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The Gumby System

McKinley Inc.’s Approach to Flexibility

Sanveer Sethi
Gary Weintraub
Joshua Bloom
Kelsey Owens
Maureen Hanrahan
Matt Kruer
Executive Summary

Since 2002, Albert Berriz has taken McKinley Inc., a near 40 year old company and

doubled it in size and earnings 1 while simultaneously increasing employee satisfaction 2 and

reducing employee turnover. Central to this accomplishment was the introduction of the

“Gumby system”. This system centers around the tenants of flexibility and positive attitude.

Employees are expected to be flexible in their roles, mindsets, and attitudes while contributing to

team and company goals.

Through primary research, surveys, and first hand interviews we examine why the

Gumby system has been so successful, how it has directly contributed to the company’s success,

how management has implemented and maintained such a system, and what challenges the

company has and will continue to face. Based on our research and analysis we are offering other

companies recommendations when considering an implementation of a similar system.

It is our recommendation that only companies with access to self motivated and

inherently flexible employee pools consider Gumby. Additionally, Gumby appears to work best

in project or deal based industries. Lastly, the right management teams, culture and job

characteristics must be in place to ensure success. Management teams must create an

environment that keeps employees motivated while systematic feedback being essential in

establishing attainable goals and encouraging tangible results.

Introduction

Founded in 1968, McKinley, Inc. specializes in solving complex real estate problems for

its own portfolio as well as select clientele, and utilizing its resources to develop, structure, and

execute complex real estate transactions and deals. McKinley’s competencies include real estate

1
Berriz Personal Interview, See Bibliography
2
See Customer Satisfaction Survey Results in Appendix
development, commercial leasing, apartment housing, as well as mortgage banking. This

complex company currently manages over $1.2 billion in assets and consists of approximately

712 team members 3. McKinley’s corporate offices are located in Ann Arbor, MI with several

other offices and properties spanning the United States.

In 2002, Albert Berriz took over as McKinley’s new President and CEO, ushering in a

period of unprecedented growth and achievement at McKinley. Over just a 5-year period, Albert

was able to take the near 40 year old company and double it in size and earnings. What made

Albert so successful was a reinterpretation and dedication to the company’s core system and

values. While McKinley’s core mission (to invest in and manage real estate) remained the same,

Albert introduced a value system centered around a “can-do” attitude, total job flexibility,

customer service, and a commitment to results. One such value, flexibility, was reinforced by

what McKinley calls, the “Gumby System”. Named after the famous malleable clay Gumby

character, the system was introduced by Albert to spark employee freedom, creativity, and

motivation. The Gumby mentality has since contributed to improved employee satisfaction, a

reduction in employee turnover, and a sharp increase in company size and profits. Our group

considers these results to be a direct consequence of the motivational structure inherent in the job

characteristics of Gumby, the integration of this system within the company culture and the

strong company leadership which has been able to manage it.

The Gumby System – Explained (Summary of the Issue)


McKinley considers the Gumby mentality to be the most important attribute their

employees possess. Ultimately, what they mean by the Gumby mentality is to be as flexible as

possible when working towards a common goal. For example, an employee at McKinley may

put weeks, or even months, of time into researching or gathering data on a property prospect. If

3
Company Website, See Bibliography
another member of the McKinley team discovers either a better method for gathering the data or

a different prospect all together, the first employee is expected to forgo their prior analyses and

focus on the new and improved method. McKinley promotes this flexibility to avoid an

escalation of commitment from employees. All work done in the past is considered to be a sunk

cost in the sense that employees are expected to hit the ground running with the next big idea.

CEO Albert Berriz states, “If your plan sucks you need to be able to let it go with no

hesitation.” 4

The “Gumby System” also extends to personal employee roles within the company. The

ideal employee is a ‘renaissance man’ in the sense he or she can adapt to any challenging role or

situation that may arise. Berriz comments, “The idea is to cross-pollinate with these teams and

create renaissance employees that can be flexible and are not limited by their ‘job description.’”

Employees are often times asked to take on numerous roles within their project or team groups

and are expected to deliver results regardless of the challenge.

The Gumby mentality that everyone must have as an employee of McKinley is based on

their fundamentals of openness and honesty. Employees need to speak up if they can think of a

better plan or if they disagree with the current actions. In this sense, employees and management

both must be flexible to new ideas. Gumby insists that not only are you open to change, but that

you are positive in your attitude towards that change. By doing so, McKinley can foster an

environment that aggregates opinions constructively within established and trusting professional

relationships.

Our group is looking to examine the “Gumby System” and explore these key aspects. By

doing so we want to examine Gumby’s influence on employee satisfaction, motivation, company

4
This and all subsequent Albert Berriz quotes come from Personal Interview, See Bibliography
culture, and management techniques. Hopefully by understanding how Gumby works at

McKinley, we may be able to extend the philosophy to other organizations.

Analysis
Hiring the Right Person – Looking at Gumby and Culture
It takes a special kind of employee to adjust to and excel within the Gumby system.

McKinley acknowledges employees must be motivated, creative, flexible, and mentally agile.

But what is most important is the employee’s ability to fit within the company’s core values.

McKinley believes in a “Right-Person Right-Seat” approach. McKinley believes that as long as

they find the right kind of person, they will find the right place for them within the company.

Employees can move around in various functions and are not tied to a job description after the

first six month term. This requires major flexibility and adaptability to adjust to changing and

dynamic roles within McKinley. A Gumby mentality is essential to this ability.

Integrating employees and getting them to accept this culture is a potential difficulty for

McKinley. Employees can be stressed by the fact that their roles and positions are so dynamic

and undefined. This may result in confusion and hesitancy. But the “Gumby System” has had

quite the opposite of a negative effect on employee satisfaction. So why is this the case?

Motivation
The first reason is the motivational structure that parallels the “Gumby System.” Berriz

commented, “Employees have to be extremely motivated and often times self motivated.

Gumby gives them so much freedom that if they’re not self motivated, they will certainly fail to

deliver.” McKinley recognizes that employee performance is a combination of ability and

motivation 5 and therefore has motivational programs to heighten employee performance.

Extrinsic motivators include a full range of benefits (cell phone & apartment discounts, holiday

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Class Lecture 7
pay, health care), generous pay packages and performance bonuses, and even recognition

awards. The prestigious President’s Award recognizes the ability of teams and employees to

adapt and succeed in challenging conditions.

McKinley recognizes that extrinsic motivation is often only reactive and transient and

therefore takes effort to develop more sustaining intrinsic motivation. Employees gain a sense of

purpose by working in a fast-paced atmosphere with an opportunity to help the surrounding

communities and make a positive impact on society by fixing up wasted real estate. The job

flexibility inherent in the “Gumby System” also acts to increase satisfaction because of the

autonomy and freedom given to employees. With such flexible roles, employees make it known

what positions they desire and are given the freedom to excel in those roles. Not only are

employees working for a company they like but in a job they enjoy. Finding purpose in your job

and enjoying your work allows employees to identify with their tasks. This is the first

component of the job characteristics model which relates to intrinsic motivation. 6 The other two

components will be added and analyzed as they become relevant.

Teamwork & Culture


The openness and honesty that the “Gumby System” has fostered makes the work

environment more congenial and team-oriented. This is largely a company culture issue. The

Gumby system has allowed for an open flow of ideas and focuses on integrated and fluid teams

of autonomous individuals. “Everything is team based here [McKinley],” stated Albert when

asked about the formal organization and divisions in his company. At McKinley, they are

somewhere between “baseball-type” and “football-type” teams. 7 They are like a football team in

the sense that they play as a team doing what is necessary to succeed. Team members have a

high level of autonomy like a baseball team, but Gumby ensures that the “players” aren’t

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7
Class Lecture 16
operating in simply fixed positions. Gumby encourages employees to have more primary

positions within their teams, instead of fixed. Ideally, Albert views McKinley as “tennis-

football hybrid” team with individuals with primary roles working together toward a common

goal and as a team. Gumby’s allowance for self-defining roles and freedom reinforces

employee’s autonomy but the commitment to the team holds employees accountable to the

success of that team. This balance of autonomy and responsibility make up the second

component of the job characteristics model relating to employee motivation and performance.

Culturally, Gumby also encourages employees to be open to deal with criticism

positively. The Vision/Traction Organizer (VTO) is a model that defines the company’s

objectives and values. It states that Gumby is largely about being positive and open to change.

Albert stated, “If your plan sucks, your peers need to be able to feel comfortable letting you

know.” Having Gumby’s tenants explicitly stated in a highly distributed VTO is likely a cultural

artifact designed to perpetuate Gumby within the company culture.

Reduced Employee Turnover


With these motivational techniques, team-oriented tasks, and cultural influences

McKinley was able to increase employee satisfaction from 63% to 80%. 8 This in turn has

resulted in a significant reduction in employee turnover. This reduction is important for several

reasons. For one, there is an obvious economic benefit in retaining employees. There are high

employee acquisition and training costs and if you have to continually find, interview, and train

employees, these costs will increase. Also, employees, over time should become better at their

job. This learning curve is lost if employees are turned frequently.

Moreover, there are intangible benefits to having low employee turnover. When

employees are retained, colleagues have a chance to establish relationships and trust. Also

8
See Appendix, Employee Satisfaction Survey Results
employee morale is reduced if employees are consistently coming and going. If employees

believe they aren’t going to be around for a long time they may be less committed to their work.

That is why it is so essential that McKinley was able to reduce their turnover from 60% to 50%.

While this may still seem high, the industry average is much higher due to the young average age

of real estate workers.

Management Techniques and Leadership


The success of Gumby must also be attributed to the leadership that has been able to

integrate it so effectively. According to Jim Collins, “The most powerfully transformative

executives possess a paradoxical mixture of personal humility and professional will. They are

timid and ferocious. Shy and fearless. They are rare and unstoppable.” This quote exemplifies

the paradoxical balance of humility and professional will found in level 5 leaders. 9 Albert

Berriz, CEO of McKinley, possesses this innate characteristic, and is a major reason for the

success of Gumby as well as the overall success at McKinley.

The reason that Berriz is so successful in creating and maintaining a unique culture is

because he truly believes in it. He leads by example and represents everything that the core

values of the company stand for. Employees of McKinley describe Albert as the ultimate “can-

do” person, and claim that he has mastered the skill of being “Gumby”. Nobody is better at

adapting to change or able to completely switch plans at the drop of a hat. 10

Leading by example is essential in a Gumby system because micromanaging is not a part

of this ultra-flexible method. The freedom employees experience gives them the latitude to

make most of their day-to-day decisions. Because Albert portrays the ideal person in the

McKinley culture, his employees see that they can be successful if they truly believe in the core

values and they buy whole heartedly into the system.

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Leadership Lecture
10
Employee Personal Interviews, See Bibliography
Management also has developed this system by only hiring those that they believe will

adopt and excel within this system. This again refers to management’s very thorough and

selective evaluative process. By hiring the right people and getting them into the right roles,

Gumby has improved company efficiency, heightened employee satisfaction, and increased

company profits.

The high level of freedom also may make it difficult for employees to create goals or

benchmarks for success. To avoid this problem, Berriz introduced a very methodical feedback

and evaluation system. At the beginning of the year, employees meet their direct manager to

jointly establish goals for the year. There is then a mid-year assessment to determine progress on

these goals. Employees are then dually evaluated by direct managers and then their ultimate

supervisor. Both correspond to determine annual bonuses. This collaborative goal-setting and

feedback makes up the final component of the job characteristics model. The three combined

result in high motivation.

Recommendations
Analyzing the immense success of the “Gumby System,” our group considered why

similar programs or systems were not being implemented at other organizations. And if it should

or could be, what were some recommendations to such an organization looking to implement

Gumby.

There are several operational challenges when looking to implement a system like

Gumby. First, the employee search and acquisition process must be extremely fine tuned in

order to secure the right type of individual to work within the system. Employees must be

extremely motivated, capable, and above all adaptable. While many workers are content being

very good at a few tasks, McKinley asks employees to cover a wide variety of roles in any given

project. This may become difficult to maintain if talent is hard to come by.
Additionally, the level of autonomy that employees enjoy may not necessarily work for

every industry. McKinley has several functionalities and each division is slightly unique in its

operation but each can enjoy Gumby differently. Real estate agents for example use their

flexibility to complete deals and make sales very autonomously. Developers may use Gumby

within the context of their development team where roles are much less defined and the project is

undertaken from a team standpoint. However, both these groups, agents and developers, are

working together to ensure the right properties are being delivered to the right customers.

In another industry, Gumby flexibility may not make sense. Inventory managers should

perhaps be very specialized in inventory management and should not be asked to ‘be more

flexible’ and take on other roles. Specialization is not necessarily a bad thing, and when

specialized roles are in place it is usually because these tasks are important and the individual

completing them must be very efficient and competent in that task. Similarly, a research

scientist at Pfizer may be very inefficient at trying to manage budgets or handle clients. One

must look at the actual industry and company characteristics to understand whether or not

Gumby is appropriate. The industries where Gumby would work best would be situations where

individuals are asked to work largely in teams and there can be fluidity amongst different roles

within the team. Project or deal oriented businesses may fit this bill best. For example,

Investment Banks may want to adopt a similar system because they too have employees that

operate autonomously but always in relation to their deal teams. Gumby would allow flexibility

amongst the different roles and tasks associated with each specific transaction. Also, it would

help to create a more positive environment instead of the current infamous cut-throat culture. It

may also help to reduce employee turnover which is epidemic amongst early investment bankers.
Management must learn not to micromanage and instead motivational tactics must be in

place in order to ensure employee cooperation. Intrinsic motivation should be tied largely with

the job characteristics model as well as company culture, which is a powerful means of internal

control. Fostering an environment of accountability can be done by goal-setting. Management

can accomplish this by setting benchmarks to be met periodically throughout the quarter or year.

Our team would recommend an even more thorough evaluation process than McKinley’s,

comprised of quarterly feedback sessions. This provides employees with constant direction and

advice. Also, we would recommend using performance bonuses as an added extrinsic incentive

for employee results. When goals are reached, employees should be rewarded.

Conclusion
Overall, Albert and his executive committee effectively lead the McKinley teams with

their abilities to understand group composition, shape culture, and manage paradoxes by

fostering support and confrontation. The core values and “Gumby System” are crucial to

McKinley’s current and future success as the system facilitates freedom, creativity, and

motivation, which in turn yield results.

Albert Berriz and his management team successfully introduced and implemented the

Gumby system, which allows for job design flexibility, deters escalation of commitment, and

creates a positive, yet critically constructive, environment. By far, Gumby is one of the biggest

reasons that the company has seen such a sharp rise in employee satisfaction, a reduction in

turnover, and a doubling in company size and profits.

This report included heavy analysis on why Gumby has been successful and can be used

as a template for any organization wishing to look more closely at implementing a similar

system. The recommendation section alone will not suffice in understanding whether or not

Gumby is right for you. Instead it should be seen as an epilogue to the preceding analysis.
Appendix
Least Stressed (1) to Most Important (6)

Employee Satisfaction Ratings (Average)

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Current System Desired System

Gumby System Word Associations

10 9

8
Frequency

6 5

4 3 3

2 1

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Teamwork Supportive Flexible Can-do Fresh
Descriptions

Group Process

As we found out when we played the desert survival game in class, groups typically are

more effective and obtain better results than individuals. Though our term project group was not
required to survive in the desert, we worked together very productively and used our knowledge

about groups to our advantage while analyzing McKinley, Inc. For nearly every step in this

project, we discussed the work as a group and then split up to accomplish specific tasks.

Afterwards, we reconvened and shared our findings. This turned out to be a very efficient and

useful way of working together because we were able to use the knowledge and experiences of

all 6 group members while still dividing up the work and assigning responsibility of certain tasks

to specific people.

One of the most important tools that we had when beginning this term project was the

personality test and our individual results. We used the results of all of our personality tests to

plan for potential issues within our group. For example, more of us are introverts than extroverts.

Thus, one of the things we were careful about was to make sure that the extroverts did not

dominate conversations and that the introverts were encouraged to speak up. This definitely

helped with the communication flow and exchange of ideas at meetings.

Additionally, all of us have strong personalities and come from different backgrounds.

This situation opened the door for very destructive abrasion and thus, we took care in being open

and accepting of ideas relating to the project. We made a strong effort to encourage, discuss, and

analyze everybody’s ideas and then to decide as a group on the best one.

Overall, this was a great group project. Each person had their own responsibilities and an

opportunity to shine. At the same time, each group member was also able to take their individual

thoughts and personalities and contribute to the group and project as a whole. Ideas and criticism

were offered and received positively, resulting in an excellent group experience and project.
Bibliography

1. "About McKinley." McKinley. 12 Mar. 2007 <http://www.mckinley.com/about/>.

2. Berriz, Albert. Personal interview. 29 Mar. 2007.

3. Chrichton, Julia. Personal interview. 29 Mar. 2007.

4. Williams, Mary. Personal interview. 30 Mar. 2007.

5. Zamudio, Elia. Personal interview. 29 Mar. 2007.

6. Barton, Michelle. Class Lecture, Ross School of Business. 7 Jan. 2007 – 10 Apr. 2007