin had recruited 38 teams, comprising 1,500 people (about 1% of the company’s head count), from 17 plants.”
The next few months were hectic At each of the 17 factories Ballarin held kickoff meetings, where he reminded plant leaders that the idea was for teams themselves to discover the solution. “The only help they need from you,” he warned, “is to encourage them to be bolder and more creative.”
Ballarin started at the bottom, write the authors, because he believed that he had “the most to gain from greater autonomy.” Participation was optional, while sticking to existing commitments was not. He tried to be creative in getting the right training for teams. He patiently let teams cultivate their skills, gain confidence, and produce positive results, looking for win-win solutions.
By March 2013, experiments were spreading, the authors report, as the teams learned what managers did and found that they could do some of that that work better,
Ballarin also ran a series of workshops, at which teams shared videos about their experiments and then worked to define the signature practices of an autonomous team. Critically, write the authors, it was not a theoretical construct produced by HR staffers or consultants but a detailed menu of what actually worked out on the ground. By the end of 2013, Ballarin got permission to test his approach at the full plant level in six factories.
As production teams began to exercise greater autonomy, managers at the test plants worked to redefine their roles. A few plant executives also off-loaded some of their responsibilities. Michelin’s plants traditionally depended on central functions to set standards, define processes, and hand out production quotas, yet some plants made progress in winning permission for for targeted experiments.
At the end of 2016, Ballarin found that results were uneven, though one case had boosted productivity by 10%. “Unlike most top-down initiatives,” write the authors, “the responsabilisation program kept early objectives broad and the means purposefully vague. The goal was to build commitment rather than force the adoption of specific protocols. Ballarin and his team understood that real change happens through persuasion and persistence, not mandates and metrics… they relied on the pilot teams to discover and map the many dimensions of the responsabilisation journey.” In 2018, Michelin was exploring plans to start responsibilisation trials in 12 additional plants.
“In early 2020,” write the authors, “the responsabilisation program was on course to deliver half a billion dollars’ worth of manufacturing improvements, prompting Jean-Dominique Senard, Michelin’s CEO from 2012 to 2019, to proclaim it one of his “proudest achievements.”
A Premature Celebration?
Yet was the celebration premature. Today, in 2022, it is hard to detect major progress from the responsabilisation effort. Revenues are still flat (Figure 2) and Michelin’s market capitalization is still growing slower than the average S&P 500 company (Figure 3).
Did Senard celebrate too soon? Now in 2022, it is hard to detect overall progress from the responsabilisation effort. Revenues are still flat (Figure 2) and Michelin’s market capitalization is still growing slower than the average S&P 500 company (Figure 3).
Figure 2: Michelin revenue 2017-2023
Figure 3: MIchelin Total Return 2017-2023 vs S&P 500 average
The lack of impact is less surprising if we look a little closer at the accomplishment. The responsibilsation changed the architecture of the work in only 6 factories, which amounted to 9% of the total number of factories over a period of 8 years. Although the program made significant operational gains in those factories, if Michelin continued at this pace, it would take many decades before they had changed all the factories. Will shareholders and management be patient enough to wait that long?
The Slow Growth Of Large European Firms
The question for Europe in 2022, given the horrendous array of problems it faces, is whether it can afford to be so patient. Figure 1 shows that all but two of the most valuable European firms are growing slower than the average S&P 500 company.
Figure 1: Ten most valuable firms in Europe
The Need For Different Leadership
While a bottom-up approach to corporate change can be appealing, it may not be adequate unless it is combined with more inspiring and energetic leadership throughout the entire organization. As we shall see in other cases in this series, stronger leadership from the top doesn’t necessarily mean issuing top-down directives or tight controls.
It can mean, as a recent McKinsey article has persuasively argued, committing to growth and communicating that commitment throughout the firm, with resources and authenticity, by energetically telling—and re-telling—five key leadership stories that can help democratize leadership throughout the firm:
· “I have a growth story that I tell all the time.”
· “I focus on long-term growth, not just short-term results.”
· “I know my customer as a person.”
· “I favor timely action over perfection.”
· “I am willing to fail.”
In further articles in this series, we will see how these leadership lessons play out in other European firms and their efforts to achieve steady, healthy and sustainable growth with energized work forces.
And read also:
How Corporate Purpose Can ‘Signal Virtue’ But Distract The Management
