Hitting ‘factory reset:’ How a willingness to recognize error and initiate systemic change can save your business

Zero tolerance can be uncomfortable. There’s a famous story about a new head of operations at a leading consumer goods manufacturer who visited a factory for the first time to see how it operated. As the executive left the airport, he observed the factory manager (who had come to pick him up) cross the road without looking out for oncoming traffic. His response was to tell the manager that the visit was cancelled. If he had so little regard for his personal safety, the executive said, the manager couldn’t possibly be running the factory safely either.

The story went round the company quickly and each factory manager took note and adjusted their behavior accordingly. While harsh, it turned out to be a remarkably effective way to reset the company’s attitudes.

Towards competitive advantage

Learning organizations get it. Automotive manufacturer Toyota is a good example. The Japanese company famously pioneered just-in-time manufacturing: that is, producing exactly the amount of product required to fulfil customer demand for that period, rather than producing excess inventory in advance and supplying demand from stock. However, Toyota did not turn away from the lessons of the past.

In 2011, when Toyota’s supply chains were severed by the Fukushima nuclear disaster, the business began to insist that key suppliers maintain inventories of a minimum two months’ worth of the microchips used in its vehicles. Lean manufacturing was all well and good, it recognized, but the lead time for semiconductors was far too long to cope with another unexpected shock.

Fast forward a decade and Toyota was the only large automotive company in the world not to be hit by the global shortage of semiconductors caused by the Covid-19 pandemic. Even as its rivals were forced to suspend production, cars continued to roll off Toyota’s assembly lines.

How, though, to instill this far-sightedness across the business? After all, not every executive will be comfortable with humiliating an individual manager to make a point to everyone.

At aluminum giant Alcoa, CEO Paul O’Neill’s strategy was to create a crisis. His first speech to investors in the company focused on employee safety. It went down like a lead balloon with shareholders, who pointed out that, while Alcoa had a pretty good safety record, O’Neill hadn’t even mentioned the company’s high costs and low profits.

However, O’Neill saw safety as a galvanizing issue. He was determined to bear down on high costs and inefficiencies by inculcating a much deeper focus on process throughout the company. But he knew that this message would fail to inspire, while his commitment to zero worker injuries would win hearts and minds. To deliver on that commitment, he also recognized Alcoa would have to think in minute detail about every step of its process. It was the reset that the business needed.

Confronting the norms

Translating common sense into common practice is harder than it sounds, often requiring leaders to take unpopular decisions and confront deep-seated behaviors and attitudes.

In such cases, delivering a reset may require a different approach. It won’t be sufficient simply to order people to change their behavior: they need to be persuaded to do so. Advertising agencies, for example, have become adept at recasting risky behaviors, from driving without a seatbelt to smoking, as having terrible consequences. Those campaigns have worked.

The bottom line, however, is that someone has to say enough is enough. There may not be an obvious tipping point for that intervention, but the most effective leaders will seize the initiative. Recognizing that the methods employed in the past are inherently flawed and taking a radically new approach may require courage, but it is also often the most effective way to get people’s attention. More simply put: what got us here won’t necessarily be what gets us there.