A number of years back it was popular for consultants (and a few executives) to draw the company organization chart upside down. The idea was that organizations needed to recognize that managers actually worked for employees, and not the other way around.
The chart concept didn't last very long, either because it was a little contrived or because it got trampled by the advent of PowerPoint templates. Upside down org charts did look awkward but it's too bad because the concept was a good one. It visually made an important point that is often lost: the key to successful organizations is to remove the obstacles that keep front line employees from being more effective. They are the people who sell, design, fabricate, store, ship and deliver products and services that generate the revenue needed to pay for everything.
Managers exist to support these valuable assets, and executives exist to guide and support managers, so visually it does seem more appropriate to place employees at the top level and managers below, supporting them. But organizations were originally created based on a command and control framework, and even the language we use (e.g. supervisors and subordinates) suggests a top down hierarchy.
Organization charts best depict compensation hierarchies, they don't do a great job of reinforcing what kind of management approach a company wants to create. The most effective organizations we see try to never lose sight of who actually works for whom, and why that is critically important for their success.
When we are trying to figure out how effective a process is or isn't, one of the basic studies we do is to spend a day in the life of an employee at some key part of the process. We simply shadow a person for the day and try to see the world through their eyes, capturing what they do, what happens around them, and who and how they interact with others. They are always interesting studies even though they sound both intimidating and boring at the same time. If you think about it, there are really few better ways to understand what issues an employee has to deal with every day.
People often ask if the studies show higher productivity than normal because the person being studied would be self-conscious and have a tendency to be more focused than they might otherwise. This turns out to be somewhat irrelevant. People are naturally a little more focused, and take a few minutes to get comfortable with the observer, but these studies are effective because most operating problems have little or nothing to do with how hard someone works.
As much as 90% of the issues we see that cause waste are a result of how the process is designed, how information or material is coordinated and flows, and how effective management planned out the day. All these issues will happen through the day regardless of whether or not anyone is watching.
During a project we do these studies with managers. The studies are very useful for helping managers visually see how operating problems, within their span of control, affect their employees' performance. This helps change the mindset from thinking improvement is wholly dependent on the actions of employees or other departments, to understanding the critical role the manager plays in engineering change.
Management systems are tools created to help managers plan work, execute the plan, and then measure and report on the results. Most management systems we have looked at in the past two decades, in many different industries and functions, suffer from the same fundamental break down: the execution tools are the weakest part of the system (and are often missing entirely).
There is usually no shortage of tools to help managers plan what should happen, and even more tools to report on what actually did happen, but there often isn't much right at the point when things are actually happening. Execution tools are things such as time-based schedules, visual feedback monitors or boards, and controls to help a manager follow up on schedule attainment and performance through the day.
This is a problem for a few key reasons. First, it means problems and lost productivity can be occurring without management knowing which obviously creates waste and rework and can frustrate employees. Second, it causes employees to create "work-arounds" which can frequently end up adopted as the actual process which hides problems within future planning standards. Third, it can effectively turn a manager into either an administrator or a reactive fire-fighter (rather than a proactive manager).
The root cause of this gap in the management system is usually ineffective time-based scheduling. Without a meaningful schedule, managers can fire-fight larger obvious problems but they can't follow up on work with a purpose and they can't identify or remove smaller day-to-day obstacles that create waste. In high performance organizations, this is where critical incremental gains are made.
When we study processes, one of the first things we think about analytically is to break the process down into two components: volume and rate. These are the two main drivers of cost in any process. It's very useful for helping identify what you need to focus on if you are trying to improve productivity.
Volume is simply the number of times you do something. We often find things are done more often than they need to be. To reduce the number of times you do something, we look at both the actual volume and the frequency. Common causes of unnecessary volume are basic over-production (e.g. building too many parts to optimize a machine run or producing too much food for a buffet), and rework usually caused by errors or inaccurate information upstream. In one large distribution company we worked for, most of the accounts payable work volumes and activities were correcting supplier invoice errors. For frequency, we challenge how often you really need to do something. We try to determine the degree of risk if you changed the frequency of an activity, for example, doing random quality checks rather than 100% audits of incoming parts.
"Rate" refers to the cost per unit. To reduce the required rate for a process, we focus on using less labor or material per unit. We try to achieve three basic objectives:
- Reduce the hours required by reengineering the steps or sequence of the process.
- Reduce the hours required by reducing the waste (or non-value added time).
- Reduce the material cost by using alternate suppliers or materials.
So to improve the productivity of any process, focus on volume and rate.
One of the things we look for when we examine organizations is the degree of variability present. The more variability, the harder it is to manage. Variability can be both inherent in the nature of the industry and it can be self-imposed through policy or errors.
Variability is inherent in some industries. In restaurants, for example, the actual demand patterns may be fairly predictable (e.g. people eat lunch during a certain time period) but the volume of people coming into the restaurant may be affected by variables that are more difficult to predict (e.g. weather).
Variability can also be self-created. Policies related to things such as inventory levels, buying practices, shift scheduling, or customer service levels can all impact the degree of variability in a business. Errors in the process are another cause of variation. Inconsistent processes, operator error, and mechanical downtime all cause variations. Managers either have to fix the variation or build it into their planning and scheduling parameters.
Determining how much variability you have currently in your processes, and separating the inherent from the self-created is a good start to understanding how much your processes can be improved.
In many organizations the link between the financial and operating world is missing. Financial results can't be managed on a daily basis, but the activities that create them need to be.
It's often very hard for managers and employees to know how the activities they are performing today are actually affecting the financial results of the company. Sometimes it's because activities that are being performed today are being done for a future benefit, like sales meetings trying to progress a sale, or building parts destined for some downstream assembly operation. The missing links in these two examples might be not knowing how many sales meetings are needed to generate enough revenue in the future, or how efficiently parts need to be produced to eventually achieve the planned operating margins.
Accounting systems tend to be historical records of what happened and less what needs to happen to achieve a result. The information is often aggregated too late to be overly useful for front-line managers. The tool organizations try to use to align the financial and operating worlds is the budget. Unfortunately budgets summarize operational outcomes, which is helpful to set financial targets but not overly helpful for identifying the underlying "activity drivers". For example, budgets identify sales by region or market, but not the number of new prospects required to eventually create those sales.
Converting outcomes to the actual activities that create them is critical to providing managers with the tools they need to properly manage an area. These conversions (or assumptions) are built into every budget ever created, they are just not often explicitly identified. We call these missing links "profit drivers." They are what managers actually manage on a day-to-day basis and when properly linked they align the financial and operating worlds.
Lesson Learned #52
People are often curious about how we can go into such a wide variety of organizations and businesses and somehow help them improve. One advantage we have is that we tend to see similar patterns over and over across industries and even across nationalities. We often have an idea about what we are likely to observe well before we set foot in an organization. What we typically find are gaps or disconnects in the process, management operating systems and organizational behaviors. These gaps or problems are rarely identical, but the patterns are often quite similar. Furthermore, if you see a gap at one point, it becomes increasingly likely you’ll see a related gap somewhere else. These gaps present potential opportunity if you can then figure out how to fix them or at least make them better.
While the patterns of gaps or disconnects tend to be quite common across industries, the solutions are often more nuanced and unique to the particular environment. This is one of the reasons it's difficult to create a generic "best practices" list and hope the ideas can be rolled out through the organization. Even without "best practice" lists, experienced managers often have a pretty good idea of what could or should be done to improve a process but sometimes get stalled because either they may have tried it before (or something similar) and it wasn't effective, or they don't think the generic solution is applicable to their unique situation.
Our experience would suggest that these specific barriers are often overstated. However, a key to getting people to change what they're doing is to get them involved in observing their own environment, regardless of how familiar with the environment they may think they are. Observation can refresh their perspective and give them different insights into what solutions might be effective, whether or not they were attempted previously. It also helps to give them the ability to take generic solutions and properly modify them to their own environment.
Lesson Learned #51
Before this Lessons Learned series, we wrote 52 Maxims. The backstory on 52 Maxims was that we worked for The Ritz-Carlton Hotel Co. for a number of years; during that time were introduced to their concept known as “The Basics” that consisted of 18 fundamentals of service, which they used as daily reminders for their staff. We had our own "Principles" but decided to copy the daily ritual and we changed the name of ours to "Maxims". We thought we were clever by coming up with 31, so it would be easy to know which maxim would be highlighted any day of any month. Over time, we found the daily review to be too repetitive, so we made it weekly and extended the logic to create 52 maxims, one for each week of the year, which we also thought was pretty clever.
During this same time, The Ritz-Carlton naturally did the opposite. They reduced the number of “The Basics” from 18 to 3 (now known as the “Three Steps of Service”). They realized that it is easier to remember and reinforce a few key concepts, rather than many. Under these three umbrella steps, they can introduce many related subideas without overwhelming their staff. So while it may not be quite as elaborate as our 52 Maxims, “Three Steps” seems a little smarter.
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.