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The Beginnings of Agility at Brioche Pasquier

The people of France—to no one’s surprise—have a love af- fair with food, and one of the essential elements is bread. From the denser, everyday baguette to the more delicate brioches and pastries served for breakfast or dessert, breads of all sorts are a staple of French life.

The Brioche Pasquier Group was formed in a very simple way by Serge and Louis-Marie Pasquier in 1974. It initially produced both bread and brioche. A year later, due to the suc- cess of the business, they stopped making bread to focus exclu- sively on brioche. Louis-Marie, the eldest, traveled extensively to distribute the products; Serge was in charge of accounting. They quickly realized that the ubiquitous village bakery was too small and the industry too fragmented to be able to meet the growing demand. Philippe and François‐Xavier Pasquier joined the organization in charge of manufacturing the prod- ucts. Pascal, the youngest, joined his brothers in 1977 to take sales responsibilities.

Worley, Christopher G., et al. Becoming Agile : How the SEAM Approach to Management Builds Adaptability, John Wiley & Sons, Incorporated, 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/harrisburg-ebooks/detail.action?docID=4040516. Created from harrisburg-ebooks on 2020-11-16 07:29:34.

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From the beginning, the company’s product/market strategy prioritized quality and freshness. All of BPG’s products were sold fresh and usually consumed within a couple of days (although the product could last up to three weeks). BPG worked closely with local customers, sourced ingredients locally, and used no artifi cial colors or fl avoring. Because sources and customers were local, the organization prided itself on its small ecological footprint.

The company distributed brioches through a commercial channel consisting of small independent stores and large super- market chains (although they eventually dropped the small store channel to focus only on mass distribution). The core, mass distri- bution channel, however, was highly competitive. Many, if not all, of these retailers had aggressive supplier policies that pressured vendors for the lowest prices, a practice that continues today.

As a family business, BPG promoted and practiced human- istic values and focused on long‐term as well as short‐term per- formance. Unlike many traditional French fi rms—where the TFW virus is alive and well—BPG’s leaders were concerned about people and profi tability. By 1984, the family business’s 240 employees produced, marketed, sold, and distributed bri- oche products from a single, functionally organized site near the western city of Cholet, France (Figure 2.1 ). Profi tability dur- ing its fi rst ten years was high, compounded growth rates were above 20 percent, and regional market shares and BPG’s brand in western France were growing. Its balanced view of the busi- ness and its concerted efforts to listen to customers is part of what made BPG such a unique element of the French economy.

Nineteen eighty‐four was also when senior management at BPG believed the time was right to think carefully about the organization, its growth, and the eventual handing over of company control to the next generation of Pasquiers. The

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The Beginnings of Agility at Brioche Pasquier | 39

main issues were not only how to continue growing but how to manage the risk associated with losing control of this growth. In keeping with the family culture, BPG wanted to prevent the organization from turning into a bloated, headquarters‐heavy, centralized bureaucracy where managers and employees were stifl ed, uncreative, and unfulfi lled.

The family was keen on ensuring the sustainability of the business and its fi nancial independence, although it did join a regional stock exchange in 1985. For twenty‐one years, it of- fered 20 percent of its equity to the public to access needed in- vestment capital to fund growth plans. For example, the fi rm used investment capital to build a new site in eastern France in 1988 (Figure 2.2). Management organized and operated the plant using the same principles that preserved the quality, fresh- ness, and ecological strategies but also adopted lessons learned from the initial socio-economic interventions described below.

Finally, BPG wanted to prepare for the CEO’s succession, who was, at that time, still young (twenty‐eight). The desire of the family to enable a peaceful CEO transition required a

Figure 2.1 BPG Organization Chart (1984)

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40 | Becoming Agile

thoughtful discussion about how best to make investment de- cisions to support the expectations of any successor .

BPG and the SEAM Methodology

Drawing on the socio‐economic theory of organizations de- scribed in Chapter 1 , the socio‐economic approach to manage- ment (SEAM) methodology is a form of action research (Savall & Zardet, 2014 ). Simply put, action research is a cyclical approach to organization development and change management that takes action based on evidence and learning. SEAM has a long history of success that owes to its structured approach to action research. The typical bureaucratic culture fi nds the implementation logic clear; SEAM’s attention to detail eliminates much of the uncer- tainty associated with large‐scale change. While based on applied intervention‐research, the implementation process is practical, operational, and useful to managers and executives.

BPG’s organization values coincided with the key values of action research and the SEAM approach: empowerment, high involvement on development objectives, trusting employees to

Figure 2.2 BPG Organizational Chart (1988)

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The Beginnings of Agility at Brioche Pasquier | 41

enhance intrapreneurship, and appreciation of the individual’s contribution to collective company performance (Pasquier & Pasquier, 2012 ). BPG leaders chose the SEAM approach be- cause of its consistency and compatibility with their views re- garding the enhancement of economic and social performance.

“When the ISEOR researchers began to work with us, we thought

the company was like a boat. The advantage or the drawback of

this boat metaphor was that, once out at sea, we could not allow

ourselves to leave it. We were all together. It is not always simple

and easy, but it allowed us, in hard times as well as in prosperous

ones, to keep unity and solidarity.” ( Serge Pasquier, 2011)

As shown in Figure 2.3 , the metaphorical objective of the change was to get from one shore to another. But how that objective would be achieved—the strategy—could take a va- riety of forms or paths. BPG’s use of the SEAM methodology represented one of those paths.

The SEAM methodology proposes that effective organi- zations apply and integrate three categories of change activity (Table 2.1 ). The improvement process describes the overall and s

The Objective The Strategy

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44 | Becoming Agile

recurring activities of change and learning. It is a straightfor- ward and participative cycle of diagnosis, the development of projects, implementation, and evaluation activities. Within the improvement process, a variety of socio‐economic management tools, such as priority action plans and periodically negotiable ac-s tivity contracts, help to align the strategic and political dimensions of the organization. That is, strategic and political decisions, such as product breadth, the type of structures used, and incen- tive systems employed, describe the targets of intervention, but it is the improvement process and the management tools that really defi ne the activities of a SEAM process.

The Initial Improvement Process at BPG

The improvement process guides SEAM interventions. Simi- lar to the Shewhart cycle of “plan‐do‐check‐act,” the improve- ment process instills in the organization a belief that change is constant and normal. However, it differs from total quality management or other continuous improvement approaches in that it operates at the organization‐ or business‐unit level rather than on specifi c processes. Optimizing individual processes can often result in a variety of dysfunctions and sub‐optimization at the organization level. Approaching change at the organiza- tion level triggers a shift in the way people think about their environment.

The Diagnostic Process

The initial SEAM intervention program at BPG began in 1984 with ISEOR researchers interviewing nearly all of the

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The Beginnings of Agility at Brioche Pasquier | 45

employees and managers at its original Les Cerqueux (near Cholet) site. They developed a comprehensive inventory of the dysfunctions harming value‐add and human resource activities. Quotes from the interviews were categorized according to six dysfunction categories that ISEOR researchers have found repeatedly: working conditions, work organization, communication‐coordination‐cooperation, time management, integrated training, and strategy implementation (Table 2.2 ).

SEAM’s diagnostic focus on the identifi cation of dysfunc- tions and “hidden costs” is unique. The rules, policies, and systems that make up these dysfunctions and reinforce their continued presence are costly for the organization. They are “hidden” in the sense that they are not captured by account- ing or other management systems, and yet they hurt organiza- tional productivity and effi ciency.

Hidden costs are like the extra heat generated by an in- effi cient engine. All engines produce heat that results from different parts rubbing together and creating friction. There are inherent ineffi ciencies and waste in even the most fi nely tuned and well‐designed engines. But ineffi cient engines pro- duce even more heat and, as a result, waste fuel and wear out parts faster. If you know where to look and how to measure the higher than expected heat, direct action can be taken to reduce the rubbing among the parts and avoid energy waste. Rather than seeing frequent part failures and the resulting re- placement costs as normal, the alignment of the parts can be improved, engine performance increased, and parts expense decreased.

Hidden costs are symptoms of long‐run ineffi ciency and managerial short‐sightedness. ISEOR researchers have

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The Beginnings of Agility at Brioche Pasquier | 47

demonstrated that most companies are absorbing a small fortune in “hidden costs.” The overall amount of hidden costs can range from 25 to 50 percent of the company’s value added, and often more than the payroll. These costs do not show up as distinct expenses, and yet traditional management systems reinforce the behavior associated with them. For example, when an additional 10 percent of the skilled workforce left l an organization following the implementation of a business process reengineering project aimed at reducing staff, manag- ers believed that they had exceeded the goals of the project because salary costs were lower than projected. However, the organization was operating below optimum staffi ng levels. These lower staffi ng levels increased stress among the remain- ing employees, who attempted to meet unchanged production quotas, but did so at a great social and, eventually, fi nancial cost. Deliberately converting hidden costs into value‐added activity—in this case, hiring enough skilled workers to staff the process appropriately—represents a commitment to organiza- tional learning and company health.

The main symptoms of hidden costs stemming from dys- functions include absenteeism, work accidents and occupa- tional illness, staff turnover, “non‐quality” (e.g., quality defects, delivery delays, returns, customer complaints, and so forth), and productivity gaps (Table 2.3 ).

As in all SEAM interventions, hidden costs were calculated at BPG by working from the dysfunctions gath- ered in the interviews and mapping them out in a chart of qualitative, quantitative, and fi nancial impacts. The calcu- lation method associated with hidden costs is based on a

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socio‐economic principle developed by the ISEOR re- searchers called “qualimetrics” or taking qualitative infor- mation and translating it into fi nancial fi gures (Savall & Zardet, 2011 ). It is different from other approaches to esti- mating cost savings because hidden costs are not only extra costs, but also earnings losses and opportunity costs. Orga- nization members and the ISEOR consultants pinpoint the costs or earnings losses and agree on the fi nancial amounts that result from the various actions implemented to handle the dysfunctions. Table 2.4 summarizes several of the hidden costs identifi ed in the 1984 diagnosis.

Table 2.3 Hidden Cost Indicators

Symptoms of Hidden Costs Example

Absenteeism An employee calls in sick rather than coming into an offi ce that is overheated

Work accidents and occupational illness

Employee medical costs resulting from on‐the‐job injuries from the new equipment

Turnover After a takeover, some of the most skilled and highly performing employees resign and are hired by a competitor

Quality defects A customer switches to a competitor because of better service (the lack of a response to the complaint)

Productivity gaps Idle time due to bug‐laden software Wasted effort because objectives were not clear and the line of sight between work effort and strategy was not established

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Every symptom of hidden costs identifi ed in the interviews is estimated, and the numbers can be staggering. For example, as shown in the circled portion of Table 2.4, the interviews ad- dressed several kinds of production losses.

Table 2.4 Example of Hidden Costs Per Person Per Year in the 1984 Diagnosis (in 2014 USD)

Symptoms Qualitative Assessment

Quantitative Assessment

Financial Assessment

Absenteeism and work accidents

High rates in packaging department Little safety training

5.8 % of absenteeism

$5,400

Staff turnover Not assessed Not assessed Not assessed

“Non‐quality” (e.g., quality problems)

Scrapped dough Unsold or recalled products Loss of raw material

Production losses

21 tons/year

1% of the products

75 tons/year

4% of the annual production

$3,700

$1,300

$1,400

$5,200

Direct productivity gap

Frequent excess weight Machine failures

50 tons/year

20h/month

$2,600

$13,000

Total hidden costs per person per year $32,600

Source: © ISEOR 1985. Used with permission.

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Production Waste Calculation

• Crushed products at the end of the production line

2,000 pieces/day

• Fallen products at the end of the oven 200 per day

• Damaged products due to the gap between the backing trays

1,000 per day

• Burnt, badly formed, badly cooked, badly gilded products

500 per day

• Crushed products during transportation

200 per day

• Crumpled packaging 100 per day

Amount of products that could have been sold

4,000 pieces/day

Production Loss Calculation

• Manufacturing failures 1,000 per month

• Daily manufacturing delays

200 per month (e.g., personnel scheduling, low coordination between departments, informal management styles)

Amount of products not produced

1,200 pieces/month

In consultation with managers and production experts, ISEOR evaluated two kinds of production losses:

Product waste: 4,000 pieces a day × 313 days a year = 1,252,000 pieces

Production loss: 1,200 a month × 12 months = 14,400 pieces Worley, Christopher G., et al. Becoming Agile : How the SEAM Approach to Management Builds Adaptability, John Wiley & Sons, Incorporated, 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/harrisburg-ebooks/detail.action?docID=4040516. Created from harrisburg-ebooks on 2020-11-16 07:29:34.

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The Beginnings of Agility at Brioche Pasquier | 51

BPG calculated the value of the product waste by using the sales revenue (e.g., $0.42/piece) the company was losing by throwing away these products. The value of production loss was calculated using only the margin lost, since the company did not consume the raw material and the production time (e.g., $0.42 × 40%).

Hidden costs related to product waste: 1,252,000 × $0.42 = $525,840

Hidden costs related to production loss: 14,400 × 0.42$ × 40% = $2,419

Total amount of production losses = $528,300

Total amount per person per year (assuming 100 people in the factory) = $5,200

This last amount appears in Table 2.4 , at the line “pro- duction losses” and represents around 4 percent of the annual production volume.

In each company, dozens and often hundreds of cal- culation sheets like the example above are developed and summed. Such a calculation process stands in contrast to traditional approaches that are more one‐sided and top‐ down, and brings evidence to decision‐makers that a sin- gular focus on cutting visible costs may be misleading or wrong. As a result, approaching hidden costs in this manner results in internal commitment to converting those costs and unnecessary behaviors into value‐added activity. Top‐ down approaches usually result in resistance to change and value destruction when intended actions are implemented poorly or sabotaged and contribute to the cycle of dysfunc- tion. This is the primary reason why business process reen- gineering and lean/six sigma approaches that claim millions and millions of dollars of cost savings are never able to point to these savings in cash fl ow statements, income statements, or balance sheets.

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Action Planning and Implementation

The second and third steps in SEAM’s improvement process continued at BPG in 1986 with the development and imple- mentation of specifi c projects. It began with focus groups designing innovative solutions, driving the transformation of hidden costs into value‐added activities, and improving per- formance.

The SEAM method focuses simultaneously on design- ing and implementing both horizontal and vertical change processes. Horizontal changes support the transformation of hidden costs into value‐added work through social and managerial performance improvements. Horizontal interven- tions involve management teams and cross‐functional (that is, lateral, horizontal, or transverse) processes. Involving se- nior managers in the identifi cation and design of coordina- tion processes across functions, business units, geographies, or other core structural features is critical. Vertical changes involve work within a function or business unit and typically address strategic objectives of economic value. Such an in- tervention architecture derives from a belief that embedding change within an organization, from the C‐suite to the shop fl oor, requires both types of work.

This horizontal‐vertical approach, what the ISEOR scien- tists call the HORIVERT principle (Figure 2.4 ), is an over- arching standard that governs and integrates a company’s managerial processes. It helps to align the projects designed at top management team levels with those proposed by focus groups in various departments of the company. This promotes collective learning and team integration, two important sourc- es of effective and effi cient operations.

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Figure 2.4 The HORIVERT Model Source: © ISEOR, 1985. Used with permission.

BPG’s Initial Horizontal Intervention

The initial horizontal intervention to address the hidden costs focused on changing the way BPG managed the site organiza- tion. The SEAM approach is not a narrow‐minded attempt to eliminate waste; the approach is not about driving out hidden costs in the pursuit of effi ciency. Rather, the focus of the ap- proach is on understanding the sources of hidden costs and converting those processes and decisions into value‐added ac- tivities. That might mean making a process more effi cient, but it can also mean using the slack resources implied by hidden costs to develop future opportunities.

All BPG managers and supervisors were involved in a train- ing program that introduced the socio‐economic management tools, including the time management tool, the internal/ex- ternal strategic action plan, priority action plans, competency grids, and periodically negotiable activity contracts (Buono & Savall, 2007 ; Savall & Zardet, 2008 ; Savall, Zardet, & Bonnet, 2012 ). New managers hired by the company were trained by existing managers. The socio‐economic management tools then were assembled into a six‐month planning and operations

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cycle—a key element in the strategic and political decisions category (Table 2.1 ).

Strategic and political decisions comprise the direction setting, operational, structural, and human resource design features of the organization. They also include the alignment among the company’s owners and members’ values and the strategy’s intentions regarding products, markets, technolo- gies, and human potential. Decisions regarding the coherence among strategy, structure, systems, and processes required to support the involvement of all organization members in strategy implementation are a central intervention target in the SEAM approach. Even traditional organization design principles suggest that organizational choices regarding work design and job enrichment, coordination, innovation, reward systems, and leadership development should be aligned with each other and with the strategy (Galbraith, 2002 ).

The new planning system was built around a rolling three‐ year internal/external strategic action plan developed at the en- terprise level and updated annually. The SEAM method assumes that employees are central to the current and future performance of the company, and they give (or withhold) their say and energy in service of that pursuit. As a result, the internal‐external strate- gic action plan is created with high levels of involvement. Most established organizations have a planning process that results in a budget or set of initiatives for the next year. These strategic plans tend to be driven from the top and focused on produc- tion/service capabilities and fi nancial objectives. Such a process and focus engenders resistance to change and creates hidden costs because top executives have not involved the people who will execute the plan. SEAM’s internal‐external strategic action plan augments this process by clarifying the scope of strategy

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implementation activities and outcomes over a three‐to‐fi ve‐ year period for multiple stakeholders.

At BPG, this high‐level strategic action plan was then broken down into semi‐annual priority actions plans (PAPs) for the site. The PAP tool creates the appropri- ate set of initiatives that will generate current and future socio‐economic outcomes. It includes an inventory of the strategy deployment and improvement initiatives related to the reduction and prevention of dysfunctional practices. These different initiatives are prioritized; focus on actions concerning people’s work, their team, or their depart- ment; and typically address solutions in the six dysfunction categories of working conditions, work organization, time management, communication‐coordination‐cooperation, integrated training, and strategy implementation.

PAP development begins with a two‐ or three‐hour “dysfunctions mini‐diagnosis,” a bottoms‐up process facilitated by each manager with his or her team every six months (Figure 2.5 ). The mini‐diagnosis encourages employees to express the diffi culties, defects, and dysfunctions encountered in their work. In organizations where the TFW virus is strong

Figure 2.5 Semi‐Annual Priority Planning Process Worley, Christopher G., et al. Becoming Agile : How the SEAM Approach to Management Builds Adaptability, John Wiley & Sons, Incorporated, 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/harrisburg-ebooks/detail.action?docID=4040516. Created from harrisburg-ebooks on 2020-11-16 07:29:34.

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or where there is a great deal of mistrust between employees and management, these meetings are often initially unproduc- tive. Management must be patient and consistent in seeking this information. This patience, in combination with actions taken in response to feedback, builds the trust necessary to generate important information and insight.

The output from these meetings was local improvement, dysfunction reduction, or dysfunction prevention interven- tions. The team managers propose these interventions to their supervisors for inclusion in the priority action plan. Following these meetings, the managers and supervisors convene to arbitrate and reconcile any contradictions or overloaded ac- tion plans, to synchronize cross‐departmental actions, and to communicate priorities to the other departments. The meet- ing helps to improve awareness and coordination, strengthen service operations, and develop and support professional skills and behavior. In addition, the site runs a coordination seminar with the production managers and the key functional staff, val- idates the site’s priority action plans, and starts a coordination process on the objectives and priority actions.

Even when organizations have a strategic plan and ob- jectives in addition to their vision and mission, their strate- gic initiatives are often uncoordinated. Grass‐roots efforts can appear without reference to other initiatives, resulting in confusion over priorities and wasted effort. PAPs differ from traditional management practices in their design as a set of participative, integrated projects that take into account the dysfunctions and hidden costs identifi ed in the diagnosis. In- deed, traditional management control practices often attempt to limit visible cost increases by rejecting investment propos- als from employees. On the other hand, the socio‐economic

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management tools and processes enable employees to argue for the relevance of investing more in innovation.

The aligned PAPs are then broken down into the man- agers’ semi‐annual calendars. Each employee and his or her superior, including the management staff, develop a periodi- cally negotiable activity contract (PNAC) to clarify objectives and the appropriate means to achieve them. Over the next six months, monthly team meetings are organized to report on team productivity and quality improvements (or losses), clarify future contract objectives, and future coordination efforts nec- essary to support priority actions.

Periodically negotiable activity contracts (PNAC) are one of the most important management tools in the SEAM meth- odology. As an individual‐level tool, they formalize objectives and strategies to improve the work systems and processes inside and outside of the usual day‐to‐day tasks. The PNAC recognizes that some hidden costs are “slack resources” that can support the trying out of new ideas or problem solving. For example, hidden costs can “constitute potential reserves or budgetary maneuver margins for improving the enterprise’s economic performance” (Savall & Zardet, 1987). PNACs can focus on improving current effectiveness or on the develop- ment of future potential.

At the end of a six‐month cycle, these negotiable activity contracts are assessed. When the projects in the PNAC are aimed at converting hidden costs that constrain performance into value‐added activities, a monetary bonus for achieving individual or team/collective objectives is distributed, funded by the amount of cost and value converted. As a result, this tool has replaced job descriptions in the company because it includes objectives related to both the short‐term performance

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of the company and the creation of potential (development ac- tions). The PNAC completes a coherent management system because the tools used (Internal/External Strategic Action Plan, Priority Action Plans, and PNACs) are prepared and validated through a negotiation process between top manage- ment, middle management, and employees and workers.

Figure 2.6 shows how the objective “increase autonomy of the sales development manager” in the internal/external strategic action plan was broken down by the sales manager and his or her team. Their proposal was to implement three main priority actions: (A) identify the salespeople for pilot training, (B) set up a new and autonomous sales team, and (C)

Figure 2.6 How BPG Links Key Management Tools Worley, Christopher G., et al. Becoming Agile : How the SEAM Approach to Management Builds Adaptability, John Wiley & Sons, Incorporated, 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/harrisburg-ebooks/detail.action?docID=4040516. Created from harrisburg-ebooks on 2020-11-16 07:29:34.

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set up a logistics project. Then, when the sales manager negoti- ated the semi‐annual PNACs with his or her salespeople, they concretely defi ned fi ve objectives, three of which (Objectives 1, 2, and 3) were short‐term oriented and two of which were intended to create future potential. The potential objectives are less traditional; they lead to actions that contribute to PAP objectives and prepare the organization for performance in the next few years. In this case, the “Provide monthly report” objective refers to a current developmental opportunity for this sales manager. The PNAC process provides the supervi- sor with the opportunity to explain the behavior (for example, lack of feedback) and to negotiate the objective to reinforce the importance of feedback.

In addition to the above process, BPG implemented three other SEAM tools—time management tools, competency grids, and piloting logbooks—during the fi rst phase of the intervention. Together, they helped managers understand how to create time for development activities, served as a platform to develop training plans to increase the versatility of differ- ent teams, and provided an inventory of measures and metrics (and their values). They played an important role in synchro- nizing the PAPs and enhanced managers’ ability to react to unexpected events. For example, the production department losses identifi ed in the hidden costs evaluation became an in- dicator updated every day in the piloting logbooks, displayed easily by the supervisors, and served as a basis for developing needed skills.

Once this system was established at the original site, it was diffused to the other plant location. Eventually, as the organi- zation grew in terms of sites and products, an additional layer of coordination was added so that the different site PAPs were

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synchronized and the organization was optimizing its resourc- es and activities.

BPG’s Initial Vertical Intervention

After the initial diagnosis of dysfunctions and hidden costs (see Table 2.4 ), ISEOR consultants, managers, and employees were aware of the need to reorganize BPG’s production processes. From the beginning, BPG’s brioche production process had been organized functionally. Separate departments for mixing and kneading the dough, baking the bread, packaging products, and maintaining the equipment reported to functional manag- ers. A production line consisted of sequential tasks from the three departments to meet a specifi c order (see Figure 2.7 , “Before”).

A cross‐functional group brought together to think through the problems believed that efficiencies might be gained by self‐containing the process and pivoting manage- rial control to a production line manager. Figure 2.7 , “After,” shows how the focus group thought about the change. By creating self‐contained production lines, each line “owned” its own kneading, baking, and packaging processes, as well as the equipment maintenance functions necessary to keep the lines running smoothly. Each production line was to have annual, semiannual, and monthly objectives for pro- ductivity and quality that would complement the emerging planning process described earlier. In addition, each line would be responsible for the creation of objectives relat- ed to future potential. Although this approach is common today under the banner of self‐managed teams, it was a rad- ical idea in 1984.

Guiding people to engage in new behaviors is a key success factor during the implementation phase. For example, imple-

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Figure 2.7 Redesigning the Brioche Production Process (Before and After)

menting the new production system involved monthly meet- ings to coach managers through the transition. Report‐outs to top management were made to track progress or when help was needed to remove roadblocks. In this case, bakers were of- ten reluctant to own the maintenance of their equipment. They argued that they had not been hired to adjust or maintain ov- ens. However, a variety of hidden costs (see Table 2.4 ) were re- lated to a lack of safety training on certain machines, frequent changes in production personnel working hours, a high degree of compartmentalization between baking and packaging, little integrated training, and unqualifi ed workers. As a result, the CEO made it clear—and emphasized—that a fl exible, multi‐ skilled, and safe workforce was key to the new strategy at BPG.

A second vertical intervention was conducted in 1988 at the second site in eastern France. The plant had manifest a

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variety of problems within two months of coming online. A partial set of diagnostic hidden costs is shown in Table 2.5 . As the production process changes described above were being implemented in the second plant, an additional set of actions, including shutting down a production line, were taken.

A third vertical intervention with the sales teams from both plants was delivered in 1988. The estimated hidden costs of $13,800 per person per year were due to absentee- ism, personnel turnover, non‐quality, and direct productivity gaps, including product loss, late deliveries, and unresolved disputes. Direct productivity gaps accounted for 80 percent of the hidden costs. The main improvement actions conceived by the project group are presented in Table 2.6 .

Evaluating the Initial Intervention

Evaluation is the fourth step in the improvement process. An assessment of the plant’s conversion of hidden costs into value‐added activity showed improvements of $19,000 per

Table 2.5 Hidden Costs in the Second Site (Partial Assessment Per Person Per Year)

Hidden Costs tAmount

Non‐quality

*Breakdowns $ 3,200

*Crushed products during transportation, crumpled packaging

$ 1,900

Direct productivity gaps

*Overproduction on one line $ 6,300

*Underproduction on another line $ 4,300

Total hidden costs per person per year $15,700

Source: © ISEOR 1987 Worley, Christopher G., et al. Becoming Agile : How the SEAM Approach to Management Builds Adaptability, John Wiley & Sons, Incorporated, 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/harrisburg-ebooks/detail.action?docID=4040516. Created from harrisburg-ebooks on 2020-11-16 07:29:34.

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Table 2.6 Improvement Actions in the Sales Teams

Dysfunction Category Actions

Work conditions Investment in a new ordering and stock management software program for reducing ordering errors

Work organization Redistribute and delegate tasks between sales manager and salespeople

Communication‐ coordination‐ cooperation

Monthly meetings between sales managers, salespeople, and sales promoters to coordinate store demonstration and share information about competitor actions and behaviors (i.e., prices, promotion, events) A rotation program for salesmen between the plants and the head offi ce

Integrated training Implementation of welcoming and integration programs for the new salesmen to reduce turnover Appointment of a mentor/sponsor for each new salesman during their initial few months of employment.

person per year (Table 2.7 ). The original site’s reorganization of the production function increased fl exibility, stabilized produc- tion schedules and working hours, and enhanced trust in mana- gerial roles. Improvements in safety and health and the shutdown of a losing production line also contributed.

In addition, BPG integrated the use of hidden costs and risks into its decision making. That is, while calculating hidden costs is useful, the concept can be applied generically in overall problem solving as well. For example, with respect to logistics and distribution issues, BPG recognized that a key point of control was not whether trucks left the factory full of goods

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The Beginnings of Agility at Brioche Pasquier | 65

but that an order was delivered on time. A focus on the vis- ible costs of truckload utilization clouded decisions related to freshness and on‐time delivery. In fact, it was delivery consis- tency and punctuality, not a fully loaded truck, which resulted in sustainable economic performance.

At the end of the fi rst year, Brioche Pasquier showed impor- tant improvements in economic performance (Savall & Zardet, 2008 ). Absenteeism dropped from 4.5 percent to 1.5 percent, staff turnover declined from 90 percent to 11 percent, and qual- ity improved, resulting in a 7.9 percent profi tability increase. This increase in profi tability occurred despite the time, efforts, and costs associated with implementing the improvement proj- ects and supported the conclusion that the performance im- provements had clearly exceeded the amount of investment.

Company executives explained their success in terms of two main factors.

“The company’s historical key success factor is fi rst of all its prod-

uct. We inherited it from our parents; it is of an excellent quality

and is greatly appreciated by customers and consumers. The

second factor consists of two fundamental choices: the choice to stay

close to the customer thanks to our decentralized organizational

system, and the choice to work directly with mass distributors. We

are aware that our brioche is good as long as it is fresh. It explains

the relevance of shortening all the circuits: logistics, supply chain,

for getting closer to the consumers.” (Pascal Pasquier, 2012 )

The decentralized organization system enabled the company to connect with its customers. The ISEOR approach—both the horizontal changes to planning, including the PNACs, and the vertical changes to production—allowed the organization to work

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66 | Becoming Agile

closely and directly with the large retailers. Several PNACs had fo- cused on ordering and manufacturing procedures that promoted fl exibility. Customers could modify their orders in signifi cant ways and still receive, within twenty‐four hours, fresh products made on the same day. By comparison, in 1985, the average time de- lay between a product’s manufacture and purchase date was about eight days. This delay was progressively reduced to a single day in more than 80 percent of cases. Hypermarket customers could fi nd products on the shelves that were manufactured the day before, and BPG was the fi rst in its market to show the manufacture dates on all its products, even though their only legal obligation was to mention the expiration date (Savall & Pasquier, 2012 ).

BPG’s Agility

It is natural at this point in the BPG story to ask: “Is BPG an agile organization?” Agility is what allows an organization to respond in a more timely, effective, and sustained way than their competitors when changing circumstances require it. In other words, agility is repeatable. It is not something that hap- pens accidentally or once; it is a deliberately cultivated dynam- ic capability. So with respect to the two standards of agility, the short answer to the question is “no,” but BPG is well on its way.

The Outcomes Standard

The fi rst standard of agility—the outcome standard—is a re- ally tough test for most organizations, and BPG’s experience at this point is too limited to yield an affi rmative answer. The case clearly demonstrates that BPG had successfully changed and adapted. However, the organization has not yet demonstrated

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that it is adaptable. Adaptability means being able to change over and over again, not once or in small ways, but in adjust- ments that result in the development and implementation of new capabilities. So far, BPG has demonstrated that it has a robust freshness and quality strategy with strong ecological di- mensions that has allowed it to grow. But other than adding a regional market, the strategy has not changed. Similarly, BPG added and organized its second site in a federation sort of way that did not require a major reorganization, and it has simply scaled up its operations, sales, and HR practices. This does not take away from the impressive results, but it has not changed multiple times or changed its capabilities. Similarly, while BPG’s performance and performance improvements are admirable, at this stage of the company’s and industry’s life cycle, there simply isn’t enough data to say whether their performance is “above average” and whether it has been above average for a long time.

The Organization Standard

The second standard concerns whether the organization possesses the strategies, structures, systems and processes to change and perform consistently. Following the initial hori- zontal and vertical interventions from 1984 to 1988, a sec- ond phase of work aimed at maintaining the progress already achieved and furthering BPG’s development began in 1988. The intervention team worked with BPG’s top management team on a semi‐annual basis to focus on changing the way decisions were made, how the management tools were applied, and how strategic investments were analyzed. This gave BPG managers a more detailed and explicit understanding of their business. By the mid‐1990s, BPG was able to state clearly the

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68 | Becoming Agile

principles that were guiding the organization’s development. The three strategic principles or family values were referred to as “fundamental” by the company leaders and provide a basis for assessing BPG’s agility at this point.

The fi rst basic principle or fundamental was the use of decentralized sites . Beginning in 1988 with the creation of the s second site in eastern France, a clear policy emerged about mak- ing each site a legally operating, limited liability, or simplifi ed joint stock company. To support this principle, the organization employed a supplementary principle they called “hierarchical proximity”—there should never be too many levels between top management and workers in the fi eld.

“Between me, as holder of the company’s vision, and the opera-

tor, there should be no more than fi ve levels to keep everyone

in direct contact […] with the world and business life.” (Pascal

Pasquier, 2011)

The decentralization fundamental extended to a variety of functional choices as well. For example, there was only a very small human resource group in the headquarters location and no separate HR function in the sites. HR issues were expected to be a part of any manager’s responsibility.

The second fundamental principle was the balance between op- erational and functional responsibilities. Each site was expected to sell and serve its regional market; geographically dispersed locations allowed production and consumption to be viewed as local and in- tegrated. Locating sites near customers and sourcing ingredients locally reduced delivery times, a key aspect for ensuring the prod- uct’s freshness, and kept its ecological footprint to a minimum.

High performance, according to this fundamental princi- ple, and in the context of a distribution channel that demanded

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continuous price reductions and improved service, required seamless, daily coordination between production and sales. As a result, each site or subsidiary was largely self‐contained, and one manager, from either marketing/sales or production, served as the primary leader but was expected to coordinate carefully with a deputy manager from the other function. Thus, a highly integrated duo composed of the two functions most critical to the site’s success led the organization. A typical organization chart illustrates the balance between operational and functional responsibilities (Figure 2.8 ).

The third principle had the awkward label, the synchronized strategic vision . The purpose of the principle was to ensure that each site fully contributed to the strategy’s implemen- tation and its future development. The best example of this principle was BPG’s development of a strategic vigilance pro- cess. By 1995, BPG executives had noticed a decline in both

Figure 2.8 Typical BPG Site Organization Chart Worley, Christopher G., et al. Becoming Agile : How the SEAM Approach to Management Builds Adaptability, John Wiley & Sons, Incorporated, 2015. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/harrisburg-ebooks/detail.action?docID=4040516. Created from harrisburg-ebooks on 2020-11-16 07:29:34.

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process and product innovation. In response, it created “stra- tegic focus groups” to explore medium‐ and long‐term strate- gic issues, including new products, new markets, and changes in work processes. Focus groups at each site were chartered to monitor the evolution of a profession, a product concept, or a customer for the company . For instance, a manager at the Lyon site, which produced brioches, led a cross‐functional, cross‐ site group to monitor social and economic issues related to brioche products for kids. His group was also responsible for proposing product development and marketing innovations. Proposals from these focus groups were validated by the executive committee and, as necessary and prudent, incor- porated into the internal/external strategic action plan and site PAPs. Other companies would have placed these focus groups and responsibilities under a headquarters group. In- stead, BPG decentralized the process to the site general man- agers and supported them with functional experts and middle managers.

These fundamentals suggest that BPG was well on its way to establishing agility routines, possessed a set of differenti- ated capabilities driving current performance, and were build- ing a strong foundation of good management practices. That the organization had developed principles and fundamentals at all speaks to the emergence of change‐friendly and robust strategizing routines. That BPG had developed a strategic vigilance process and fl at structural arrangements speaks to the formation of a potential perceiving routine. That it has adjusted to strong customers and made changes in response to the SEAM implementation speaks to the development of test- ing and implementing routines. Finally, that the organization was growing and performing at rates that were satisfactory

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The Beginnings of Agility at Brioche Pasquier | 71

to the owners speaks to the quality of their differentiating capabilities. Thus, BPG had implemented some important changes but they had not, as yet, implemented any changes to their distinctive capabilities. Those capabilities—local sourc- ing, close customer relationships, decentralized operations management, and highly integrated, self‐contained sites— were enhanced through the SEAM intervention, but have not changed at this point.

These fundamentals also make it clear that most of the work to date at BPG has focused on building stronger management practices and improving its social performance (work- ing conditions, communication‐coordination‐cooperation, and strategy implementation). The horizontal intervention changed the organization’s core planning, operations, and human capital processes. The vertical intervention changed the production system to increase effi ciency and converted hidden costs into value‐added activities. These changes have affected resource allocation, HR incentives, leadership devel- opment, and goal‐setting practices. The strategic vigilance focus groups are an effective environmental scanning process.

Importantly, the SEAM process did not just improve BPG’s management practices. It changed them in very fun- damental ways. First, it improved the clock speed of the processes. At the site level, production lines and teams shift- ed from an annual cycle of goals, initiatives, and incentives to a semi‐annual one. Second, it improved the fl exibility of the processes. The PAPs were not just driven top‐down but bottom‐up by “mini‐diagnostic” sessions that fed in local information to senior management thinking. Moreover, the PAPs and the PNACs meant that individuals, teams, and

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72 | Becoming Agile

managers could contribute to current performance, future potential, and change.

Thus, while many of the changes developed during the SEAM implementation were contributing to all three layers of the Agility Pyramid—routines, capabilities, and management practices—agility is an advanced organization capability. The changes have not yet cumulated or been integrated together into repeatable routines of agility and consistently above aver- age performance. We cannot say, at this point, that BPG is an agile organization. But all that is about to change.

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