Lesson Learned #50
During a change program, everyone goes through a real emotional roller coaster. You tend to be a little overly optimistic at the front end. when the program is being hyped and people are excited. Then your emotions take somewhat of a nosedive as you discover it's tougher than you thought to change. And finally your spirits rebound as things actually start to improve – that is, if you have a good game plan and have both the courage and conviction to stick with it. We've learned over many years of implementing changes that to be successful you really do need courage and you really do need to commit to making it work. Every change program has its hiccups, and it's very easy to go back to the way things were. It takes genuine courage to give change a chance to work. It helps if you have lived through the change cycle a few times. because it gives you the confidence to know that things will get better. It also takes time to allow any new process or pattern of behavior to become habitual.
Two guidelines that we find quite helpful when navigating through a change program are: (1) Try to keep people from getting unrealistically optimistic or pessimistic as you go through the inevitable ups and downs; (2) Move with speed to limit the duration of the cycle. Change can be exciting and invigorating, but it requires careful management of people’s emotions and expectations.
Lesson Learned #49
One of the interesting things we've learned is that the manager who is initially the most outspoken opponent of starting a performance-improvement program often ends up its greatest champion. The reason for this seems to be that people who are overtly outspoken share their feelings and opinions fairly easily. You know what they think and where they stand. This allows you to uncover whatever concerns they have and work together to try to overcome them. If you are successful at addressing their issues, their open nature can lead them to become just as outspoken in support of the initiative. We refer to this as "active resistance." It may seem a little threatening initially, and can derail initiatives if you don't deal with it, but it's fairly normal and it's out in the open.
A more dangerous type of resistance is the flip side of active resistance – what we call "passive resistance." Passive resistance is the resistance you get when managers (or employees) claim to support an initiative but don't really want it to succeed and quietly undermine it. Managers who are passively resisting do very little to help correct the course when you encounter the inevitable obstacles common to change programs. They may even discuss deficiencies in the new way of doing things with their employees, which breeds dissatisfaction.
Passive resistance is not the same thing as what happens when people pay lip service to new initiatives because they don't think they will last. (This can occur if an organization develops a "flavor of the month" approach to change programs.) These people don't think a program will last, but they don't try to intentionally derail it. Passive resistance is a little more sinister. Passive resistance has similar roots to active resistance. Both reflect a fairly natural concern that a change program will negatively affect the existing environment. However, passive resistance is difficult to ferret out. Because of this, you may never address the underlying concerns.
Lesson Learned #48
It's not as popular in management discussions as it once was, but every so often we hear someone talk about the need to empower employees. No one would ever argue that empowering employees isn't basically a good idea. The trouble is that the argument is usually made as to counter why management shouldn't regularly follow up on their staff.
Following up regularly with staff is seen by some as "micro-managing." Adding to this belief: it's not uncommon to hear some industry titan reflect on their success by saying something like, "I was successful because I hired good people, and then I got out of their way." It's a good soundbite, and it may work in some circumstances, but we don't believe it is good management. In fact, you might just find out that the "good people" who were hired are exactly the ones following up regularly with their staff.
Defining employee empowerment, as some managers do, as a proxy for "getting out of their way" ignores a key role of a manager. Most operating problems that impede people's productivity during the day need management intervention of some kind to be fixed. This means that managers need to know what their people are doing and how they are progressing, at least periodically, so they can help identify when problems crop up. It's not so much a question of "getting out of their way," as it is a question of what can managers do to help without getting in the way?
We have conducted hundreds of thousands of hours of observations on people in their work environment, and one basic conclusion is that most of the problems that impede individual productivity are not under the control of that individual. The most common problems we see involve the flow of material or information in and out of work areas; the accuracy and timeliness of inputs; and issues that originate somewhere upstream in the process. Even with state-of-the-art training and equipment, an individual cannot easily fix any of these types of problems without the help and support of management. People will often develop creative work-arounds for recurring problems, which may get the job done but tends to make the issues invisible to managers. Even worse, the work-arounds often become the basis for formal or informal planning standards, which bury the problems deep within the system.
Employees can most effectively be empowered if managers perceive their own role not to be only as someone who monitors performance, but someone who helps remove obstacles for their staff.
Lesson Learned #47
When Carpedia first started, we were predominantly a manufacturing and distribution consulting firm, due to the backgrounds of our initial founders. We cold-called The Ritz-Carlton Hotel Co. one day, and the CEO passed the call over to the head of Quality. Our timing wasn't great, as they had just become one of the few companies in the world to win their second Malcolm Baldrige Quality Award. The head of Quality's initial reaction was, perhaps understandably, outrage. After he warmed up to us and our approach, he realized that we might prove useful to them precisely because we weren't hoteliers. He had the insight to see that even a company known around the world for its quality could learn something from the manufacturing world. We subsequently learned a lot from him. Today our company does the majority of its work in office or "white collar" environments, whether healthcare or hospitality or financial services firms. What started with a cold call was augmented by the economic decline of manufacturing and the growth of various service industries. Throughout this shift, we have tried very hard not to forget that office environments can learn from the shop floor.
The basic principles of management don't change from industry to industry, or one environment to another. In many ways, the shop floor has been a leader in management practices. Many management fads start there and eventually migrate to service environments (Lean and Six Sigma being two recent examples). This may be in part because many of these improvement methodologies are used to increase productivity and often the shop floor is the first on the target list. Or it may be simply that it is visually much easier to see what is happening on a plant floor than in an office. When you walk around a factory, you hear machines operating (or not), and you see piles of material moving (or not). You can visually see activity and backlogs. You also see charts with numbers and diagrams and daily production schedules posted on boards in front of production lines. Few of these visual clues exist in many office environments. Call centers often display real-time metrics up on the wall, but most office environments are mazes of cubicles, with people busily moving paper and hitting keyboards.
More and more office environments are adopting and adapting techniques that were pioneered on the shop floor. This includes basic, but key issues, such as how managers plan and schedule work, follow up, measure and communicate results, and continuously improve. It's a helpful and useful transition of ideas.
Lesson Learned #46
Despite the apparent wisdom of not trying to reinvent the wheel, we've actually learned over the years that it is vital for most businesses to do exactly that. We may be playing with semantics a little, but time and time again we’ve observed that the best companies we work for are those that are constantly reinventing the wheel in one way or another. For these companies, this means upgrading products, modifying services, streamlining processes, and even continuously improving the way they manage.
We were recently conducting an internal management-training session when one of the senior partners suggested that it might be a good idea to share some analytical studies we had done very early in our company's history (in the early ‘90s). A few printed studies were dug up out of the company archives, and after we blew away the dust, were laid out on a conference room table. We were shocked by how primitive they looked. Much like the wheel analogy however, the basic purpose and message of the studies remained the same. However, digital technology and advanced graphical capabilities had advanced so far since the studies were put together, they now looked archaic.
Management styles and approaches have themselves gone through many wheel variations, and continue to do so – as have change-management approaches. This has been at least partly driven by new "management theories," which tend to be promoted by consulting firms and which form the basis of intellectual "products" that can be marketed and sold. If you sift through most new theories, they are generally existing theories that have been modified in some way. We don't believe there is anything fundamentally wrong with this, as each theory tries to make the "management wheel" a little more effective. We shy away from management fads simply because we find them unnecessarily limiting. There is usually some value in most "new" theories and approaches, but they need to be sifted through and thoughtfully applied to specific environments.
We never did show our current management the old study. The value we might have gained from displaying that the core management concepts haven't changed was overshadowed by the desire to limit questions about the advancing age of our founding partners.
Lesson Learned #45
Lasting productivity gains in highly variable work environments can be elusive. Highly variable environments are those where the work volume fluctuates throughout the day, week, month or even throughout the year. Typical industries with big volume fluctuations include hotels, restaurants and retail, but you also see it in functional areas, such as accounting, where the volume of work peaks at month-end or year-end, as companies close their books. We have created method changes in these environments that made processes more effective, but were ultimately disappointing when the financial results got tallied. The reason is that making a process better in a non-peak period doesn't have a financial impact unless you remove resources. You may improve throughput, cycle time or even customer satisfaction, but if your volumes are down and your basic costs are the same, productivity actually declines.
We've learned that the two main ways to improve productivity in these environments are to attack the peak and to creatively schedule off-peak periods. Attacking the peak simply means understanding which activities are done during the highest workload times and then trying to re-engineer them or remove some of them to off-peak periods. This reduces the peak's cost requirements and therefore lowers costs in the off-peak times as well. The second approach, creatively scheduling off-peak periods, is easier in some environments than it is in others. For example, you may be able to have split shifts at a retail store, but this may be harder in an accounting department. Union environments are sometimes a little less flexible for this type of resource juggling. But this is where the creativity needs to come in. We have seen companies creatively use part-time resources, cross-train departments, pull in work from other areas or stagger shift times to try to balance their resources against their volume fluctuations.
When you come up against these types of volume fluctuations, it's helpful to remember to attack the peak first, then creatively schedule the off-peak periods.
Lesson Learned #44
We worked for a number of years for a company known worldwide for its quality and service. We worked jointly with their quality team and built a management approach for a number of their functional areas. While the projects were successful in achieving results, the management approach, in its intended form, didn't sustain. The key reason was that it was a quality initiative, not an operations initiative. Operations management was involved throughout the projects, but they were not the ones driving them, or selecting the next areas, or presenting the results to the executive committee. It was also considered a "nice to have" if the busy regional VPs attended key project milestone meetings. These were all mistakes.
Many companies have corporate improvement teams of one kind or another, such as quality or Lean or Six Sigma or some combination. And sometimes they bring in outside consultants to serve a similar role. Whether internal or external, if the improvement initiative is not owned and championed by management within operations, it's very tough to sustain. Consultants and internal improvement groups can be periodically useful catalysts to help operations management achieve their objectives, but they should always be subordinate.
Lesson Learned #43
An auto-parts supplier who made plastic components for a large car manufacturer needed to increase the throughput of one of its production lines, because the line was losing money. After studying the production line, we helped the company implement a number of method changes, resulting in a 30% increase in throughput. The client was thrilled, at least until the financial results started getting worse, not better. A thorough financial review subsequently determined that the company lost money on each and every part it shipped, so increasing throughput simply made them lose more money, faster.
The obvious lesson learned here was to understand the problem first. We knew the production line was not profitable, but we jumped to the conclusion that increasing throughput (and the productivity of the workers and equipment) would make the line profitable. We didn't properly understand why the line was losing money. Productivity was part of the problem, but not the most significant part. The real problem was actually a currency issue. The supplier paid most of its costs in one currency and was compensated in another. The exchange rates had fluctuated significantly since the contract was awarded, eliminating what were already thin margins. Increasing productivity is never a bad idea, but had we better understood the nature of this particular problem from the outset, it would have changed the direction of our analysis, and better addressed the complexity of the problem.
Lesson Learned #42
We are often asked by our clients to help build their internal performance-improvement (PI) groups. The concept of developing internal skills to reduce their reliance on high-cost consultants is appealing to many companies. We always tell our clients that the most important lesson we have learned about these groups is that if you want them to be successful, you have to make them accountable. This may sound obvious, but it's not. As a result, most groups have a limited shelf life. When times get tough and executives are looking for costs that can be cut out quickly, an internal group that isn't obviously accountable is a pretty easy target. We have seen this history repeat itself many times over with quality specialists, re-engineering teams, and more recently Six Sigma and Lean groups.
The reason is because many internal groups simply aren't truly "accountable." We define being accountable for a PI group fairly simply: the group needs to improve the company's profits by some magnitude greater than its total cost to operate (salaries, office, travel costs, etc). This is much harder to quantify than you might think. First, the cost to operate these groups is often higher than many realize (which is why they are periodically an appealing target). Second, many projects have measurable outcomes, but the link between the outcome and how it affects a company's profits is not always easy to calculate. You may improve customer satisfaction by answering calls on the first ring, for example, but how does this actually improve profits?
But as difficult as it is sometimes to determine cause and affect, if the internal PI group does not figure out how to make these correlations, or choose projects that have a more obvious connection to profits, the group will eventually become part of their CEO's cost-reduction project.
Lesson Learned #41
The temptation to negotiate price is big, but after roughly 20 years and hundreds of project proposals, we've learned that it is a cardinal mistake to negotiate price too early in the sales process. In almost every transaction, a buyer first has to weigh the product's benefits against the consequences to determine whether a purchase is necessary, and finally whether it is affordable. If you negotiate price before a buyer has decided that they need the product, you will give away a price concession too quickly.
Most proposals, wins included, are rife with complications and objections – objections that more often than not have nothing to do with price. Strangely, sales executives almost universally have a reflex that can't be suppressed: they can't help but tinker with the price to make a sale more attractive. It doesn't work. When we introduce price too early in the close of the sale, we introduce two possibilities.
- It is quite possible that the real objections to a positive result will remain hidden, resulting in an unfavorable decision.
- If we are required to handle additional objections afterward, there is often a second price negotiation that eats up important profit.
This is a lesson taught to us by many clients over the years (over, and over, and over). We expect a negotiation of price, as it is generally good business practice to do so, but if we negotiate an acceptable price and lose an opportunity or negotiate a price twice on the same opportunity, we know we’ve just been taught the lesson again.
If you find yourself in the sales process and the thought of price negotiation comes to mind, ask yourself whether you have handled all your customer's issues EXCEPT price before you proceed. Then ask your customer the same question. Then proceed.