Creative Performance Improvements

Operational Excellence using tools like Lean and Six Sigma

Operational Excellence – Where to Begin? (May 16, 2012)


Filed under: Business Culture,Change Management,Operational Excellence,Operational Excellence Overview — Tags: , , , , , — admin @ 11:43 am

 

When you are ready to launch a program like Operational Excellence, where do you begin?

 

Over the years I have helped turn around or significantly improve four different businesses. While there were similarities, each one was unique and had its own set of issues and opportunities. Some had begun to use tools like Lean and Six Sigma and others had not. In the end, however, even as effective as Lean and Six Sigma are, they are still tools, not solutions. As the old saying goes “When all you have is a hammer, everything begins to look like a nail”.

 

When I work with clients who are interested in making a significant improvement in their business or turning it around, the first thing I like to do is get an understanding of the organization as a whole, from organization charts and product line descriptions to the top line financials. I also want to know who I will be working for, what they are trying to accomplish and how they fit into the overall business. Changes at a divisional or departmental level are possible, but they can be hindered by other divisions and/or departments that are not part of the project and have different priorities. I much prefer a program that the CEO initiates or at least fully supports so that everyone has an interest in good results.

 

From there I perform a physical and financial assessment of the business by product lines and products as well as interview employees at all levels within the organization. The physical assessment will give me a feel for how well products and/or services are flowing and a sense of inventory levels, delays, frustrations, etc. The financial assessment will give me a look at the overall financial health of the business, where the greatest costs lie, and an understanding of the relative contribution margins of the various product lines and business segments that roll up into the top line numbers. I like to see a year’s worth of data to check for seasonality and I will ask to see trends over multiple years. The financial reports will ultimately help us understand what to measure and act as theCurrentStateor starting point for upcoming changes. At the top level I recommend the creation of an Asset Velocity profile to provide a visual snapshot of the business overall and to help us target our Continuous Improvement projects for the greatest return.

 

My conversations with employees are critical to the overall process and our ultimate success. Prior to my conversations I will ask to see the Vision Statement, Mission Statement, Core Values, Strategic Plan, and SWOT Analysis  so that I can tell if there is clear communication and line of sight visibility to the overall goals of the business from the corner office to the floor. I will also be looking for charts, graphs, and other visuals that are regularly updated to help employees understand where the business is going and assess their understanding of what their role is in getting there.

 

Operational Excellence – The Hand Off ??? (April 3, 2012)


Filed under: Business Culture,Change Management,Operational Excellence,Operational Excellence Overview,People,Roles & Responsibilities — Tags: , , , — admin @ 6:22 am

 

Have you ever participated in strategic planning sessions or the launch of major business initiatives with the CEO or Senior Staff? Have you spent the time viewing PowerPoint slides and grand objectives only to see that “deer in the headlights look” from the staff around you? Or you see the “good old boys” congratulating the CEO on a wonderful job and yet knowing full well that little, if anything is going to really happen?

If you have experienced that gap as I have; you’re certainly not alone. Too many businesses and corporations today can dutifully and skillfully create the Vision, Mission, Core Values, and Strategic Plans for their enterprise, but totally fall apart when it comes to turning those into an Operational Reality.  

Over the past couple of weeks I have heard comments back from readers who have talked about the lack of “buy in”, the lack of communications, nobody “walks the talk”, apathy of the workers, and the feeling that “if we just keep our heads down, agree with the boss, and keep doing our jobs, this will all go away”.

In my next few posts I will offer some suggestions on how to turn this around if you have the will power, determination, and support from upper management to make it happen. Having led several businesses through this kind of improvement and/or turnaround I will tell you that it can be very difficult but it can also be very rewarding. In the end, however, you won’t be successful unless you have the employees on your side. This is likely to be a complete change of culture for your business and the employees on the floor and in the offices already have the answers to the majority of the problems that you will need to solve to be successful.

Operational Excellence – The Financial Factor (February 9, 2012)


Filed under: Communication,Finance,Operational Excellence,Strategic Plan — Tags: , , , — Chuck @ 11:44 am

 

Can you clearly distinguish the financial contributions of your products and services? Do you use ABC (Activity Based Costing) or some other technique to understand and distribute costs and overhead? Does your business have a specific target or “hurdle rate” for margin?

I don’t believe that we can leave the Strategic segment of a business without looking at financial systems and metrics. Although there are standards and regulations like GAAP and SOX to contend with there are still plenty of variations around how companies manage and report their finances. These variations are often driven, at least to some extent, by the reporting requirements of the Board and Investors.

Beyond all these regulations and requirements, however, are the tools and techniques that are necessary to really help measure and manage the business. Whether they are called KPI’s (Key Performance Indicators), Financial Targets or the like, the essential elements of a successful business are TIME and MONEY and the best run businesses are the ones that know how to make the best use of both as they focus on Asset Velocity.

In their book “Execution: The Discipline of Getting Things Done” Larry Bossidy and Ram Charan do a wonderful job of defining Asset Velocity and discussing its benefits. What is Asset Velocity? “Velocity is the ratio of sales dollars to net assets deployed in the business, which in the most common definition includes plant and equipment, inventories, and accounts receivable minus accounts payable.” What are the benefits of higher velocity? “Higher velocity improves productivity and reduces working capital. It also improves cash flow, the life blood of any business, and can help improve margins as well as revenue and market share.”

Regardless of how a company decides to keep the books, it is critical to have visibility to the REAL profitability of individual products and services and the accumulation of those costs over time. Good financial tools can and should provide the targets for productivity and continuous improvement projects using techniques such as Lean and Six Sigma to improve quality while reducing variability and time. They should also signal when it is time to discontinue, sell, or shut down underperforming products and services rather than wasting more time, money, and effort trying to “save” it.

What is your experience with financial systems and tools?

Operational Excellence – The Strategic Plan (December 7, 2011)


Filed under: Change Management,Communication,Operational Excellence,Operational Excellence Overview,Roles & Responsibilities — Tags: , , — Chuck @ 10:39 am

 

What do you consider best practice when it comes to the Strategic Plan? What are some of the tools used to create it? How often is it reviewed / revised?

So far, in reviewing typical business structures from the Top Down, we have discussed the Vision Statement, the Mission Statement, and Core Values. One of the last major “strategic” elements is the Strategic Plan. In each step that we have discussed so far we have gone from the broadest, biggest, and most ethereal ideas to things that are more measureable and actionable. In my own view the Strategic Plan begins to really bring it all into focus. Although it is still far ranging (a five or ten year horizon) it’s typically the point where a business will implement metrics and timing. It is likely to also be the point where the business seriously considers the competition and what is going on around them. I once again, however, caution management teams to “define” the problem not “fix” it.

There are numerous techniques used by companies as they reach this stage of definition and direction. One of the most effective is SWOT analysis where a company defines their Strengths, Weaknesses, Opportunities, and Threats, but new tools such as Voice of the Customer and Six Sigma analysis are adding to the options that are available in collecting and analyzing data. Regardless of the technique used, the objective is to define where the company is today as well as where it needs to be in the future to keep from falling behind.  If the Strategic Plan is done well the goals will tie directly to achieving the Mission and Vision of the business. And the goals need to be SMART objectives (Specific, Measureable, Achievable, Relevant, and Time Bound) without being overly directive. The exception to this rule may be in situations where the business is failing or in a turn around situation and rapid direct intervention is necessary to “stop the bleeding” and get the organization back on track.

An example of a SMART objective in a Strategic Plan might be: To move from the number four spot in the industry segment to the number three spot in 3 years. This sets a target for the organization without telling the staff HOW to get it done. It will require an understanding of the industry segment’s metrics in defining market position, but it ties directly back to our very first discussion around The Role of Employees in setting objectives and encouraging involvement.

I recommend that the business only have one Strategic Objective at a time. Although I have seen companies work with as many as three, unless they are prioritized, you are forcing employees to make choices concerning which one they work on. The loss of Focus can spell disaster and torpedo actual execution. I also recommend that the Strategic Objective be reviewed annually including all the data and tools used to create it. This allows for adjustments for movements in the competition and/or acceleration of unanticipated successes in the Strengths area by your team.

What is your experience with Strategic Plans?

Operational Excellence – Core Values (September 23, 2011)


Filed under: Business Culture,Core Values — Tags: , — Chuck @ 11:23 am

 

Does your organization have a set of Core Values? How do they fit into the corporate culture and ethic? They appear to be common in mission-based Non-Profits; should For-Profits adopt them?

What are Core Values? Looks like Wikipedia let me down on this one, but in my own experience Core Values define the moral and ethical character of the company. I have seen them most often in mission-based non-profits or family owned businesses in the US and they speak to the overriding values that the owners want to see used as their Mission is carried out. They have a tendency to focus internally on the employees and how they treat one another as well as the image that the employees project to the company’s external customers. 

While some employees may complain about them if they include dress codes, when properly chosen and maintained, Core Values can provide a sense of pride and teamwork as well as respect for one another. After disasters like Enron and the recent debacle on Wall Street, I wonder whether or not Core Values should be incorporated by more companies as a sort of Moral Compass. After all, even Blogs are establishing rules and standards for operation to ensure that people have a right to speak and express themselves while reminding responders that they don’t have the right to abuse others.

What do you think? Maybe we can get some of our HR staff members to chime in on this one.

Operational Excellence – The Mission Statement (July 13, 2011)


Filed under: Business Culture,Mission Statements,Operational Excellence,Operational Excellence Overview — Tags: , — Chuck @ 4:04 pm

 

As we work our way through the business from the Top Down and from Strategy to Tactics and Action, I believe that the next important element of an operationally excellent business is the Mission Statement. What makes a good Mission Statement? What distinguishes a Mission Statement from the Vision?

Checking once again with Wikipedia we find Mission Statement defined as “A formal, short, written statement of the purpose of a company or organization. The mission statement should guide the actions of the organization, spell out its overall goal, provide a sense of direction, and guide decision-making.”

Sometimes you will hear the Mission statement referred to as a BHAG. The acronym BHAG (pronounced BEE Hag) or Big Harry Audacious Goal was coined by James Collins and Jerry Porras in their 1996 article entitled Building Your Company’s Vision. Collin and Porras are also authors of the widely read books Built to Last: Successful Habits of Visionary Companies and Good to Great: Why Some Companies Make the Leap… and Others Don’t. In their 1996 article they said “A BHAG is clear and compelling, serves as a unifying focal point of effort, and acts as a clear catalyst for team spirit. It has a clear finish line, so the organization can know when it has achieved the goal; people like to shoot for finish lines.”

In some cases companies will borrow another acronym and practice from project management known as SMART goals to better define their BHAG. SMART, which is attributed to George T. Duran in an article written for Management Review in 1981, encourages businesses to make sure that the goal is Specific, Measureable, Attainable, Relevant, and Time bound.

In my own experience there is a fine line between “enough” and “too much” guidance in creating a Mission Statement. While I certainly agree with the creation of a BHAG as a way of further defining a strategy for achieving the Vision, and I support the attributes of SMART goals, I caution clients to make sure that the Mission Statement stays Strategic. Ultimately the idea is to use the strength and knowledge of their staff to determine how the BHAG will be accomplished. When management begins to dictate the how by defining the BHAG too narrowly they have violated one of my personal rules for Operational Excellence; they have turned their staff members into victims instead of participants.

What are your thoughts and experience with Mission Statements?

Operational Excellence – Vision Statements and Focus (June 14, 2011)


Filed under: Business Culture,Operational Excellence Overview,Vision Statements — Tags: , , , — Chuck @ 12:04 pm

 

How important is it for a business to have a Vision Statement? Should staff members and employees be able to reasonably recite the Vision Statement for a client or customer? How important is a Vision Statement to the employees themselves?

I believe that a Vision Statements provides Focus for employees. They act as a guiding light as employees are bombarded throughout the day with a multitude of choices and decisions to be made without the continued need for direction from management.

What is a Vision Statement? Wikipedia aptly defines a Vision Statement as “the desired or intended future state of an organization or enterprise in terms of its fundamental objective and/or strategic direction. Vision is a long term view, sometimes describing how the organization would like the world in which it operates to be. For example a charity working with the poor might have a vision statement which read ‘A world without poverty’”. So why does a business need one?

When an individual or group of individuals develop a product or service that they believe meets the needs of a group of prospective customers they usually have great clarity (Vision and Focus) concerning what it is, how it is supposed to work, and what need they are addressing. Although the originators may go through a number of iterations in the early days of their business, they know how to make or provide duplicates of the original product or service so that they can continue grow. Usually, all is well and good until the first staff person is hired who was not an original member of the development team.

Adding staff can be difficult, but with experience and a bit of luck, employees are added and the business moves forward. All too often, as employees are added, the Vision and Focus begin to get diluted and the quality of the product and/or service as well as the business can suffer. They may not suffer enough to fail but it’s likely that they will not move forward with the same clarity and passion of the originators without help.

The loss of Vision and Focus can also occur as new opportunities arise and there is a call for the original product or service to be modified or upgraded to meet new or expanded customer needs. It can also occur when there is a problem in the duplication, implementation, distribution, or use of the product or service by the customer and a rework or retrofit is required. However these changes and modifications occur; they negatively impact the original intent and purpose of the business causing it to be less efficient and less responsive than it was in the beginning. Individually these changes are often small; so small that there is little perceptible impact, but over time they build up like “dust bunnies” under a bed and eventually the business is ready for a good cleaning. But how will you know what to keep and what to toss without Vision and Focus?

Operational Excellence – The Role of Employees (June 8, 2011)


Filed under: Business Culture,Lean,Operational Excellence Overview,People,Six Sigma — Tags: , , , , — Chuck @ 9:19 am

 

This post, and hopefully all those that follow, is intended to applaud and celebrate the role and the impact that “employees” can and do have in the positive transformation of the businesses that they participate in. Over the past 30+ years I have had the honor and privilege of helping a number of companies, as an employee and as a consultant, increase their productivity and/or turn themselves around through creative performance improvements, productivity tools like Lean and Six Sigma, and the implementation of Operational Excellence. In all cases, however, the real key to my success and the success of the company in making and sustaining the improvement and effecting true cultural change has been the people who are involved in the various business processes, at all levels, within the organization when given the training, direction, and opportunity to make it happen.

Having started out on the factory floor at the age of 16 and working my way through college as well as many different industries and businesses domestically and internationally, it is my belief that the majority of employees want to make a positive contribution to the businesses that they work in and be recognized for what they know and how well they perform their jobs. While I will admit that I have run across my share of deadbeats, slackers, and goof balls, I believe that the success, the growth, and the ability of businesses to not only survive but thrive, is linked directly to how well their employees are trained, motivated, led, and allowed to actively participate in their own destiny as well as that of the businesses for which they work. In short, I believe that the majority of workers want to know and feel that they are participants in their businesses; not victims of the whims and directions of some far removed management team or boss.

As I mentioned above, I have used and ardently support the use of tools like Lean and Six Sigma, and I have installed and implemented sophisticated computerized process control systems, but there is much to be said for the value of the person actually involved in the process in terms of their experience and instincts. In the end, even as powerful as they are, Lean and Six Sigma are still “tools” and they rely on the operators. Without the experience and instincts of the process operators these tools and others can be used poorly or can be a complete waste of time.

 

Going Forward 

In future posts I plan to cover and comment on other elements and structures within a business and those things that I believe are necessary to achieve Operational Excellence while taking a top-down approach. While I work away sharing my own thoughts and experiences, I hope to hear back from you as business participants and leaders concerning the topics that I tee up as well as any others that I have missed or neglected. While every business and company is unique and will have its own needs to achieving Operational Excellence, I believe that a lot can be learned and accomplished by sharing our thoughts, experiences, and knowledge.


Mission Statement

At CPI our strength is Business Operations and our goal is helping you transform your Vision, Mission, and Strategic Direction into Operational Excellence.

Over the past 20 years we have led five businesses, from small to Fortune 50, through significant process improvements and/or business turnarounds as well as the cultural changes to reach Operational Excellence. At CPI we can help you and your management teams revitalize or re-start your business as well. In doing so, we will help you create an effective and efficient operating structure from the Top Down and Bottom Up while searching out and launching creative performance improvement projects from within using Lean, Lean Office, Six Sigma, and other performance and financial tools.

While we are proud of our 25+ years of international experience in Class I, II, and III Medical Devices and Medical Products, we also have experience in plastics, elastomer chemicals, biological components, machining, metal forming, metal finishing, forging, and international supply chains.

Contact us

Chuck Camp, President

Email: .................... ccamp (at) cpiops.com
Phone: ................... 614-917-7282

Address:.................. 5796 Aspendale Drive
                                  Columbus, OH 43235