The foundation for successful process improvement programs.

Most professionals have seen initiatives come and go over the years. While for most initiatives success stories can be found, it is equally easy to find failures for the very same initiatives. We will examine some of the fundamental requirements for the successful implementation of process improvement initiatives and discuss the hurdles that must be overcome.

Organizational Design for Success:

Any process improvement initiative needs a solid foundation to stand on. The foundation consists of corporate culture, organizational structure and leadership behavior. Process improvement is accomplished through change, and without the proper motivation change will not happen.¹ With fear governing many organizations, change will not take place simply because of the associated risk of failure. Change therefore needs to be rewarded. Initially, strong leadership can paint burning platform scenarios thus motivating the organization. An outstanding example was the approach utilized by Larry Bossidy, former CEO of AlliedSignal. The message of the company being in a state of disarray and dire need for change was communicated quickly. As a result Bossidy managed to lead one of the most impressive culture changes in US history. Jack Welch of GE has been known to take a similar stance in situations that require rapid change. While this approach may be used to generate motion, long term, a culture change must replace the top driven pressure and self-motivation must be generated. Only self-motivation will make improvement sustainable. There are only two motivators for change and improvement, aspiration or desperation – and businesses will default to one or the other. Unfortunately, most businesses have to reach the stage of desperation prior to focusing on process improvement with the intensity required. Once the organization goes through some improvement and is operating profitably again, complacency moves in and the cycle starts again several years down the road. Organizational design and corporate culture are the foundation that leadership must address prior to the deployment of process improvement initiatives.

As a first step, leadership has to clearly understand and communicate the motivation for change. Whether or not the organization is ready for the disruption and uncertainty it is about to face is a question that has to be answered. A detailed assessment of the organizational structure and corporate culture is required.  

Most companies go through an evolutionary process that resulted in their current organizational structure. At some point, the structure was designed and implemented, possibly during the latest re-engineering event. Over time, business needs arise and small changes are made. Additional functions and responsibilities are added to the existing organizational chart. Soon so much has been added outside of the original design that the organization is not capable of supporting the business. The organizational structure has evolved to the point of constant gridlock. Conflicting goals, metrics, and reward structures prevent the organization from fixing the overall process. We need to ask if the current structure still serves its purpose. The purpose, however, should not just be the production of products and services that are sold today. Fundamentally, the structure must allow for continuous change to take place and improvements to be made. If organizational structure is not considered, improvements that should take place are hindered by current measurements and reward structures in functional areas. Future improvements will continue to produce lackluster results.

Today, most organizations are aligned by function: Marketing, sales, design engineering, customer support, manufacturing, distribution, etc. The prevailing logic in this setup is based on economies of scale and intra-function learning based on specialization. The result is slow change and lack of rapid process improvement. Unfortunately, the cost associated with lack of rapid improvement can’t be found on financial statements, thus these costs are getting too little attention by leadership. The total cost of lackluster process improvement makes most line items on financial statements look miniscule. While most of the aforementioned functions are required to deliver product to customers, our organizational layout is perpendicular - 90 degrees - to product flow. This is a serious flaw, which requires action.

Not convinced? Try the following exercise during the next staff meeting. Draw a flow chart of the entire product delivery process: customer-touch-to-customer-touch including all support functions. On top of the flowchart draw the organizational chart aligning the process step with the organizational function and extend this picture all the way to the CEO. At which point in the organization does the responsibility connect for the entire product delivery process? How far up do you have to go? If the answer is close to the CEO, you have found one reason for failures of historic initiatives – the organization is not designed for improvement. This process works well for the initial assessment of organizational structure. It quickly and graphically points out if the organization is aligned to delivery customer value.  

In other words, if product delivery process crosses many functional areas and therefore areas of accountability, an organizational revision may be in order prior to launching massive improvement initiatives. Organizations often attempt to compensate for the organizational inefficiencies by deploying goals and breaking them down into departmental goals and objectives. This process often results in conflicting behaviors, red tape, and barriers for rapid improvement. The mere fact that goals have to be broken down into many sub-level goals and measurements causes tremendous exposure increasing the risk of conflicting inter-departmental goals. With these conflicts in existence, the door has been opened to sub-optimization at best and failure at worst. Classic examples of this issue can often be found in the interfaces of purchasing and manufacturing. While the acquisition cost of components from a certain supplier may be low, the total cost including express shipments due to delays, quality and warranty may have increased by using the ‘cheaper’ supplier. Since some of the metrics, such as increased shipping costs, are tracked in departments other than purchasing the system is now sub-optimized. Acquisition costs may well be lower, but total costs to the business have increased. Introducing any process improvement initiative will not yield its full potential with these conflicts in existence. Again, the tools are hardly at fault here, rather it is the organizational structure and the lack of clear managerial leadership.

Re-engineering and Lean Thinking have helped many organizations identify and eliminate this barrier by allocating accountability for the total product delivery process at the appropriate organizational level.³ But this allocation alone has not been a silver bullet. It is merely the foundation for breakthrough success.  

Once the structure - and therefore the team - is in place, the organization needs to be aimed. Yes, aimed. When a team plays basketball, it knows the rules, the score and the objective of the game. The same is true for soccer, football, baseball, and any team sport. How about teams in business? The team now contains thousands of associates.² The stakes of the game are weekly paychecks with the well being of families and communities at risk. Is the team clear on the goals, the rules, and the scorekeeping?⁴ If not, how much effort is spent on non-critical issues? Running a business is very much like team sports. Visions and goals need to be clearly communicated and understood by everyone in the organization. Technique needs to be taught and discipline needs to be instilled. Sounds simple, but it is not. Not convinced? At your next staff meeting pose two simple questions: “What are we in business to do? How do we get it done?” The answers should be clear, consistent, and concise.  

Some of the above-mentioned issues are about providing leadership in conjunction with providing tools. Tools - no matter how powerful - are no substitute for good leadership. Good leadership provides the appropriate structure, vision, goals, and tools to win the game.⁵

Vehicles for Improvement:

Many organizations attempt to forego the first step of establishing adequate culture and organizational design. As a result, they end up with spotty improvement records. Like all tools, specific process improvement tools are useful for specific tasks, but no single tool or methodology is capable of delivering results for all issues.

Most methods used in industry today can be grouped into one of two categories: technical tools or human capital related tools. Both are important. As a result, many process improvement methodologies are a hybrid of the two.  

Total quality was one of the initial movements in the United States to drive talent to collaborate on business problems. It helped create the realization that individual contributors alone, the white knights on their white horses, cannot achieve the types of improvements required in a fast-paced business environment. TQ provided the platform for team relationships and typically also equipped teams with some basic tools for problem solving. By the time TQ was implemented, however, the success rate varied due to a number of issues. Subsequently, TQ received a bad reputation. This was largely the result of inappropriate application of the methodology. Thus teams were improperly deployed, projects were not on the critical path of process improvement for the organization, or the teams were improperly equipped to tackle the kinds of issues they were asked to resolve. Consensus of team members was often times used as a substitute for data driven decision-making. The limited sphere of influence of some teams often presented a barrier. None of these reasons for failure, however, can or should be attributed to the idea behind TQ. By teaching individuals how to work together, TQ did bring substantial value to businesses. It provided, for the first time, a common language of process improvement. But again, the silver bullet to all business problems it is not.

Another approach, which is still popular today, is Lean Business. The idea originated as Lean Manufacturing, and the concept then migrated to all business processes. Lean tools enable value flow through waste elimination. The application of lean tools eliminates activities such as waiting, storing, intermediate packaging, large batch production etc. A myriad of tools are associated with Lean to identify waste in the process and change the process to minimize waste, such as Spaghetti Charts, Time Value Charts, Video Process Analysis etc. Toyota Motor Company is still viewed as the benchmark in having implemented this methodology. Many companies today are a far cry from being Lean. Lean commands significant top-level leadership support and involvement, as fundamental process change is often required. Sacred cows will be brought to the slaughterhouse and may disappear within one week, which brings us right to one of the most prevalent implementation methods of Lean: Kaizen events or Blitzes.

During Kaizen events or Blitzes, areas are ‘leaned.’ Processes are physically re-arranged in a very short amount of time, typically one week. The team executing the change is often cross functional and includes individuals from many organizational and functional areas. A sense of urgency is disseminated throughout the workforce using these events, resulting in a ‘can do’ attitude. Making changes is not optional during these events. As employees gain substantial confidence in their ability to influence the way business is done, awareness of potential improvements is gained and basic training is performed just-in-time on the projects. Organizations such as General Electric, AlliedSignal, Delta and Xerox have utilized this method to varying degrees. On the downside, these events are misused a good number of times. Lines get re-arranged that are not on the critical path of product delivery, resulting in resources being spent without return to the business (like increasing the line-rate of non-bottleneck operations). Should the process be subject to large amounts of variation, the ‘leaning’ of the process can in fact translate into delivery problems for the company. Once more, the issue is not the methodology.

Computer information systems are yet another approach to process improvement taken by many companies. Here we are, an entire multi-billion dollar industry later, spending fortunes on new information systems with various names, from MRP to ERP. Our attempt is to control the business using information systems, but the best-case scenario is that we have computerized a fundamentally sub-optimal process. The worst-case scenario is that we are matching the business to some IT provider’s software package. The implications of placing this vehicle into the business are quite significant and often underestimated. The implementation of information systems require large investments, which may result in them becoming the barrier to process improvement in the future. Any information system should be laid out to enable value generation.

Currently, a very popular methodology is Six Sigma. It was originally invented by Motorola, embraced by AlliedSignal, and then publicized by Jack Welch of General Electric. Six Sigma utilizes statistical methods in a practical and disciplined approach to improve business processes. The tools used range from Process Mapping, Statistical Process Control (SPC), Measurement System Assessments to Designed Experimentation (DOE) and Advanced Administrative Sampling Plans (AASP). The basic premise involves understanding processes at a fundamental level such that defects can be eliminated. Six Sigma can help reduce variation in the process. It is usually the same variation that is a major barrier to the successful implementation of Lean. Many fortune 100 companies are currently in the midst of implementing Six Sigma programs and the business results associated with those implementations are impressive. However, it is being sold as the methodology that will eliminate all harm, which is an expectation that no single methodology will ever meet.

This discussion could be continued for many other vehicles and the list is long: JIT, Benchmarking, ISO, etc. The message does not change. Careful vehicle selection and integration is the key element that is required to take businesses to the level of performance that is desired by all stakeholders.

The first step in breaking the vicious initiative cycle is to institute an organization designed for process improvement in addition to pure product delivery. Aligning processes, functions, measurements, and accountability are the initial step. This is usually a restructuring effort that must be carefully orchestrated to provide product flow parallel to accountability.  

Secondly, we must assess what tools best fit the issues at hand. As we solve the most burning issues, the requirements will change and different methods may be required to continue the path of improvement. These methods are in fact not mutually exclusive but complementary if properly integrated. Currently, some organizations are not just exposing the entire workforce to the ‘newest initiative,’ rather they provide the appropriate tools just in time. Those tools are presented to the organization in a package, such that everyone clearly understands what tool should be utilized for which task. In addition to providing tools, teams utilizing these tools are supported by experts to ensure correct and efficient application. In such a model, the tools and the deployment model are designed to support the business goals. The teams working on accomplishing the tasks are properly aimed, equipped, and supported. By following this approach, the game has been defined and the teams understand the rules and the scorekeeping. Coaching has even been provided. This approach requires all players, management, employees and consultants to collaborate and coordinate. It is much harder to do than purely announcing the next initiative, but then, it sure beats getting nailed again.

References:

1. Jeffrey Pfeffer and Robert I. Sutton, “The Knowing-Doing Gap” (Boston, MA, Harvard Business Press, 2000)

2. Charles A. Coonradt, “The Game of Work” (Park City, UT, The Game of Work, 1991)

3. James P. Womack and Daniel T. Jones, “Lean Thinking” (New York, NY, Simon & Schuster, 1996)

4. Gordon Bethune, “From Worst to First” (New York, NY, John Wiley & Sons, 1998)

5. Donald B. Bibeault, “Corporate Turnaround” (Washington, D.C., Beard Books, 1999)

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