The way things worked was clear from the start. Just do what you're told. Do what you're told and everything will be fine. The only time you get in trouble is when you don't do what you're told.

As the new leader over supply chain and manufacturing at O.C. Tanner, Gary was confronted with a culture where there was no real ownership or accountability for the results.

Gary Peterson:

When I first moved to manufacturing, I found that we had very bright, capable people on the floor, but they were not being invited to participate in any way whatsoever. The supervisors, the team leaders, the directors—just very controlling. When I would talk to people about the output, they were like, "Well, I don't have anything to do with the output. The manager owns everything—safety, quality, efficiency. I'm not involved." I was like, are you kidding me? You're touching every piece. You own it all.

McKinlay:

So how do you change a culture like that? That's what we're talking about today. The kind of change required to take an environment that's dominated by fear, where employees feel like cogs in a machine, and turn it into a culture where each person is a meaningful contributor who takes ownership and drives innovation.

Welcome to Leading Outward, the Arbinger Institute's podcast, where we explore the tools and ideas we've used for over 45 years to help people solve their toughest leadership and organizational challenges by leading with an outward mindset—seeing people as people. I'm McKinlay Uterson.

Gary:

First thing we're going to do, let's go out on the floor. I want you to go talk to people.

McKinlay:

Today, I'm speaking with Gary Peterson, who's been at O.C. Tanner for 20 years. O.C. Tanner is a powerhouse in the world of lean manufacturing. They've grown their revenue by 56% in the past five years, and they're a showcase for Toyota and a "go and see" site for McKinsey. But this has not always been the case. When Gary first stepped into his role managing supply chain and manufacturing, he inherited a culture where employees operated in silence, afraid to take any initiative.

Gary:

We'd have team meetings—I'd have eight people sitting in front of me. We were collecting data. So I'd say, "Okay, let's see what the data shows for this week. You guys did this, you did that. Can we talk about what happened?" Not a word. The team meetings at that time were 15 minutes long, because that's about all the silence I could take in one go. They wouldn't even look at me. There was just fear. A lot of fear.

It took literally months before people started to open up a little bit. The very first comment somebody made—I'd said, "Your team's quality is the worst of all the teams. You've got to know what's going on." A woman slammed her hand on the table. "You want to know what's wrong with our quality? Katie's work looks like crap." But she didn't say crap. I'm thinking, oh, that's not what I wanted.

McKinlay:

Which is exactly why no one was saying anything.

Gary:

Exactly right. It's not safe.

McKinlay:

It's not safe. But this is not at all what their culture looks like now. I actually got to go meet Gary in person at O.C. Tanner, and he took me on a tour of their production floor. The space is beautiful—full of natural light and organized into aisles, where each aisle has the machines the team needs to do their work. And as we walked around, Gary kept pointing out improvement after improvement. Machines that used to be filthy to work with are now totally clean to operate. All machines are height-adjustable and movable, so they can be adapted to whatever project the team is working on, and the specific person using the machine. Even the machine setup process has been dropped from minutes to seconds. And I asked Gary, who comes up with all these ideas? And he immediately walked me over to a whiteboard that was covered in writing. And then at the bottom of the board, there are these small holders packed with slips of paper.

Gary:

We've got these idea cards, improvement cards. Anytime a team member has something they want to improve, they write down the problem. They answer some questions about it. They turn it over—how much money would be saved if we cut out three seconds here? How many times a year? They do the math. They're like, "Wow, I just saved $800. That's fantastic. That's really cool." They write down their idea. They put it on the board here. And then in the weekly team meeting, the team pulls the ideas off the board and they talk about them. The team decides which ones to implement.

McKinlay (reflection):

The team decides which ones to implement. And being here on the floor, it's obvious why that's key. If they came up with the ideas but someone else had the final say, it would be so easy for things to get misaligned and people to end up working in silos. But instead, they own it. They track the impact. They make the decisions, because they're the ones who feel the effects firsthand. And they're the ones who know exactly when and how to roll out these changes in practical and sustainable ways.

Gary:

That's how everything changes. Like, if a team member were to say to me when I'm walking through, "Hey, Gary, we ought to fix this," I'm like, "Cool." Right? Actually, no one ever says that to me. They just come and write it down.

McKinlay:

This seems critical, too. The team isn't just throwing ideas into the void, hoping that Gary or someone else in leadership takes notice. They put things into motion themselves. No waiting around, no passing of ownership, no bottleneck of a leader—because empowerment at O.C. Tanner means action from everyone, all the time.

Gary:

We give them all the data they need so they can make the best decision. They know what their profitability is, or what it was yesterday and what it is now. And this whole group is working on a profit margin for their product. We do incent them—it's on our six-month bonus. They can hit their goals. But this way, they are actually chasing value to the client, as opposed to pieces per hour or something like that.

McKinlay (reflection):

This seems like the third key ingredient. It's not just, "Hey, what ideas do you have?" It's, "What ideas do you have that will improve the business?" And the team is empowered to make those changes because they have full access to the data. They see how their ideas impact the bottom line, and they care about that—not just in theory, but because they have real stakes in the results. Their work directly ties to the company's success, and they share in that success.

That's what kept standing out to me as I walked the floor with Gary. Real change is driven by the people closest to the work. They own it. They feel responsible for making things better. And that creates an environment where ideas aren't just encouraged—they're expected.

This mindset doesn't just exist on a few teams at O.C. Tanner. It's across the board. Even the busiest teams make time to discuss new ideas, test them, and make improvements quickly.

Gary:

Let's go visit the team that is the busiest.

McKinlay:

I would love to.

Gary:

A lot of pressure on them. More than any other team in the factory right now. Hey, how you doing?

Mary:

Hi.

Gary:

We were over in Jade and everybody was laughing and smiling, and I said, "Hey, let's go to the busiest team in the factory." Crystal says, "Everybody is talking about you guys—how much you laugh."

Mary:

Yeah, that's fine. Why not?

Gary:

You're under too much pressure. You shouldn't be smiling or laughing.

McKinlay:

What's your name?

Mary:

Mary.

McKinlay:

Mary, I'm McKinlay. Nice to meet you. Can I ask you, Mary—you're so busy, you have so much to do, and you're still laughing. Getting comments about how much you're laughing. How?

Mary:

Oh, I have a great team, and I believe in them, and they work hard, and they're easy to work with. When you have a good team, no problem.

McKinlay:

How do you think about them individually? Every person is different. How do you approach your work in terms of person by person, knowing how to help each one?

Mary:

Well, that's a good question. I have Jennifer—extremely quiet, but a really, really hard worker. So I have to be really careful how I approach her, so that she doesn't think I'm yelling at her. Well, then I have to yell at Christina. Christina is from Mexico. We have kind of the same personality, so we can laugh and yell and stuff like that. So yes—I try to learn who they are, how they like to be approached, how they take my feedback. And then we don't put our names on any defects or catches.

McKinlay (reflection):

As I'm listening to Mary, I'm thinking, wait—I thought the whole point was to celebrate catching the inefficiencies and defects, so that they can be fixed and improved. But Mary explained that recognizing the individual who finds the problem shifts the focus away from what actually matters. Because at the end of the day, it's not about who caught the issue. It's about how the team solves the issue. Problems matter because they shine a light on where things can be better. But the win is greater efficiency, smoother processes, and a team that works together to make that happen.

And talking with Mary, it became clear that this approach—a total lack of blame—is a huge reason why these teams are able to take ownership and make improvements quickly.

Mary:

So I don't blame, ever, any team member or myself for something wrong. We have processes that we can always make better for us. We talk—what can we do? How can we change? Why did somebody get confused? We need to improve it. You need to talk about it, but you need to make it safe to talk about it.

Gary:

I was here one day for the huddle after lunch. They had a bad first two time buckets. They missed them, and Mary was like, "Hey, what's going on? What happened here?" And her two most senior people—one of them said, "My fault. I read the die number wrong. I worked the wrong die for the whole 15 minutes. Wasted everybody's time." And Connie said, "No, no, no, not your fault. I took it from you and I didn't double-check it. I just kept it working. It's my fault." In front of the executive vice president.

These two senior team members were trying to take the blame from each other for this problem, instead of looking for excuses. Nobody worries about, "Well, whose fault is it?" Let's just figure it out. We don't want anybody to be scared to say, "Hey, I make mistakes." We want to help them be better and do better.

McKinlay:

Thanks for sharing.

Mary:

Thank you. Thank you for stopping by.

Gary:

The best team member.

McKinlay (reflection):

Mary is a team leader. But she's not in the team. The team is making all the shots. There it is again. Mary's the team lead, but the team doesn't wait on her to step in. They are fully empowered to take action on their own. And that's what leadership looks like at O.C. Tanner. It's not about catching every issue or making every call. It's about building a team that can do that themselves.

McKinlay:

What was the beginning of this journey?

Gary:

Maybe your listeners won't believe this is true—you don't even know this. You didn't know this before you came here. Everybody read Leadership and Self-Deception. My ring's manager, Dustin, brought it to me one day. It was still pretty hot off the press, a couple decades ago. He says, "Hey, I'm not giving you this book because I think you have a problem." That's the standard. "I've given it because I think you'll really like it."

McKinlay:

Leadership and Self-Deception was first published by the Arbinger Institute over 20 years ago. And it talks about how, when we're self-deceived, we don't see people as people, with their own needs and concerns—and how when that happens, we end up working against the very results we're trying to achieve.

Gary:

I read it, and it's like, holy cow, it changed my life. Literally.

McKinlay:

How so?

Gary:

You're reading and it's interesting until it connects. Once it connects, all of a sudden it becomes very real to me. I have six children, and as I was reading the book, they were talking about not getting up at night with the wife and kind of abandoning her to it. Guilty. And here I had all these reasons why I needed to do it. I had to go to work. I had to be productive. I could justify myself all day long. But in the end, I was treating my wife as an object. And I knew it. It was just like a ton of bricks falling on me. A good ton of bricks. It didn't smash me. It woke me up and said, "You know, Gary, you use people. You treat people as an object."

So I believed it. I could see its application, and so the rest of the book made sense to me. We gave everybody a copy in the factory, and it was powerful. I was so delighted that, over the course of the next several months during the weekly team meeting, I was seeing teams in conference rooms reading the book together, and then they put down the book and they talk.

So at the same time that I was starting to teach these teams about how to be a team together, how to talk about issues, I was also sitting down with the management and retraining them on being more of a coach and more of a teacher, more of a mentor—which they had no interest in doing. I think a lot of the production managers and supervisors thought, "I can outlast this guy. He's not going to last. I'm a survivor. Eventually, he'll just go away, and I can go back to how I was."

There was fear on both sides. Management thinking, "I don't know how to succeed in this environment that you're describing. I'm not sure I believe this environment you're describing is actually good." There wasn't a clear message from the top that this is what we're doing. There were questions at the top. "Is this the right thing to do? Are you sure about this?" And even our CEO at the time—I got called into his office a couple of times. "Explain empowerment to me, because it sounds like everybody's just putting off the solution until someone in the corner is forced to call it." So I was always a little bit off-guard. I was a little bit afraid. I was running a lot on fear—is my job really safe? If I take this next step, am I going to be okay? So that's what we had. It took a long time, but we've turned it upside down.

McKinlay:

If this episode was sent to you, thanks for being here. That means someone in your life listened to this and thought of you, which is such a gift—to have relationships like that. And if someone has come to mind while you've been listening, it's probably because what you're hearing could help them solve points of friction in their life. So care enough about them to share this episode.

How did you go from this uncertainty and resistance to where you are now?

Gary:

At one point, we decided that we had to do something to get team members to realize they do control quality. They do control efficiency. They do own safety. They can work together. Those were the four things we were trying to teach them to do. We changed our compensation system so that, as a team, you had to meet certain goals each week and you qualified for the week. And you had to put together 13 out of 16 good weeks to get a raise. So if you missed four weeks in a 12-week period, you're basically starting over. So it's consistency in hitting your targets—efficiency, quality, safety. But I'll tell you the thing that made the biggest difference: they had to sit down with their manager every week, one-on-one.

McKinlay:

O.C. Tanner has team leads, like Mary, who we heard from earlier, whose job it is to improve processes. Then there are also team managers—which is the role Gary is talking about right now—and their job is to coach and develop their people.

Gary:

You had to sit down. The manager had to walk through your data with you. Had never happened. And the span of control was too big at the time, so we were only asking the manager to spend five, seven minutes with a person. But it was magical. That one-on-one time where we're talking, and all of a sudden you're more real to me, I'm more real to you. It's no longer, "You're up there, you're the boss, I'm down here." It's more like we're just sitting here talking to each other. "And actually, you're a pretty decent person." And, "Oh, and you see how smart I am." All of a sudden, a lot of doors started to open up. And I'm not kidding you—within six weeks of just weekly interactions, one-on-one with everybody, I was feeling some pretty big icebergs melt. Some distance between people, some struggles—everything was changing as people were seeing each other more as real people.

McKinlay:

So the change in pay structure, it worked.

Gary:

Within a year, all the team members were like, "We can do this." We took that system away. We didn't need that anymore. But we kept the coaching. We kept the one-on-ones. We're saying to every manager, "You're going to sit down with every team member for 20 to 30 minutes every other week. You're going to talk about how you can help them, and what matters to them, and how work is going. Just be there with them."

A lot of them didn't want to do it, despite having a good experience. A lot of them were like, "Oh, I'm too busy. I don't have time for that. What do you want me to drop?" And I said repeatedly, "I don't care what you drop. Drop whatever you want, because this is what matters the most."

To this day, this coaching system is one of our most important systems, because it brings people together. I would say now that coaching capability is probably what we value the most in our management. Managers are now coaches and teachers and mentors. They're very good at it, and they genuinely care about their people, and their people know that they care. So if I sit you down and talk through an issue with you, it's from a place of safety. You know I have your best interest at heart. So let's talk candidly. Let's fix this issue.

Crystal—who came walking by—she's the manager, and she is spending 30 to 60 minutes once a month with every team member. She has about 20 team members on average. So that means every day, she's spending 30 to 60 minutes of her day with a member of her team. It's a big demand.

McKinlay:

So Gary, talk more about this. Because when you said there was some resistance—"What do you want me to drop? I have a whole schedule of things to do"—and you said, "I don't care what you drop, because nothing is as important as these 30 minutes that you're spending with these members"—that sends a really clear message. Why? And did it take a minute for people to agree with you on that?

Gary:

It didn't take long. I was actually saying at least once a month, preferably every other week. And the ones who were doing it every other week were telling everybody else, "All of these issues I'm reacting to are gone. They're disappearing. There's nothing for me to solve."

McKinlay (reflection):

Leaders were experiencing this firsthand—that spending time with their people wasn't just meaningful, it was giving them time back in their day. And for leaders, time is one of the scarcest resources. So seeing that investment in team members pay off by clearing away issues before they even occur is an incredible return.

And Gary believed in this process and structure because he was seeing it work. But then he became the executive vice president, and suddenly this idea that investing time in your people gives you time back wasn't as simple.

Gary:

When I became the executive vice president, the outgoing executive VP said to me, "You're not going to be able to spend as much time on the factory floor as you have been. You're going to get sucked into strategy, into corporate things, and you just got to set that aside." And I thought he was wrong. Turns out, he was right.

When I was getting to the floor, people were saying, "Oh, we missed you. Where you been?" It was painful for me. And I thought, I'm good at strategy, I'm good at corporate stuff, but my time on the floor with people matters. I think one of my gifts is best manifest by me talking to people and being with people on the floor. So how do I prioritize my day so that I can get to the floor?

I made a list of all the gifts I thought I had—this is what I'm good at. And then I shared it with my directors and vice presidents, and they laughed me to scorn. But then they agreed. "No, this is true. This is true." "I don't know about that. You think you're good at that?" And then I listed all the stuff I was doing. I tried to match them up, and there were a bunch of things that didn't match up to what I brought to the table. So I went back to my team and I said, "Hey, so I matched this up, and I think these things don't fit. I think I'm going to stop doing these. So whoever wants to do them, you can grab them." Two-thirds of them, people grabbed. "I'll take this. I'll take this. I'll take that." But there were three or four things that nobody grabbed. I was like, "Well, I'm going to stop doing that." Everyone was like, "Yeah." It was like, "Oh my gosh, that would have been good to know—that nobody cares that I do that."

So I was able to jettison things off of my plate, and instead put on my leader standard work—my daily activities, these are the things I'm going to do that make me more valuable to the company. And so, every person from Mary up has leader standard work, defining what matters and then tracking it. And you saw this. We don't spend hardly any time on interpersonal struggles on our factory floor.

McKinlay:

How much time do you think interpersonal issues was taking initially?

Gary:

Oh, I think it was taking all day. Maybe not dealing with it all day, but all day long dealing with the ramifications of these three people who were in turmoil. And the hit that gives them productivity in a four-person cell when three of them aren't getting along.

We believe that the people closest to the job are the ones best suited to make improvements to the job and to drive the job. And if you're not seeing eye to eye, then how do you do that together? Teams make better decisions than individuals do. You get a good group of people together, especially if they're diverse. You noticed on the floor, we're incredibly diverse. Different backgrounds, different upbringings, different languages—whatever it is, they come with a different view. "Well, what are you thinking?" "Wow, that's different than me. How—that's interesting. Say more about that." If I can get them talking like that—man, good decision-making. "I never even thought of it that way." But there's not going to be that desire to even communicate like that if you're really annoyed.

McKinlay:

That's right. "I'm not talking to you. And now, oh, there's a problem here, but I can't talk to you about it because we're not speaking."

Gary:

So I think it's a big deal.

McKinlay:

How do you, as the leader, actually ensure that people are working in this way in terms of this coaching?

Gary:

I say to everybody, "This is what you need to do. This is what you're going to do." And then I go do something else for a month, and I come back, and two people have done it—which is probably your normal. 18 people have not done it because they were just waiting to see if it was really going to be a thing. And when I never asked about it for a month, they just let it slip.

But now I try to say, "I really want you to do it this next month." It is harder to get it going. It is much less effort to say to everybody, "Look, you're going to coach at least once a month, preferably every two weeks, everybody for 30 to 60 minutes." And then to come back two days later and circle around with everybody. "You have 20 people, so you should have already done two. How's that coming?" And then the ones who haven't done any, circle back the next day.

It sounds like a lot, but it is a lot less effort than waiting to the end of the month and trying to get it all going again. Momentum is the most important thing. Once you start doing something, if it's really right, you got to stick with it.

McKinlay:

Did this momentum get picked up by other people in the organization? Because I'm just thinking that this is way more than just one person can do.

Gary:

I found, rather than trying to change the whole organization at once, it was better to go to a group that was interested and willing—who I could work with—start to do excellent things. And other people are like, "That looks good. They're excited. Tell me about that." "You want to do that? I can get them involved."

You're always going to have your outliers, the cave dwellers. And I spent too much time in the early days trying to convince the cave dwellers to get on the boat. I was in a big insurance company helping them with some of their continuous improvement ideas, and I was in a customer service huddle. There were about 20-some people, 17 of them fully engaged. The manager or supervisor, I don't know who it was, was up there talking. Everyone was like, "Yeah!" And then there were three people at the back with their arms folded, and they were grumpy and they were just scowling. I just kept looking at them, because they were so different than the 17. And the manager came down to me afterwards. "I'm sorry. I noticed you saw my three." I said, "No, no, sorry. I'm fascinated by them. They've lost. They used to control the narrative. They used to be the ones who, 'Oh, come on, everybody, yeah, what she says.' And they can't figure out how they lost it. How did this slip away from me? And now all of a sudden there's 17 people who don't care what they think."

They really only have two options at this point. They can either get on board, or they can go work for some other company who is fine with the scowling and the growling. Now, I do think it's totally legit, after that huddle, to go to them individually and say, "How are you doing? You want in? Can I get you in? How can I help you in?" Give them an invitation. I think you got to keep inviting. Then they get to choose. "I don't want in." And the people who don't want in to something like that—I worry there's something wrong in their life. They need someone to pay attention to them and to show that they're interested in what's going on. Sometimes they're not in a position to talk about it, and that's fair. Life's tough. But where you got to spend time is with these people who are like, "Let's try it. Let's do it. I love it. Let's talk about it." Because they build momentum, and they attract people.

McKinlay (reflection):

Big changes do not happen because everybody gets on board right away. Those big changes happen from the work of a small group of highly influential people who create energy around the change, which invites people in, builds more momentum, and gradually invites more and more people into that process.

But an important component of momentum is making sure that the right things are in motion. At the Arbinger Institute, we talk about that as measuring our impact and adjusting our efforts based on the impact we're having. Because without those elements of measuring and adjusting, it's really hard to innovate. So Gary talks about this in context of why it's important to have those consistent check-ins while you're in the process of facilitating change.

Gary:

If you're not there and present and something's going wrong—like the instruction I've given isn't quite right—it's not hitting on all cylinders. It's a little bit uncomfortable. If I'm not right there, I can't see that, I can't hear that, people can't talk about it, we can't adjust it. Instead, I leave them all month to struggle with this idea that really wasn't fully formed and wasn't really thought through. So if you really believe in continuous improvement, you've got to be willing to put something out there and then the next day challenge it. "Is that the best we can do? What did you find when you tried to apply it that's better than what I told you?"

"Hey, everybody, she said, let's listen to this. This is what she learned yesterday. What do you think?" And everyone's talking. "Yeah, I found that too. Should we do that?" That's part of the momentum building. You got to be in it if you really care about it.

McKinlay:

Have there been setbacks? Have there been things that are like, "Oh, we shouldn't have done it this way," or, "This has made things harder"?

Gary:

Yeah, there have been a ton of setbacks. We made so many mistakes, so many errors. But I think that it also gave us a ton of growth.

I made a huge mistake one time. I was in a tough spot. I ended up hurting a woman who was trying to challenge what we were doing, and I was too scared to acknowledge it. In the end, I had to apologize, and she wouldn't make herself available to me. So when I apologized, I was really apologizing to her whole department. The only thing that made sense by way of excuse was: I don't know what I'm doing.

So here, I fought her initially because I felt vulnerable, and the only way out was to make myself more vulnerable. I tried for days—literally for days—to come up with a way to say it where I didn't become more vulnerable, and it just—it wasn't real. It wasn't the truth. It didn't make any sense why I would behave the way I did, if that wasn't really the reason.

So I go in there and make myself completely vulnerable to these people. And I thought, blood in the water. I was waiting for the pitchforks and torches. And instead, the two most powerful team members on that team came to my office, and they said, "Hey, I'm listening to you describe this problem you're trying to solve. What if…?" And they came up with a possible solution.

This was a couple years into our journey, and it was, quite honestly, the first time that people had tried to just—"Let me tell you what I think we should do." It was the first time. I said, "Well, are there people that you're working with who would like to try to help you implement that?" Yeah, there were like five of them. "Well, do you guys want to try it?" And they went and did it. It didn't work. So they tried something else. "What are you guys doing?"

It was like an atomic explosion, in the sense that everyone's seen, and everyone starts picking stuff up and running with stuff. Why? Because, turns out, Gary doesn't know what he's doing. So we might actually be able to contribute here. Maybe we ought to get involved.

What I taught was the principles we were trying to follow. What I didn't know how to do was actually apply them—how to make the principle work. Me making myself vulnerable was the beginning of everybody taking ownership, and it spread like wildfire. And of course, a lot of preparation. It probably wouldn't have worked if I had done that three years earlier. But by then, we had gotten to a critical place where we had solved a lot of other issues, taught a lot of problem-solving methodologies, built a lot of things. The people were ready to take off.

McKinlay:

So mistakes became a big part of what drove you to becoming better.

Gary:

Yeah. Though they maybe were setbacks initially, but then they actually helped the momentum.

McKinlay (reflection):

It's so cool to learn about how all of this started, and how mistakes were actually the origin of their change. Because you see a company like O.C. Tanner and you think, "We will never get there." But they've been at this for a while. So for me, hearing how all of it started helps me remember that as rare as their culture is, it isn't impossible. You can replicate this.

Gary:

Everyone who comes in here on a tour, I have a timeline of all the things we've done over the last 30 years. And about seven years in, there's the Arbinger training. I say to them, "Are you familiar with this outward mindset, Leadership and Self-Deception?" And there are usually a few people like, "I know what you're talking about." And I say, this makes a big difference. Because people just know, "I'm supposed to treat people the right way. I'm supposed to see people the right way." And man, it just makes everything easy.

McKinlay:

Leading Outward is produced by the Arbinger Institute. To have a conversation about how we can equip you to transform your leaders and organization, schedule a complimentary strategy session at arbinger.com.

And whatever came to mind for you while you were listening—a conversation you've been putting off, or feedback that needs to be shared, an action you need to take—don't wait. Take that action, because that's how change starts.