Friday, May 21, 2010

Show Me the Results

One cultural aspect of American business that is both a driving force and a curse is our obsession with getting results. It does not matter if we are looking at company performance or individual performance. It does not matter if we are looking at strategy, marketing, sales, manufacturing, or finance. Neither does it matter if we look at our lean progress or any other business approach, our business metrics or our stock performance. Bottom line, everything and everyone is rated and evaluated on results and only on results.

Just as in sports, all the matters is the final score, who won. What do we see in the majority of sports headlines…who won, who lost and the score.

For most of us, this is just a fact of life, a given, part of our competitive nature, our culture. I can not argue against results entirely, results are important.

Sometime we can easily quantify the results making them objective. Sometime we can not. Results that are subjective are like beauty, it is in the eye of the beholder. Despite our efforts to make all results objective and quantifiable, in many cases, subjectivity remains.

Overlooking this problem, we obsess over results. What is our stock price? What were our quarterly financials? Did I hit my quota? What is our 5S audit score? What is our OEE? What is my direct labor costs? Was this project a success? What are each employee’s talent matrix rating? Just tell me the score.

But does this tell us the whole story? Are we focused long-term? Does it reflect the struggle? What about the knowledge gained? Does it matter? What impact will it have on our future? What was the cost of our success? Were there any negative consequences in getting our results? Do we care?

In our obsession with results, do we actually miss something, perhaps something greater?

Wednesday, May 19, 2010

How to Kaizen

It is not important to know “how to kaizen” as it is “to kaizen”. It does not matter so much if we start with 5S on our lean journey as it is to start our lean journey. It does not matter how to use each of the lean tools as it is to use the tools to solve our problems.

Kaizen is a messy, bumpy struggle to improve. However, it is in this struggle that we will learn and gain knowledge. This is the only knowledge that will truly help us succeed in lean.

Each of our lean transformations will be different. It will not be like it says in any one book or how some other company operates in their lean approach.

Do not wait for perfect kaizen rather just kaizen continuously. Results from any kaizen are secondary to the act of kaizen itself. The only failure in kaizen is to no longer kaizen.

There are no right and wrong ways to kaizen, only the way we kaizen and better ways. There is always a better way.

Thursday, May 13, 2010

The Winning Poker Hand of Corporate Metrics

When we say company metrics, many of us quickly think of Cost, Quality, Safety, Delivery and Morale. All are important metrics for any company however we tend to view them differently. Specifically, we focus our time and attention to one or maybe two metrics while virtually ignoring the rest because some are valued higher.

The King of all metrics is Cost.
The Queen is Quality.
The Ace is Safety.
The Jack is Delivery.
And the lowly 10 card is Morale.

Many companies consider these to be the top company metrics. In my experience, the overwhelming majority of companies focus primarily on COST as THE key metric. How do I know?

Just look at your company’s key performance indicators (KPI).

How many ways is cost charted, measured and analyzed? Could it be…
Sales dollar per employee?
Sales dollar per Direct Labor Manhour?
Direct labor cost per department, per shift, per plant, per product, per on and on?
Overtime cost?
Piece part cost?
Purchasing variance?
Overhead cost?
Capital budget?
The list goes on and on.

The metric that the majority of companies focus the least amount of their attention is Delivery. How do I know?

How many ways is delivery charted, measured and analyzed? Could it be…
On-time Delivery?
And that’s about it.

Quality, safety and even morale have more than one KPI.

Similar to delivery, morale does not rank high on anybody’s list of metrics. Many of us may think morale is too vague, not quantifiable and too hard to measure much less have any control in improving it. So we tend to ignore it, unless it is close to contract time for those of us in union shops. Besides, we can still post stellar financial results with low morale.

In any management meeting when the company metrics are reviewed, how much time is spent discussing cost? How much time is spent discussing delivery? And when was the last time morale was even mentioned?

Quality and safety are somewhere in the middle and time spent on these metrics is directly proportional to the number of safety incidents or customer complaint issues of late. No issues, not much discussion. But when an incident occurs, the discussion time goes up.

As a lean thinker, how should our time be spent with regard to our metrics? In my opinion, we should spend the majority of our time on Delivery, Quality, Safety plus Morale and spend less time on Cost. If you think about it, improvements in delivery, quality and safety are process focused while Morale is a good indication of employee engagement (ie employee suggestions). Focusing on these areas will end up improving cost.

As for single delivery KPI of on-time delivery, this is the perhaps the easiest one to achieve in most cases…just increase our inventory level, right? But is this the best course of action? Is on-time delivery the only measurement we should concern ourselves with? What about leadtime?

How many companies focus on leadtime reduction? Now how many of us relentless pursue leadtime reduction with the same passion as we tend to do in cost reduction? In our kaizen, do we focus on eliminating waste to reduce costs or shorten leadtimes? Do we understand the difference?

If we focused the majority of our time and attention on cost, our King card, it would be like holding a handful of kings. The best poker hand we could hope for is a four of a kind. But if we aligned the whole organization to follow suit, holding each our metrics in our hand, we beat a four of a kind every time, royally.

Tuesday, May 11, 2010

Is U.S. Productivity at its Limit?

According to the USA Today, printed in the Friday, May 7th, 2010 edition, a glimmer of economic hope is seeming given with news of U.S. productivity and our job market. The slowing of U.S. productivity to a mere 3.6% annual rate in the first quarter and applications for unemployment dropping over the last three weeks led analysts to predict an increase in hiring as growth in production, the output per hour of work, is predicted to slow even more.

As quoted in this article, Nigel Gault of HIS Global Insight stated, “Companies are close to the limits of what they can do with their existing staff. They are going to have to start rehiring people.”

Hogwash! Not even close! Yet Mr. Gault's prediction may end up correct despite the flawed data, in my opinion.

Instead of looking at their spreadsheets and computer models, these analysts need to go to gemba to see for themselves. The only problem is that they probably don’t know what to look for if they did. From my gemba perspective, limited to the small sample size of companies I know about, U.S. manufacturing companies have only made a small dent in productivity. They same goes for our service industries or any other category for that matter.

There are still vast amounts of waste remaining in our processes if we only could see it.

So I believe that there are still enormous opportunities in the U.S. to substantially increase our productivity.

On the other hand, I see limitations in what companies are doing to improve and the rate of their improvement. The majority of companies in the U.S. are not relentless pursuing a path of waste elimination and continuous improvement. As demand picks up (not really noted in the predictive analysis), companies may in fact start rehiring.

Monday, May 10, 2010

Management Improvement Carnival #97

Got Boondoggle is proud to host this edition of the Management Improvement Carnival. Please check out the following top posts from follow lean thinkers in recent weeks. Enjoy and learn!

Don’t Do 5S by Jamie Flinchbaugh – “So make sure that using 5S, at any point in the journey, is solving actual problems that you currently have. Start with the problem statement, then pick the tool. Don’t start by picking the tool.”

The Will, the Willow and the Frog by Jon Miller – “There are many stories from many cultures that remind us that with faith and will, nothing is impossible. The irony is that if you don’t believe this, you will never find out whether it is true.”

Leadership: The Power of Influence by Tim McMahon – “The challenge is to get people to follow in a direction they might not otherwise go.”

Continuous Improvement by Lee Fried – “Thus, there is no way an organization can claim to be promoting continuous improvement through events or projects. It will only occur when improving the work is the work.”

Kaizen in the Laundry Room and My Domestic Shortcomings by Mark Hamel – “Kaizen opportunities are often best identified (and done) by those who do the work.”

Lean Thoughts During Saturday Errands by Mark Graban – “In the course of these errands, I had some thoughts about lean or related to it (or just fun thoughts, maybe), including: Why 100% utilization isn’t possible or optimal, Visual controls with moving tape and Good “flow” from a store to a dental practice office.”

Some Growth is not Visible by Pete Abilla – “When you think about it, that’s how a culture is created. Not through some big program, or some big push top-down. Instead, true, long-term cultural change happens over a long period through many, many, small micro-interactions.”

3 Tips for Continuous Improvement by Ron Pereira – “In this article, I want to share some ideas for how to approach things such as workout programs and continuous improvement as they are surprisingly similar.”

Toyota the Bad Guy by John Shook – “Even so, we must recognize that even at its peak as an organizational GPS, Toyota was never as good as its reputation in some ways, but better in others. Both at once.”

The Human in the Loop by Mark Rosenthal – “If we truly want to construct a work environment where people make the best possible decisions, it behooves us to rid ourselves of decades old stereotypes and convenient beliefs about why people decide what they do.”

The Secret to Successfully Running a Lean Office: Daily Management by Jeff Hajek – “Daily Management is a proactive, systematic approach to balancing capacity and expected demand. In a nutshell, it is a process for using Deming’s PDCA cycle to manage a workday.”

Should I Pursue Waste Elimination or Lead Time Reduction? by Michael Balle as the Gemba Coach – “To respond to your question directly; there is no debate: Kaizen without a pull system will be disappointing.”

Bagel with a side of Jidoka by Evan Durant – “And the more we explore the concept of Jidoka the more we are forced to challenge our assumptions about what exactly the human and machine elements are. Often there are untapped opportunities to separate the two.”