Open-door policy
At Texas Process Equipment, sharing information is a way of life
By Victoria Fraza -- Industrial Distribution, 12/1/1998
Ten years ago, Don Grogg heard something that changed his business life completely.Grogg, president of Texas Process Equipment, a Houston-based distributor of pumps and related products, was at an industry seminar listening to a talk by consultant Tom Peters. In that talk, Peters quoted an executive from a major airline as saying: "An individual without information cannot take responsibility. An individual with information cannot help but take responsibility."
Since then, the books, the doors and all communication lines have been open to every employee at Texas Process Equipment. The only information Grogg and his partner -- his brother David Grogg -- don't share is payroll and personnel information.
"No one will be motivated to improve their career or the company if they don't know what's going on," says Grogg, who founded TPE with his brother in 1971. The company started out as a pump repair house and moved into distribution a year later. Today, TPE has a branch in Dallas, a sister company in Benicia, Calif., and annual sales of $14 million.
TPE's commitment to sharing information is at the heart of the company's success. By opening the books to everyone, the company is able to focus on profitability -- an activity that works to strengthen everyone's bottom line. Through gainsharing programs for office and shop personnel, profit-based raises for outside salespeople, and educational initiatives for everyone, Texas Process Equipment makes an investment in its employees. The result is a commitment to quality and customer service that helps keep TPE ahead of the competition. It also helped win the distinction of being named ID's 1999 Excellence in Distribution award winner for the $10 to $20 million category.
Open-book management
Information sharing at TPE begins with job descriptions. As an employee, if someone in the office needs your help, the phrase "that's not my job" or "it's not in my job description" won't get you out of the duty. That's because at TPE, there are no specific job descriptions. While each employee has a particular area of responsibility -- customer service, outside sales, applications engineering, shop service, etc. -- it's not unheard of to help out in a variety of other areas from time to time.
"If you're in customer service but we need help in the shop and you can do it, then you're expected to do it," says Grogg, who has 60 employees. "If it involves a customer and it's going to benefit the company and yourself, it should be done that way."
Employees are encouraged to expand their responsibilities and capabilities through cross-training. It's the best way to make the company better, says Grogg, and when the company does better, employees do better. TPE's gainsharing program is proof of that. With the program, employees get a monthly bonus based on company profits. Sales, on-time shipments and other statistics are posted in Houston and Dallas every month, so employees can keep track of TPE's performance. At the end of the month, if the gainsharing check is small -- or non-existent -- they know that something is wrong. And that's when employees are likely to take advantage of TPE's open-book policy and actually take a look at the books themselves.
But things have been running pretty smoothly in recent years, according to Grogg. He says net profit has doubled since 1995, part of a conscious effort to streamline company activities and re-focus on core competencies. The re-focusing effort included dropping more than 20 product lines and moving outside salespeople (account managers) into "virtual" offices.
It's not that Texas Process Equipment wasn't making any money three years ago. As Grogg puts it: "We were doing a tremendous amount of work for not a lot of net profit." Eliminating suppliers seemed a first necessary course of action. TPE went from 40 manufacturer partners down to 15 -- enabling the company to focus on core lines, have fewer emergency orders, improve inventory turns, and achieve greater customer loyalty due to improved on-time delivery rates. TPE eliminated lines that weren't valuable to their customers, or those in which TPE wasn't investing enough time. The company even eliminated some manufacturer partners based on the difficulty of doing business with them.
And it seems the changes have worked. Earlier this year, TPE conducted its first-ever performance audit as a way to gauge customer satisfaction. A consultant examined all aspects of the business and conducted interviews with nine of TPE's customers. The interviews were overwhelmingly positive -- on a scale of one to five (one being poor, five being outstanding) everyone gave TPE a score of four or higher.
"[TPE] is an integral part of our success," says Bob Skinner, purchasing manager for TPE customer Exceltec of Sugarland, Tex. Skinner participated in the performance
audit, giving TPE a rating of 4.5. "They are very responsive and they do what they say they are going to do."
Despite such good reviews, Grogg says things aren't perfect at Texas Process Equipment. That's why the company has a one-year strategic plan that is formally reviewed every 90 days. The plan is simple -- it maps out what TPE wants to accomplish in the coming year -- and was the catalyst for all the major changes that have occurred in the last three years.
Strategic changes
Moving account managers into virtual offices is one of the prime ways TPE has improved profitability. Essentially, salespeople are now set up to work from home -- a process that increased office space, reduced paperflow, and raised call volume. The company's 10 outside salespeople -- many of whom lived more than 100 miles from the office --now only spend time in the Houston or Dallas locations when they need to check on a quote, give a customer tour, or attend training sessions. Office space has increased in both locations and the company was able to close its Austin branch soon after the changes were made.
But it doesn't end there. In the process of moving the account managers, TPE implemented new technology that automated most of the paperwork done by sales assistants. For instance, account managers now run their own reports which are posted to the company network. A customer management database further enhances communication by allowing inside and outside salespeople access to shared account information. At the same time, TPE took the account managers off commission and gave them a straight salary and once-a-year bonus -- all based on the profitability of their accounts.
Grogg says the new system is working well, although not everyone was happy with the changes. Three salespeople have resigned since 1995. Grogg admits that it's difficult for some people to work based on profitability -- because if they're not doing well, their salary goes down the following year. But he adds that the news comes as no surprise -- salespeople get their numbers every month, so they always know what's coming. The new system, he adds, forces people to take advantage of all their technological resources and make the most effective use of their time.
"There are no guarantees," Grogg says. "You're making as much money as you want to. And that's one of the nice things about giving out information."
Profit is top-priority
Sales coordinator Curtis Cunningham is the person responsible for posting sales and profit information each month. Cunningham posts sales and profit charts for each salesperson, as well as sales and profit data for the entire company. He also posts a contribution to profit chart which shows how each salesperson stacks up regarding branch profitability. On top of that, Cunningham posts the numbers from a product standpoint -- showing which manufacturers the company is doing the most business with. There's a top 10 list every month and a top 10 year-to-date list, as well.
"It keeps the profit levels healthy in everybody's minds," says Cunningham. "They pay attention to waste and cost reduction. It all applies directly to the bottom line and creates an overall awareness of bottom-line profitability."
And that gets back to Grogg's initial goal -- empowering employees through the sharing of information. It's all about taking responsibility, he says -- for yourself and for the company.
"[People are] the only asset in the company that's going to grow in value and we continue to invest in it," says Grogg, who offers regular training sessions and tuition reimbursement as a way to enhance employees' careers. "That's what makes the whole process work."
COMPANY SNAPSHOT
Texas Process Equipment
President: Don Grogg
1997 Sales: $14 million
Founded: 1971
Headquarters: Houston, Tex.
Locations: 3
Primary Products: Pumps and related equipment
Web site: www.texasprocess.com
Quality: ISO 9002 registered
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