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Feature Article from Our Distribution and Materials Handling Subject Area - See All

From SCDigest's On-Target E-Magazine

July 13 , 2011

Logistics News: Building a Performance Culture in Distribution

Beyond Just Labor Management; We Offer a Definition


SCDigest Editorial Staff

What is a "performance culture" in distribution center operations? And what does it take to get there?

The term, originally coined by the consultants at Kurt Salmon Associates, has moved into the wider distribution lexicon, though not pervasively so. Still, it is increasingly common to hear logistics executives and distribution center managers to speak of their success in building a "performance culture" in their operations, or their plans to get there.

SCDigest Says:


Most important of all the factors in building a performance culture is probably a distribution center manager who "gets" what this end state is really all about, and continuously looks for ways to sustain and build that culture over time.

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We're not sure, however, that there is a clear definition of what the term means, or how a company knows when its DC operations have moved to this state of goodness. Search Google on the term "performance culture in distribution," and what shows up are a few entries from previous work SCDigest/SCTV have done in this area and little else.

The concept is clearly connected to the area of Labor Management Systems (LMS), which in general involves a combination of engineered or discrete standards for tasks in a DC, LMS software for productivity tracking at an individual level against those standards, and changes to the way supervisors manage their associates, moving to more of a "coaching" orientation, among other elements.

Building a "performance culture" is a goal often associated with LMS projects, with the objective of using the tools of LMS not only as is commonly done to drive productivity gains, but as a platform to establish a performance culture that will endure over time.

However, we would also argue that it is certainly possible to build a performance culture without a full LMS implementation, though some type of equivalent reporting system would probably need to be in place. But creating a performance-based culture without the use of engineered standards would certainly be achievable, if perhaps not capable of delivering quite the same results as might otherwise be attained.


Defining a Performance Culture in Distribution

Based on SCDigest interviews with a number of companies that have said they have reached this state in their DC operations (e.g., DSC Logistics, The Sports Authority, West Marine and others), we offer the following definition of a performance-based culture in distribution:

"A performance culture in distribution is one where there is a pervading but positive sense of achieving continuous improvement in both total operations and individual performance, where DC associates are valued and recognized as the key resources needed to drive that improvement, and extensive reporting on productivity measures and fact-based decision-making drive operations."

There are a couple of key and related components of that definition.

The first is that while the focus on performance and continuous improvement is pervasive, it is developed and maintained in a positive environment, not a negative or punitive one. At times it may be hard to tell the difference, but spend much time in two different distribution centers and often the differences in the positive versus negative approached to productivity become apparent.

Second, a performance culture needs to be focused around the individual associate. While such efforts can and often should be led from the top, the most successful ones are those that clearly value the associate, not just in words but in sharing some of the benefits of improvement, with high levels of recognition for performance.

Most important of all the factors in building a performance culture is probably a distribution center manager who "gets" what this end state is really all about, and continuously looks for ways to sustain and build that culture over time, as workers come and go, other priorities emerge, pressure on operations builds and other issues are faced that can easily lead to backsliding.

(Distribution/Materials Handling Story Continues Below)


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Guidelines for Getting Started

Two years ago, KSA's Michael Gregory authored a column for SCDigest in which he offered some guidelines for getting started in building a performance culture, which we think are just as valid today as they were then:

Craft a vision…not just goals: While goals and objectives are necessary (i.e., productivity, cost per unit), a vision implies much more. It includes “seeing” the results, as well as the means to achieve those results. It includes the interaction between management and associates, understanding the roles of partners, and clarifying the new organizational expectations.

Declare non-negotiables…not just future improvements: What are the company’s core values and cultural aspects that you do not want to change (i.e., respect for associates, value for customers, individual accountability, team-based problem-solving)? Are these values a competitive advantage? If so, ROI expectations must be defined for improvements that do not sacrifice these core values. In most instances, it means that additional checks and balances are required to reinforce those values.

Create fair, objective measures…not just expectations: One of the easiest ways to derail a performance management program is to lose trust with associates. Regardless of the engineering methodologies employed, associates need to understand how the measures relate to their job. It must be absolutely clear that the measures are a fair representation of the work they perform and that the measures accurately calculate performance for the variety of work conditions and product mix that associates will encounter.

Define interactions…not just roles: All roles and responsibilities as they relate to the program are defined – including management, supervision, associates and engineers. How will the interactions be characterized in a performance management program? How frequently will supervisors meet with associates? What kind of feedback is required? What attributes of performance will be included in the feedback?

Define the actions…not just gaps: Currently, are managers focused on crisis management (fire fighters), managing flow (expeditors) or employee production (bean counters)? In the vision of the new organization, what new responsibilities are required? Determine the development needs for supervisors and identify the systems, processes and routines to fill the gaps.

Demonstrate commitment…not just support: Front-line management needs to be seen as the sponsors of the performance improvement initiative. Often, the team implementing the program is seen as the key sponsor with management playing a back seat role. This ownership must transition to management to achieve lasting improvement. The management team should be prepared to answer questions, reinforce the reason for the changes and clarify any new expectations. It may require time behind closed doors to educate the management team and prepare them to play this pivotal role.

Focus on the path …not just the destination: Quite frequently, there’s a temptation to focus only on bottom-line results with little regard to the details of an implementation. While a management team should not lose sight of progress against the ultimate goal, knowing the details and understanding implementation options will help the team remain flexible to input along the way and foster a willingness to course-correct if needed.

Build partnerships…not silos: With complex, high-value implementations, it’s critical to enlist partners in other parts of the organization to assist with the initiative and to provide support. This likely will include IT, engineering and HR, but also store operations, allocations and transportation.

In a recent Videocast on our Supply Chain Television Channel, Jim Chamberlain, Director of Industrial Engineering at DSC Logistics in Chicago, noted that building such a performance based culture "has totally transformed our operations."

He added that "The standards and the methods that go along with Workforce Management, those are just the enablers. These are people projects, the people on the floor. You have to make sure they understand what the definition of success really is when you roll these programs out.”

Is the concept of a "performance-based culture" meaningful to you, or not? What do you think of the SCDigest definition? What can you add to the discussion? Let us know your thoughts at the Feedback button below.

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I have seen a few distribution centers who truly have a performance oriented culture.  There tend to be three things common:

a. They use labor standards to measure progress
b. They set goals and HAVE FUN achieving them
c. The executives monitor and regularly inquire into the progress on those goals every week so everyone knows they are important

I remember being at one DC that set a goal to increase throughput 50% without increasing staff.  The DC manager promised if they would do that he would sit in a dunk tank for all to enjoy.  Months later when the goal was achieved the DC manager was summoned; he kept his promise and promptly was placed in a dunk tank that the supervisors had arranged for earlier that day.  It was a lot of fun and people never forgot the meaning.  You have to get better. It’s important.
Another point that is worth making is that you have to transition from productivity apathetic to productivity empathetic culture.  That transition can be tough but you should work hard to make it quick.  There is a stage where you have to weed out the people who aren’t interested in working in a place like that.  It is kind of like “cuts” in high school football or basketball.  You have to do it so you can form a team that will get along and be interested in winning.  More  importantly the transition needs to be done as quickly as possible to establish momentum and to get people focused on getting better and having fun doing it instead of making fun of the premise or trying to undermine the program.

Steve Mulaik
The Progress Group




Mike Gregory’s and Jim Chamberlain’s points are spot-on; yet they don’t go far enough.  The quest for motivating staff is the oldest pursuit in business for complex organizations.  Yet, too often workforce motivation initiatives get their start from someone desiring the latest features of an LMS or management’s inclination to create a metrics-driven culture.  Sadly, this thinking can – and often does - miss the point.  Frederick Herzberg, considered one of the fathers of human motivation theory; claims in his Two-Factory Theory that there are clear distinctions between what do and do not motivate people including: a sense of achievement, recognition, and responsibility for doing a job well done, among others.  Amabile and Kramer in their recent Harvard Business Review article revealed that what really happens on a good work day is—progress—getting stuff done.  This outranked doing important work, collaboration and getting support. Not surprising, their work confirms work done by Herzberg.

To be sure, these theories can be incorporated into any workforce motivation program to make it more successful.  In fact, we find that starting with this perspective helps organizations clarify their thinking and build resilience necessary to overcome the unavoidable frustrations that come with integrating an LMS, solving complicated engineering challenges, and leading change.

Jeffrey Boudreau
XCD Performance Consulting