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Thriving in the Hardest of Times - Bata Shoe
Company (Part 1 of 2)
by Stewart
Nash,
Questback Boston, LLC
The Bata Shoe Company of Zlin, Czechoslovakia (today's Czech Republic)
during the great depression is a remarkable story of success in hard
times. Bata Shoe thrived during a time of deflation, social un-rest,
international protectionism, financial collapse and ultimately war.
Without external financing, during the decade of 1930 to 1939 Bata Shoe
grew from a large Czech business with 16,500 employees into a
trans-national enterprise employing over 100,000 people in 40 countries.
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Given the circumstances - how was Bata able to grow so
much and so profitably?
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What lessons can we learn and apply to our businesses
today?
Bata Shoe has been the subject of academic study with a number published
articles and books available. This two-part article attempts to describe
key ingredients of Bata's success and their relevance to businesses
today.
Background
At the turn of the 20th century Bata Shoe was a small family owned
enterprise. The company began to grow just prior to World War I after
the introduction of modern American shoe manufacturing techniques. WWI
provided a major boost to business (manufacturing boots for the Austrian
army). WWI's aftermath brought on a major recession as war spending
ceased, deflation set in and the national government changed to
Czechoslovak from Austro-Hungarian.
At this point in time Bata Shoe became a really successful business. In
response to deflation, in 1922 Bata reduced retail prices by roughly
50%. The company's unit sales growth and profits continued. Bata'
leadership, management system, financial structure, alignment to
customers and alignment with employees allowed everyone to "win."
Customer's with a better value proposition, employees a better standard
of living (even after salary cuts), society a thriving business and
communities, and lastly profits for the enterprise.
Bata understood that in a time of deflation it was critical that their
shoes become less expensive, both on a nominal and relative value basis,
while maintaining quality. Bata believed the company should be perceived
as contributing to higher living standards through both its employment
activity and its lowering of footwear prices. "Service to the public"
was a famous Bata slogan of the time, and they followed through, with a
pair of Bata shoes costing 75% less in 1931 vs. 1922.
Core Principles
Two principles guided everything Bata did:
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Enterprise
alignment with the Employee
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Enterprise
alignment with the Customer
Bata's success had other important contributing characteristics
including a unique cost accounting system and high vertical integration
from production through to retail distribution. They also had visionary
leadership in Tomas and, after 1932, Jan Bata who envisioned the company
as the trans-national enterprise it subsequently became. But Bata looked
first to their customers and employees for the competitive advantage
that allowed them to achieve major, profitable and organic growth.
Note: Many competitors of the day had varying degrees of vertical
integration. And Bata's unique (for the times) cost accounting system is
a subject for study in and of itself. This article deals with Bata's
focus on Customers and Employees as growth drivers. We touch upon Bata's
cost accounting system, but only in the context of aligning employee's
individual interests with those of the customer and the enterprise.
Enterprise Alignment with the Employee
"Buildings; they are just piles of brick and concrete. Machines; they
are a lot of iron and steel. Only people can give life to it all." -
Tomas Bata
Bata believed that removing "barriers to focus" would let associates
concentrate effort on improving their standard of living through smart
and hard work. Bata associates had high standards of living but were
paid mediocre salaries. Rewards came from profit sharing, bonuses,
subsidized housing, subsidized health care, continuing education and
even payments to employees who had had a baby. Each associate's path to
higher standards of living was visibly within his control yet also very
closely tied to company success. As associates worked to improve their
department's profits, Bata also profited. The enterprise was "aligned"
with the interest of its employees.
"I want every worker to be the first book-keeper in the factory. I
want him to know in figures all there is to know about his job, and I
want all the workers to know in figures how they fared each week. It is
no use for these figures to be known by the managers alone, or to know
them only once a year." – Tomas Bata
Bata's profit sharing was unique for the times. "Profit" was accounted
for at the department level and each department was a profit center.
Every employee knew his department's inputs/costs and outputs/revenues
on a weekly basis – as well as for all other departments. Internal
pricing was completely transparent. And, managers were rewarded based on
the same profits as were workers. The system unleashed a torrent of
innovation and productivity as associates worked to decrease costs and
increase revenue across their departments. Bata associates worked hard
and "smart" to maximize profits in their departments. They were
"engaged" to a degree that companies today only dream about.
In our next issue, we will conclude this article with a discussion of
Bata's second guiding principle – Enterprise Alignment with the Customer
– and a presentation of lessons from Bata's experiences that can be
applied to today's troubled times.
Authors note: Jan A. Bata was my grandfather. At the age fourteen I
began training as an apprentice shoemaker in the Bata Shoe factory in
Batatuba, Brazil. The management practices discussed in this article and
the reasoning behind those practices comes from direct instruction by
managers and principles in the Bata system. To create this article I've
relied on research published at Fordham University, the book
Entrepreneur Extraordinary – The Biography of Tomas Bata by Anthony
Cekota, the public books and private notes of Jan A. Bata.
Get Your Serve On
On March 3rd, despite a day's delay due to a snowstorm, 12 people from
the First Baptist Church of Hudson, NH boarded a plane for New Orleans
to participate in a Habitat for Humanity project building houses in the
gulf coast area of Mississippi. The team was comprised of: Craig Bailey,
Ellie Cropley, Al Daigle, Bri Daigle, Torre Daigle, Pastor Jim
Harrington, Clarice James, Mike Ledoux, Bruce Mostrom, Terry Mostrom,
Tony Rice and Jessica Surro.
The team arrived at the worksite on March 4th eager to work alongside a
team from Maryland, under the direction of Jamie Morton, the site
foreman from Habitat for Humanity. The previous crew had framed and
sheathed the house, which was now ready to receive a roof. The team of
volunteers worked diligently throughout the week in great weather
requiring sun block and bug spray. By the end of the day Friday, the
house had a roof, a shed was erected and both were ready to be tar
papered and shingled by the next crew.
Day 1 – Wednesday March 4, 2009
Day 3 – Friday March 6, 2009
The team's quick work put this build project ahead of schedule by 4
days! A key factor contributing to the team's productivity was the
FANTASTIC leadership of Jamie Morton from Habitat for Humanity. Jamie
had a great attitude, provided the direction needed and made sure that
all the tools and materials were on the site in advance of when they
were required.
The most rewarding part of the experience was meeting the Lyons family
who is scheduled to move into the home in the July timeframe. The Lyons
were forced from their home as a result of hurricane Katrina back in
2005. Until recently they had been living in FEMA provided housing but
have since been vacated from that and are now living with relatives in
the area.
The entire crew with Mrs. Lyons (in center of door)
Every person on the team recognized what an extremely rewarding
experience this was. In addition, the local people were extremely
appreciative of the efforts of volunteers who are continuing to stream
into the area to help rebuild.
The team would like to thank a number of people, including: all those
that donated funds for the trip completely covering all costs; Heather
who hosted the team at Camp Victor, in Ocean Springs, MS; Loren Moylan,
the Habitat for Humanity volunteer coordinator; and Jamie Morton.
If you haven't had the opportunity to do anything like this, it is
highly recommended. Don't feel that you need to be a master carpenter to
add value to these projects. There is quite literally something for
everyone to do, from working in the kitchen feeding volunteers to
swinging a hammer (which ANYONE CAN DO).
In closing, there is still much to do; the rebuild of the gulf coast
area of Mississippi is ONLY 30% complete. As the team worked on the
Lyons' new home, they could gaze around at the neighborhood and see
boarded-up homes and inhabited homes that probably would be condemned if
a strict inspection were conducted. Habitat for Humanity has a goal of
building upwards of 800 more houses in the area in the next few years
for people who are still without housing, as a result of
hurricane Katrina.
The crew from First Baptist Church, Hudson, NH
Thanks for your support.
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Contents
+ Thriving in the Hardest of Times - Bata
Shoe Company (Part 1 of 2)
+ Get Your Serve On
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