PROMISE AND PERFORMANCE
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Effective managerial control of productivity norms is the key to Esso's radically streamlined distributive system
BY: JOHN DARKER, AMB1M
USSO'S productivity deal launched in January 1966 spelled out in great detail the arrangements jointly agreed with the Transport and General Workers Union for rationalizing the distributive function of the company. In return for substantial pay increases, to be progressively applied as successive phases of the plan took effect, drivers and terminal operators accepted the need for shift working as a matter of course and undertook readily to accept new operating equipment and procedures.
Were the social and commercial benefits promised by the Esso productivity deal exaggerated? To find out, I talked recently with Mr. Trevor Payling, costs and operations manager, and Mr. Brian Marshall, the company's industrial relations adviser.
Principles proved
Many of the principles embodied in the 1966 productivity agreement were proved in the successful reorganization of the Fawley refinery on which many thousands of laudatory words have been written. The need for a parallel examination of the distributive function as a whole was recognized as long ago as 1963, I learned. Studies suggested substantial scope for improvements both in equipment used and in operations generally. Despite high overtime (28 per cent) productivity was low. There was overmanning at terminals and the number of driving staff was excessive. Of the 1;409 tanker vehicles operated only 10 per cent were double-shifted.
Management itself was not excluded from the self-critical analysis to which Esso subjected themselves. In many cases it was recognized that managers were intellectually inadequate or required further training. The scope of local managerial authority, too, was reviewed to ensure that authority matched responsibility. Esso asked themselves five major questions: 1. Are our plants and terminals organized in the best way?
2. Is our distribution pattern efficient for the job we want to do?
3. What is the best equipment to do the job, 4. Are we using equipment to best advantage?
5. Are working practices as efficient as they might be in relation o effort and is reward adequately related to effort?
When prolonged research had provided the answers to the first bur questions it was possible to sketch out the details of the "new leal"—for question 5 led inexorably to the highly detailed producivity plan.
.Esso identified the objectives of their new deal and kept them n sight continuously. They included: (a) A financial return to the company with control systems to :nsure its achievement.
(b) A much greater utilization of equipment, particularly vehicles.
(c) Radical changes in operating procedures, including the introJuction and acceptance of new equipment.
(d) A radical reduction in manpower.
(e) Acceptable redeployment provisions.
(f) Widespread in-plant training to allow the development of he full flexibility called for.
(g) A satisfactory basic wage to remove the social need for ;xcessive overtime, while maintaining and increasing the man's vork output.
(h) An encouragement to greater productivity with controls to :nsure its regular measurement.
It is significant, I believe, that a company with such immense esources as Esso should accept that many of its managers needed to undergo training disciplines. Centrally, more than 2,000 mandays of training in managerial techniques.and control were organized and well received. The success achieved in implementing the productivity deal probably stems largely from there-educated management. Changes in the top structure of management, with associated reorganization at head office and in the provinces, were also called for. It is an indication of the competition faced by Esso managers seeking promotion that 10 area operations managers were chosen from 210 candidates.
Esso redefined managerial responsibilities giving plant managers and their subordinates greater scope for decision making. At the same time the industrial engineering function, which had grown from a regionally oriented work stpdy group was centralized to permit a concentrated study of countrywide problems.
Estimates of savings
The first estimates of possible savings based on the 1962 level of operations indicated that on truck operations alone more than Elm. could be saved. Revised clerical procedures could save nearly £700,000, and substantial savings could accrue from the increased flexibility of operating staff and drivers and their ready acceptance of new equipment and procedures.
So, when Esso managers negotiated with the T and GWU they were armed with detailed estimates of cost savings possible if the new deal could be successfully negotiated. In the event, the negotiations took much longer than eipected and not all the hoped for concessions were achieved. But the positive achievements included increased productivity; Saturday as part of the normal week; a single class of driver (except for drivers under training); a simplified
wage structure—no 30 m.p.h. bonus, no consolidated overtime allowance, no London differential, uniform treatment of overtime and simplified lodging allowances; flexibility of plant staff and between drivers and plant staff; and agreement to the proposed basic wage structure. There was a vast extension of shift work.
The Union would not agree to Sunday as part of the normal working week, and Esso accepted a limitation on the types of work to which this applied. There was no agreement on the general use of recording devices on vehicles (though recorders are fitted when there has been local agreement). Full countrywide acceptance of 40 m.p.h. working was resisted but much progress has been achieved here though, for obvious reasons, precise quantification is impossible. Esso's suggested 41 hour week (which had been agreed as the new working week during the pre-negotiation period) was reduced to 40 but, balancing this, no increases in manpower or overtime objectives were agreed on this score. Holiday entitlement was improved to three weeks after five years instead of the proposed 10.
Summarizing the achievements so far, Mr. Payling told me that despite a marked increase in the volume of sales, and hence deliveries, manpower has been reduced by about 11 per cent and the vehicle fleet, which was 1,409 in 1963, is now around 1,100. Overtime has been cut to a fraction of its former extent.
In the retail market 20 per cent of the work has been on a doubleshift basis for some months, said Mr. Payling. In the industrial market more than a third of the delivery vehicles are operated for at least 16 hours a day and the upward trend continues. All drivers work a shift system of some sort—often four days spread over six— and even day men are on a cyclical movement. Ideally, operations would be spread over 24 hours but it would need marked changes in the attitude of many retail and industrial customers—with consequential improvements in terminal facilities.
I was impressed with Mr. Payling's stress on the management control systems so necessary in a scheme of this magnitude. Esso establish manpower targets for all plants and check progress achieved on a monthly manpower statement. Likewise, overtime is checked at plant and branch level and an overall figure is produced weekly. The main item needing performance control—vehicle operations—is checked by what is called the R.I.D.E. programme—
reduction in delivery expense. A monthly control is prepared on th computer giving detailed comparison of actual performance agaim laid down standards. The performance of each type of truck i assessed and summaries of the performance achieved by each plan branch and region are prepared. The R.I.D.E. programme also prc vides a performance measurement on shift working and a break down of delivery data. In effect, it gives Esso complete cost dat on their delivery operations, measuring the contribution of bot management and drivers to productivity.
'Motivation index'
Naturally, adjustments are made whenever new equipment, suc as automation equipment on vehicle loading racks, is installed workload variations arising from changed distribution patterr occur. Within this overall control it is possible to assess tt drivers' effort isolated from the management contribution. Indeo a "motivation index", showing drivers' effort, was used to contn stage payments proposed under the new deal, and at head offic a marketing control centre—a sort of operations room—helps tho: with direct management responsibility to assess progress made great detail.
For example, it shows the number and operating costs of ESf and hired vehicles by size and the volumes handled by each categot
in relation to target volumes. It shows the average delivery size ft Esso and its associated Cleveland company vehicles against ti all important target delivery size. The numbers of weekly an
monthly paid staff, broken down into employment categories an overtime levels, are shown for all branches and regions and co and throughput details of plants and terminals are also show. Such data enable productivity indices to be plotted and they indica the sophisticated marketing techniques developed by Esso conjunction with the new deal.
Although the main lines of direction of Esso's new deal we determined at the top, Mr. Marshall stressed that depot manage and their works committees have been free to exercise a good de of local autonomy. The important question of rotas has been matter for local agreement—with a choice of perhaps 14 rot: there has been room for a great deal of discussion by those affected. I was not surprised to learn that rotas involving Saturday evening working are not very popular, although they have been accepted.
Esso have profited from joint consultation for many years and it was natural that in drawing up their new deal proposals they should seek ideas from staff at every operating point. Plant managers, and supervisory staff, of course, were familiar with drivers' problems and their proposals had regard to the human side as well as to practical operating necessities.
The new deal proposals offered generous retirement benefits under which drivers were permitted to retire at 55 on a voluntary basis. Mr. Marshall stressed that no discrimination was exercised by the management but in fact a very high proportion of people in the upper age groups chose to retire. In places local staff shortages had to be adjusted though overall the establishment position was satisfactory.
Operating and driving staff—and their wives—had accepted the inconvenience of shift working because they recognized the benefit of the shorter working week in total. Brian has personal experience of shift working—he opined that the most inconvenient form of it was continuous coverage which involved switching from mornings to afternoons and then to nights in successive weeks—justifying the highest shift differential.
"Sometimes," he went on, "we are asked: why didn't we sit down with the men and create the new deal jointly? Our answer is that it would have been hopelessly impracticable to follow any other approach than the one we chose. There are limitations to drivers' knowledge of technological and organizational matters. We hold that it is management's duty to point the direction and to make the proposition to the employees affected. This conception is implicitly approved in Alan Flanders' book on the Fawley experiment. It is quite essential for management to have costed out the plan before they approach the negotiating stage".
I asked Trevor Payling if he felt—with hindsight—the Esso approach could have been bettered. He thought that in the prevailing circumstances Esso had bitten off as much as they could sensibly chew. Further productivity deals with consequential changes in attitudes and operating practices could be anticipated in the future. I did not gain the impression that Esso is at all complacent about the benefits achieved so far with the new deal. Progressive improvements in organization are still possible though much depends upon changes in customer and selling conditions. The Prices and Incomes Board has stressed that the public interest must be recognized in any productivity agreement and here Esso can justly say that their heavy investment in plant and distributive facilities has enabled them to improve the quality of their products and services, well deserving a fair return on capital employed. As Trevor Payling reminded me, other forms of energy have increased their charges; oil has not—indeed the recent price cuts are the more remarkable in that they have coincided with escalating costs in many areas.
The drivers and operating staff whose working routines have been altered by the new deal have gained increased leisure and the sense of security which comes from working for an efficiently organized company. Esso have demonstrated that traditional productivity and overtime norms can be greatly improved with profit to everyone concerned—including the public at large.