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"Challenge" Examples

Sometimes challenge is as much about "how" to do business as it is about what business to do. Marshall Industries is a multi-billion dollar electronics distribution company, a "middle-man" in an era where distributors are dropping like dinosaurs.

In the early 90s, Marshall looked like all the other dinosaurs and had embraced management-by-objectives and individual incentives with a vengeance. Everyone in the company was on some sort of individual incentive system and the sales force (almost half the company) was on a mind-boggling array of incentives and promotion schemes offered by the more than 150 suppliers as a way of getting their products touted.

The challenge showed up when Rob Rodin, then vice-president of sales and marketing, and other Marshall managers attended a W. Edwards Deming workshop. Rodin "got" Deming and realized that everything the Marshall management was doing was wrong. Individual incentives were creating a culture where "gaming" the system was the norm, there was no incentive for collaboration and sharing across p&l lines, and customers were getting the short end of the stick as sales people tried to maximize their own revenues rather than maximize customer satisfaction.

Rather than take half-measures, Marshall Industries decided to bet their entire company on the truth of Deming's ideas. They eliminated all individual incentives, including sales commissions and supplier premiums. The electronics industry went crazy and said they would lose all their best people; some media folks even accused them of communism! What happened instead was that people started working together and because there were no more incentives for turf-protection, they created a common vision of using the internet to do business, long before "e-commerce" was on the lips of the entire globe. The strategy has paid off in growth, profit, and customer satisfaction. Marshall Industries no longer looks like a dinosaur.

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