Voice Card  -  Volume 27  -  Paul Card Number 11  -  Sun, Feb 21, 1993 10:14 AM

Quality Control From Mars

Forget the Japanese. Forget the Germans. The best lessons on management come from Mars.

No, not the planet. But the multibillion-dollar, world-class company known as Mars Inc., a leader in candy, pet food, rice and other products. A secretive, closely held company like no other in the U.S., Mars is as successful as it is unconventional. As someone who worked as an executive there, I can speak from experience. Being hired into Mars from a conventional, publicly held company is akin to an earthling trying to survive on the red planet. You can survive only by letting go of most of the beliefs and assumptions learned in a normal business environment.

The first visible symbols of this alien culture are the absence of assigned paring spaces, private offices or even partitions between desks. Time clocks are at the door and everybody punches in, including senior executives and the billionaire owners. Punch in on time and get a 10% punctuality bonus.

Walk into any Mars subsidiary world-wide and see the same office layout of concentric circles, with the president and his (or her) staff at the center and their direct subordinates at the next circle, their subordinates at the next, and so on. Operating in close proximity to each other in the fish bowl at the center, the senior staffers are totally visible and accessible.

When something important happens in the business, watch the president call the senior staff to his desk. At the conclusion of the impromptu meeting, observe the staffers going back to their desks to call their departments together for their own impromptu meetings. Like an army of ants going hither and fro, the office is soon a buzz of sound and activity. Communications are fast and open. Memos aren't written and electronic mail goes unused.

Since Mars offices are always connected to a plant, it's an easy walk over to the factory, where the most wondrous sights await you. Everyone is in white uniforms and bump hats-- managers and workers alike. The plant is spotless and shiny, the high-speed lines are marvels of efficiency, and the high-paid, non-union employees are loyal and proud.

On any particular day, one of the Mars brothers who own the business is likely to show up at a subsidiary. He flies in from his Virginia office, where a headquarters staff of less than 50 a far-flung, 25,000-employee enterprise. Wearing scuffed cowboy boots and a wrinkled shirt, he parks a midsized rental car in the far end of the employee lot and walks toward the office. Unlike most chief executives, he does not head straight for the subsidiary president to review the quarterly results. Instead, he grabs a white smock and bump hat and heads for the factory. You will hear him screaming if he finds unclean or unsafe conditions. And woe to the plant vice president if less-than-perfect product is coming off the line.

Quality is an unrelenting obsession at Mars. One example of that obsession is a fear of "incremental degradation," a term used by Mars to describe what can happen by using cheaper ingredients. Rather than replace a high-priced ingredient with a cheaper one, even if taste tests show that the consumer would not notice a difference, Mars will forgo the extra profits instead of risking an incremental degradation of the quality of its products.

The latest in statistical process/quality control charting may not be seen on the walls, but observe in the factories the constant product inspection and tasting-- even the tasting of pet food. Watch a whole production run of candy bars be thrown out because of barely noticeable nicks in the chocolate coating. Better yet, follow a Mars salesman on a supermarket visit. Watch the individual discard a whole display of product because it is getting too close to the date on the freshness code. Look for someone with quality in his title and come up empty-handed. Look for people concerned about quality and come up with the entire work force.

Closer inspection of Mars's operation reveals huge market shares, obscene profits and such high productivity that the business operates with 30% fewer employees than its closest competitor. With results like these, you'd think that Mars must have the best merit and incentive programs in America. But the conventional wisdom does not hold true in the world of Mars. All Mars employees are on a step-increase system, getting the same annual adjustment as everyone else.

Employees at Mars have something more motivating than phony merit and incentive systems: a high degree of job security and pay that is pegged at the 90th percentile of the compensation offered by other premier companies in the world. Moreover, by operating with only six levels and paying all vice presidents approximately the same salary regardless of the function they head, Mars finds it easy to transfer people from business unit to business unit and function to function.

Someone heading up human resources today in a billion-dollar domestic business may be heading up manufacturing tomorrow in a half-billion-dollar domestic European business. It is a rare general manager who has not done a tour of duty in manufacturing or marketing in at least two business units. As a result, key managers know the business so well that a consistent organizational culture and operating style can be maintained world-wide with few formal rules and procedures.

Financial and business measurements are few but powerful. The most powerful is ROTA (return on total assets), which, in a unique equation, takes into account inventory turns and asset utilization. This measurement, combined with valuing equipment at replacement cost instead of book value, gives managers an incentive to replace equipment with the latest technology. At a Mars pet food plant I once visited in Germany, a perfectly good can-filling machine was replaced by a state-of-the-art machine, even though the additional capacity wasn't needed at the time.

Is there a dark side to Mars? Yes. Just as the planet is a harsh environment, the company can be a stressful place, particularly for higher-level managers who must deal with the impulsive nature of the owners. I remember the finance vice president in a subsidiary who decided to buy some nice wooden desks. One of the owners came by one day and began to fume when he saw them. "Would you ever buy a more expensive desk than your boss has?" he asked me, as he sat down just waiting for the VP to walk in. When the VP arrived, the shouting began.

If it had been anybody other than an owner, it would have been devastating. But because the culture of the organization is so effective, there's an aura about the people who own the company. These occasional outbursts become ingrained in the mythology of the company and serve to reinforce the corporate philosophy.

Companies like Mars can force us to face the possibility that we are wrong about what a true quality culture looks like, about how business should be measured, about how people should be paid, about the role of senior management, and about the development of management talent. Instead of looking overseas for solutions to our problems of competitiveness, maybe we should look to another planet for the answers. The Mars Voyager is waiting for you on the launch pad.

The Wall Street Journal, Vol. CXXVI No. 18, Monday 27-Jan-92 "Manager's Journal" by Craig J. Cantoni

Mr. Cantoni is vice president of human resources and logistics at J.M. Huber, a $1 billion family-held company in Edison, N.J.