Johnsonville Sausage L.L.C

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Johnsonville Sausage L.L.C.

950 Woodlake Road
Kohler, Wisconsin 53044
U.S.A.
Telephone: (920) 459-6800
Toll Free: (888) 556-2728
Fax: (920) 459-7148
Web site: http://www.johnsonville.com

Private Company
Incorporated: 1945
Employees: 1,000
Sales: $200 million (2003 est.)
NAIC: 311612 Meat Processed from Carcasses; 311611 Animal (Except Poultry) Slaughtering

Johnsonville Sausage L.L.C. is a leading manufacturer of bratwurst, dinner sausage, and breakfast sausage. The company sells its products nationwide through retail outlets and to food processors, institutional customers, and food services. Johnsonville bratwurst (brats) are the official brats of Lambeau Field, home field of Wisconsin's Green Bay Packers, and the brand is also sold seasonally at more than 4,000 McDonald's restaurants. The company has plants in Johnsonville, Sheboygan Falls, and Watertown, Wisconsin, and in Momence, Illinois. The company is owned and run by members of the Stayer family. Johnsonville achieved national prominence in the 1990s for its unique management style. Many traditional management roles at the company have been replaced by worker-run teams, and workers control their compensation, hiring and firing, quality control, and near- and long-term goals for the company. CEO Ralph C. Stayer initiated this system in the 1980s, as the company grew from a small regional player to a national marketer.

Early Years

Johnsonville Sausage was founded in 1945 by Ralph and Alice Stayer. The couple bought a small market and slaughterhouse in Johnsonville, Wisconsin, and named the business after the town. Johnsonville is a small community near Sheboygan, north of Milwaukee near the western edge of Lake Michigan. The Stayers were of German and Austrian descent, and they began making sausages according to an old family recipe traced to 19th-century Austria. Their sausages grew popular, and within a year the Stayers had added on to their business. Apparently their bratwurst was a big hit from the very beginning. Founder Ralph Stayer recalled in company documents an early customer requesting ten pounds of bratwurst and 40 pounds of hamburger. "On his next visit," Stayer went on, "he ordered 40 pounds of bratwurst and 10 pounds of hamburger." Stayer knew the young company must have been doing something right.

Johnsonville Sausage expanded throughout the postwar years. In the 1950s and 1960s, the company began selling in more nearby Wisconsin communities. By the 1970s, the company had bought its own fleet of trucks and was making deliveries throughout Wisconsin. The Stayers' son Ralph C. Stayer graduated from Notre Dame, where he studied business and finance, in 1965. He then went to work for the family business. He had worked on the production floor since high school, and his academic training led him to imagine big things for the company. Annual sales were about $1 million when Ralph C. joined Johnsonville full time. Ralph C. got his parents to agree to let him develop the manufacturing and wholesale business, while they remained in control of the retail operations. In 1978, Ralph C. Stayer became president of Johnsonville Sausage. The company also broke ground for a new production facility that year. Stayer began moving the company's products into markets beyond Wisconsin, pushing first into nearby Michigan, Minnesota, and Indiana. As Johnsonville expanded in the 1970s, sales grew at around 20 percent annually. Johnsonville was changing from a small local producer into a leading regional sausage company.

Management Odyssey in the 1980s

By all conventional markers, Johnsonville Sausage was a successful and growing company by 1980. Sales were strong, the company was profitable, and the Johnsonville brand was making inroads into more midwestern markets. Nevertheless, Ralph C. Stayer was deeply dissatisfied with the way things were going, and he pushed the company into a massive change in structure and attitude. Several factors led Stayer to take the company in a new direction. One was fear of competition. Although Johnsonville was doing well, Stayer felt that its success might be tenuous. The sausage industry was dominated by a few national players like Armour and Oscar Mayer, who were able to spend far more on advertising and promotion than Johnsonville could. On the other end, small sausage producers that sold only in their nearby communities had intense customer loyalty. Stayer felt that Johnsonville was too big to be a small producer but not big enough to fight off the national brands, if it came to a battle over market share. The second major factor that set Stayer on his management odyssey was his perception that Johnsonville's workers did not care about the company or their work. This led to many avoidable mistakes. Workers mislabeled products, spiced the meat wrong, wasted time and materials, and even caused physical damage to the plant unintentionally. The product was good, quality control was okay, but Stayer was sure the company could do better, if only the employees cared more about their results. Stayer began reading management books, looking for a solution. He beefed up the company's quality control department, and he began meeting with groups of workers to find out about problems at the plant. But things failed to change at Johnsonville.

Eventually Stayer was sparked by a consultant from the University of Wisconsin, Lee Thayer, who specialized in communication. Thayer pushed the CEO to let Johnsonville's employees solve the company's problems themselves. In 1982, Stayer sent a six-page letter to all his employees, along with a $200 bonus. In the letter, he explained that Johnsonville's workers could become the best paid in the industry as they shared in the profits of the growing company. But they needed to figure out how to make the plant work better. Over the next decade, Stayer completely turned the structure of Johnsonville Sausage around. Workers took control of many aspects of production, the hierarchy of the company simplified, and everyone was compensated in relation to their ability to meet performance goals.

The changes began small, and gradually encompassed the entire way of doing business. For example, workers had complained to Stayer that they did not like the food in the factory's vending machines. Stayer had them research competitors and find a new vending machine company. Ordinarily, Stayer or another manager would have dealt with this. But Stayer felt that it was not his problem, and he trusted the people who used the vending machines to make the best decision about them. Next came more complex problems. The sausage makers often had to work weekends in order to meet delivery dates, and they resented this. Stayer prodded the workers and plant managers to figure out how they could avoid weekend work, and soon equipment downtime was revealed as the problem. Slipshod work practices had led to a lot of stalled time on the production line. When it was up to them to change it, the Johnsonville workers made many improvements that kept the plant going, and soon they were able to get their weekends free. The workers eventually took responsibility for traditional human resources roles, hiring, firing, and training. Lateness, absence, and maintenance problems declined, and the plant became much more efficient. Workers were compensated for new roles they took on, and they also earned a share of the company's profits. Stayer put 28 percent of profits into a pool that was divvied up every six months. This greatly increased motivation at Johnsonville.

Quality control had been a major issue at the company. Though Stayer had hired more quality control people since 1980, he found that quality had actually gone down. Finally he took a crucial step. He decided that top management would no longer taste the sausage. He asked the people who made the sausage to taste it in a daily session. This seemed to make all the difference. Quality went up as the line workers got to eat and critique what they made. Eventually customer complaint letters were funneled directly to the production workers. They responded to customers and used customer input to find ways to make the sausage better. The quality control department became a new animal at Johnsonville. Instead of checking the quality of the sausage, the quality control department began providing technical support to the line workers who wanted to improve quality. Terminology also changed throughout the company. Workers became "members," and managers became "coordinators" or "coaches."

Company Perspectives:

We here at Johnsonville have a moral responsibility to be the best Sausage Company ever established. We will accomplish this as each one of us becomes better than anyone else at defining, then serving, the best interests of all those who have a stake in our success. We will succeed by setting near-term objectives and long-term goals that will require personal growth and superlative performance by each of us. We will change any objectives or goals that no longer require personal growth and superlative performance to ones that do. We understand that our commitment to stretch, grow and excel is an unending one. This is the Johnsonville Way and we are committed to it.

This radical change was not easy, yet Stayer was adamant in ceding more and more of his control to Johnsonville's members. Between 1980 and 1985, the company became more efficient, raising its return on assets, and it improved quality and profit margins. Sales climbed to $50 million by 1985, up from $15 million in 1982. That year, the company had the opportunity to take on a big new chunk of business, making private-label sausage for a large competitor who was closing one of its own plants. It was a great chance for Johnsonville to gain more business, but it carried some clear risks. The company would have to run weekend shifts to handle the increased production, but the competitor could cancel the order at any time on only 30 days' notice. Johnsonville could invest in a new plant to handle the increased production, but might have to swallow those costs and lay off workers if the contract was canceled. Stayer's own instinct was to turn down the offer. But instead of making the decision himself or with his senior managers, he called a meeting of the entire workforce, laid out the problem, and asked for input. Workers met in groups, and representatives got back to Stayer with plans. The workers were in favor of taking on the new business, as long as they could continue to improve quality enough to keep their large customer happy. The venture was a success, with expanded sales and a new, efficient production plant completed in 1987.

Stayer wrote in Harvard Business Review (November-December 1990), "Everyone at Johnsonville discovered they could do considerably better and earn considerably more than they had imagined. Since they had little trouble meeting the accelerated production goals that they themselves had set, members raised the minimum acceptable performance criteria and began routinely to expect more of themselves and others." He went on, "Our greatest enemy now is our success. Our sales, margins, quality, and productivity far exceed anything we could have imagined in 1980." The company, and Stayer, became media darlings, to the point where Johnsonville began hosting day-long management seminars for executives from other industries curious to learn about the "Johnsonville Way."

Changes in the 1990s and After

Although the company had already turned around, Johnsonville did not stand still. In 1991 Johnsonville held a company-wide meeting and discussed its compensation and profit-sharing systems. Johnsonville changed from offering a six-month performance bonus to allocating a monthly share of profits, dubbed GPS, for Great Performance Shares. This allowed members to be compensated more quickly for meeting goals. The Great Performance Shares came to 20 to 25 percent of an individual's total compensation. Stayer credited Johnsonville's growing sales to improved employee performance. By 1994, sales had climbed to $120 million, and increased to around $165 million the next year. By 1998, sales had grown to $200 million. The company was still a model for its management style, which it had not given up on. A management consultant told the Business Journal-Milwaukee (April 17, 1998) that it had been a challenge at Johnsonville both "to give autonomy and maintain structure." The company had swung between poles of chaos and rigidity, but by the late 1990s it was well balanced.

In 1998, Johnsonville entered a venture with leading fastfood restaurant McDonald's to offer Johnsonville brats on the McDonald's menu at selected regional stores. The Johnsonville brats appeared under the Johnsonville brand name at close to 300 McDonald's restaurants in Wisconsin, Illinois, and Michigan's Upper Peninsula. This was the first time McDonald's had offered another company's brand-name product on its menu. The initial rollout was a success, and over the next five years, McDonald's sold Johnsonville brats in more than 4,000 of its restaurants.

Ralph C. Stayer had been president of the company since 1978. His sister Laura had been directing Johnsonville's sales force since 1984. In 2000 the Stayer family agreed to sell 20 percent of the company to the Chicago-based conglomerate Sara Lee . Sara Lee had begun as frozen foods manufacturer, but by 2000 was a huge company that marketed a variety of consumer goods worldwide, from Kiwi shoe polish to the Wonderbra. It acquired a chunk of Johnsonville in 2000 with the aim of strengthening its core packaged food business. Sara Lee's chief executive believed that with the big company's distribution networks, Johnsonville would increase its sales by 6 percent a year under the deal. The arrangement allowed for Sara Lee to purchase the remaining shares in the company at a later time.

The next year, Johnsonville moved to a new advertising agency, the Minneapolis firm Kerker and Associates. Kerker put together a $10 million campaign to elevate Johnsonville to a national brand. The Wisconsin company was well known for its brats, but Kerker hoped to also raise consumer awareness of Johnsonville's other sausages. Television ads highlighted Johnsonville's ties to the football team the Green Bay Packers. These aired during nationally and regionally broadcast games. In 2002, Johnsonville Sausage began airing new commercials on national television. These featured the small town of Johnsonville. The next year, Johnsonville co-sponsored a car on the popular Nascar race circuit. Not only did the car feature the Johnsonville logo, but it had a grill strapped to its hood. The company aimed to bring awareness of brats to markets beyond the Upper Midwest, where they were already established summer grill food.

The market for sausage as a whole grew substantially in the early 2000s. Johnsonville was one of the fastest growing brands in the industry. Between 2000 and 2003, the company found demand for its product growing by almost 20 percent annually. By 2003, Johnsonville employed more than 1,000 people, and put out some 100 million pounds of sausage annually. It broke ground that year for a new plant in Sheboygan Falls, Wisconsin, investing $34 million in the 70,000-square-foot facility. A few months after starting work on the new factory, the Stayer family announced that it had bought back the 20 percent of the company that Sara Lee had bought in 2000. Brother and sister Ralph and Laura Stayer said they had decided to keep the company private.

Key Dates:

1945:: Ralph and Alice Stayer found the company as a single shop in Johnsonville, Wisconsin.
1978:: Ralph C. Stayer, son of the founders, becomes president.
1980:: Stayer begins the search for a new management style.
2000:: Sara Lee buys a minority interest in Johnsonville.
2003:: The Stayer family buys back Sara Lee's shares.