GA 232 | How to Embrace the Higher Calling of Lean with Kevin Hancock

A few weeks ago, Gemba Academy was fortunate enough to attend the 2018 Lean Systems Summit in Portland, Maine. Now we were able to capture the keynote presenters on video and today I'd like to share the audio portion of the keynote given by Kevin Hancock. Kevin is the CEO of one of the oldest family businesses in America, established in 1848 and led by over 500 employees. Hancock Lumber owns Timberlands and operates sawmills, retail stores and a trust plant in Maine. Now, during his talk, Kevin offers a fresh perspective and thought provoking twist on traditional Lean in the business world, which he calls the higher calling of Lean. I can safely say this was one of the most powerful keynotes I've ever heard where I felt just about every emotion possible. Show notes for this episode can be found over@gembapodcast.com just look for episode 23 2. Also be sure to check out our AME conference page over at gembacademy.com ame where you can learn how to save 10% on a registration cost. You can also RSVP for our annual cocktail party we're doing at Sally's Fish House and bar. Again, that's gembaacademy.com ame okay, enough from me. Let's get to the show.

Hello. Hello everyone. To be here so I was. Let's see, it was October of 2012 and I was standing for the first time at the Wounded Knee Massacre site on the Pine Ridge Indian Reservation in the southwest corner of South Dakota when an old jewelry maker pulled up and said to me, what brings you here? And that question has since become my favorite question that I find I can ask myself any time of any day and it is relevant. So I was thinking about you and that question, what brings you here today when there are so many other places that you could be on a beautiful day in the middle of summer in Maine? And if we took the time to go around the room and have everybody answer that question, I think a common theme might be I'm here because I'm trying to make the world a better place by making work a better place. We can make the world a better place by making work a better place. I've thought quite a bit about the meaning and the purpose of work, and I don't think you can answer the question about the meaning of work without contemplating the meaning of life because it would not make any sense for work not to complement life. So thinking about work is really thinking about life and the meaning of life. And I've thought a lot, therefore, about what's the Meaning of life. And I think that one way to think about the purpose or the mission of a life is that it is a quest, an individual quest to find and release our own true, authentic voice, our own true self, to find ourselves, to know ourselves, and to live authentically as who each of us uniquely is. So we own timberland, and we grow trees. One of the things I love about a forest is that never will there be two trees that are identical. If you think about all the trees that have ever existed on the planet or will exist on the planet, there will never be two identical trees living the same life in the same place, in the same form. And that is also true of humans. We each have a voice, a perspective that is uniquely and only ours, and it will never, ever be duplicated. And so the individual mission of any human is to try to find the essence of who you are and to release that essence or that voice and live it authentically. That, to me, is the mission of life on earth, which therefore, to me, supporting that should be the mission of a business or a company or an organization on earth. So in 2010, as you can hear, I acquired a rare voice disorder called spasmodic dysphonia that sometimes makes speaking difficult. When I go to talk, the muscles in my throat spasm and contract. And talking can be a bit of a chore, which I don't want you to worry about, because it ended up making my life better, not worse. And I'm happier, not less happy, because of the disorder. I wouldn't trade it away or give it back because it gave me more than it took. Two years later, I started traveling to the Pine Ridge Indian Reservation, a place I've now been 15 times, and encountered an entire community that felt as if it had no voice, an entire community that did not feel heard. And the combination of those two events led me to a series of conclusions. The first is, there are lots of ways to lose your voice in this world. And second, I specifically learned what it felt like to not always feel heard. And finally, when I started looking in that context at human history and leadership specifically, I concluded that more often than not, leaders had done more to restrict the voices of others than to liberate them. And right then and there, I knew that my voice was actually a gift and a calling and an invitation to do what I could to help strengthen than the voices of others, especially those who didn't always feel heard. Gallup's 2017 engagement survey came out recently. They polled 190,000American women workers and approximately 130,000 of them said they did not feel inspired or engaged by their work. Two out of three. And on the surface, you can say, wow, what a big lost opportunity for productivity. But this is bigger than that. To me, it's, wow, what a big lost opportunity for living. People who work spend a huge chunk of their life at work. And to have that huge chunk not be vibrant and exciting and inspiring and meaningful is a huge lost life opportunity. So then let's just take the next step. Why is it that these people don't feel anything engaged at work? If we interviewed them all, I think we could pull it back to one common theme. They don't feel authentically heard. They do not feel authentically heard and understood and appreciated and respected and trusted where they are in place without having to change or to be somebody different or to say something different. So my goal in all of this at work at Hickok Lumber is simple. It's to try to make life meaningful for the people who work at the company, for the work to be meaningful and valuable and fun and rewarding and inspiring for them. So then I got thinking about, well, what would need to change within companies for this not to be the case? For 90% of the people to be engaged as opposed to 60 to 70% not engaged, what would have to change? And I concluded that four things would have to change. One, the vision of a company would have to change. Its purpose would have to change. Number one. Number two, therefore, the metrics we use to measure the company would have to change. And number three, behind that, the culture within the company would have to change. And behind that, number four, the leaders who drive culture. The they would have to change. Those four things would have to change. So let's go back to the first one and start with mission. We decided to adopt an employee centric mission. Employee centric. And the first goal of the business became to enhance the lives of the people who work at the company. We have other goals. We have other priorities. But that became the top priority. So to get there, we had to take on some longstanding assumptions, like this one, the customer comes first. So I've stood in front of rooms full of customers, took a deep breath. I was scared at first to do this, and told them that while they were super important, they came second. What we say at Hancock Lumber is the customer. We use a main slang. We say, the customer comes a wicked close second. So we love customers. We're really into them, we're really thankful for them, and we're very responsive to them. We love our Customers, but they do not come first. The people who are going to take care of the customer come first. The people who are going to make their products or provide their services, we decided that if we put them first, they would figure out how to take world class care of the customer and that would produce a world class result for the company. So that's our model. The employee comes first. You put all your energy into creating a great experience for the people who work at the company and then really get out of their way while they take that energy and channel it to the customer. And the combination of those things will produce a great result for the company. But again, to really change the mission of work or the mission of a company, you've got to be willing to take on some big, deeply rooted assumptions. So here was another one we took on. Who decided that shareholder return should be the only or even the primary purpose of the business? Who decided that? Who gets to decide that? And is that actually right? And we've moved the concept of shareholder return over into the category of being an outcome, not a goal. It's not the goal. It's important because when we are not financially strong, the employee platform gets weak. But it's not the goal. The goal is to improve the lives of the people who work at the company. And an outcome of being good at that is those people will show a super high level of loyalty and care and passion for the company, which will produce a result, which is an outcome, but not the objective. So all of that requires new metrics. When profit was the goal, that was easy to measure. When productivity was the goal, that was easy to measure. But now employee engagement is the goal. So how are we going to measure that? We have to measure it. Everybody in this room knows if it's important, you have to figure out how to measure it. So we have chosen to do that through the best places to work survey process. So every year, our employees spend 20 minutes, they go online and they fill out a blind, confidential third party survey where they define across 80 questions their perspective of the company. And that score has become the most important metric at Hancock Lumber, our managers anticipate that score with far more energy than they anticipate the release of a financial statement. And you can see on this chart that in our last survey, in a country where one in three describes themselves as engaged, almost nine in 10 and Hancock Lumber describe themselves as being into and excited about the work that they're doing. And does that turn into a competitive advantage?

Yes.

But is that the purpose of doing it? No. The Purpose of doing it is they're spending a huge part of their life at work, and we're not going to waste that. We're not going to live that way. So we have the survey, we get the questions, it shows us scores we like, it shows us scores we don't. And then we sit down in huddle groups in a safe environment where people can say whatever it is they want to say. The single biggest thing, thing we've taught our managers to do is not judge what anybody else says and to give up on this silly idea of pursuing a single truth, the party line. The only way to see it, the only way to talk about it, the only way to think about it. The pursuit of a single truth is the fastest path to disharmony and a lack of alignment, because all it gets people to do is be quiet. And we've really pushed to create a culture where the truth is plural. There's no way two humans at completely different points in completely different lives should look at the world and see it exactly the same way. That's backwards. The truth of the company. We have 506 people on our team. The truth of the company is in what all 506 of them see and think. And the key ingredient within culture is to make it safe for people to actually say what they think. And to do that, managers and supervisors have to give up correcting what people say. When someone says something, it's not right and it's not wrong. It's just their world as they see it at this moment in their life. And the key to helping people broaden their thinking is to make it safe for them to think. So that brings me to culture and how the culture needs to change. So here is another myth we've gone to work debunking. You know that old saying, our people make the difference? Have you ever seen that slogan? We used to have it on the back of our T shirts and sweatshirts 20 years ago. And you can tell by now, I love people, but I actually don't believe that saying is true. I don't believe our people make the difference because I believe that great people are actually everywhere. The planet's full of them. To say our people make the difference is to say we've run the table on the best people and everyone else has the less than best people. And that's just not true. The planet is filled with great people, but performance of companies or countries do vary. So if the world's filled with great people and performance varies, what's the variable? It's Culture. It's super simple. It's culture. And history plays this out time and time again. Think about Germany after the Second World War, suddenly arbitrarily divided down the middle between a West and an East. West Germany went on to lead the planet forward in a long list of ways. And East Germany hung on with guard dogs and gun turrets until it collapsed under its own weight. But what was the difference? Had randomly all the. I don't even know how you'd say it. All the good Germans ended up in the west and the less good Germans ended up in the East. No, they were equally good on both sides of that line. It was the culture that was different and who imposed the culture and drove it. It was the leadership. Look at North Korea and South Korea today. The economy of South Korea is 45 times bigger than the economy of North Korea. Were all the best Koreans on one side of the line and all the not best Koreans on the other? No culture. Culture makes the difference. So what are the themes that separate culture at its simplest level? At its simplest level, to me, it's this. The leadership either disperses power or it collects it. And the culture either pursues one truth or an unlimited number of truths. In the Soviet Union, in communist East Germany, the whole thing was about the pursuit of a single truth that was given to you and you were then expected to recite. And there were grave consequences for thinking or speaking otherwise. So to change the culture, it's the leaders that have to change. Or to say it differently, the leadership script has to change. So we've been working on. I've been thinking about what I talk about 7 Habits of Leadership that strengthens the voices of others instead of squashes them. And these are the seven. The first is we've asked all our leaders to broaden their view of their mission. If you run a sawmill for us, making lumber is not your mission. We're going to make lumber and we're going to make good lumber, and we're going to make it efficiently. But that's not your mission. Your mission is to improve the lives of the people who work at that mill. And to do that, we've encouraged our managers to do less, not more. Such a hard flip switch. To do less, not more. To say less, not more. And to lead through listening. And then on the heels of that, to understand that when you create a safe environment where everyone connects, say what they think, that it's important to let the truth be broad. The quest for consensus is what kills alignment. It's flipping script on the idea of Having a party line where everybody sees it and recites it the same way. People may recite it the same way, but they don't see it the same way. They're just reciting it the same way. Because it's easier in that culture to recite it than fight it. And then we ask our managers to swap. To do. What I talk about is swapping ego for self awareness. So if you're a manager, you are not the result of your division's performance. That's such a shallow, small way to think about your existence. That's your role, a role that you play, that role is important, but that's not you. You are something much deeper and broader than that. And we don't want business performance to drive our egos. We want a strong business performance for the purpose of creating a great workplace, but not for the purpose of driving my ego or your ego as manager. And then the next thing we ask our managers to do, I call it here, creating change first from within. We ask them to manage other people less. I've essentially encouraged our managers to stop worrying about anybody but themselves. Because change is something that happens inside an individual, one individual at a time. And that old saying from Gandhi, just be the change. So what we've encouraged our managers to do is if you'd like to see something different in the culture on your team, just put all your energy into you being different, focus on how you need to change. And if you become the change and are consistent about being the change, the organization will come with you when everybody's ready, on their terms. And then we talk about getting out of your lane. And to me, that means remembering that work should be balanced and we want our managers. I don't want our managers spending all their time at work. I pay more attention to the work hour ceiling than the work hour floor. And I want them traveling and thinking and reading and doing different things and getting a broader base of knowledge and living, because I think that puts more energy into work, not less. And then finally, we ask them all to think about how they can disperse power, not collect it. So the last thought I thought I would share on this, a couple final thoughts is as follows. One of the other things we've tried to take on under the heading of making work great for the people who do it is we've taken up the goal of putting the work back in its place where it's important, but not all consuming, where we're competitive and we're into it. But we want to put more balance back into everyone's Life. And here's the big lean idea to me in all of this. So as we become lean and we create all this new capacity, what should we do with it? Well, of course, we can use some of it to make more widgets, of course. But how about we use some of it to just plain work less? That gives Wayne a purpose that anybody on the team could get behind. So we looked at our own company where everybody's full time, just for context, and our average work week was about 50 hours. When I grew up in the business, it would have been about 65. It was an industry of rugged individualism where the earlier you got up and the later you stayed, and the more you suffered, the more loyal you were to your company. That's how you showed your love for the company and the script. There was the individual sacrificed for the company and hopefully someday for your own future. But in the new age, that script needs to flip. The company's purpose is to serve the people. And if you are good at that purpose, those very good people will see it and know it and appreciate it and be inspired by it, and will serve the company in return far better than any other totalitarianistic approach could create in terms of engagement. So we've gone about in the last five years, we set the goal of reducing the work week from 50 to 40. And to do that with all the productivity that we created. But to do that, you've got to reinvent one big thing, which is how people get paid. Because the overtime system. The overtime system, it does not fit the objectives of the modern world. The overtime system is the longer it takes and the longer I stay, the more I make, and that is backwards. It should be the less time it takes, the more I make. So we went about replacing the overtime with an incentive system that we call performance gold, which started paying weekly or monthly or quarterly for making it better and faster and more accurate and safer and taking less time. And we were able to do two things at once. We took the average work week from 49 to 41 while increasing the take home pay over 4% a year faster than the rate of inflation. And nobody maybe got rich per se by doing that. But if people can work a little bit less and earn a little bit more, that's directionally the right path. And we were able to pull that off. So just in closing, quick story and then we'll stop. I was this spring, I was spending time on the Navajo reservation. And one night there I was walking in the desert at sunset and it hit me this simple phrase. In nature, power is dispersed. If someone took you into the forest and said, show me the tree that's in charge of all the other trees, you wouldn't find one. If someone took you into the desert and said, show me the capital of the desert, the headquarters of the desert, you wouldn't find one. Where does the desert? It lives dispersed in everything that's there. And humans are part of nature, not above it. And as such, we aspire and are going to organize in the same way. But for centuries, leaders have spun this tale of collecting power in the headquarters, in the capitol, in the bureaucracy, and handing down the truth to others. And that path is on borrowed time. And anyone who can't see it isn't looking. They're not looking. But a lot of organizations can't quite see it yet, which is why the engagement so low. Individuals know there's a better way to do this. And leaders right now have a super cool opportunity to be in front of that wave, not behind it. And I got really lucky because it was a disorder, something that went wrong in my life that helped me see this. And it's changed the way I think about trouble when it comes into my life. And what's the message it's trying to bring me? What's the invitation it's trying to bring me? And where is the offer to change? I was really stubborn, so I needed a really significant shot across my bow. But eventually I listened enough and thought enough and saw why this happened to me and have been able, really fortunate to have a company where I could actually test this out and put it in play. And now the opportunity to share like you gave me today is something that, that I am inspired about and appreciate. So it's been an honor for me to be able to be part of your day and to help you close this day. And I'm hoping there's something in this that clicked for you. Thank you very much. It's a pleasure.

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