When John Lively, director of operations at Preserve, arrived for his first day on the job ten years ago, there wasn’t much to see. The company, which  makes housewares and personal care products from recycled plastics, was just getting started. There were about three or four people in one room doing whatever it took to get the company off the ground. It’s hard to believe, but in 1999, the whole idea of an information technology (IT) department and all the organizational tools to which we’ve grown accustomed was still new. Larger companies certainly
had systems in place, but those tools were merely something a four-person start-up company hoped to acquire someday.

“My original mandate for Preserve was to come in and look at their customer relationship management database,” Lively recalled. His charge was not to manage customers, but to look at the data the company had accumulated and come up with a way to use it to improve efficiency. It was not an easy task. At the end of six or seven months, however, he had trained the staff to print shipping labels.

Just when everyone started to get acclimated to Lively’s newly efficient system, Wal-Mart called. “Growth happens,” Lively said. “But you’re always hedging, saying, ‘I’m not really sure that’s gonna happen; maybe we won’t get that big account.’ ” That year Preserve experienced a remarkable 75 percent growth in revenue, yet Lively was running the entire administrative part of the company with only a few eager, but inexperienced, office mates. Instead of anticipating staffing and infrastructure needs as it should have been doing, Preserve was hiring folks to recover from the large influx of business. “Looking at it and saying, ‘How could we have done better?’ has definitely resulted in some hierarchy of management,” Lively admitted. Up to this point, Preserve had been a very flat organization. It was time for some real reporting structure.

IT systems and accounting continue to be the most important factors in improving Preserve’s organizational performance. Lively is constantly working with his crew to forecast and project sales, profit, and expenses. Making each department accountable for its day-to-day spending ensures accurate balance sheets and profit and loss statements. “It’s a large undertaking to understand where we need to be and look around process-wise to get those actuals in the books quicker,” Lively lamented. Preserve now employs two controllers, freeing Lively to work on the big picture.

Forecasts show sales aren’t going down anytime soon, and Preserve has reacted by asking more from its vendors and manufacturing partners. The factory responsible for manufacturing its most popular product, the Preserve Toothbrush, now handles all the inventory management and shipping on behalf of Preserve. When it comes to quality control, the factory implements its own systems and standards. Preserve works with them initially to set the standards, then it steps back unless problems arise. The choice to outsource adds value in the form of reduced cycle time and improved service to the customer.

Preserve’s total quality management approach results in cost savings and improvement in accuracy and efficiency in all aspects of Preserve’s business. As the company grows, even stricter financial and manufacturing controls will no doubt result in a more hierarchical structure. Although this poses some threat to Preserve’s casual and open culture, all recognize that it is a necessary part of growth. A smoothly run organization means the folks at Preserve can get back to doing what they do best—creating innovative, earth-friendly products.

Discussion Questions

1. Do you think Preserve would benefit from employing an activity-based costing system? Explain.

2. Do you think implementing a formal corporate governance policy is appropriate for Preserve? Why or why not?