Op Excellence

Insights

We want to share with those who visit our website, insights that we have gained over the years in applying techniques of sound management in working with our customers. We believe that you will find many of these thoughts valuable and hopefully will find ways to apply them in your own situation. If you have comments or experiences that you would like to share with us, please feel free to leave a comment on one of our posts, or click on the CONTACT link above.


Successful Major Change Requires Effective Sponsorship

25

Mar

2010

When an organization decides to proceed with a major change, typically it means a major investment of resources – financial, people, and time.  Major change is expensive and for most organizations failure is not an option.  Unfortunately, all too often, the results they realize from their change initiatives falls short of their expectations.   There are countless reasons why major changes yield disappointing results.  Typically, they show up as excessive time required to accomplish the change, having the effect of running up the investment required and/or the actual benefits realized upon completion fall short.  The net result is a negative effect on ROI.

Why does this happen so frequently – largely because major change is difficult.  The more dramatic the change, the more difficult it is to accomplish.  Success with major change needs to be lead by individuals that are competent to lead major change.  They have had successes in the past when leading major change and/or they have had training on how to successfully lead major change initiatives.  Since leadership has responsibility for doing everything it can to make a major change succeed, they evaluate the factors that might affect the desired outcomes, identify those over which they have some degree of control and those they do not.  One of the most critical is completely within their span of control – sponsorship of the change. 

Role of the Sponsor: Good sponsorship is essential if a major change is to achieve the results expected.  Daryl R. Conner, in his book, Managing at the Speed of Change, discusses sponsorship as one of several vital roles required to successfully accomplish a major change.  Sponsors of major change have “the power to sanction or legitimize change.  Sponsors consider the potential changes facing an organization and assess the dangers and opportunities these transitions reflect.  They decide which changes will happen, communicate the new priorities to the organization, and provide the proper reinforcement to assure success.  Sponsors are responsible for creating an environment that enables these changes to be made on time and within budget.”

All too frequently many of those attempting to sponsor major change have had little successful experience sponsoring major change and are not aware that with a little coaching their success rate could be significantly improved.  Most often leaders in the role of a sponsor of major change will make their decision to move forward with a major change and attempt to communicate the change to the organization.  Their expectation is that those that work for them will make it happen.  In reality, sponsors have much more to do.  To sponsor a successful major change (defined as on-time, within budget and realizing the expected results), the sponsor needs to consistently and at every opportunity, reinforce to the organization the fact that the change is still a major priority and the reasons why it continues to have such a priority.  Frequently the sponsor is not at the right level in the organization to successfully sponsor a change.  Sponsors must be able to not only effectively communicate what is to be changed and the rationale supporting it to the people that are expected to change but they must be able to motivate them to adopt the change.  

Communication: Before most of us are willing to adopt a major change, we need to understand the change and its implications on us.  The less we understand about a change the less likely we are to adopt it, particularly if it will have a significant impact on the way we work.   For this reason, sponsors must communicate the change and the reasons for the change in terms that those who are expected to change can clearly understand.  Often the rationale for a major change is communicated in terms that do not hold much meaning for those who are expected to change resulting in resistance leading to distrust.  That is why it is critical that the individual sponsoring a major change be someone who is at the lowest level in the organization with legitimate authority to lead the change. 

Just this week, the citizens of the US are preparing for a major change to our healthcare.  The person sponsoring the change, our President, has given a very brief overview of the change contained in the 2,700 page bill to the general population.  As the general public has sought to understand its implications on their individual lives, their questions have been inadequately answered, leading to distrust of the sponsor and resistance to the bill.  The President has done an excellent job of sponsoring the bill through the legislature within his own party but has failed as a sponsor to achieve bi-partisan support, further fueling the distrust.  If he had been open enough to help each legislator understand how the bill in its entirety would affect their constituents, given them the time they needed to fully understand it, and been willing to negotiate and/or address their concerns, the bill would most likely not have met with so much resistance.

The sponsorship role of the President needed to be cascaded to others who could work more effectively within their own parties.  This was partially accomplished within the President’s party but not at all accomplished within the Republican Party.  By working with the 3 or 4 most influential congressmen in each party, to help them thoroughly understand the change, the rationale for making the change and the implications on their constituents, he may have been able to significantly belay their objections and create sponsors for the change at the level required to achieve the desired outcome, bi-partisan support for healthcare changes.  Realistically, however, he needed to openly listen and negotiate the issues, being willing to take things off of the table that were objectionable that would still allow him to achieve his ultimate goal, passage of a healthcare reform bill.

As stated earlier, good sponsorship is difficult to do and yet is one of the most critical and yet controllable factors in accomplishing major change. 

Sponsoring Change through the Organizational Hierarchy: So how can sponsorship move from upper levels in the organizational hierarchy to the level required to enact a change?  This requires the originating sponsor of the change to sponsor the change to the next lower level in the organization structure, communicating the change and the rationale for the change to them in terms that they clearly understand and can adopt.  And likewise they will need to do the same to their direct reports and so on until the role of change sponsor resides at the lowest level with legitimate authority to sponsor the change.  And meanwhile, all sponsors from the originating sponsor on down throughout the organization need to continually speak supportively about the change both publicly and privately at every opportunity and monitor the status of the change as it is implemented to not only ensure the results anticipated are being realized but to ensure the importance of the change continues to maintain a high priority in the minds of those actually changing.

With an approach of this nature, the likelihood of successful change increases enormously while reducing both the investment and time required to accomplish the change.  What’s not to like?  As sponsors of major change, it’s imperative that we do everything that is within our power to make it happen, including learning as much as we can about good sponsorship and putting it into practice.

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“Perfect Orders” Means Satisfied Customers and Possibly Competitive Advantage!

13

Mar

2010

In recent weeks, we have seen what has happened to Toyota as a result of their quality failures.  The damage done to reputation is costly and will take time to rebuild our trust in their ability to consistently produce reliable product.  How can we keep that from happening to us?  Granted we may not be the size of Toyota, but we all understand the effect relatively small number of negative customer experiences can have on our business.

Understanding the importance of satisfying our customers’ requirements when they place an order with us, we have to wonder how good we are at doing so. 

The performance metric that many use to get their arms around this is “perfect orders”.   A perfect order occurs when we are able to deliver the right quantity of the right product at the right level of quality at the time the customer requires it with accurate paper work (shipping documents, invoices, etc.). 

A few years ago I had the opportunity to discuss perfect orders with the senior executive team of a $125 million business.  They were of the opinion their perfect
order percentage was in the neighborhood of 95%.  We set about to collect the data and calculate it for them.  We discovered the percentage was closer to 26%.  What a shock!  Amazingly, they were no worse than their competitors.  Strategically, the door was open for them to gain a significant competitive advantage if they could dramatically raise their percentage.  This led to major changes in the way they did business. 

Organizations that are able to produce perfect orders with a high degree of consistency are able to do so because their order fulfillment process is in control.  Processes that are in control deliver consistent and therefore predictable results.  Once a process is in control, the effects of changes in the process can be measured and improvements effectively implemented.  Those with a background in statistical quality control, “lean” and/or “six-sigma” understand that until a process is in control, measurable performance improvement is difficult to accomplish.

Perfect Order Performance Measurement  

Most organizations find that delivery of the right quantity of the right product is not too difficult.  They were founded around the concept of being able to do this on a consistent basis.  However, claims and complaints arise when the product delivered doesn’t meet the customer’s specifications for quality, when the product is not delivered on time and or when the paperwork following the delivery is inaccurate.  A perfect order measurement system should be tracking each of these independently by order.  To do this effectively, the customer order database should have four fields for capturing claims and complaints, one each for those related to quality, those related to on-time delivery, and those related to paperwork errors, as well as, those related to product quantity.  Categories of claims/complaints should be established for each of these fields which describe the kinds of claims/complaints the organization is receiving.  This will enable the business to identify the major types of claims/complaints in each field allowing management to drill down to the root causes of the most common claims and complaints, proactively eliminate them and thereby improve the organization’s perfect order performance. 

Ideally, we would like our quality assurance system to identify shortcomings in each of these areas before the product is shipped to our customers.  Realistically, even the best quality assurance systems will fail from time to time.  Inspecting perfect orders into an order fulfillment process can never guarantee 100% success.  The only way to approach high levels of perfect orders is to ensure the order fulfillment process is in statistical control.  That requires designing the process for that purpose.

From my perspective, one of the most troublesome parts of the order fulfillment process is our ability to actually measure delivery performance.  Since customer expectations around delivery are based upon what they have been told by our customer service, it would seem that measuring time to deliver against our promised delivery time would be relatively easy.  Without some decision rules, it can be a nightmare.  We have seen instances where organizations, realizing they could not meet their originally agreed upon delivery commitment, contacted the customer and obtained their approval to modify the commitment.  Is the renegotiated “agreed upon” delivery time the right time to use for calculating delivery performance?

Likewise, occasionally, customers need to change the agreed upon service delivery time to suit their needs.  Identifying who requested the change is almost always an issue.  Obviously if our organization requested our customer make changes to accommodate us and we renegotiate their delivery time to suit our needs, it can have an unsatisfactory impact on their business.  If we renegotiate to suit them, it can have an unsatisfactory impact on ours, as well as, require us to renegotiate delivery schedules with other customers.  Since at issue is our perfect order percentage, it seems reasonable that we should be measuring what is within our control, renegotiations brought about by failures within our own system, not that of our customers.

The perfect order percentage can then be computed as follows:

                    % Perfect Orders =   % of Orders delivered with the right product

                                                         x % of orders delivered with the right quantity

                                                         x % of orders delivered of the right quality level

                                                         x % of orders delivered on time

                                                         x % of orders delivered with accurate paperwork

If we are at 95% on each of these, 95% x 95% x 95% x 95% x 95% would give us a perfect order percentage of 77.4%.  This tells us that we disappointed 22.6% of our customers for one reason or another.   On average, disappointed customers will tell 69 others of their bad experience, effectively damaging our reputation in the marketplace and negatively effecting our competitive position.  With more than 1 out of 5 of our customers having a bad experience with us, we must make an effort to significantly improve if we are to stay in business.  If we improved our percentages to 98% in each of the 5 categories, we would have a 90.4% perfect order percentage, still disappointing nearly 1 in 10 customers, but a tremendous improvement from 1 in 5.

Design Order Fulfillment for Perfect Orders

So how can we ensure perfect orders are delivered consistently?  The answer lies in recognizing that when an order is not delivered perfectly our order fulfillment process failed in one place or another.  Hence our order fulfillment process may be out of control.  By collecting information on the types of failures we are experiencing, we can drill down to discover the root cause of the most prevalent failures and develop solutions that will either eliminate them or minimize their frequency.  Most often these solutions will involve changing the way people do their work – designing and implementing new systems and controls and training those who will be using them to use them effectively.

Successful redesign and implementation, involves having resources available that are capable of doing the root cause analysis, developing a solution that will work within the existing organizational culture, and effectively managing the change.  There is no substitute for having resources on board that have a track record of success in each of these areas before attempting to develop and implement solutions.

We have seen many organizations attempt changes of this nature and fail simply because they did not have the right resources available to deliver success.  Since in nearly every case, people have to change the way they do their work, a failure results in losing the trust of the very employees that are being asked to change.  Trust is difficult to regain.  For this reason, before attempting such a project, be sure to have them on board.

For consultative guidance on this subject, please contact Milt Burton of Op Excellence, LLC at (804) 304-2303.

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Are Our Core Business Processes in Control?

10

Mar

2010

Operationally excellent business processes produce predictable results.

How do we know our business processes are in control?
Business process control requires appropriate measurement systems that track process performance and allow identification of sources of variation.

How do we derive appropriate business process performance measurements?
Process performance measurements are tied to the specifications for what each business process delivers. In the manufacturing world, it is easy to understand that when a product is manufactured, it must meet critical specifications to satisfy the customer. In addition to those specifications, it must also meet operational cost performance specifications to ensure the product being produced will generate the expected level of profitability when it is sold.

In the service world, customers have expectations for services being delivered and the business has expectations for profit that will be derived from the sale of those services. As such, performance measures that address specifications around these expectations are fully appropriate.

The challenge is to design the performance measurement system in such a way that it will allow management to drill down to identify root causes for failure when a business process breaks down. The more quickly we can identify the root cause, the more quickly corrections can be put in place. Building such a system is imperative for each of our core business processes.

In the private sector, core business processes include (adopted and modified from the work of the International Benchmarking Clearinghouse):
• Understand customers & markets;
• Develop new products/services;
• Market & sell;
• Produce & deliver products/services;
• Invoice and service customers

Performance measurements for each of these processes need to be tied directly to expectations around process throughput:

Understand Customers and Markets: The process involves customer surveys and market research. Output from this process will resemble statistically valid findings, conclusions and recommendations. Plans and associated budgets need to be established for both. Performance can be tracked against budget and plan. However this kind of tracking misses the primary objective of the process. We deploy resources to the process in order to understand fully our market and competitive position and discover actionable opportunities. The appropriate performance metrics need to be tied to the value of the actionable opportunities discovered and the cost and time associated with discovering them.

Developing New Products/Services: This process is employed specifically to enable our business to identify potential new products/services, that when added to our offerings will enhance our competitive position and profitability. An effective new product/service development process accurately identifies potential losers early in the development process to minimize our investment in them. Further, it accurately identifies potential winners and enables rapid development shortening the time to market. As such, effective performance metrics for new product/service development processes should address the success rate of new product/service offerings that came through the process, the speed at which they traverse the process, the return on investment generated by new products/services and the percent of sales generated by products/services less than 3 years-old.

Market & Sell: Many organizations struggle with the performance of their marketing and sales process. The two go hand in hand. Marketing establishes the demand for our products/services (targeting market segments for promotions; establishing pricing policies; terms and conditions; etc.) and sales develops customer requirements and establishes the value our products and services will deliver to our customers. Effective measures of our marketing and sales efforts always come down to top line dollars of products/services sold. The top line sales can be broken down by market segment with growth rates compared to our marketing and sales efforts in each. Our ability to drill down into this metric is totally dependent upon our ability track our marketing and sales costs by market segment. A well conceived system will be useless without the cooperation of those responsible for using creating the data to be put into it. This is a critical success factor.

Produce & Deliver Products/Services: Process throughput appears to be a reasonably good performance measure. It is defined as the sales less the direct expenses associated with sales (primarily direct materials and direct labor). As a performance metric, we can estimate throughput at the time an order is placed and with an appropriate cost system track our performance by order.

In addition, we might consider the organization’s ability to deliver orders as agreed upon with the customer – perfect orders. The degree to which we can consistently meet customer expectations as established in our customers’ orders, will go a long ways toward establishing our credibility in the market place. Lean organizations are typically fairly proficient at consistently meeting customer expectations and thereby generating perfect orders.

Invoicing and Servicing Customers: Nothing slows the flow of earned cash into a business like failing to provide timely, accurate invoicing to customers. The product/service was delivered and the invoice sent was either not sent in a timely manner (too early is as bad as too late) or the invoice was incorrect giving our customer the grounds to dispute the bill and withhold payment until the dispute is resolved. With this in mind good metrics for this process will address the timeliness and accuracy of invoices.

After sales service is core to most businesses as well. Typically, after sales service is about responding to customers’ questions/concerns/complaints/claims – typically this amounts to damage control. Effective after sales service will resolve these items equitably and quickly. Speed is of the essence. The longer we allow an unhappy customer to wait, the unhappier they become and the more damage they can potentially inflict upon our reputation and brand. For this reason, appropriate performance metrics for after sales service are related to frequency by category of concern and time to resolution. Some will argue that cost is a critical metric as well. However, we must be careful not to attribute the cost of resolving complaints and claims to the cost of the after sales service process. In fact these costs are a result of the work our other core processes put into delivering our products and services. As such, these costs should be born by them.

In every process, we define the desired outcome from the process and measure the critical aspects of delivering that outcome. Typically with only 2 or 3 metrics for a process we can determine whether our processes are in control and generating consistent reliable results.

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Category: Business Process Improvement, Operational Excellence | 2 Comments »

Process Performance – Who Owns It?

08

Mar

2010

Process Ownership – Who’s Responsible for Process Performance?
Every organization has a set of core business processes.  Continuous improvement of their performance is critical to achieving operational excellence. When asked who’s responsible for the performance of those processes, most organizations point to the person who resides at the top of the organization chart.  The reality, they are responsible for P&L and therefore the performance of the entire organization.  For them to take ownership of each of the core processes would be more than an overload.  The highest performing organizations assign ownership for core processes to key employees working in the process.

Process owners are responsible for:

  • Ensuring the process is in control, consistently delivering the quality and quantity of throughput expected from it.  As such they must implement performance measurement systems that track and report the performance of the process.
  • Improving process performance – therefore they are responsible developing and requesting funding for performance improvements.  In addition, they are responsible for developing and meeting performance goals for their process. 
  • Defining and documenting the process – identifying the boundaries of the process (what is included in the process and what is excluded from the process) documenting the activities and steps in the process, and identifying the resources required for the process to function (machines, materials, supplies, people, etc.).
  • Staffing the process – ensuring that employees assigned to the process (and their backups) have: (1) Understanding of the importance of their individual role in the successful operation of the process, (2) Knowledge of the overall process from start to finish, (3) The appropriate skill sets and levels of competency to their role effectively, and (4) Thorough knowledge of how to successfully perform their role in the process.
  • As improvements to the process rollout, process owners will be responsible for ensuring all employees working in the process are capable and willing to adopt them.
  •  


Typically, business processes (especially core business processes) operate across organizational boundaries.  As such, process owners must work collaboratively and cooperatively with managers of other parts of the organization to ensure resources and staffing are available to ensure consistent process performance.  From time to time, conflicts will arise between the goals of the process owner related to process performance and the goals of the various organizational units through which the process operates.  When these arise, it is incumbent upon all parties to resolve the conflict by identifying a solution that will give the entire organization its greatest benefit.  This may require engaging the expertise of others within the organization who can evaluate the effect of various alternatives on the organization as a whole – accountants, engineers, etc.
Who should be given ownership responsibility for core processes?  Ownership responsibility should be given to those that already have responsibility for some part of the process, have demonstrated the ability to work across organizational boundaries to achieve organizational goals, have a reasonably good understanding of the process from start to finish and a willingness to take on more responsibility and accountability.

 

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Category: Business Process Improvement, Managing Change, Operational Excellence, Organizational Design and Development | 1 Comment »

Mission vs. Vision

20

Jun

2009

Every business and organization has a mission and all should have a vision.  It seems there is a great deal of confusion around the difference between the two.  So today I want to bring clarity to the issue.  The mission of an organization is the reason it exists.  It is much more obvious in the governmental and non-profit sectors.  In these two sectors, the mission is what they are chartered to do.  They may not be doing as well as they could, but to perform their mission is why they exist.

On the other hand, the vision the organization is a state to which the leader of the organization is committed to take it.  If we look at the organization on a time line, we can see where the organization was several years ago and where it has progressed to, today.  The vision describes where it will be several years from now.  Frequently, leaders will describe their vision for the organization in terms of the characteristics and attributes of the organization in the future.  They can talk to the way business will be transacted, the attributes of the systems that will be in place to support it, the organization structure and the way work will be done.  The more thoroughly they flesh out their vision for the organization of the future, the more likely it will be that they will realize their vision.  I say this because I believe that when we get very specific about our visions, we can then get very specific about the goals that need to be accomplished by the organization to achieve it.  As goals are refined and objectives put in place, we are able to build strategies and tactics to accomplish them, make assignments within our organization, measure progress and hold people accountable.

To further enhance the likelihood of an organization being able to accomplish its vision, it is imperative that everyone in the organization be sold on the vision.  They need to want to go there.  They need to believe that it will be a much better place to be than where they are now.  As such, the leader needs to be talking about the vision as often as possible when communicating with the organization.  To facilitate their by in and make it easy for them to remember where they are going and help them make the basic decision, distill the vision down to a single statement or phrase.  One of my favorites came from a Japanese manufacturer of earth moving equipment Komatsu.  They distilled their vision down to “surround Caterpillar”.   Simple enough that every person in their organization understood where they were going.  This simple statement guided their growth strategies for years into the future.  

So we see the mission speaks to what we are about and why we exist, while the vision speaks to the state of the organization at a point in the future.  Remember the power of simplicity as you build both your mission and vision statements.  Your people need to be able to understand what your organization is about and where you are taking it.  Once they do and are sold on it, they will help you get there.  When you realize that you are all in this together, it is amazing what you can accomplish.

Category: Managing Change, Strategy Planning | No Comments »

Cash? Growth? How?

29

May

2009

On May 15, the Federal Reserve released its Industrial Production and Capacity Utilization Survey for April, 2009, indicating that business activity is continuing to decline although at a much slower pace than in the previous 5 months.  It appears the economy is approaching the bottom of this cycle.  This is the ideal time to be considering strategies for growing your business.  Opportunities for extrinsic growth abound as do opportunities to grow capacity by picking up surplus capacity that competitors have had to unload.  All it takes is cash!

Unfortunately, most banks cannot free up cash for lending without finding themselves in trouble with bank regulations.  But the good news is that not all banks are in this situation.  Some of the smaller banks are in fact able to make loans, particularly SBA guaranteed loans.  However, to succeed in acquiring these funds, businesses need to have their financial houses in order.  If through the last few months they have been able to remain profitable and pay their bills on time, they may be in an ideal position to get an SBA guaranteed loan.

On the other hand, if they have not been able to pay their bills on time and remain profitable, they will need to restructure their operating costs to bring them into line with the level of business that they are supporting, we call this right sizing.  No doubt this process is painful but it is a necessary condition for businesses to survive and emerge from this recession stronger than they were going in.  If you need some ideas about how best to go about right sizing your business, please give us a call.

Further, in most cases it is helpful to get some outside advice when you are considering an acquisition or a loan.  Please feel free to contact us at the number below for a free consultation.

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Succeeding with Strategic Change

22

May

2009

Strategic plans almost always demand major change in the way things are being done in some part of an organization. Everyone understands what it takes to succeed at change. After all since the day we were born, we’ve been dealing with it. So managing change should be reasonably easy for just about everyone, right? In the world of business, the issue is not that we know how to do it but that we know how to do it well and in fact can do it well. ODR, the predecessor Conner Partners (www.connerpartners.com) did considerable research in the area of change management under the leadership of Daryl Conner. He recognizes that major change always results in a certain amount of dysfunction within organizations. For leaders of major change, the goal is always to minimize both the duration and magnitude of the dysfunction. Successful implementation depends on it.

As a change management consultant trained by ODR a number of years ago, I have discovered much of his research has held true to my experience as well. When implementing major change, most executives have a good vision for what life will be like in the organization after the change but seldom understand that realizing that success largely depends upon their ability to effectively sponsor the change – really take the lead, expressing their support for the project both publicly and privately, managing the entire project including all aspects of the change and holding others accountable for progress in areas that have been delegated to them. Most top executives believe these activities can be effectively delegated to others in their organizations. Unfortunately, the employees affected by the change are always wondering if he really understands what he is expecting them to do. And if he did, he probably wouldn’t be expecting them to do it. It is for this reason that the senior executive responsible for the change must take the reins, and continue to speak out in support of the project, building commitment throughout the organization until the project is fully implemented and his vision is fully realized.

So what has your success rate been with major strategic changes? You may want to ask a few people in your organization about it. If it has not been what you would like it to be, consider engaging a change management consultant to coach you through your next major change.

Category: Managing Change, Strategy Planning | No Comments »

Operational Performance Improvement

15

May

2009

The real key to improving organizational performance is to either improve throughput, a term developed by Eliyahu M. Goldratt in the 1980’s, or reduce fixed costs.  Goldratt defines throughput as total or gross sales less variable cost.  Based on his definition, throughput improves when an organization:

 

  • Successfully reduces its variable cost
  • Increases its sales by raising its prices and/or increasing its sales volume.

 

In so doing, organizations are able to leverage their investment in fixed assets and fixed costs.    

 

Improving organizational performance in any way that does not improve throughput or reduce fixed expense, sub-optimizes.  This is the primary reason so many organizations that are engaged in 6-sigma and lean implementations see so little of what they claim as improvement translated into true profitability.

 

Years ago, I had responsibility for evaluating the savings generated by various cost reduction projects in which our company had invested.  Frequently engineers and accountants would agree that a particular investment reduced incremental cost in one step of an operation that would translate to a large improvement overall.  When examined more closely, typically those savings were nothing more than smoke.  In fact what had happened was an incremental increase in capacity had taken place that successfully moved a bottleneck operation up stream resulting in at best a minor improvement.  Monthly operating expenses did not change.  Without increased volume to generate additional sales and consume capacity increases created by the improvement, neither throughput nor profitability increased.  Volume increases were then limited by the new bottleneck operation, somewhere upstream.

 

Successful improvement projects focus resources on those critical few areas in an organization that will allow significant improvement in throughput or reduction in fixed costs.  These are strategic initiatives —  they result in improvement that always translates into profitability.

 

Keep this in mind when developing an operational strategy.  Focusing on improvements that drive throughput or reduce fixed cost, will bolster its likelihood of success.

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Building An Effective Organization

09

May

2009

How do you know that your organization will be able to effectively meet the challenges of the future?  This is a key question that many of our clients have asked in the past.  We answer this question by examining two factors.  First, does the organization in its people have the skill sets and competencies necessary to effectively do the work that is currently expected of it and will likely be expected of it in the future?  And second, does the organization recognize the breadth and depth of the processes that need to be in place to carry it into the future.

We’ll wrestle with the first of these questions this week.  To define the skill sets and competencies required by an organization, we work our way through the following steps:

1.  Define the work to be accomplished – type, volume, quality level and productivity.  Forecast the workload that you anticipate in the coming quarters and years.
2.  Define the processes employed to accomplish the work – types and sources of inputs required, types and quantities of outputs required, and the conversion process that must take place to change the inputs to outputs.
3.  Define the skills sets and levels of competency that are required by the process employed to accomplish the work.
4.  Examine the work from the perspective of wasted time and effort – employing lean concepts to minimize waste. Be careful not to get bogged down in the minutia of this step.  By focusing our efforts on only those items that will truly drive throughput, we will see the maximum benefit.  Failure to maintain this focus is perhaps the single largest reason lean projects fail to see the bottom line results they promise and disillusion management.
5.  Define the skill sets and levels of competency possessed by the workforce – for most positions in most organizations this is largely a subjective evaluation.  Even in cases where certifications are required, a range of competency still exists and can for the most part only be evaluated subjectively.
6.  Examine the gap between the desired skill sets and competency levels of the existing personnel and establish the organizational development plan to close the gap – training and motivating employees to broaden their skill sets and improve their levels of competency or bring in a more skilled and competent workforce.

If you are facing these types of concerns, understand what needs to be done, discuss it with your management team and get the help you need to proceed with the studies of this nature if you believe you and your team needs it.

Category: Operational Excellence, Organizational Design and Development | 1 Comment »

Strategy Execution

01

May

2009

A recent Ernst & Young study reports that about 60% of all strategic plans are never implemented.  It is hard to imagine all of the time and energy that goes into non-executable strategic plans.  It seems to me that the reasons for failure to implement a strategic plan are likely three:

 

  1. The business was incapable of executing the plan that was developed.  Either it required more change than the organization could assimilate or it required more resources than the business could assemble in the time required.  Strategically, the executive team responsible for rolling out the strategy should be able to assess their organization’s capability before deciding to proceed with a plan that has no chance of success.
  2. The plan was never approved by top management.  Lower level executives assembled the plan, presented it to top management for their approval and had it scuttled before they could do anything with it.  When I have seen this happen, it is typically because the lower level team fails to recognize the criteria their top management team is using to evaluate the likelihood of its success.  Frequently, organizations are facing a survival issues when this happens.  To avoid having the plan tossed back in your face, why not get realistic.  Identify the real key issues and make the hard decisions. Top management will make it for you if you do not.
  3. The plan was preempted by a competitor’s action.  It is all about doing your homework.  So many businesses are not paying close enough attention to their competitors to know what they are thinking.  You cannot assume your competitors are complacent.  Their top management team is constantly considering ways to strategically move their business ahead.  Having hand on the pulse of competitive information is crucial to ensuring your efforts to grow your business are not being wasted.

 

As you consider future moves for your business, consider the risks, rewards, resources and timing you are up against.  And whatever you do, its got to be executable with the resources you have and can acquire within the plan timeframe.

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