Federal Companies

Company Background

Federal Companies, based in Illinois, is a $30-million provider of warehousing and logistics solutions. Since 2003, its 290 employees have been playing The Great Game to strengthen their 16 profit centers, enhance their ownership culture and become a market leader in the Midwest.

Great Game Solutions

Federal uses a balanced scorecard to manage growth. Semi-annual bonuses are based on profitability and its drivers: service, quality, safety and efficiency. The financial-literacy plan, designed to engage every-one in value-creation activities, includes basic business training, weekly dashboard forecasts, monthly P&L reviews and projections, incentive-pay forecasts, High-Involvement Planning and plenty of Mini-Games.

Mini-Games in recent years have slashed costs related to workers’ comp and cargo/property claims. In 2007, teams began to focus on customer satisfaction, and annual challenges have greatly increased their ratings. Last year, a mystery-shopping program captured more leads and firsttime callers. It’s been so successful that other companies have adopted it.

Meanwhile, Federal’s award-winning culture has made it a destination workplace. Employees take full responsibility for living the core values and posting best-possible results. They lead Huddles, chair committees, run educational events and play rounds of business trivia to stay fresh.

During the company’s early years of Game play, profit margin steadily rose to a three-year average of 6.6% in ’08. It dipped in ’09, yet was well above the industry mark, and revenue was off by only 8%, versus a norm of -17%. What’s more: An employee buyout of Federal—which, say insiders, would have been impossible without the financial stability provided by Open-Book Management—was completed in 2009.

“The Great Game has had an impact on us that is truly greater than any financial measurement can show,” says Randall Schrock, VP of finance and administration. “It’s so cool to find truck drivers in the break room talking about ways to improve profitability.”

RESULTS

• Revenue: Flat in ’07 and ’08; down 8% in ’09, but outperformed peers. Annual growth averaged 5% during its first 4 years of Game play.
• Profit: Gains in ’07 and ’08; a 4% margin in ’09 beat the trade norm of 2.6%. Profit grew by >500% in the 4 years following launch.
• ’09 shipments vs. peers: +30%.
• Cash flow: Receivables > 60 days fell to 9% from 17% in 3 years.
• Mini-Games: Cut claims costs by 13% in ’08 and by 48% in ’09.
• Reduced workers’ comp costs: incidents fell by 76% in ’09.
• Increased annual customer-satisfaction ratings: 4.4 in ’07, 4.5 in ’08 and 4.6 in ’09