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The butterfly effect Featured

7:00pm EDT December 26, 2009

To the employees who kept walking past it, the broken case of beer in the warehouse at Monarch Beverage Co. Inc. was a mess that they didn’t make and didn’t need to clean up. But to John Xenos, the puddle of beer was symbolic of a much larger problem.

Thirty minutes had gone by and the mess was untouched. But instead of grabbing the first employee he could find and handing that person a mop, Xenos, the company’s general manager, decided it was time for a lesson.

Phil Terry, Monarch’s CEO and executive vice president, picks up the story from there.

“He gets all the warehouse managers together, he picks up a case of beer and he throws it on the floor and breaks it,” Terry says. “Then he says, ‘Now we have two broken cases of beer. How long are these going to sit here before one of you does something about it?’”

Terry laughs now, but the story did not paint a pretty picture of what was happening at Monarch. And had things continued this way, with the company in disarray and spills that were left for somebody else to clean up, Terry wonders where the company would be today.

“It was a very good way of demonstrating to people that we didn’t have clear direction,” Terry says. “We didn’t know what our priorities were, and we were just here to get a paycheck. That’s a prescription for disaster for your company when your people are just earning a paycheck.”

Terry knew things had to change at Monarch. Sales were not growing, and as a result, the beverage distributor’s profits were taking a hit. There just seemed to be no motivation to pick up the pace or to even pick up a broken case of beer.

No matter what kind of business you’re running, Terry says you have to have a reason and a sense of motivation to be doing whatever it is you’re doing. It sounds simple enough, but it clearly wasn’t happening at the 630-employee company.

“If you don’t all agree on what you are trying to get done, everyone will make it up on their own,” Terry says. “It’s just human nature that when you get up in the morning and you engage in an activity, you have a reason for it. If you allow everyone to make up their own reason, you might be working at cross-purposes. If you wake up in the morning and decide the reason I’m going to work today is I’m just going to make money for myself, that’s not an illegitimate reason. It just won’t be the one we want everybody to focus on, which is being consistent with our mission statement.”

And so that’s where Terry started. He reminded employees that they were there to serve the customer and increase distribution of the company’s product. He didn’t tell them that their job was to make money for the company, which achieved $290 million in sales for 2008.

If they focused on the mission, that would take care of itself.

Find a reason

Leave it to Xenos, the same guy who threw a case of beer on the floor, to give employees another perfect illustration of their lack of direction.

“If every business leader could have the inspirational qualities of John, I don’t think any company would have a problem,” Terry says. “He brought a bunch of managers into a room early on in the process and gave them a piece of paper and said, ‘Write down the three most important reasons we’re here. What is it we’re trying to do?’ He collected them and no two people had the same three priorities. Regardless of what order, no two had the same three. That clearly indicated that we had a lack of direction here.”

This wasn’t a decline that happened overnight. So it wouldn’t be turned around overnight either. But you still have to come out and tell your employees that you’re making an effort to make a change in the way you do business.

“They won’t believe it the first time you say it,” Terry says. “You start saying it and you keep repeating, ‘Things are going to be different. The way we’ve done things in the past will not carry us to the future. We will do things differently.’ Tell them what it is, the why and the how, and then hold people accountable.”

The message Terry wanted employees to hear was that Monarch was in business to serve its existing customers and convince new ones that they should try its product, as well. These were the priorities he was looking for on those slips of paper that had been given to Xenos.

“Our primary reason is to serve that customer, the bar, the restaurant, the grocery store or the liquor store,” Terry says. “The second thing we do is to responsibly enhance demand for our product. We engage our consumers, either at the store or at a venue, to try to persuade them that our products, when consumed responsibly, provide greater benefits for them than other products.

“We didn’t say we’re here to make money. Part of the power of it is to deflect attention away from ourselves. A lot of mission statements you read, they talk about some form of making wealth for ourselves. What we’re trying to do is focus everyone’s attention on what society wants from us. It’s a for-profit business, but what is it that we do?”

It’s easy to think that society owes you its business, but society has lots of other options to choose from.

“We think the world owes us a profit or a good job, and what I think we’re trying to convey with our mission is that stuff is a byproduct of doing what others want,” he says. “If you make it about others, you win.”

Repetition is key. Say it once, then say it again and again and even again.

“Once you’ve identified what your mission is, that needs to be part of every message that you give,” Terry says. “You give a message of the month. If you’ve got your core message and you repeat it consistently, people will start to believe that, ‘Yes, that is what we’re all about. That is why we exist.’”

It was Xenos and Terry who decided on the priority to focus on customers. And while some might look at a business and say, ‘Duh, of course, you’re there to service your customers,’ it wasn’t happening at Monarch.

“In hindsight, I think it was obvious,” Terry says. “But going back to our three priorities and no one could agree on them, it really wasn’t that obvious. Even if you think it’s obvious, state it, repeat it and make sure every manager is held accountable to that.”

Tell people why to do it

After the initial delivery of the message of this new mission, Monarch provided its employees with cards that had the mission statement printed on them. New employees would also be told about it when they became part of the company.

But it’s still not enough, even if you repeat it over and over again, to just tell employees what you want them to do. Contrary to when you were a child and your mother told you to do something because she said so, employees really do need a reason why they should adhere to your wishes.

“It’s not just saying, ‘This is the message,’” Terry says. “People want to know a reason. Why is that the message? Share with people your thought process, not just individually, but institutionally, as to why this is important. Share why it ’s important and how it will be done. How will we execute on this? You start with that from day one. Set the course and drive the stake in the ground. For everybody new, that becomes lesson No. 1 for entrance into our family. The lesson is why we have that mission and how we’re going to execute it.”

There are two words that Terry uses in his speaking pattern that almost always come one right after the other: repetition and reward. It’s no coincidence why he does it.

“Rewards have to be tied to that message that you consistently repeat,” Terry says.

Many companies will reward employees who sell the most product and while that’s not a bad thing, it doesn’t totally fit under the column of doing your best for the customer in Terry’s eyes.

“Our reward systems are set up differently,” Terry says. “Do you have the right display and the right account? Are your orders put in for your customers? Are those an acceptable level of correctness? Are your displays in the right location? Do you have the product on the right place on the shelf? All that stuff goes into serving the customer and driving demand. Not stuff that deals with our company’s bottom line.”

If you’re having trouble getting employees to meet your mission, maybe you’re not reinforcing their compliance with the mission.

“When you’ve got a mission and you tell everybody, ‘This is what we’re doing and this is what we’re trying to get done,’ are your actions consistent with that?” Terry says. “If you give a mixed message and say one thing is important, but either your monetary compensation or your psychic compensation is based on something else, you confuse people and they don’t know what they are supposed to be doing. It’s the rewards. People do what you pay them to do.”

Support your leaders

When you’re embarking on a big change, it’s easy to want to have your hand in everything to make sure it’s being done the way you want it. But even as president or CEO, you’re still only one person.

“If you’re going to empower your managers, you have to make sure they have ultimate responsibility,” Terry says. “You can’t undermine their authority.”

You can’t be everywhere and watching everything. You have to let your managers do the job you hired them to do and told them you wanted them to do.

“If the test is always how would you do it, the organization is always going to be looking to a single person to make the decisions,” Terry says. “A successful and viable organization thrives because of the diversity of views, not because of the singularity of a view and an outlook. As long as we’re all in agreement on what the mission is, there’s many different paths to getting that done. If you’ve done the hiring right and they buy in to the mission, get out of their way.”

That doesn’t mean you give up all of your power and adopt a completely hands-off approach to leading your business.

“I could never say to those people to whom I report, ‘That’s our warehouse manager’s doing; it’s not my responsibility,’” Terry says. “It’s my responsibility. If the ‘what’ isn’t happening the way it needs to be, if we’re not living the mission, improving customer service and increasing demand for the product, I need to be engaged in it and say, ‘This isn’t working. How can I make this work? How can I help you make this work?’ I can’t abdicate, but I have to empower.”

It was early on in this process of change that Terry received proof his message was being heard. Two cases of beer had been left off a delivery truck and, therefore, would not make it to their destination, a rather remote location, on time.

“The account needed it and the driver supervisor, without being prompted, told the customer, ‘We’re sorry; we’ll have it there in two hours,’” Terry says. “That cost us a whole lot to take that product out there, but that was the right response. The response beforehand would have been, ‘Tell them we’ll be there the next delivery day.’ But it was our error and the customer wanted it. It was the reaction because they knew the mission was service.”

How to reach: Monarch Beverage Co. Inc., (317) 612-1300 or www.monarch-beverage.com