February 3, 2016
What prevents us from improving our companies? Believe it or not, profitability can be the greatest obstacle to growth and change. Companies that are doing well have difficulty not only identifying but also finding the motivation to work on them. At the opposite end of the spectrum, when a company is experiencing trouble with cash flow, the tyranny of the urgent can consume resources normally focused on improvement. So, how can we keep our companies focused on improvement, and what can we do to lead this effort?
To begin, we must lead with humility and courage to follow the data to systematically eliminate problems. Like most, I learned these lessons the hard way. Having spent more than 35 years in and around manufacturing facilities, I recognize that an abundance of data, metrics, and analytics is available to management. I noticed that the company’s five big losses have been constant, though they are a different set of problems every year. The adventure of business is to know the problems exist, to hunt and eliminate them, and to grow a culture that does this continually. We should not be drowning in data and still lacking information. We need to lead the charge in solving problems, and the first step is to admit that we have them.
There is no one-size-fits-all process for your company, but let me say that I heartily recommend that your process include these four components: declare, detect, discover, and develop. A wise person said, “You won’t see it until you believe it.” In most cultures, people won’t talk about problems and bring solutions until given permission. You can give permission by admitting the company has problems, by making it a point to declare that your organization has five major areas of loss right now. You can publicly promise to detect the extent and priority of losses by using the data at your fingertips. Then you can work with your people to discover root causes of those losses. Lastly, you can develop strategies, measures, policies, and procedures that will reduce or eliminate them.
Declare
I want to be clear that admitting your organization has five big losses is not a negative statement. It’s just practical. It’s also a state of mind. It is the nature of organizations that at any point in time it is doing some things well, i.e., “in control,” and some things not so well, i.e., “out of control.” And to complicate matters, organizations do not operate statically but rather dynamically, so these losses change and shift constantly. The five big losses your organization was focused on last year are hopefully not the same five big losses you are focused on this year. As process improvement strategies are implemented, last year’s losses are reduced or eliminated, which means a new top five losses will rise to your attention. And so it goes, year after year. Don’t despair over this fact; embrace it as normal and healthy. It is what processes do.
Detect
Once there is an admission that five big losses exist, which is no small step, where do you go from there? To the numbers, of course. A careful and holistic study of your general ledger, in tandem with what your instincts are telling you, should lead you to a list of priority losses that need to be addressed. I think the discovery step is crucial and needs to be done cross-functionally. It can even be fun! Once we admit we have five big losses, the process of discovery and implementation becomes a treasure hunt—who doesn’t love a treasure hunt?
Discover
Numbers can only tell part of the problem and never provide the solution. People need to be brought into the discovery stage and the implementation stage, and this is where corporate culture really needs to be supportive of the mission. My experience has generally been that the people closest to the problem fall into two distinct categories: Either they are part of the problem and therefore too close to initiate and achieve real change, or they have been trying to bring the losses to someone’s attention for some time, just not in a way that has received serious attention. This group can be of great service in the discovery stage. Both groups’ participation is required to implement lasting changes.
Develop
There are any number of process improvement models available in the market today that can be additive to this journey. There are plenty of tools available to effect real change in processes and therefore in your company. Google “process improvement,” and you will see an ocean of ideas and concepts that, if implemented properly, will improve performance. From the Deming Cycle of plan–do–check–act (PDCA) to anything written by Shigeo Shingo, the Lean Enterprise Institute, or the P 2 team, there is a wealth of knowledge available to you. The key factor is to be consistent in codifying your solutions, then training the users and holding each other accountable.
Cultivate Continual Improvement
How will your corporate culture react to these process improvement initiatives? Will your culture embrace change, or will your culture reject change? Not surprisingly, many companies do not embrace systematic, process-altering change. To companies that are too entrenched in the way we’ve always done it or resist the notion that we always have five big losses, change will not come easily. But, let me encourage all companies that the axiom “You won’t see it until you believe it” is far more valid and culturally defining than the axiom “Until I see it I won’t believe it.” I really believe that the first axiom will lead to greater teamwork, greater corporate unity, and greater profit.
Thomas S. Andersen is a founding partner of P-Squared (P 2). He may be reached at tom@psquaredusa.com.
