The Performance Improvement Industry is full of companies and consultants with outstanding results of Performance Improvement (PI) projects they’ve undertaken and completed. By and large these results are focused upon reducing expenses and improving profit margins. There is no argument that the tools of PI are proven over the years by thousands of companies in their pursuit of excellence.
Generally the client companies are pursuing goals such as reduced labor cost, reduced cycle time, reduced lead time, improved quality, improved inventory turns, etc. Faster, better, cheaper is the battle cry heard throughout industry.
The most common reasons companies give for embarking upon the PI journey include improved competitiveness, increased customer satisfaction, customer demands, reduced waste, and improved employee morale.
From my experience over the years, the ROI of PI projects are almost never questioned. The metrics that are used to show success are generally posted on the wall and are celebrated by all.
But is that the end? Is that all there is?
I believe that there is key step missing in almost every PI project completion. And yes I do agree that PI or continuous improvement is a journey not a destination; hence the name “continuous”. The results gained have been posted on the wall of the shop floor, but often that’s where it stops.
I’d like you to think about these “results” for a moment. Is there any other value to this “asset” that the company has developed?
My answer is YES!!! Your sales and marketing team should be provided this asset immediately. Why? Because your company has improved itself and this can be significant leverage for increasing your sales and your market share. You are better than you were before, and perhaps better than your competition and can, therefore, provide a better product due to the improvements you have made. Customers and Buyers and Prospective buyers need to know this so they can make educated purchasing decisions. A better supplier or vendor means less risk, better products, potentially better costing, more responsive, and better financial health.
Today’s smart sourcing decisions are no longer based solely on price or cost. Often the lowest price is not the best price in terms of “Total Cost of Acquisition”. Total Cost of Acquisition includes many factors and one that is critically important in smart sourcing is “risk.” Risk relates to many things and is primarily boiled down to financial risk and production risk. A supplier who has done little or no PI has a higher internal cost due to inefficient processes and workflow. This affects more than just the production results; it also causes them to be less financially healthy over time, translating to higher risk. With higher risk comes a higher potential for a “surprise” to their customer. We’ve all heard the stories about the customer arriving at their supplier only to discover that the supplier has priced himself into bankruptcy and the front door is chained.
So in closing, I’ll just say that in my experience, a capable, high performing, low risk supplier is much more valuable to the customer. Armed with PI metrics, the sales and marketing folks should make full use of the potential of this company asset to help them close more sales.
This week I received another call from a senior professional acquaintance informing me that he had been laid off after 22 years of dedicated loyal and award winning performance. His employer cited the current economy, and the Federal Government’s Sequestration forcing budget cuts across the board. The call was the 5th call that I have received in 2013 and it’s only March.
Out of curiosity I ventured onto the Bureau of Labor Statistics website and discovered that their Mass Layoff Statistics program (http://www.bls.gov/mls/) was itself being terminated due to Sequestration. Wow.
Clearly, the economy is not in good shape; although some would argue that we are moving in the right direction.
At any rate, I started thinking about the human predisposition for “quick fixes” in life as well as work. It often seems as if the first action a company (or government) undertakes is a reduction in workforce, or layoff. These layoffs often are governed by rules and or processes, which have no real data to support the selection or value of the employees terminated. I would also argue that many of these decisions are based upon personality conflicts, lack of value placed upon sustainability, and frankly outright laziness.
What about a possible alternative? If you ask any performance improvement practitioner about the possible cost improvements from Lean, Six Sigma, Value Stream projects or any of the Continuous Improvement Tools in the world, most would probably say that the cost improvements can range from 20% to as much as 80%. But they would follow with, “It takes work and support of leadership” to be successful. In my career, I would agree with these folks. In fact, less than 10% of all of the companies that I have assessed or interviewed have completed any kind of Value Stream Mapping of their key and critical processes. Furthermore, I have only run across a formal documented “Job Skills Certification” program within a company twice in the last decade. Not sure what to make of this, other than to say it is, “Seat of the Pants Management”, which is all too common in todays world.
This brings me to the point of this “rant”. Why don’t leaders focus on improving their companies and/or government agencies? Certainly a modest 25-30% improvement in expenses would help offset a financially challenging economy.
The improvements made would help the company through the difficult times, and position the company for a greater success in the good times.
Layoffs may help boost the bottom line in the short term, but the long-term costs may be more than the savings. Consider the following costs: severance packages, accrued vacation payouts, benefits continuance, manager’s time to reallocate work, and increased cost of unemployment insurance. In addition, we have the indirect costs of low morale affecting lower productivity and quality, lost knowledge and skills, lost innovation, lost contacts, lost market share, angry customers, and the cost of recruiting and rehiring during an ensuing “ramp up”.
So in summary, while layoffs may seem to be an easy fix, the long term effect may not even come close to the ROI of focusing on improving performance.
Preeminent Tool for Performance Improvement
(Interview with Karen Trisko)
(Barry Neighbors Consulting, March 18, 2013
As an Aerospace and Defense Supply Chain consultant who has worked with companies to improve their sourcing metrics, or helped suppliers with their sales and performance improvements, I am always interested in tools and programs available to accomplish and perhaps accelerate this task. The Malcolm Baldrige Award is such a tool. The Baldrige Program was created in 1987 by congress. The goal of the Malcolm Baldrige National Quality Improvement Act of 1987 was to enhance the competitiveness of U.S. businesses. Today, the program oversees the nation's only Presidential award for performance excellence while offering criteria, assessments, tools, and a community for those dedicated to helping organizations improve.
I recently had the opportunity to speak with Karen Trisko, President of Excelleration, Inc., who has extensive, 360-degree hands-on expertise in every aspect of Baldrige Performance Excellence. She has guided companies in all sectors to achieve greater profitability, cost reductions, customer satisfaction, and employee motivation through Performance Excellence and Continuous Process Improvement practices. She has helped over 20 organizations, including two of her own businesses, to earn Baldrige awards and successfully integrate the practices and values of Performance Excellence into their daily practices. Her specialties include Baldrige assessments and award application development, leadership systems, strategic planning, results measurement using the Balanced Scorecard and process metrics, and process management / improvement.
Me: Karen, can you tell me the top 3-4 reasons that a company might want to follow the Baldrige Criteria?
Karen: Sure – a company may be in trouble, it may be stuck at a plateau and unable to break through to a higher level of performance, or it might be doing great but needs to identify and overcome blind spots to get to the next level of high performance. The beauty of the Baldrige Criteria is that it’s a complete roadmap that continually shows executives the company’s strengths and the next opportunities for improvement, no matter how mature or immature the company is.
Me: What do you see as the most common misconception about the Baldrige Process?
Karen: Most people think it’s just about winning an Award. True – it’s great to have an award trophy, especially the National Baldrige Award for Performance Excellence, because it is difficult to attain due to its comprehensiveness and emphasis on results trends against competitors and comparisons. The best reason for using the Baldrige Process is to improve your company to get better and sustainable results. It’s funny, I’ve worked with companies where the top executive was insanely focused on earning the Baldrige Award, and it took them longer to improve than companies who used the Baldrige Award Criteria purely to improve. Another misconception is that Baldrige is only for large companies. If you run a company with 10 people or 100,000 people, isn’t it equally important to be successful? My smallest client had 7 employees, and we took the basic essence of the Baldrige Criteria to make that little organization highly focused on attaining its goals.
Me: There are many “Performance Improvement” strategies and tools out there such as LEAN, Six Sigma, TQM, etc., what makes the Baldrige different and can it co-exist with these other programs?
Karen: The Baldrige framework embraces those performance tools – it assumes that your company uses one or more of them for continuous improvement, because that’s fundamental for any business to survive and prosper. However, the Baldrige framework is an over-arching umbrella that transcends the traditional performance improvement methods that you cited, which mainly focus on design and production of products and services. Baldrige includes expectations that a company fully understand customer segment requirements and then build products and services to meet them. A company following the Baldrige roadmap must develop and consistently execute sound leadership processes, strategy and execution methods, business measurements, knowledge asset management, workforce effectiveness from recruiting to retention, and more. And it expects you to track key results based on your company’s long- and short-term goals, customer requirements, and process effectiveness. That’s why I say it’s comprehensive and complete. It’s not a quick fix – but rather a system for companies that tried quick fixes like process improvement methods and didn’t get where they needed to be. A company is a complex system, and to keep it in good health, you must address all the company’s components and processes.
Me: If I were to recommend the Baldrige Process to a client company, what do you feel are the most significant results that would be obtained?
Karen: The most significant results are better customer loyalty and repeat business, reduction in costly rework and mistakes, higher revenue and market share, more effective and focused employees, and improved bottom-line profit. To get the results, a company must fix “broken processes” and put in “missing processes” to better deliver value to customers.
Me: If a company has done no “continuous improvement” at all, are they still a prospect for this approach?
Karen: Absolutely! Companies have to start where they are. The Baldrige system can be taken in “tiers” – starting first with the basic requirements of the Baldrige Criteria to get a baseline reading. Then a company moves up to use more of the details of each Baldrige Criteria Category. The important thing is to get started. I would say that 98% of companies are immature and never come close to their true potential because they’ve never seen a real world-class company, like I have in my 20 years of examining Baldrige Award applicants. Maybe two percent of companies are mature and excellent. But how did they get there? They started using the Baldrige roadmap and stuck with it. They got help from someone who could shorten their learning and implementation time.
Me: Karen, thanks for your time and insight. If someone were interested improving performance using the Baldrige Criteria, what would be your recommendation?
Karen: They could start with an assessment. Occasionally I offer an online assessment to companies at no charge, just so they can“get their feet wet” and get a basic understanding of the types of things that should be going on in their company. They could participate in my Baldrige webinar to teach them the Criteria and how to evaluate their own company’s processes and results. They can schedule an in-house workshop to learn to write an application for the State’s Baldrige Award. Only companies that earn their State’s top Baldrige Award are eligible for the National Award for Performance Excellence – the ultimate prize. They should also attend State and national Baldrige Conferences to hear award-winning company executives speak about how the Baldrige system transformed the company’s results. But they MUST do SOMETHING different than they have in the past, for as Einstein said, “Insanity is doing more of the same but expecting a better result.”
(Karen Trisko can be reached at Karen@excellerate.biz)
(Barry Neighbors can be reached at email@example.com)
Barry Neighbors has extensive experience working with OEM's and A&D Suppliers on Supply Chain issues. Focused on developing a more efficient supply chain, or helping suppliers in their business development efforts.