Agile Case Study – FAVI

Background

FAVI is a manufacturer and supplier of copper alloy parts for the automotive industry, among others. Located in Hallencourt in the Picardy region of France, it was founded in 1957 and has gained considerable attention since the 1980’s for its unique way of working. Starting in 1983, former CEO Jean François Zobrist radically changed the way FAVI was organized. He transformed FAVI from a traditional command-and-control organization to an agile company based on core values of love of customer, freedom, trust and equality. As a European industry leader, FAVI supplies almost all European automobile manufacturers (Renault, PSA, Fiat, Opel, Audi, Volvo, Volkswagen, etc.). In an industry where the threat of outsourcing is very real, only the quality of the company’s products, its relationships with its customers, its specialist skills, and its competitiveness can explain its current success. 

Results

With the exception of matching the cost of raw materials, FAVI has not increased its prices since 1995. From 1985 through 2010, they never had a late delivery. In 2010, FAVI generated a Net Profit of €75.5 million with 406 employees. FAVI has achieved ISO 9001-2000 and after, becoming the first European foundry to gain ISO 14001 certification in 2000, FAVI also became the first French company to obtain OHSAS 18001 certification (health and safety at work). In 2008, FAVI was also the first European foundry to obtain ILO OSH 2001 certification and in 2010 the company was awarded the Peugeot Quality Trophy. 38% of employees have a tenure of 15 or more years. 

Preparing for the Transformation

When Jean François was presented at FAVI as the new CEO, he first started with a 4 month ‘tourist period’. He decided to learn by observation only; to do and touch nothing along the way. He settled down in an empty office and spent his first days just touring the factory. He started talking to everyone and attended all meetings without participating in them.

After the first 4 months of his ‘tourist period’, Jean François started what turned out to be a long transformation period. He began this work by clarifying his personal strategy to his management team: “First, you have to know that I will never leave by myself. But I will offer you my resignation letter every 5 years because I know that power can make you mad. I want to provide you with the opportunity to act in the best interest of the organization when something like that happens to me. Moreover, I may exhibit the strengths and weaknesses that are well suited for the organization at this particular moment, but the same strengths and weaknesses might become a burden at another time in history.”

The Transformation begins

Jean François: “I knew that we had entire freedom from Max Rousseau (the owner), so I started dreaming. I was dreaming of a company where the worker would become the operator. A place where operators would be able to organize themselves, adjust machines themselves and manage themselves.

At that time, we were awarding bonuses every month, up to 20% of the monthly salary. Most of the bonuses were awarded based on the mood of the direct supervisor. I was dreaming of a place where the bonuses were integrated in the base salary and I was dreaming of a system where we would share our results equally with everyone.

At that time, there was an artificial partial mandatory time off planned from workshop to workshop to maintain a ‘healthy pressure’ on the employees. I was dreaming of a place where there would be no more unemployment. And would such a thing happen in a worst case economic scenario, then everyone would suffer the consequences, not only the operators.

At that time, everything was locked in our warehouses, including consumables and safety equipment. I was dreaming of a place where everything would be unlocked by default. Even the offices. Everyone should be able to have access to the tools that are necessary to perform their job.

At that time, we were only demanding hands and muscles from our employees and only the boss and sales manager knew the clients. I was dreaming of a place where everyone could use his brain and his heart, and where everyone within the company knew their clients, could visit them, and even meet them.

I was simply dreaming of a place where everybody would behave like they did at home, nothing more and nothing less.”

A series of symbolic acts followed. First Jean François decided to brick up the big window where management overlooked the production floor, symbolizing that the job of management was no longer to oversee the operators. This was seen by the employees as a symbol that profound change was about to happen. Jean François: “Looking back, this symbolic gesture created the first levels of trust.” The next steps were:

• removing the time-clocking system;
• unlocking all storage rooms, cabinets and cupboards;
• making the beverages in the vending machines freely available for all employees;
• abolishing the annual lunch which was exclusively held for management;
• removing the bonus system;
• eliminating all kind of departments such as human resources, planning and purchasing.

As you can see, FAVI got rid of all methods and structures that prevented the operators to think and act freely. All the above actions were based on the belief that humans are inherently good. Zobrist realized that the organization chart was still built on the assumption that humans are bad. 

Jean François: “Based on the works by McGregor and Maslow, I began designing a different organization chart built on the assumption that ‘the human is considered good’. People always tend to act as they are treated. If we open the spaces of freedom, people will start developing themselves and they will set themselves ambitious targets.” 

Org Structure

FAVI is organized into a series of self-managing 20-35 person “mini-factories”. Each mini-factory has a specific customer (internal or external), and includes all of the capabilities to sell, deliver, and service that customer. Each mini-factory has a dual leadership role, with a leader a sales representative. Leadership of the mini-factories is founded on the following sequential principles: Performance comes from operators. There is no performance without happiness. Leadership’s job is to make the operators happy.

The sales representative’s role as defined by Zobrist: “Each salesperson was chosen by me – they have the gift of sales which cannot be taught at school! Their role is to communicate to the operators if the customer loves them, to make sure the customer knows that we love them, and to take action so that this love increases continually. It is not uncommon for the sales representative to invite the customer to meet with the mini-factory operators to clarify what they would like. The factory floor of each mini-factory is typically decorated vividly in the colors and logos of their customer. The sales representative’s high-level goal is to create jobs for their mini-factory that add value.

The entire FAVI org structure has only three layers: CEO–Leader/Sales Rep—Operators

As of 2006 there were 21 mini-factories, five with internal customers (the other mini-factories) and 16 with external customers.

Internal:

Commercial, Research, Laboratory Equipment, Quality, Administration

External:

General maintenance and building of machines; Production of molds and tools; Maintenance of molds; Foundry of automotive parts; Foundry of other types of parts; PSA Valenciennes; PSA Borny; Citroën; Volkswagen; Audi; Getrag; Renault; Fiat; Volvo; Diverse electric parts, locks, sanitary; Water meters; Copper rotors

Mini-factories practice voluntary load balancing through a regular meeting of the leaders. For example, if the Renault team has a large order and is uncertain if they have the capacity to deliver on-time, the leaders will ask if another mini-factory has excess capacity. That leader will then return to his or her mini-factory and ask for volunteers to fill the temporary need. This provides some variety and cross-training, while keeping the mini-factories stable over time and reducing the peeks of variation in output.

Mini-factories are completely autonomous. The Fiat team at one point had fallen behind on their production of an order of gear forks due to a machine being down. They completed the production with only a few hours before the parts were due to be delivered in Italy. The Leader of the fiat mini-factory chartered a helicopter, loaded the order, and hand delivered it to the Fiat factory. The Fiat employee that received the order said, “you didn’t have to go to all that trouble – we would have been ok with a minor delay”. The Fiat Leader replied, “we haven’t had a late delivery in decades – it is one way that we show our love for Fiat.”