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May, 2011

The Impact of Standards: Path to Productivity

I took responsibility for a collection of manufacturing operations that supported final assembly businesses that were well regarded and considered to be operating "OK".

However, it was not too long after I arrived that I recognized that the "OK" impression was related to how much their internal customers were complaining regarding on time deliveries within the factory, level of quality and cost to produce.

When things drifted downward in the bad or unsatisfactory direction, people complained, and there was a crisis reaction to make things better - until things were "OK" again.>

The Problem
The "standard" or goal for acceptable performance was based on external impressions and feelings from internal customers - which varied over time. The group consisted of a variety of different operations typical of a vertically integrated electronic manufacturing company.

Planning

Each group did their best to be responsive to the needs of their customers independent of the manufacturing schedule. Expediting was very much the norm to support the next group in the process, the amount of material and labor to deliver the expedited part was a secondary concern, and quality - well - "we can rework it."

Amazingly things got done but under abnormal and super human efforts by expeditors once hired as temporary but now viewed as permanent employees. There were constant meetings to prioritize the "line" and pull jobs forward and move others back in order to get the parts needed for that day.

Corrective Action
With great resistance I was able to convince the manufacturing group that a manufacturing schedule had significance, it was critical to be accountable to deliver to the production schedule and get away from "expediting" parts through the process, and to monitor the time and material applied to completing a job to the standard allowed.

There were initial set backs but as each group moved toward on time delivery the expediting meetings became less necessary and eventually dropped. Surprisingly as each group examined what it was supposed to take to complete an order the time applied to complete the order dropped and the material used approached or fell below the standard for the part.

Results
After a year of consistent effort the group was recognized for their significant contribution toward the overall performance of the company.

  • On time deliveries were very high,
  • Job cost performance was exceptional
  • Labor applied was below the average that had been used as the standard,
  • Material usage was improved due to correct usage, improving the accuracy of the engineering documents, which resulted in an accurate costing of the products.
  • Quality levels also increased due to the increased attention to the overall manufacturing process and engaging various engineering groups in making changes that would improve the manufacturability of the product.

The Secret Sauce
The absence of "standards" was the missing link. An environment of letting crises determine the pulse of the operation had become the norm. Key people were absorbed with expediting and not managing their areas of responsibility. They were just basically surviving day-to-day.

As standards of performance were adopted such as delivery people then looked at what needed to be changed to be able to consistently make deliveries on time. The same was true of labor standards. Operations and scheduling got together to make sure the orders were scheduled and the operations level loaded so that they could consistently deliver the parts using a standard amount of labor and machine time.

As this process continued the groups continued to set better standards so that less work in process was needed. Consequently the financial contribution of the group was significant.

Summary
Where the change started with setting a few standards. Productivity became the focus and reputation of the group. Supervisors and employees became enabled working within their group and with other support groups including engineering to create a very productive climate of collaboration.

While this example was a vertical manufacturing operation the principle can be used in other business models. Professional services, distribution, online, green, home based, etc. can benefit by establishing standards that are the cornerstones of profitability.

Everyone wants to do well. Not everyone intuitively knows what it takes to make that happen. Standards provide the rungs to the ladder to help individuals and teams perform in a manner that makes the business productive.

Setting effective standards sets the path toward successful business productivity!


Regards,
Mike Brice
Phone: (206)226-1617
Email
Blog


Executive Poll

The April poll on Strategic Planning produced a low response. Five people responded.

The April poll tried to measure the degree of implementation and satisfaction of strategic planning.

Question Responses %

Do not have a strategic plan process 2 40%
Plan is poorly communicated 0 0%
Goals not connected to daily initiatives 0 0%
Executive compensation not tied to plan 1 20%
Very effective strategic process 2 40%

While the total responses was low the results were interesting:

  • Two respondents said their company did not have a strategic plan process.
  • Two respondents were comfortable in saying their company had an effective process.
  • It is is interesting that one person said that while they had a plan it was not tied to executive compensation.

I did get the following comment from the TechAmerica group that I belong to that I thought was valuable in this discussion.

"Many companies can not be objective when trying to answer this question. However, I will be interested in your results. Our experience in facilitating strategic planning is very few companies actually plan; of those who do, few implement; of those who implement, few communicate; of those who communicate, few measure.....

But there is hope for those who choose to actually go through the process consistently - the potential of leading the pack."

While this poll had a low response possibly it was due to the observation above where few companies commit themselves to an effective planning process.

Click here to participate in the May poll on Strategic Planning. All poll responses are confidential.

Feature Article

This article challenges the accepted view of the role of leadership. Is leadership overrated? In today's world of knowledge intensive industries, dynamic leaders may be superfluous.

Henricks cites a software company that has avoided creating management positions in their 26 member company. A comment to this article did point out that without a leader would the company have even been formed.

Henricks does summarize with the following points.

  • Promote people to managers only when you need managers. Donít do it only to justify a pay raise.
  • On the other hand, if your best technicians need more pay, pay them more.
  • But never put them into leadership jobs that donít make use of their best talents.
Read the article, it raises some interesting points, but also scan the comments that follow it.


Management Resources
Articles:
Communicating Your Message: There are plenty of reasons not to tell someone theyíre wrong. Itís uncomfortable, for one thing. You also might come off as rigid, unsympathetic, arrogant, or worst of all, politically incorrect.
How To Tell Someone Theyíre Wrong (And Make Them Feel Good About It)


Reinvent Your Company: You can't run your company the same way forever. Here are 10 ideas to bring about change and breathe new life into your business.
How to Successfully Rebrand Your Business


Sales Management: A sale, even a big one, can mean very little for your company if your customer feels unsatisfied, or if it wasn't actually profitable for your business.
How to Evaluate Your Sales Success


Brand Value: Performed objectively, this exercise might rattle your assumptions about your brand's health and prospects. It will certainly help focus your efforts.
Brand Evaluation: Would You Invest in You?


Banking Alternatives: Small businesses that are rejected by the banking behemoths shouldn't overlook nonbank lenders, community and regional banks, and community development financial institutions
Three Alternatives to Big-Bank Borrowing


Leadership Development: When you place a colleague or a new hire into a management position, you'd better not abandon the poor soul.
Twelve Ways Leaders Fail New Managers

Video(s): 
Personal Brand: This video offers four tips to help you develop your own personal brand around the office. Focus on your core strengths, determine your brand benefits, find opportunities to exhibit those strengths and benefits, and bring consistency to your brand message.
The Art of Personal Branding (3:32 min)


Blogs: 
Business Development: Angie Hicks is the founder of Angie's List, a website that collects consumer reviews in more than 500 service categories - everything from doctors to contractors. More than 1.5 million consumers across the U.S. rely on those reviews because Hicks refused to let her idea land in what she calls "the idea scrap heap."
Angie Hicks: The One Thing a Startup Entrepreneur Should Never Do



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