Best Practices Blog

Rough Cut Capacity Planning

2008-01-30T15:29:00.000-08:00

Anwendung der grob-zugeschnittenen Kapazitätsplanung

um die Finanz-Vorplanung zu verbessern.

Von George. J. Miller

Facilitator Group, Camarillo, CA U.S.A.

I. Einführung

Wie kann die Finanz-Vorplanung in den Bereichen wie Geldmittel-

Vorhersage, Bruttogewinn Vorplanung und Lagerbestandsänderungen

verbessert werden?

ZIELSETZUNG dieser Ausarbeitung: Zu erklären warum eine grob zugeschnittene

Kapazitätsplanung eine ausgezeichnete Möglichkeit ist, diese Herstellungsdaten

in den Finanzplanung Input zu konvertieren und aufzuzeigen, wie dies bewerk-

stelligt werden kann.

Die hauptsächlichen Punkte dieses Papiers sind:

Die meisten Firmen machen einen schlechten Job hinsichtlich der

Finanzplanung für ihren Produktionsablauf. Aber sogar diejenigen,

die dies relativ gut bewerkstelligen, haben diesbezüglich große Anstrengungen hinter sich.

Grob-zugeschnittene Kapazitäts Anforderungsplanung (RCCRP) kann

angewendet werden, um diese Arbeit zu vereinfachen und - in vielen

Fällen - auch die Resultate zu verbessern.

Sie bedarf jedoch einiger zusätzlicher Überlegungen, um sie in die

Tat umzusetzen. Allgemeine Konzepte und Techniken werden für

die Anwendung bei der Finanz-Vorplanung aufgezeigt.

Wir möchten die Beiträge von Karl Lopker, DFPIM über Quad Systeme in Carpintera, Kalifornien und der Lieferung eines Software Modells sowie auch bei der Unterstützung in der Durchführbarkeits Analyse anerkennen. Gleichzeitig geht Dank an Milt Cook von Hewlett-Packard, Westlake Village, Kalifornien für die Über-prüfung, seinen Rat und Ermutigung.

Die Motivation, dies niederzuschreiben kam während eines Interviews mit dem Finanzplan Manager eines Kunden im vergangenen Jahr. Alan (ein Pseudonym) war dabei (zum dirtten Mal) die Finanzierungs-Vorplanung 1987 für seine Firma neu zu planen. Er saß vor seinem Computer, umgeben von Stapeln von Berichten und Finanztabellen. Es war schon fast komisch, die Abläufe durch die er ging, um die voraussichtliche Finanzplanung für seine Firma zu erstellen, zu beobachen.

Zu diesem Zeitpunkt war unsere Firma in einem Projekt mit einem anderen Kunden, bei welchem die nächsten Betriebsplanungssysteme verbessert werden sollten, involviert.

Mit all den normalen Verzögerungen, die bei einem solchen Projekt vorkommen, kamen wir bis zur Definierung des Systems, dem Layout von Berichten und der Durchführung einiger generellen Wissensstände, um - falls die Dinge auf „on hold“ gestellt wurden, jeder sich darauf konzentrieren konnte, daß die Produkte beschleunigt wurden und man am Finanzplan für das nächste Jahr arbeiten konnte.

Es schien, als ob da irgendwo eine Erkenntnis war (?). Als Folge hiervon wurden wir wieder gerufen und hatten die Möglichkeit, einige der Dinge, die in diesem Papier enthalten sind, in die Praxis umzusetzen. Andere befanden sich zu diesem Zeitpunkt noch in der Ausarbeitung.

II. DAS PROBLEM

Der tragische Teil war, daß die Resultate nicht genau das widerspiegelten was unter angenommenen Umständen passieren könnte. Der Prozess war ungeheuer umständlich und Fehler anfällig und keiner konnte so richtig verstehen, wie der Plan mit den eigenen Zahlen in Verbindung gebracht werden konnte. Es wurde festgestellt, der Vorgang ist:

° sehr arbeitsintensiv

° sehr Fehler anfällig

° zeitaufwendig

° schwierig zu ändern

° schwierig oder unmöglich in der Mehrfachreproduktion

° ein schlechtes Betriebsmodell

° in Bedarf von einigen manuellen „Massagen“

° in Bedarf von vielen Detaildaten

° mangelnde „Transparenz“ (Anwender konnte den Ablauf nicht

verstehen)

Jedes Jahr, zu Beginn der Sommerhitze, versammelte die Firma das mittlere und obere Management und gab Anweisung, ihr input für DEN PLAN zur Verfügung zu stellen. Dieses Input bestand aus einer in Dollar budgetierten Arbeitstabelle für die eingeschätzten Bruttoumsätze, die aber auf eine Art und Weise festgestellt wurden, die mir keiner auf eine adäquate Art beschreiben konnte oder wollte. Jeder Manager erstellte die Vorausplanungen für die Dinge, die sich direkt/indirekt auf Arbeitsstunden/Dollars, Abteilungskosten, Abfall, Überstunden, Werkzeuge, Hauptkapital Ausgaben etc. bezogen.

Diese Angaben wurden dann mit viel Arbeitsaufwand in irgend etwas, was wie ein allgemeines Tabellenformat aussah hinein gedrechselt, jedoch erst dann, nachdem die Finanzabteilung noch kräftig „massiert“ hatte. Sie konsultierten eine Anzahl von computerisierten Programmen zur Unterstützung dieser Aufgabe. Manches Input war ursprünglich automatisch, aber vieles war jedoch noch manuell. Nachdem die Finanzabteilung damit fertig war, hat das Top Management die gesamte Sache in kleine Teile unterteilt und sie an Alan zurückgeschickt, um sie in einer, für sie mehr ansprechenden Form wieder zusammen zu fügen.

Nachdem ich über all dies eine Weile nachgedacht hatte, war mir klar, daß die meisten Firmen, die ich bei meinen Reisen angetroffen habe, ein ähnliches, nicht zu bearbeitendes System haben. Ich begann es mir zur Gewohnheit zu machen, Firmensysteme zu untersuchen wann immer sich mir die Gelegenheit bot. Nach etlichen Monaten zeigte das Resultat meiner informellen Studie die folgenden regulären Ansätze bei der Anwendung:

1. Klare, gebräuchliche Hauptbuch Modellstrukturen

2. Gebräuchliche Hauptbuch Modelle, um einiges an input aus

Betriebsmodellen zu sammeln

3. „Kluges“ von Computer Systemen die Dateiauszüge aus

Betriebsgeschichte und Planungsunterlagen, um diese mit

verschiedenen Vorausplanungen, Einschätzungs- und

Entscheidungstabellen zu kombinieren

4. Modelle, die hauptsächlich auf faktorisierter Geschichte

beruhen

5. „Gutes Gefühl“ Einschätzungen

6. Anspruchsvolle simulierte Abläufe aufgrund von statischen

Modellen und Daten

7. Anspruchsvolle Ablaufmodelle, basierend auf aktuellen

dynamischen Daten

Zusätzlich zu dem vorher beschriebenen Problem, leiden alle Ansätze, außer Nr.7 (aktuelles dynamisches Modell) an mangelnder Dynamik und reale-Welt input,. Auch das Nr. 7 Beispiel war so umständlich und erforderte so viel off-line Input, daß ein update auf einer regulären Basis gar nicht so praktikabel war.

Meine eigenen Erfahrungen und die Kommentare einiger interviewter Leute zeigten den Bedarf auf für einige einfache, aber wirkungsvolle Finanzplanungstechniken, die vertrauensvoll von Finanz- und anderen Abteilungsmanagern angewendet werden können.

III. CRASH KURS IN GROB_ZUGESCHNITTENER KAPAZITÄTSPLANUNG

Für diejenigen, die mit dem RCCRP (manchmal als „Ressourcen Bedarfsplanung bezeichnet) Konzepten noch nicht betraut sind, eine einfache Übersicht wie folgt:

Die Techniken werden entwickelt, um eine einfache, zeitgemäße Methode der Vorausplanung für Ressourcen Bedarf zur Verfügung zu stellen, ohne:

° komplizierte Systeme

° Aufwendige Computer Ressourcen und lange Ablaufzeiten

° Ausgeweitete detaillierte Leitwege und Ressourcen Datenbank

° Lange Zeitabstände zwischen den updates

________________________________________________

GROB-ZUGESCHNITTENE KAPAZITÄTEN PLANUNG Das

Procedere, den Produktionsplan und/oder den Stammzeitplan

in den Kapazitäten Bedarf für die Hauptressourcen: Arbeitskraft,

Maschinen, Lagerplatz, Lieferpotentiale und, in manchen Fällen

auch Kapital umzuwandeln. Produkte Ladungsprofile werden oft

angewendet, um dies zu bewerkstelligen. Der Zweck für die Grob-

zugeschnittene Kapazitätsplanung ist, die Planung noch vor

deren Einsatz auszuwerten: Ressourcen Bedarfsplanung.

(Kapazitäten Bedarfsplanung.)

Quelle: American Production + Inventory Control Society Lexikon,

Fünfte Ausgabe

_____________________________________________________

RCCRP ist ein guter erster Schritt, um die Kontrolle relativ schnell und billig zu verbessern. Es ist besonders wertvoll bei Firmen, wo gute formelle Planungen/

Normen fehlen, oder wo die Planung und Einteilung verschiedener Engpässe in eine viel bessere Kontrolle des Arbeitsablaufs resultieren würde.

Der Anlauf kann erfolgen durch einen weitreichenden Produktionsplan, Stammzeitplan oder einer Vorausplanung, ohne jedoch Kenntnis zu haben über eine präzise Mischung von Produkten oder detaillierte Teile Planungen/Normen und Arbeitsmittelpunkt Information. RCCRP kann dazu angewendet werden, um die Auswirkung eines Plans noch vor seiner Durchführung einzuschätzen. Es ist realisierbar, viele verschiedene Versionen durchzulaufen und sie bis zur endgültigen Zufriedenheit über das endgültige Resultat „hochzufrisieren“. Nachdem es sehr einfach ist, ist es auch weniger Fehler-anfällig, es ist weniger zeit- und kostenaufwendig und erlaubt mehrere Simulationen und rasche Umplanung.

Wenig Computerkraft ist erforderlich, nachdem nur kleine, einfache Daten Aufstellun-gen durchgeführt werden. Die Lernaufgabe ist minimal. Nachdem weitere Details über die Planung, wie die spezielle Produktmischung, Zeit- und Ablaufpläne bekannt werden, kann das Model mit diesen Erkenntnissen verbessert werden.

Was RCCRP von regulären Kapazitätsplanungen (CRP) unterscheidet ist, daß nur Zusammenfassungen oder hauptsächliche Ressourcen mit einfacheren oder zusam-mengefassten Leitwegebestimmungen in Betracht gezogen werden. Typisch kleinere Arbeitsgebiete, wie „Kabelbaum Montage B“ und „Fahrgestell Verkabelung“ können in eine Einzelressource, mit der Bezeichnung „Montage“ zusammengefügt werden.

Muster RCCRP Daten

Ressourcen Definition oder „Profil“

Ressourcen Kapazität Zeit Zeiterhöhung in Effekt am

Montage 200 Std Tag 01/01/87-12/31/87

Löten 120 Std Tag 01/01/87-12/31/87

Löten - 120 Std Tag 06/15/87-06/30/87

(deutet an, daß das Löten während dieser Periode geschlossen wurde)

Test 80 Std Tag 07/01/87-06/30/87

Test 88 Std Tag 01/01/87-12/31/87

(deutet die Erhöhung von 8 Std täglich ab 1. Juli an)

Anstrich 10 Stck Woche 01/01/87-12/31/87

(Anstrich Kapazität ausgedrückt in Einheiten anstatt Stunden)

Zur Aufstellung-von Ressourcen

Leitwege sind gewöhnlich zusammengefasst oder eingeschätzt durch Ressourcen in einer „Aufstellung-von-Ressourcen“ und Ausgleich des Fertigstellungsdatums durch durchschnittliche, ungefähre Laufzeiten. Leitwege von vielen Montagen und Teilen für ein Produkt können in eine einzige „Aufstellung-von-Ressourcen“, wie sie gewöhnlich genannt wird, zusammengefasst werden. Während herkömmliche CRP Systeme meistens die Ressourcen in Stunden messen, mißt RCCRP in Pfunden, Maschinen-laufzeit, Arbeitszeit, qm, Einheiten, Menschen und sogar Dollars. Ein Beispiel, wie sich ein Bedarfsplan auf Dollarumsatz auswirkt, wird im Absatz IV dieser Ausarbeitung aufgezeigt.

_______________________________________________

Aufstellung von Ressourcen

Produkt Ressource Menge Ausgleich Dauer wirksam

B1-B Montage 400 70 20 01/01/87-12/31/87

B1-B Löten 120 55 10 01/01/87-12/31/87

B1-B Test 80 15 30 01/01/87-08/31/87 B1-B Test 84 15 30 09/01/87-12/31/87 (Test Einschätzung erhöht mit Wirksamkeit am 1. September)

B1-B Oberfl.Überzug 1 5 5 01/01/87-12/31/87 geheime Montage 120 5 20 06/01/87-12/31/87

______________________________________________________ zum Bedarfsplan

______________________________________________________ Bedarfsplan

Produkt Menge Fälligkeitsdatum

B1-B 10 06/15/87

10 06/30/87

10 07/15/87

15 07/31/87

10 08/17/87

geheim 6 06/25/87

6 07/24/87

______________________________________________________

zum Ladeprofil

Der Bedarfsplan kann an der Produktebene ausgedrückt werden, oder in der Höhe der Produktgruppen Ebene. Dies vermeidet die Notwendigkeit einer mühsamen Planung bis runter zur Teile Nummern Ebene. Es muß lediglich in Gruppen mit ähnlichen Produktionsressourcen Charakteristiken aufgeteilt werden. Das System output ist ein „Ladeprofil“, welches eine Darstellung der Ressourcen ist, die während dieses Zeitab-laufs für die Planeinhaltung benötigt werden.

„Lade“ Vorgang..... ___________________________________________

Lade Profil

Montage April Mai Juni July August

Arbeitstage 22 20 22 22 21

Kapazität 4400 4000 4400 4400 4200

Ladung

B1-B 4000 7600 2000

geheim 720 720

Gesamt 4000 7600 2720 720

Über/unter - 400 3600 -1700 -3680 -4200

kumulativ - 400 3200 1500 -2180 -6380

______________________________________________________

IV. RCCRP ANPASSUNG FÜR DIE FINANZPLANUNG

Genügend Hintergrund! Wie verwendbar für die Finanzen

A. Um auf den Grund zu kommen, hat das Projekt Team vereinbart, daß ein guter Stammzeitplan und das RCCRP System die Möglichkeit haben sollten, folgendes entsprechend zu berücksichtigen:

1. Prioritäten

- Kunden

- Firma

2. Kapazität

3. Laufzeit

4. Material Verfügbarkeit

und auch...

5. Herstellungs Finanzplanung

B. Empfehlungen:

Nachdem wir bereits am Ablauf der Betriebsseite arbeiten, war es nicht sehr viel schwerer einige Verbesserungen der finanziellen Anforderungen in das RCCRP System einzubringen. Wir hatten jedoch einige Hindernisse zu überwinden, die durch Bearbeitungen oder freundlichen Druck auf den Software Lieferanten, der das System ursprünglich für die Finanzplanung entworfen hatte, überwunden werden konnte. Die empfohlenen Schritte die dann folgten sind wir zunächst nicht angegangen, sie wurden aber durch das im Ablauf Erlernte entwickelt!!

1. Entscheiden Sie welche Finanz-Information gefordert ist. Holen Sie die Zustimmung

der wichtigsten Abteilungen darüber ein, wie die Festlegung, Maßnahme und

Anwendung sein soll. Dies erscheint fast offensichtlich, aber es geschieht nicht immer

Bezeichnenderweise könnte diese Information eine Auswirkung haben auf:

- Bruttogewinn

- Cashfluß

- Shipping dollars (?)

- Rechnungen

- Lagerkosten

- Materialkosten

- Arbeitskosten

- Unkosten

2. Legen Sie die vorgeschlagenen Übersichten und Berichte auf. Falls ein übliches

Softwarepaket verwendet wird, stellen Sie sicher, wie die existierenden Daten-

felder und Kalkulationen eingesetzt werden und ob Verbesserungen erforderlich

sind.

3. Entwickeln Sie und fügen Sie die finanziellen „Arbeitszentren“ (Punkt Nr. 1 oben)

zu dem Ressourcen Profil. Definieren Sie „Kapazität“ als budgetierte Summe oder

andere finanzielle Einschränkung. Falls die eigentlichen Ladungen beim Lauf

des Ladeprofils anders sind, sollten Sie als Abweichung interpretiert werden. Falls

zum Beispiel die Umsätze Auswirkung „Kapazität“ als 30000 K$ ($30,000,000)

definiert wird und die Ladeprofil Gesamtsumme beläuft sich auf 20000 K$

($ 20,000,000), dann gibt es eine Hochrechnung mit einer ungünstigen

Abweichung von $10,000,000. Wenn die Budgets nicht bis runter zum Ressourcen

Level bestimmt worden sind, dann schätzen Sie den konsumierten oder produzier-

ten Teil mit Hilfe der geplanten Aktivitäten. Steigerungen in Zeit beziehen sich auf

die zu budgetierenden Zeitperioden - Monate, Jahresviertel, etc. (siehe Illustrationen von Beispielen über finanzielle Auswirkungen).

Ergänzungen zu einigen finanziellen Arbeitszentren

_____________________________________________

Ressourcen Definition oder „Profil“

Ressourcen Kapazität Zeitsteigerung Gültigkeit

Warenkosten 20000 K$ Monat 01/01/87-12/31/87

Umsatzauswirkung 30000 K$ Monat 01/01/87-12/31/87

Cash Auswirkung 30000 K$ Monat 01/01/87-12/31/87

_____________________________________________________

zur Ressourcen Plan

4. Entwickeln Sie und addieren Sie die finanziellen Modellierungschritte zur

Ressourcenliste. Besprechen Sie, zusammen mit den beteiligten Abteilungen,

wie beispielsweise Betrieb, Finanzen oder Technik die Einschätzungen. Das

ist wahrscheinlich der schwierigste Teil, denn:

Finanzieller Ressourcen Plan......

________________________________________________

Ressourcen Plan

Produkt Ressourcen Anzahl Abweichung Dauer Gültigkeit

B1-B Warenkosten 1000 0 0 01/01/87-12/31/87

B1-B Umsatz Auswirkung 1500 0 0 01/01/87-12/31/87

B1-B Cash Auswirkung 1500 -45 0 01/01/87-12/31/87

geheim Warenkosten 900 0 0 01/01/87-12/31/87

geheim Umsatz Auswirkung 1000 -45 0 01/01/87-12/31/87

geheim Cash Auswirkung 1000 0 0 01/01/87-12/31/87

________________________________________________________________________

zum Bedarfsplan

Annehmbarer akurater Durchschnitt der Dollar Auswirkung beim Produkt oder den Produktgruppen werden benötigt. Das heißt, daß Gruppen vorsichtig nach der Homogenität von Kostenauswirkungen ausgewählt werden sollen, oder den Durch-schnitt entsprechend werten mit dem Verständnis, daß eine Produktmischung die ursprünglich ausgewählten Durchschnittswerte ungültig machen. Dies kann eine neuerliche spätere Ausrichtung der Produkt Definition erzwingen.

Es wird dazu geneigt, die Ressourcen Profile und Ressourcen Pläne in viel zu kleine Details, die viel zusätzliche Arbeit bergen, aufzubrechen - meistens ohne die erhoffte erhöhte Genauigkeit der Vorhersage zu erreichen. Kämpfen Sie hiergegen an!

Manchmal verwenden die Leute die gleichen fehlerhaften, überaus komplexen ‘Mülldaten’, um die Einschätzung des Ressourcen Plans zu kalkulieren, was aber mit Hilfe des RCCRP Systems umgangen wird! Verwenden Sie vermutete Annahmen und vergleichen Sie diese mit Erfahrungsdaten. Bauen Sie Realitätsfaktoren, Beträge für Abfall und Überarbeitung ein.

Manches Kostenverhalten bezieht sich nicht direkt auf Volumen bei den meisten der RCCRP Systemen. Es kann hierfür notwendig werden, die Software zu modifizieren oder um das Problem herum zu arbeiten in dem separate Anforderungen und Ressourcen Pläne für nicht wiederholende oder Menge bezogene Kosten Aktivitäten hinzugefügt werden.

Beträge für schrittweise Abweichungen in Zeit und Dauer sind schwierig einzu-schätzen. Lassen Sie sich nicht dazu verleiten, die Standard Laufzeitabweichungen der Tabellen, herkömmliche „Weisheiten“ oder computerisierte Leitlinien zu glauben.

Seien Sie sich darüber im Klaren, daß einige Produkte oder Bestellungen vielleicht auf der „Schnell-Spur“ entstanden sind oder spezielle finanzielle Bedingungen aufweisen, die ein anderes Ressourcen Profil fordern.

5. Testen Sie die Modelle mit einfachen Muster Anforderungen und dem Lauf der Lade

Profile. Vergleichen Sie dieselben gegenüber dem was sie ausdrücken sollen oder

gegenüber dem Tatsächlichen und ob es machbar ist. Denken Sie daran, dies ist ein grob-zugeschnittenes System, welches Ungefähres liefern soll!

6. Nachdem das Modell eine annehmbare Art aufweist, lassen Sie die Lade-Profile

laufen und beobachten Sie genau was passiert und angewendet werden kann.

Original Plan

_______________________________________________________

Bedarfsplan

Produkt Anzahl Fällig

B1-B 10 06/15/87

10 06/30/87

10 07/15/87

15 07/31/87

10 08/17/87

geheim 6 06/25/87

6 97/24/87

_______________________________________________

zum Lade Profil

Finanz „Ladung“ in 000 $

____________________________________________________________

Lade Profil

Umsatz Auswirkung April Mai Juni Juli August

Arbeitstage 22 20 22 22 21

Kapazität 30000 30000 30000 30000 30000

Ladung

B1-B 30000 37500 15000

geheim 6000 6000

Gesamt 30000 37500 21000 6000

über/unter 0 7500 -9000 -24000 -30000

kumulativ 0 7500 -1500 -22500 -52500

_____________________________________________________________

7. Behalten sie das Modell up to date während sich die Dinge ändern. Neue oder

geänderte Produkte, sowie Abläufe, Zeitpläne, Tempo, Leistung oder Preise

können das Modell verändern.

8. Der Bedarfsplan muß auch up to date gehalten werden. Neue Voraussagen,

Bestellungen und Stammpläne sowie fertige Arbeiten können eine Auswirkung

haben.

9. Wenn Kosten effektives und mögliches eine automatische Routine ergeben, für

die Zusammenfassung der betrieblichen Daten, wie Arbeitszentren Kapazitäten, Leistung, Voraussagen, Produktions Pläne und Stammzeitpläne und das update

des RCCRP. Vermeiden Sie das automatische Laden darauf, nachdem die Information öfters fehlerhaft ist. Es kann ausserdem zu einer sich selbst erfüllenden

Prophezeiung führen (wir haben weniger als erwartet erreicht, also haben wir die Kapazität niedriger eingegeben und weniger eingeplant. Raten Sie mal? Wir haben das nächste Mal wieder weniger gemacht!).

10. Einige RCCRP Systeme haben interne Kalender, um Programme und Lade

Kalkulationen zu erleichtern. Dies hilft zum Beispiel abzusichern, daß in die von

Ihnen definierten Planungsperioden, die Aufgaben Dauerzeiten von 90 Tagen

richtig zugeteilt werden und daß arbeitsfreie Tage definiert sind. Stellen Sie

sicher, daß die Kalender up to date sind.

C. Fallstricke

Wie wir bereits vorgeschlagen haben, gibt es eine Anzahl von Dingen, die beachtet werden sollen:

1. Selbsttäuschung durch unrealistische Voraussagen. RCCRP ist genau so wenig

immun dagegen wie jedes andere System auch.

2. Wenn Ressourcen Profile sind falsch sind: Kapazitäten sind nicht so dargestellt

wie sie aufgrund von schlechten Einschätzungen, veränderten Potentialen,

fehlender Erlaubnis für Realisationsfaktoren, Überarbeitung und Abfall sind.

3. Ressourcen sind zu genau definiert (zu detailliert) oder zu großzügig für eine

akkurate Voraussage.

4. Ressourcen Profile sind ungenau aufgrund von schlechten Einschätzungen unter

Verwendung von fehlerhaften Daten aus den Leitwegen; bei nicht Berücksichtigung

aller Schritte, Ablaufänderungen, Einstufungsänderungen, Zeitabweichungen und

Dauer (wie lange dauert es tatsächlich bis sich Rechnungen in Cash verwandeln?,

wird alles Fertiggestellte immer sofort ausgeliefert und berechnet?, werden alle

Materialien immer rechtzeitig angeliefert?) bei der Anwendung von unangepassten

Modellen bei eiligen oder verzögerten Bestellungen und von aktuellen Einstufun-

gen und Leistungsunterschieden, um das Modell up to date zu bringen.

5. Das Modell berücksichtigt nicht genau die Wirkung der Größenordnung, Voraus-

produktion, Verzögerungen und die sich nicht wiederholende/die Größenordnung betreffenden Ereignisse und Kosten.

6. Bedarfsplan falsch oder nicht updated von anderen Systemen.

7. Angebrachte Maßnahme Einheiten für Kapazitäten und Ressourcen Pläne werden

nicht angewendet und Umwandlungsfaktoren sind unangemessen eingesetzt.

8. Leute wenden nicht wirklich den output an oder sind sich gar nicht bewußt, daß er

existiert! Auch das erscheint unglaublich, aber es wurde so beobachtet.

V. Schlußfolgerung

In der Zusammenfassung ist anzunehmen, daß RCCRP ein exzellentes, einfaches und nützlich ausgerichtetes Werkzeug ist, um den Finanzplan Prozess in Gang zu setzen und Kommunikation und effiziente Arbeitsbeziehungen mit den einzelnen Abteilungen zu verbessern.

Nachdem das System einfach und intuitiv ist, verbindet es die operativen Ereignisse mit den finanziellen Konsequenzen. Es vereinfacht die Aufgabe für die Abläufe der Herstellungsplanung in vielen Organisationen. Richtig angewendet für die finanzielle Vorausschau, kann es Fehler reduzieren und rasche Wiederholungen, Erkundungen von mehrfach Szenario und Feinabstimmung erleichtern, was andere Methoden bisher nur versprechen aber nicht halten konnten.

Manche Leute sind der Meinung, daß der Ansatz ungewöhnlich grob ist und daß er für besonders hochentwickelte Modelle keine Erleichterung darstellt. Das System sieht täuschend einfach aus, aber es stellt ungeheuer viel Power und Flexibilität zur Verfügung, was ich nur bestätigen kann, nachdem ich die Beispiele für dieses Papier manuell erarbeitet habe. Obgleich RCCRP einfach genug ist, es auf diese Art anzu-wenden, bekommt es erst den richtigen Glanz wenn die Anwendung per Computer Software, die für diese Aufgabe gestaltet worden ist, erfolgt.

Best Practices Q & A - Part 15

2007-07-13T13:26:00.000-07:00

Question: "We have been told by several people that we do not need a dedicated Conference Room Pilot facility, that it can all be done from our regular workstations via Internet meeting technology and conference calls. Why are you so insistent on having a physical place, a meeting room for the team? Isn’t this a bit "old school?"

Answer: "Good question; goes to the heart of how we do, or don’t work together. We are great fans of Internet meetings and conference calls, and have done significant portions of projects using these tools. However, there ARE limitations. As a guideline, the more closely a team needs to work together, to trust each other and communicate not only hard data information, but to perceive more subtle forms of communication, the more physical presence will prove valuable and, in the end, will save major amounts of time.

The lack of trust is the greatest cause of additional work on team-based projects, because it leads to CYA work, which does not add value to the actual project itself. When people are physically in the same room, learning, growing, arguing, debating, collaborating, disagreeing and resolving issues, there is an opportunity for trust to really grow and strengthen. If you label in-person communication as "100% of the information" that passes between people, as you move further away from this, major portions of this "100%" are lost. Video conferencing would be the closest, followed by Internet meetings, with phone conference calls in last place. Each increment allows the participant to pay less and less attention to what is going on. Everyone is under intense time pressure, it seems, to "multi-task" which is techno-speak for "I’m not really paying attention to you."

Advanced web meeting technology allows the presentation organizer to discern who is really paying attention to the presentation, as the viewer client software can detect and communicate real-time to the organizer who has moved the window into the background, to work on their email or something else. This doesn’t happen when you are in the same room together. Your CRP is way too important to allow it to be "moved into the background."
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Implementation: Conference Room Pilot Preparations

2007-07-06T15:55:00.000-07:00

Article Summary: In previous newsletter articles, we focused on the “front-end” of an implementation project, including setting up clear top management support, involvement and communication, and selecting a Best Practice implementation project team. When these are accomplished with Best Practice methods and principles, the team is, at this point, operating in a low-risk field – so far, so good.

In this article, we discuss preparation for a Best Practice Conference Room Pilot. This includes making sure the team itself is sufficiently educated and trained, and that the CRP itself is sufficiently organized. In our next issue, we will discuss the detailed implementation preparation activities, the “dress rehearsal” aspect of the CRP – where the rubber hits the road before the rubber really hits the road – and the Go-Live preparations critical to success.

Topics include:

Education and Training for a CRP
CRP – the Dress Rehearsal
CRP facility – organizing for success

Education and Training for a CRP

The first step in this area is to clearly separate education from training. Briefly, in the context of implementation, the purpose of education includes:

New concepts – these are underlying thought processes, and assumed understanding that is embedded in the Best Practices integral to the new software. The implementation team must clearly understand these if it is to be effective in the CRP process and implementation preparation that is at the core of the CRP. Often these are different ways of looking at things, different perceptions. If one doesn’t understand these, there can be a real crippling effect, as people (unintentionally) try and force-fit the new software to work the “old” way.

Example – many problems associated with implementations of material planning (MRP) functions stem from the fact that those using it have not been adequately educated in MRP concepts. Effectively using software delivering MRP capabilities has a poor chance of succeeding if the users are blindly clicking on buttons and following rote procedures. A person who truly understands the concepts involved with a particular software function can almost figure out how the software works on their own.

Precedes and informs detailed planning – if those who are planning the project truly understand the concepts behind the business processes, and the revised, more effective work flows that will come with the software, the steps from “here” to “there” will be considerably shorter and more direct.

Speeds up detailed, hands-on training – As was just mentioned, the actual amount of detailed, hands-on training needed to become proficient with the software is a small fraction of that required to “teach” rote-style, how a person is to do their job with the new system. We have observed people like this taking notes that say “hit the down arrow 3 times, then press Enter…” and the like. Frightening, from a management point of view! As MRP legend, George Plossl said many years ago “If you think education is expensive, try ignorance!”

Ideally, education of the core project team precedes the business process analysis and software selection process discussed in the preceding chapters. If it has, so much the better. If not, start now. In any case, though, the education process should be expanded to include others in the company who will be using or otherwise involved in the system. The implementation planning process that is the core of the CRP includes a detailed education and training plan for all who will be using the new system’s functions.

For the complete article, please visit the PROACTION website "Conference Room Pilot Preparations".

Best Practices Q & A - Part 14

2007-07-03T14:43:00.000-07:00

Question: “Several of the people that appear to be the best choices for our implementation project have worked at this company their whole career. How do we bridge the gap for these otherwise good folks between the ‘way we’ve always done things’ and the new Best Practices that we hope to bring into operation with the new system?”

Answer: “While the first impulse answer is ‘education,’ in reality it is ‘support.’ These folks must feel secure in their place in the company, in their jobs and roles, to be able to embrace changing how they look at things, how the work is done. No amount of education, to an unwilling, threatened or frightened person will stick. The more it is pushed on them, the more they will tend to fight back, to resist, defending the status quo. Naturally, this is the opposite of what you want to accomplish. If your leadership pays quality attention to these seemingly non-business, yet essential needs, these people may become the champions you need to lead the change because they are often very loyal to the company and really want to see it succeed now and in the future.”

Implementation: Best Practice Teams

2007-06-25T14:28:00.000-07:00

Article Summary: In the previous newsletter’s feature article, we focused our attention on the “front-end” of the implementation project. This included how to establish meaningful ownership of the project, how critical real, effective leadership is, and the pivotal issue of setting up clear, unambiguous top management support, involvement and communication. When these are consistent with Best Practices, the implementation team is operating in a zero or low-risk field – they can stick out there necks, own their work, be fact based (not “politically” oriented), with little or no CYA activity. The focus is instead on getting everything in place solidly, getting it “right” and effectively identifying and resolving all potential problem areas.

In this issue, we’ll focus on the formation of the implementation team, who should be on the team, who not, what areas they’ll come from, and how to organize the team so the company isn’t driven off the proverbial cliff with no one at the wheel. Topics include:

How NOT to create an implementation team
Project leadership – selection and administration
Selecting team members
Success example story

How NOT to create an implementation team

To continue a recurring theme in this topic we touch once again on the CYA factor, and the importance of confronting it head-on. This same thought process should be carried over into selecting the team leadership and members. This kind of activity is overhead, extra baggage and waste of the first magnitude, and can in itself cause a project to fall short.

Remember – once the project is done, no one will care in the least who said what at a meeting, or what the basis for a minor decision as – only that it was successful, and if/where it is not, what is underway now to correct it. When serious CYA activity is going on, it is prima facie evidence that there is a lack of trust. When you find this going on, drag it and whatever “sacred cows” are involved out into the open, shine light on it with candid, honest discussion, then provide leadership and support to re-establish trust.

We mention this in the context of team formation because of far too many examples we’ve seen where teams were selected with the desire to absolve one’s self of blame of any sort for possible failure, not only of the implementation project, but of possible operational short-falls that could result from the implementation.

By identifying implementation team mistakes, we will concurrently illuminate their logical opposites, Best Practice team formation methods. Here are some of the bigger, yet surprisingly common mistakes companies make when assembling an implementation team.

Have an external project manager – assign project management to a person who is an outsider, not in any way a part of the company’s success, failures, or culture. He/she will be an “expert” in a mysterious, dangerous process, but if/when it crashes, will be long gone.

Depend heavily on external skills and resources - hire temps, consultants, people hired only for the project. This will make the internal people feel completely incapable of performing on their own, and thus remove ownership from it. Almost all huge implementation failures have this element in common.

Reassign key internal people full time to the team – remove them from their daily jobs and responsibilities. This way, they cannot fully own the resulting success or evaluate risks. They will now be in “their own little world.” Meanwhile, life moves on in their former departments, new political alliances are formed, new in/out groups, and new “secret handshakes” created. They must “sell” everything they do to those still in their old departments and work groups. Challenges, high potential for difficulties and failure are virtually assured.

Assign expendable people to the team – when department managers are asked to select people for implementation teams, it is VERY hard for them to select their best people – or even harder, to take the responsibility on themselves; they just feel way too overwhelmed. Further, they depend on their best people to keep things together, working well – vital for their own performance reviews, raises, etc. So, the “weakest link” is often selected. Once again, challenges, high probability for difficulties or failure are virtually assured.

Create a large team - with many people on the team, they’ll have to spend a lot of time in meetings, communicating with each other, resolving disagreements, etc. This dramatically increases project overhead, adds confusion, decreases individual ownership. Once again... You can see where this leads – once again.

Make a long schedule – allowing a long time for the team to prepare, convert and Go-Live greatly adds to the number of meetings, CYA projects, and changes in team members, none of which actually moves the implementation forward. When new people join the team, they have to “get up to speed” – all extra work, with no added value on the actual project itself. With a long project, the percentage of time devoted to status reporting, meetings, communications, reporting to top management, collaborative sessions with work groups, changes in business processes and strategy – all dramatically increase, thus once again – increasing the probability of difficulties or failure. A short, tight schedule may appear counter-intuitive, but it is a fact. A multi-year implementation project is almost assured of never succeeding fully, simply because of leadership changes, both within the company, and on the team alone.

This depressing “checklist” is included here, in an otherwise positive-oriented set of guidelines specifically because we, and others, have so frequently seen them in actual practice. Although it is widely known that implementation projects are risky, what is NOT so widely discussed are the causes of the risks. We’ve just covered some of the major ones – where problems or failure were almost built-in from the start.

To take an example – sky-diving – the act of jumping out of a perfectly good airplane couple of miles above the earth’s surface, would appear to be highly risky, and it is, if you aren’t prepared. Just “going for it,” in this situation can and has resulted in a greatly shortened life span. Similarly, in a complex business change, i.e., software implementation, rigorous planning, preparation, education and training virtually eliminate risks, just as it does in sky-diving. And high blood levels of testosterone won’t bridge the gap.

This depressing “checklist” is included here, in an otherwise positive-oriented set of guidelines specifically because we, and others, have so frequently seen them in actual practice. Although it is widely known that implementation projects are risky, what is NOT so widely discussed are the causes of the risks. We’ve just covered some of the major ones – where problems or failure were almost built-in from the start.

To take an example – sky-diving – the act of jumping out of a perfectly good airplane couple of miles above the earth’s surface, would appear to be highly risky, and it is, if you aren’t prepared. Just “going for it,” in this situation can and has resulted in a greatly shortened life span. Similarly, in a complex business change, i.e., software implementation, rigorous planning, preparation, education and training virtually eliminate risks, just as it does in sky-diving. And high blood levels of testosterone won’t bridge the gap.

Project Leadership – selection and administration

Strong, internal project leader – Select a key leader, not “manager”. A key hands-on executive or relatively senior manager (not the IT manager) should take this role – he/she will be a powerful force for ownership. Here’s how to keep from overwhelming this person:

Add project administration – provide a full-time project administrative assistant to the leader – most of the project management work can be handled by a capable assistant. The most time intensive part is gathering status information, preparing reports, presentations. o ·

Add key role deputy – assign a capable deputy, a fully-capable “stand-in” who can, if/when needed for the functional manager serving in the project leader role. This can and will off-load the leader, so he can have enough time to effectively lead the implementation project, while remaining effective in his / her primary functional role – essential for full ownership.

We have found there is frequently a lot of confusion over the roles of project leadership, management and administration. Leadership is clearly the most powerful and critical, yet most of the time for getting a project to move forward is devoted to administrative work.

Keeping the project leadership securely in his/her power base of a key line management role insures that reality is an integral part of the change/implementation process and keeps ownership solidly in place as well. The Best Practice here is to select a real, effective leader, keep that person in their primary job, while providing supplementary support to back-fill the person in their primary leadership role, while off-loading as much of the project administrative work as possible.

This strategy allows the project leader to truly be physically and emotionally able to continue to provide leadership in the primary business role, yet also effectively lead the change process for the company, including his/her own work area as well at the same time.

Selecting team members

In the NOT to do it discussion, we eliminated many of the most common, yet failure-driving ways to create an implementation team. Similarly, the theme of hands-on, leadership based individuals who are capable of the degree of ownership of the results in their own work areas, plus the implementation team we can concisely summarize how the team should be assembled and who should be on the team:

Strong, functional managers as team members – everywhere possible, assign a strong manager for team membership, one who exhibits real leadership characteristics, more than just someone who really knows the functional area. Follow the same guidelines described above for insuring that these people have enough time to effectively carry the dual responsibilities of their functional management role plus the implementation project role. Off-load and support them in their regular job role to allow quality, effective time for the implementation project.

Keep the team small – a highly focused, tight, small team of intensely motivated people who really know what they want to accomplish, will move mountains, quickly to get it done. Communication lines will, on a small, tight team, be short, concise, and trust-filled.

Continuity – ideally, the implementation is the same team that performed the “as-is” and “to-be” business process analysis, and which thoroughly understands the business strategy and its critical success factors.

Note the common thread of ownership – the before and after work, having people remain in their line roles, and keeping communication and responsibility lines within the team short and effective, with a minimum of overhead. And, of course always selecting people who exhibit real leadership qualities. This “follow-me,” lead by example method has proven very, very effective in countless situations of change within work groups. A solid leader helps people feel relatively safe and secure in the midst of change, potential confusion and what they feel will be the chance of mistakes.

Success Example

One company we are familiar with, a $ 50 million/year high tech manufacturing company, was unable to utilize much of its implementation consulting budget that it had planned. The company is highly customer focused, with many short-notice on-site visits by key customers. Consulting resources from the software company had to be scheduled in advance, and frequently were cancelled at the last minute, or went under-utilized while they were on-site.

This forced the management to “do it themselves” – using Webinar and conference calls to tap into outside expertise just for educational purposes, so they could learn what was needed. Since they were working nights and weekends, they really wanted to get it done soon, yet since the team was entirely composed of key line managers, making sure it went well was critical.

As a result, all of the planned functions in the new system went into live use only a few months after starting, with only a small portion of the external consulting support that had been planned being utilized.

This simple example illustrates the key points involved in Best Practice implementations – all centered around maintaining effective ownership of the before and To-Be processes, and all steps between the two. In this instance, the company’s leadership was able to simultaneously keep things moving well in their work groups while moving the implementation forward, without the off-loading and back-filling steps recommended above. However, in a larger company, this may not have been possible – the additional work would be more than could be handled by some evenings and weekend work.

In our next issues, we’ll continue the implementation discussion, moving onto the topics of education and training, and the all-important conference room pilot.

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Best Practices Q &A - Part 13

2007-06-25T14:16:00.000-07:00

Question: “Our company does not have anyone in any of the leadership management positions with any prior experience in a major implementation project. What is the best way we can bridge this gap to insure a successful implementation?”

Answer: “There is nothing wrong, per se, with bringing in outside expertise to support your project. The issue is one of how is this person to be used – what role will he/she be assigned. In-house people on the team will be the experts on the company. The external person’s role is to help the team grow themselves to the point where they can meaningfully, effectively own the “to-be” business processes – after the implementation is successful. The best practice role of a person outside the organization is one of coaching, facilitation, and education – NOT being responsible for deliverables, milestones, go/no-go decisions that the like. There is no quick, easy way to escape the reality of experience the team has – the remedy is always education, coaching and extra trials to gain the needed experience.

Likewise, there is no escape from the fact that handing a project over to an external person WILL definitely shift responsibility and thus ownership away from internal leaders. Finally, remember that when any well motivated leader is leading a project where certain expertise may be lacking – that person WILL be paying attention during education sessions.”
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Implementation Preparation Best Practices

2007-06-18T13:33:00.000-07:00

Article Summary: The preparation process – i.e., the “front-end” of a Best Practice enterprise software implementation project sets the basis for what follows. This article explains the common thread of ownership and effective leadership upon which a successful, low-risk implementation project is based. In a subsequent article, we will discuss the Best Practice way of organizing and preparing the implementation team, and then in a third article, the activities of the implementation team – conference room pilot, go-live preparations and support. Topics:

Background and context factors
Ownership – the overriding principle
Leadership – key best practice
Top management interface

Background and context factors Few business areas seem to be so risk-filled as implementation of new Enterprise software systems. Research has shown consistently that more than 70% of all ERP system implementation result in one form of short-fall or another, ranging from acceptable performance with no real measurable benefit but at a higher operating cost, down through several gradations of difficulty to outright failure. Collapse or bankruptcy does occasionally result, although rare.

A sane business leader reads these research findings and thinks “Yikes! Do we have to do this? There must be a way to reduce or eliminate this terrible risk, isn’t there?”

Fortunately, there most definitely is. Understanding and following proven Best Practices can and will lead to an almost zero-risk implementation project. These are NOT a mystery, although if one doesn’t know about them, they are. Absent proper preparation, implementations become the business equivalent of just jumping out of a perfectly good airplane and hoping that your parachute will open OK. “Banzai!” is not a Best Practice.

In this first of three articles, we discuss the Best Practice way to prepare for an implementation project. This involves understanding the common thread of ownership and leadership that runs through all facets of successful implementation projects.

Ownership – The Overriding Principle

At every level in a Best Practice implementation project there is the principle of ownership. The project that comprises the implementation is, itself a process – one that results in a slew of other processes. This means that the project manager, the team members, and adjunct participants such as those in functional work groups whose role is to interface with the implementation team – all of these individuals must feel the ownership of their tasks, that it is their job to see it through to successful completion, and to work as a team to bring this about.

The principle of ownership and its importance can hardly be overemphasized. Here is why:

Risk mitigation - The team will not just “jump off the cliff” blindly. They’ll move when they are ready – because it is their project, their success.

Details – ownership helps insure that participants are truly paying attention to relevant details – and ignoring irrelevant ones.

Education and training – when non-owners attend classes, one is lucky if they a) show up, b) stay awake, c) retain much. In contrast, if it is my project, my success at stake, I will pay attention and make sure I retain everything I need.

Preparation for Go-Live – a goal driven team that owns the outcome, the success, will not agree to a go-live until they know they are truly ready. At this point, the risk of failure or serious problems is virtually zero.

Painless transition – if the team owns its success, and is prepared, the Go-Live is almost just another work day. There is little or no additional re-training of everyone, because they are prepared, looking forward to working with a new, better system and work flows.

Leadership – Key Best Practice

When a team of change agents, which is what an implementation team is, is organized, it is vital that, at the very start, that top management display real leadership – backing the team’s efforts, making sure everyone in the company understands their role, its importance, and that management is “in the boat” with the team – and will succeed or fail with the team. The oldest project joke is that the most important task at the start is to “figure out who to blame when it fails.” Unfortunately, this is what happens all too often. Make sure there isn’t even a suggestion that this could happen and your project will go well.

Experience – remember that most people on a project team have, at most, participated in one, perhaps two implementation projects in their career. This is OK, normal, but needs to be factored in. They are learning both how to do this one, and how to do them in an overall sense.

The Machiavelli principle – implementation projects “establish a new order” which has long been identified as carrying high risk to its leader – one where there are few friends, and many enemies. In many of the unfortunate situations the project management ends up consistently in a defensive posture, working in a conflicted state where each step forward exposes the manager to more criticism, opposition, and various fears.

Bearing this principle in mind, senior management can, in effect, “shield” the project manager by providing solid, consistent backing. This must go beyond just budget to clear, explicit leadership via words and deeds that clearly show support and an intention to share all risks associated with the changes being made.

If there is even a hint by top management that, in the event of a short-fall in the project that “heads will roll,” everyone will take cover, and the project will soon make no steps forward without solid CYA material in place, greatly hampering its effectiveness.

Top Management Interface

Every major project in a mid to large sized company needs a process to connect it with the CEO, ideally the Board of Directors, key investors, and C-level executives. There are several ways to accomplish this, such as:

Executive Management Team (EMT) – in mid-sized or smaller companies, the project leader can just interface directly with the executive top management team. This provides an immediacy and a reality to the endeavor, as the EMT is fairly closely involved, and must understand and concur with all major issues, resolutions and decisions.

Steering Committee – these can be very effective, or not, depending on how they are constituted, their charter, and how they are led and operated. We define a Steering Committee as an appointed group of senior level executives, either a mix of “C” level and below, or managers who are most affected by the project. Typically these are not the EMT, but are appointed by the EMT to function in their behalf. Hazards with Steering Committees:

Disconnected from top management – since the project SHOULD be tightly tied to the company’s business strategy, having an additional reporting layer (read: “insulation layer”) allows the EMT the costly luxury of imagining that they don’t need to be concerned with it, never a good idea.

Second-guessing / excessive approvals – a poorly led steering committee will require the project manager and his / her team to review each detail with the committee at its (monthly) meetings, until they fully understand it, then approve it. This severely hobbles forward progress, needless to say. It occurs when there is weak or no trust of the judgment of the project manager and the team. The trust issue should be addressed head-on, here as in all other circumstances where it occurs and changes made so trust can function – this is the only way true, effective delegation can occur.

“No-shows” – key managers may miss meetings delaying key decisions, or producing “I’m not involved” attitudes in the missing manager’s mind. It can also foster an attitude of “abdication” instead of delegation.

Single Senior Executive Responsibility – if the single executive is the CEO or President, this can work, unless his/her availability and access is very limited, typically the case. More likely, if the CEO says “I’ll manage this myself” it is a case of inability to delegate, which of course severely hampers the project. Alternatively, if another senior executive assumes this role, it CAN be very effective. While there are some great exceptions, generally this should not be the CFO, unless the person in this role is unusually operationally oriented. Otherwise it’s like having the CFO have reporting responsibility for all of IT. The financial function, in too many of these cases, ends up with everything it needs, while the operational functions wait, or worse, are starved of budget and leadership. When in doubt, remember the objective of the project – to improve (operational) performance of the business.

Summary of Factors – in the area of project leadership interfacing with the top management of the company, as we’ve seen, the mechanism or process used is not the major factor – it is how it is run or used that determines success. Some guidelines for a Best Practice executive interface:

Keep the goal in mind – The goal here is a fast-moving, low-cost process that transitions the company from operating with its current systems and processes, to a new one. Everything that aids this process adds value to it, and activities and actions that do not subtract or are just waste – expensive waste. A Best Practice, of course, is to constantly strive to improve this, as with other processes by eliminating waste and improving quality.

Summary level reporting only – one big time/cost waster is elaborate PowerPoint presentations and reports, which don’t add value. One of our favorite report Best Practices is that of a major global corporation. You are limited to one 11 x 17 piece of paper, both sides, but can do anything you want with it. This is the paper equivalent of the “stand-up” meeting – key issues only.

Frequent is better – more frequent, short, informal, summary level meetings which focus on unresolved issues that need top management involvement, budget, time-line, schedule, or resource issues. This allows the project to move fast, change plans and directions quickly, without having get bogged down in the “why did the plan change?” kind of discussion, a waste of time.

Confront CYA head-on – inherent in this kind of reporting structure and project is the desire to look good, look like you knew what was going on from the start, etc. The evidence that CYA forces are operating is when one sees an expansion of presentation materials, reports, minutes of meetings, emails and memos to “document” discussions and decisions, multi-media presentations, and other time-consuming items that do not move the project ahead. Once the project is done, none of this will matter and the extra baggage can, itself, cause the project to not meet its objectives.

In the next installment we will discuss how to form and prepare a successful implementation project team – how to select the team members, and the education and training component both for the team members, and others in the organization.

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Best Practices Q & A - Part 12

2007-06-12T12:37:00.000-07:00

Question: “Your recent article on marketing and sales management best practices could have been written specifically about our company. We don’t really have a true sales process, as you wrote, so there are good months and bad ones. What can we do to improve this?”

Answer: “First, start openly discussing the fact that there is NO actual, defined process. Make sure you are clear that this is not a reflection on any manager or sales person’s capabilities per se. The person leading the sales team may in deed believe that there IS a process, thinking of the steps, scripts, etc. that may be in use. So, a head-on confrontation will not work. Instead, we suggest starting with a collaborative effort to document the process, as it is now, in whatever form. With this result in hand, the next step is to collaborate to define measurements for these steps, NOT the overall process only (“win / lose” the sale only).

The point is to measure the effectiveness of each step in the process, so that new ways can be devised to improve the process. If the process really isn’t followed, or can’t be defined well, this will become clear through these steps. If it is, great! The main feature of a defined, measured process we are most interested in is that it can be improved upon in significant ways over time. With continuous, consistent improvements in your sales process, sustained success is just a matter of time.”
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Marketing & Sales Best Practice

2007-06-06T15:44:00.001-07:00

Article Summary: Does your company have “too much success” in the marketing and selling area? No? Really? We thought so. Well, you are not alone – this is one of the least understood, least worked on, most universal performance improvement opportunities, applicable to almost every firm. The message here is that Best Practice marketing and sales is a defined, understood, improve-able process, with its own performance metrics, business processes, systems, and continuous improvement program. Key topics in the article include:

Symptoms identify great opportunities
Widespread – lack of a defined process
What to do, where to start.

Symptoms Identify Great Opportunities

In the marketing and sales area, it is rare to find a company with a well defined, well understood marketing and sales process, even though sales is the “life-blood” of any company. It is this lack, we believe, more than any other single factor, that kills off otherwise good companies, with great products or service offerings. Symptoms that one typically finds:

Marketing, a separate world – often marketing is a separate organization from sales – it buys media time, advertising, creates art work, logos, ads, brochures, does direct mail campaigns, or other “bush-beating” activities. But often there is little or no coordination, even communication with the sales organization.

Star-based sales – in many companies there is a small, often VERY small team of “hot-shot” sales people (“stars”) who bring the bulk of the business in the door. When one of these people leaves the company, often taking key customers with him/her, the company suffers a huge drop in sales. One company in our experience literally went bankrupt after its top sales rep left for a competitor and took the “A” customers with him. No joke.

Coaching oriented – selling is seen as a motivational challenge, one wrapped up with personal egos, fears of rejection and the like. Sales improvement therefore involves personality attributes like confidence, charisma, speaking skills, and others. Coaching does have a role, of course, even in a well-defined sales process.

No improvement over time – since marketing and sales are not structured, clearly defined processes, with inputs, steps and outputs that can be studied and improved, the company has good years, and not-so-good years. No one knows what else to do.

As a side note, we should comment here that the primary focus of these remarks is business to business marketing and sales. Consumer products, at least at the retail level, are typically more driven by effective (or ineffective) marketing – advertising especially. However, even with these products, the preceding steps from producer of the product to the retail shelf will frequently involve a considerable amount of “business-to-business” strategy, marketing and sales activity.

Widespread – lack of a defined process

What do we mean by a “defined process?” A process is a series of actions or functions between inputs and outputs that brings about a result. The elements of the process are therefore capable of being measured. If they can be measured, then they can in turn be controlled.

Anything that can be controlled, and therefore changed, and if it is changeable, it can be improved by comparing the effects of the changes on the results (outputs) with measurements.

In the absence of processes, there is, even under the best intentioned circumstances, a powerful element of randomness. If it is random, then the results cannot be reliably predicted over time.

In the sales and marketing arena, there are three distinct overall processes:

Strategy
Marketing
Sales

Each of these is in a sense, nested within the others – sales within marketing, marketing within strategy. There is, then, a strong interdependence relationship between these three processes. The interdependence is there whether we like it or not, that’s not the question.

The question is, is the interdependence being intelligently and effectively managed? Further, it is a simple fact that in addition to these interrelationships, there are others with the rest of the company. Are these being intelligently managed, as interrelated, interdependent processes, with appropriate measurements, communication streams, information management, and improvement efforts?

What about the effect on the 4 Essential Factors of the Best Practice Path of a non-process oriented approach to handling both overall business strategy and specifically marketing/sales strategy, marketing and the activity of selling? Let’s touch on these briefly:

1. Effective Systems & Processes – to the extent that these three critical-success-factor areas are not managed via defined, improvable processes, this vital factor will be seriously constrained, even if efforts elsewhere in the company are top-notch.

2. Continuous Improvement Process – by definition, if it isn’t a defined process, with measurements, controls and changes over time, it is not amenable to organized improvements. There will therefore be a strong element of luck in how things go with a company in this situation. Or “star” performers.

3. Education and training – there may be education and training, but where will it go, absent a structured process to apply it to? If it’s personal growth-style, with confidence development workshops and the like, there may be some improvement, but only as long as the individuals who took the workshop retain the material and stay with the company in that position. The best use of education and training is to apply it to the process improvement effort itself, so that improvements are permanent.

4. Effective Leadership and Culture – absent a structured process, leadership may have a very positive effect, but it is only temporary, as its effect is almost exclusively on the individuals themselves, not on the process or system that produces the results. It is important here to distinguish between the vitally important individual motivation, or better still inspiration that results from effective leadership and organization culture, and much longer-term results of having that effective leadership and culture applied to continuously improved, integrated marketing and sales processes.

Leading best practice companies have been working on their strategy, marketing and sales processes for decades; this is why, in part, they are consistently successful over such long time periods. Naturally, excellence in other areas is vital, but these, such as engineering and production are dependent on successful marketing and sales processes.

Some few companies with average-level products or services, but superior, high-performing marketing and sales processes experience sustained success for many years, with the only distinguishing characteristic being their highly effective marketing and sales process.

What to do, where to start

The good news in most companies is that their mere survival indicates that they are doing enough “good” things to at least stay afloat. Those of us who have been focused on business performance improvements are often the most enthused when we find un-worked improvement opportunities, as it is far easier to improve something that is already working, however poorly, than it is to start something from scratch.

And, if intelligently worked out changes are made, there is a very good chance that performance will improve substantially, simply because you have brought order into a previously random or even chaotic area.

By contrast, if you tinker in a major way with an already well-defined, very successful process, the odds of scoring a “home-run” are not as high – you may even do some damage. So, improvements opportunities are great news in most cases.

To provide a guide for you to place your company in perspective, we provide a series of questions that you can ask yourself, a checklist, to determine where your company is, and where the best place to start might be. This list, by the way, is by no means exhaustive or all-inclusive to all types of companies or industries.

Strategy – McKinsey, in a recent global survey, concluded that most companies are not satisfied with their strategy planning process. If the overall strategy process is weak, then the market/sales strategy process will, of necessity, be weaker still in most cases. What is the strategy process your company uses – both overall, but specifically, the marketing and sales area? Is there a start-middle-end set of steps that are used repeatedly, the result of which is a set of actions? And, over time are these actions measured, then “re-processed” in the next strategy cycle in a systematic way so improvements in the strategy process can be made?

Marketing – is it an “island?” Are managers in marketing measured by criteria such as how many ads are placed, direct mail pieces sent out, or other non-sales oriented factors?

Does the marketing function work closely, via defined steps on a regular, consistent basis with sales and other functions? Are promotions made for which products are not yet available? Are selling activities and resources adjusted and coordinated with promotion campaigns and with production schedules? Are marketing performance measurements tied to sales volume successes and targets or better still, profitability and market share penetration? Or are these kinds of measurements absent?

Sales – can you (or someone working in sales, at least) articulate the specific steps, the sequence in a structured, systematic sales process? Does the process start with tracking some type of initial contact or expression of interest and work step-by-step through the whole process to actual sales? Is there a sales “system” that is used? Are there measurements at each step in the process to enable sales managers to understand how to improve the process? Is it improved over time?

Sales Forecasting – it is an axiom among sales managers that more managers are fired for poor sales forecasting than for inability to generate actual sales. What is the sales forecasting process at your company? Is its accuracy measured? Publicized? Has the forecast accuracy improved over time? Is it accurate overall, but terrible at the detail level? If so, what could be done to improve this? Do people make jokes in bad taste about the forecast?

Is there an effective sales and operation planning process in use? How is the sale forecasting process adjusted to accommodate new product or service offerings, promotions, close-outs, soon-to-be-obsolete products and other non-linear factors? Is there an effective product-life-cycle management process in use?

Mixed product and service business – increasingly companies have realized that integrating the two activities brings sizeable benefits – to customers, and especially the marketing and sales activity. Is there a service component to your company’s products?

Is service even marketed at all? Or, is it treated as an after-thought, with the “real money” being in the product sale? Companies that have worked long and hard to develop well-integrated combined product and service offerings have frequently come to dominate their market, as customers come to depend on them, and are willing to pay consistently for the service that follows the product.

Is there a defined process by which services are linked to products or other integration opportunities. Is the “service or field support” manager a low-ranking person at the company? Or is he/she a real executive, with P&L accountability?

In conclusion, we have just scratched the surface here, as you may surmise. The thread through all of these questions is, once again, not whether you have “something going on” in the area. Rather, is it systematic, carried out by means of a clearly defined, consistently followed set of steps – a process that is itself independent of specific people and personalities.

And better still, is it consistently improved in its performance over time, so the results of that these processes themselves improve over time? If your company is like many, the good news is that there is a LOT of opportunity to improve performance, stability of the company, security of everyone’s jobs, happier investors (higher profitability), larger market share, and a host of other benefits that all result from integrated marketing and sales process management.

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Best Practices Q & A - Part 11

2007-06-01T13:58:00.001-07:00

Question: “In your and other discussions of outsourcing to China and other foreign countries I keep reading and hearing about a variety of other, somewhat hidden costs. What are these, besides the more obvious ones of freight and customs? Why do we need to pay so much attention to them?”

Answer: “Mostly they are indirect costs, what we call the cost of coordination and communication. Since they are indirect, they are often more hidden, poorly measured, and with consequences that are not necessarily immediate and obvious. One company we know of, doing over $100 million in outsourced products to China has over 100 US-based people traveling to/from China, to meet with vendors, resolve problems with quality, deliveries, materials, processes and other issues. The travel expenses alone are huge, of course. And these are relatively simple products, yet substantial in-person communication is required.

Our favorite story of this kind of communication / coordination problem is old and involves a company with an “internal outsource” arrangement, where engineering design was in California, with production in Arizona, about a $ billion/yr operation. The complexity of communication between engineering and production was so difficult that a company study showed that about 5% of the entire manpower of the whole company was involved in this single communication activity, with scheduled company flights several times a day to/from the two locations. It’s seldom as easy as it looks, and when one adds differences in language, technical understanding, culture and other variables, it can easily escalate into a huge problem, a costly one – yet the unit cost and logistics costs can be as originally planned.”

Outsourcing: Best Practice Impact

2007-05-21T15:42:00.000-07:00

Article Summary: This article explores the practice of outsourcing of critical parts, products, services and processes. There are a number of impacts on the “host” company’s ability to improve performance – achieve and sustain Best Practice status in key areas. The message in this article is that there is a Best Practice to the process of outsourcing – a best way to initiate it, select products or services for outsourcing, select the appropriate supplier, and to manage the resulting, altered ongoing business process. Key topics include:

Outsourcing – goals and basics
Impact on Best Practices essential factors
Planning for Outsourcing Success

Outsourcing – Goals and Basics

Every company purchases various goods and services, from rent and utilities. Many also purchase items that are its life-blood. However, the term “outsourcing” doesn’t usually refer to the every-day, basic stuff, or even exotic materials and parts that have always been purchased. Most often, the goals of an outsourcing initiative are in these categories:

Lower cost – it is believed that an outside supplier can perform the tasks at a lower cost, compared to internal costs. This will provide a strategic or competitive advantage.

Higher quality – the supplier may often have capabilities that cannot be matched internally, due to engineering or production expertise or that is difficult to provide internally.

Outside focus area – management wishes to intensify the team’s focus on certain key areas that are truly critical success factors, and to increase capability and performance in these areas. Off-loading non-critical activities is a good way to improve this focus.

It is generally when we decide to take something that has been, until now, performed internally, within the organization, and have an external supplier, a different company, do the work or make the item. This decision, increasingly popular has potentially profound effects on both the company’s operating performance, and its financial results. So, our view is that it should be done thoughtfully, with serious rigor, and not be undertaken lightly. Business literature and informal stories are filled with stories of companies that rushed into outsourcing, only to discover that important aspects were not even considered.

Let’s be clear up front – we believe outsourcing is a potentially very powerful tool, one that has the potential to transform a company’s operating and financial performance. We have performed major, extensive projects on both ends of this spectrum – companies whose entire strategy depended on successful outsourcing, as well as contract manufacturing and services companies providing this outsourcing capability. These experiences have made us quite aware of the many factors involved, and what success in this area involves. We even built an entire ERP system for a client, driven primarily by their outsourcing management needs.

The key aspect to this decision is to understand that the key difference between a “supplier” and an “outsource supplier” is that the outsource supplier is really much more of a partner in your company, compared to the arms-length transactions with typical vendors.

There are several major factors involved in outsourcing that are common threads that “run through” other areas. These include:

Internal Communication and systems – transferring what is currently an internal function or operation to an external location changes how communication to/from/with it will work. Much informal communication may be involved, which must be replicated or formalized. We once built an entire ERP system for a client to help resolve this challenge.

Cost impact – these include the obvious (unit costs, transportation, etc.), but more importantly, the not-so-obvious, such as additional communication, problem resolution challenges, and information and work flow dependencies. It is failure to identify, and manage the not-so-obvious cost impacts that typically causes the most trouble.

External communication - Language – typically the outsourcing supplier is outside one’s home country – abroad. The people who run the supplier company, and who will be doing your work are not native English speakers, or writers, and more importantly, even if they are educated appropriately, their education is typically not in English.

Having spoken, and written a couple of foreign languages ourselves at different points in life taught us the painful lesson that all of the knowledge and expertise one acquires resides in the vocabulary and understanding of the language in which it was learned. Translating this highly detailed, often subtle understanding into words that a native speaker, or writer, in another language would use, is difficult and challenging. It requires, really, to learn the additional vocabulary and usage subtleties. Technical language is called “jargon” for a reason – it is a form of local usage, like a dialect.

During our recent project in China we were never far from the awareness of these facts. The written Chinese language is completely, ah... inscrutable to a foreigner. Even foreigners who speak good Mandarin readily admit to a difficulty with the written language. So, the opportunity for serious misunderstanding is ever-present.

Key Documents - Engineering drawings, specifications, service or maintenance procedures, software design specifications, and other documents are critical to the success of an outsourcing initiative and must be considered in this context. Someone who can speak fluently, “do lunch” well, and is friendly, may have no clue whatsoever what is meant by various notations on these documents. People who have never wrestled with another language, especially writing it, have almost no effective way to grasp this particular challenge and its extent.

Impact on Best Practices - The 4 Essential Factors

The impact of outsourcing will fall also on the company’s efforts to achieve Best Practice status in key areas. Briefly, the impact in each of what we call the “4 Essential Factors” includes:

Effective Enterprise Systems & Processes – these are the communication and coordination functions of the company. If a key process is transferred to an external source, how will these essential systems/process flows continue to be effective? How will information that will now reside within the supplier’s infrastructure be integrated to internal sources that need it?

Continuous Improvement Process – does the supplier have an effective continuous improvement process? How will it integrate, or support your own process? Will you have to educate, train and support the supplier’s staff to achieve continued improvements downstream?

Attempts to “install” leading initiatives such as 6 Sigma often produces what we call “eyewash” charts. Walk around and you see nice looking charts and graphs, while your guide says the appropriate buzz-word phrases he learned from the consultant. Look closer and often you find that the dates on these charts are months old. Speak to people (difficult: remember, they don’t speak your language) and you’ll find that often they don’t really use any of it on a daily basis.

Education & Training – Since you depend partly on your education and training program to both maintain capabilities of your team members, as well as advance them, what impact will transferring a key function to an outside firm have? Do they have an effective education and training program?

Effective Leadership & Culture – will your Best Practice-focused culture mesh well with that of the supplier? The highly participative work environments typical to well-run companies in the west are normally not found in 3rd world countries, where the “command and control” style of management is standard. Improvements are something the boss decides in these companies. And they never forget who the boss is.

Planning for Outsourcing Success

In order to insure your best chances of real success in your outsourcing initiative, we suggest using the following as a starting but incomplete checklist:

Plan carefully – make sure all important steps are covered. Especially critical is to plan in detail the transition, providing for pre- and post-support activities. Don’t expect instant benefits to appear unless what is being outsourced is really simple and plain. We suggest using proven project management methods and tools to perform these initiatives. Don’t just hand a list to a buyer and say “call me when it’s done.”

Document everything – rigorously documented work flows, processes and parts are the exception. Often consistent high quality and repeatability depends on personal knowledge and expertise within your staff. Make sure you “capture” this information – after, of course, identifying what it is. Then – have them translated by someone YOU know and trust, generally not the supplier.

Recognize the new competency – outsourcing important items (products or services) to an external supplier, and managing the ongoing result is a NEW skill for your team. Understand clearly that you most likely don’t have this skill now, but can and must, acquire it. High blood levels of testosterone are not a substitute for this skill.

Select carefully; start simple – if you are new to outsourcing, we urge you to start with simpler items, those with a low-rate of change, that don’t challenge the supplier and your team’s ability to communicate about it. Use these as a learning device to gain the new management skill in managing outsourcing that your team must acquire. It’s harder than it looks. Other selection factors to consider:

Don’t outsource your core competency items – these are products, component parts, assemblies, services that constitute your strategic and competitive advantage. Not sure what your core competency items are? Uh-oh!

Strive for low rate of change – don’t start with an unstable process, or manufactured items that are highly engineered, in a constant state of change. Your supplier will never keep up with the changes, nor will your internal staff.

Labor intensive – preferably, select items that do not involve a lot of skill or experience to do successfully, and consistently. In our experience, consistency is preferable to erratic, but sometimes high, sometimes low quality.

Simple / standard inputs – your first outsourced production project is not the place to start if it is made of the proverbial “unobtainium” – material that is hard to get, harder still to work with, and involves subtle specifications that even your people have trouble understanding.

Shorter lead time – the reason to select short-lead time items is so you will have time to recover from problems – which there most assuredly will be.

Perform serious vendor due diligence – we suggest evaluating a vendor as though you were going to be a significant investor in the company. In a way you ARE becoming an investor; you ARE staking a part of your business success on their ability to perform well. Highlights of a good due diligence process from this point of view:

Evaluate internal processes – production, work flows, factors like dual-controls.

Quality – built into the processes, or by inspection-&-reject / supervision?

Information systems – effective, or antiquated? Capable of supporting integration with your system?

Skill and expertise – these should be at least equal, if not greater, to your internal capabilities. If they are not, they MUST be capable of being improved by training or you WILL have problems.

Stability – how long as the company been in this business? Financial strength? Who are the (real) owners?

3rd world country factors – in general, companies in the 3rd world have less in the way of management capabilities, non-participative culture with authoritarian management, and less advanced information systems. Conversely, they often have excellent work habits, and are very intent on “getting it right” with their customers. And, of course, the cost structure is what opened the door in the first place, which can often be dramatic.

Political factors? – no due diligence checklist for outsourcing would be complete without at least mentioning the political hot-button factors you should consider. Is the vendor really operating what many call a sweatshop? Are there environmental concerns? Is a revolution about to happen, or just did?

We have long learned that the optimum meshing of internal and external partners (i.e., careful outsourcing) can really strengthen a company’s performance – but with some caveats. Careful planning, real thought, discussion, and collaboration are essential threads through the points and factors that we’ve discussed above. Here, we have endeavored to “hit the high spots” of the many factors involved in this decision and process and trust that the reader will regard these as a good start in side-stepping the potential pitfalls and create lasting success in your outsourcing initiatives.

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Best Practices Q & A - Part 10

2007-05-17T15:17:00.000-07:00

Question: “Our company is considering outsourcing some of our production items to China. We have heard about the low cost structure, of course, but have also heard about some of the difficulties others have experienced. What would you suggest as a starting point for this process?

Answer: “First, consider getting some assistance. Remember that it is not like domestic sourcing, where you just put out an RFQ and wait for some responses. And it is not just about the unit cost. Companies that succeed with China outsourcing either engage long-term support, have the ability to provide in-country support themselves, or add indirect staff (read: higher overhead costs) to provide “liaison” with Chinese vendors. There are, as we have indicated above, ongoing translation and other issues. Don’t just assume that the vendor will be fully English and western business practices oriented. The ideal is someone who works for your company, or is a 3rd party who works for your company, and also has permanent in-country resources fluent in Chinese language, culture, business practices, your technology and the government.”

Who Owns the Work

2007-05-11T14:48:00.000-07:00

Article Summary - This article discusses the common thread of ownership of work activity, or process ownership – a Best Practice common thread that runs through all of the 4 Essential Factors on the Path to Best Practices. Here, we discuss how this powerful concept acts as a catalyst and powerful leverage of excellence in each of the 4 Essential Factors.

Topics include:

Work Ownership – the continuum.
How Ownership Supports the 4 Essential Factors
Alternatives
Powerful Results

Work Ownership – the continuum.

One of the most fundamental issues in understanding how organizations work is the question of who owns the work – i.e., who has felt or perceived responsibility for the work itself and the results it engenders. In a full-fledged, many-layered bureaucracy, there may be thousands doing work, being busy, creating documents, etc., but actual approval for actions, signatures, and therefore the “real” authority and responsibility is highly centralized. By contrast, in a highly decentralized company, people either doing the actual work of the company, or those very close to it, have final decision authority, and may bind the company in various ways.

These contrasting ways of organizational functioning can be said to comprise a continuum, with bureaucracy at one end, and a high-performance, highly decentralized, highly delegated organization at the other. Of course, most organizations are somewhere along this continuum. Let’s explore the ends of this continuum a bit further with examples.

Bureaucracy style - In a traditional military bureaucracy, historically everything was done “in the name of the King.” This translates in more modern settings to everything being done in the name of the commander. People who are essentially clerks prepare documents, but have no real authority, and so no real responsibility. These documents are sent, often through a series of reviewers, to a final “approver” who has the actual authority, and therefore the responsibility for the action. Each reviewer will “endorse” the action (or sometimes not), and then forward it to the next person in the chain.

Consequences of this method include:

Diffused actual responsibility – since many prepare and review a document, they are to a degree “involved” in it. However, since there are others “downstream”, the perceived or felt ownership is minimal.

Time-delay – it takes a while to “process” an action through multiple steps. This aspect also reduces flexibility, since actions are tied to the organization structure.

Paperwork intensive – since all communication is via written document, the document is THE thing, adding to the preparation time. Reviewers, endorsers and approvers must have all the information they need for their actions, so it has to be in the document, or attached to it. There are no informal, or oral communications with this method.

Approval authority remote from action point – the initiator of the action is always in the best position to know the most about the situation, what action is needed, and why. However, since all of this must be written down, then forwarded “up” the chain of command, subtle aspects are lost, and there is a CYA aspect to the whole process. Finally, the approver simply cannot know enough to insure the best possible action in every case.

Senior level approval – this is a highly desirable method for accomplishing actions that have a major impact on the organization as a whole, bind it in a major way via a contract, or are strategic in nature. These are the kinds of actions that should NOT be delegated down to the front line levels of a sizeable organization.

Highly Decentralized / Empowered style – this method is often referred to as an “empowerment” model for an organization. This means that the authority and responsibility to act are in close alignment, and as close to the “front line” workers as possible. In many cases, those on the production line, for example, will have authority to initiate what are considered capital projects in other companies, responsible for the return on investment it involves. Or, for customer-facing workers, the person may have what is essentially a blank check to do what is needed to take appropriate care of the customer.

Southwest Airlines became the most profitable airline in the US, earning more total profits than all of the other airlines combined. They buy their aircraft, parts, fuel and airport gates at the same places as all of the others, so what are they doing differently? In a word – employee empowerment – focusing on their people, what they need to do well, giving them authority and responsibility, plus the room to try and fail.

One of the most remarkable success stories with empowerment is Harley Davidson, which made business history by transforming its failing, over priced, bottom-level quality motorcycles of the 1970’s and early-mid 1980’s into the business power-house we know today. Here is a link to an excellent article describing why the company won the Catalyst Award in 2004. (PDF)

The highly decentralized / empowered style involves pushing authority and responsibility as far down the organization as possible. Leadership, rather than management control, is emphasized. The result is that individuals “doing the work of the company” feel personally responsible for its success, for the achievement of its vision and mission. In a word, they “own” their jobs and the activities it involves, regardless of where in the organization they function. Other examples of these companies include Whole Foods Market, the Container Store, and SAS Institute.

How Ownership Supports the 4 Essential Factors

We view the issue of work activity ownership as the common thread running through each of the 4 Essential Factors on the Path to Best Practices. When the level is high, there is the opportunity for true excellence in each of these areas, and for gaining the maximum benefit and synergy with the other Essential Factors. With a low level of ownership, it is quite difficult to achieve anything like excellence in the 4 Essential Factors. Here’s how each is “powered up” by high work activity ownership:

Effective Enterprise Systems & Processes – in the bureaucratic model, system implementation is experienced as something people are doing for the “higher ups” in the company. Often, they have no notion that the system is there to help them in their jobs at all. Conversely, with high levels of ownership, implementation is not even considered until everyone at the “lowest” levels of the organization fully understands and has enrolled in the benefit the system will bring the company, and sees how their work results will fit into the overall structure. Then, even the most challenging implementation will go well.

Continuous Improvement Process – this area is, in truth, very difficult without high levels of work activity ownership throughout the company. If people at the line level have little authority, responsibility or involvement, improvements must be generated by “experts” – i.e., staff-level people such as industrial or manufacturing engineers, consultants, business process engineers, or teams of managers. Companies attempting to achieve improved performance this way seem to never quite make it. Witness the current situation in the US with the auto industry. Those that have mastered the empowerment culture, and with it, have generated powerful continuous improvement processes, are literally slaughtering companies that have not – the “Big 3” of Detroit, still stuck in the command & control culture of decades ago.

Education & Training – if individual workers are just carrying out instructions, narrowly defined guides for what and how they do their jobs, they feel like uninvolved cogs in a machine. As one such worker told us years ago, “You are confusing me with someone who gives a s___.” Adding education and training into this non-fertile field is typically a waste of money, as the worker has little he/she can do with the new knowledge. Conversely, in a highly empowered culture, education and training is like adding oxygen to an already hot fire – leverages the fuel already present to intensify and speed up the combustion rate.

Effective Leadership & Culture – When a person with otherwise good leadership ability assumes leadership of an otherwise bureaucratic organization, most of what he/she has to offer ends up being wasted or so completely diffused as to accomplish little. Exciting visions of the future for the organization are filtered “down” through layer after layer of entrenched bureaucracy before ever reaching the line level. This is why putting a new Cabinet-level official in a government agency typically has so little effect, or why a new leader in a big-city school system seems to accomplish little. In the private sector, we have seen truly exciting leaders step into CEO roles at large corporations only to accomplish little, due to their inability to change the ponderous, change resistant non-empowered organization culture. By contrast, if the new leader is able to substantially alter the culture towards a highly empowered work environment, then the vision for the company’s future, its possibilities and potential, and mission, can all serve to inspire and motivate the empowered, now-capable individual workers in the company to become individually high-performing, collaborating team oriented contributors towards that success.

Alternatives

Since leaders of organizations are faced with the reality that their company is somewhere along the bureaucracy – empowerment continuum we outlined above, the alternatives facing them are simple on the surface, while involving some difficulty at the detailed level. Having engineered several of these organization culture changes ourselves, plus our research, we can offer some suggestions:

Move now – delay, extensive consideration, deliberating, all convey a not-too-subtle message of fear, lack of confidence in both yourself and in your coworkers. Success seems to go to those who act boldly, expeditiously, and with courage.

It’s not as hard as you think – much of the details of how to operate effectively in a newly empowered culture can and will be effectively worked out by those who do the work. You do not have to resolve every issue a team of left-brained thinkers comes up with.

Act from the heart – inspiration, courage, and confidence do not come from the logical, left-brained parts of our beings. People have an inherent desire to make something of value with their lives – leadership’s job is to give them the chance to do this. When one actually takes in an inspirational vision articulated by a good leader, something powerful within them shifts. Remember that there are tears of inspiration, joy and meaning – altogether different from the tears of sadness, grief and loss. Do not confuse them – allow the former to occur.

Ask for help – an effective leader, who “gets” the servant leadership concept, confesses his limitations frankly and openly, asking for those he is leading for their involvement, caring about results and performance, and their knowledge and effort to achieve the vision for the organization. This is where each person’s inherent desire to be useful, valuable, if not blocked by cynicism and resignation, comes into effective play.

Powerful Results

Increasingly we are seeing a global world where companies that have mastered the principle of work activity ownership – of empowerment cultures, are leading the way into the future in their industries. It is vital in seeing this to not be distracted by short-term successes, of companies who are, for the moment, leading in their industries because they went to China first (or to Bangladesh), have a ring of patents around their processes, or other such historical or strategic advantage.

The fundamental fact is that, even in these situations, there is an untapped advantage, potential that is not being put to use, in making the most of each person in their organization. Moving to a low-cost country, such as China, will give a temporary advantage – very temporary, however. When high levels of empowerment and work activity ownership are added, the advantage is the same as in a higher cost environment – better performance, higher profitability, growing market share, more secure, predictable performance.

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Best Practices Q & A - Part 9

2007-05-08T13:35:00.001-07:00

Question: “In working with people from other cultures, such as Mexico or China, how can one overcome the decades of often counter-productive cultural conditioning? People have been taught to simply follow the bosses direction for centuries. What actions can be taken to create a more involved, less passive mentality among workers in these kinds of cultures?”

Answer: “First, it is important to be patient – but not TOO patient. People can and will change, given the right reward system. They are the way they are because of the reward, and too often, the punishment system they have lived and worked in. Under the old-style Communist system in China, for example, people taking initiative and responsibility sometimes just disappeared in the night – not exactly an incentive for taking more responsibility. Japanese companies such as Toyota started with these cultures, then gradually evolved over the years into the highly participative, highly empowered cultures of today.

They did this by carefully altering the reward system, so people who took initiative and responsibility were rewarded in a way that made sense to them and others around them. Also, by explicitly talking about the culture change you want to engender, people are aided in making the transition. Finally, it helps to hire carefully, to screen people for deeply entrenched attitudes that are simply never going to change. Toyota was successful with the Fremont, California plant, starting with a serious labor union problem, by hiring carefully, then training thoroughly to get the culture the rest of the company had, even with a UAW union.”
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Best Practices - China & Elsewhere

2007-05-04T15:15:00.000-07:00

Article Summary - This article recaps material from our previous newsletters on leadership, best practice cultures, and the 4 Essential Factors that constitute the Best Practice Path. Here, we discuss these in the context of the rapidly emerging, highly dynamic, complex business and government environment that is business in China today. Topics include:

Background and Contest - China today

4 Essential Factors - brief recap

Best Practice Path Challenges - Not Unique to China

Changing organization culture

Background and Context – China Today

To “get a feel” for how things are in China at this point in time consider that only 25 or 30 years ago, China was essentially like North Korea is today – run by iron-fisted Communist dictators that controlled and regulated every aspect of life. The effect of this kind of government is a little like putting one’s foot on a garden hose – pressure builds up, but nothing comes out, nothing much is produced. Government only restricts people’s natural efforts to create better lives and more prosperity.

What has happened here since the death of Mao, has been a gradual loosening of the iron fist of control, allowing more and more of what is essentially capitalist free enterprise to take root and flourish. The result is the fastest growing economy in the world, averaging nearly 10% per year in overall growth.

While the emphasis has been on growing companies that export products, generating a USD$ Trillion trade surplus balance (China Daily, November 2, 2006) much prosperity has resulted in the populace, with huge traffic problems, construction everywhere, and an inability to keep up with the demand for electric power. China builds new power generation capabilities roughly equivalent to that of Australia’s total capacity every year, and it’s not enough.

A Chinese friend said it is forecasted that approximately 400 million rural Chinese will migrate to cities over the next 20 years, necessitating the construction of urban growth equivalent to 100 Los Angeles-sized cities and associated infrastructure.

Traditional Chinese private business practices have been oriented around a single person keeping control. Only one person has signature authority, called the “chop” here. The “chop” refers to a rubber stamp, similar to a corporate seal, used to authenticate checks, purchase orders, contracts and other official documents. Everything is brought to the head man, who briefly reviews each document (emphasis on briefly), then “chops” it with his official seal. In the West, the person’s handwritten signature (or a rubber stamp of it) is used to do the same thing.

One explanation of this practice is because of the endemic corruption that has been here for centuries. To this we would add that China did not originate corruption – the potential for it is present everywhere. There is also a similarity to traditional government and military practice for everything to be done “in the name” of the senior official – commanding officer, department secretary or minister, etc.

Because of the decades of Communist government dominance, there is a heavy layer of bureaucratic habit and practices, which has also affected older worker’s attitudes and work habits. However, younger people have little knowledge or experience of the old heavy-handed, fear-driven Communist days where the last guy that took some initiative to make things work better disappeared.

4 Essential Factors - Recap

To place our discussion in the Best Practices context, these are the 4 Essential Factors that we identify as being the PROACTION Best Practice Path:

Effective enterprise systems and processes – the combination of people-based actions (procedures) and software performed functions to form an overall work flow or “business process.”
Continuous improvement process - formal, organized, and systematic activities by almost everyone in an organization to examine every aspect of work flows / processes to improve their quality, productivity and reduce cost and problems.
Education and training – an ongoing, formal program, a curriculum of classes, courses and practical training, separate from “on-the-job” training to improve the conceptual understanding and build proficiency of everyone – a primary input to the continuous improvement process.
Effective leadership and culture – leadership by vision and example, empowering of individual workers, delegating of as much authority and responsibility as possible.

As the work and related experience here in China has repeatedly, consistently validated, these four factors are not culturally specific. As elsewhere, when one or several, but not all, of these factors are present, the business may perform adequately, even successfully for a time.

But, when they are all present, there is a synergistic effect that multiplies the effects of the others to transform the business from a so-so performer that may be dependent on competitors simply being worse than they are for success, into a globally competitive, high quality, high performing, hard-to-catch organization.

Also, on a scale from truly mediocre through adequate but less than true best practice (where most companies are), each of these four factors has a major impact in and of itself. We have really seen the truth of this here in China. Several brief observations in this regard:

The majority of China’s export business is from foreign owned firms with their superior management, business processes, and improvement-driven cultures. Many are Japanese, as well as North American and European. The computer this article is being written on was built at a Toshiba plant in Shanghai, shipped via FedEx to me in Los Angeles.

State owned enterprises often lose lots of money. The government is trying to make them more like private enterprises, by listing their stock and other measures, but in many areas things have a long way to go, a fact that is publicly admitted even in the state-controlled press.

In personal interviews and work experience here we have been struck by the clarity of people’s response to good leadership vision and lead-by-example, their strong desire for things to work well, be done professionally, with high quality and make a profit.

Many of the business processes we have reviewed, when set up by a Western-trained Chinese professional, are as good as, or better than many companies in the US. Efficient, good controls, and other elements are clear, even through the Chinese language and “flavor.”

Go-forward plans are all based on improving or implementing more in the way of what we call Best Practices – there is little difficulty in having people here see that these are the way to make a company work better, be more successful and thrive. There is no national bias.

Best Practice Path Challenges – Not Unique to China

There is no question that many of the attitudes and practices in China, as elsewhere, are contrary, or are in opposition to Best Practices. Were this not so, the work of teaching and implementing Best Practices would be quite easy. Instead, it is often a challenge – where one faces misunderstanding, ignorance, or paradigms that may blind a person to a degree as to what is actually going on.

Our forthcoming book, Understanding and Generating Best Practices has a whole chapter devoted to these challenges, and they are more numerous than one might think. Origins of these challenges stem from accounting practices, beliefs about human nature, laziness, fear of losing control, and dozens of others.

Throughout our career we have consistently come into conflict with the belief, for example, that inventory is a good thing, resulting from the accounting practice of calling it an “asset.” When a business is viewed from a cash flow perspective, it becomes immediately clear that inventory causes one to spend cash now, with an uncertain cash inflow date and amount – hardly a good idea. But this fact is completely obscured by accrual accounting that recognizes a record profit while simultaneously holding massive finished goods inventory balances that will eventually have to be marked down to sell.

Also, centralization of decision making and approvals – summarized above in the Chinese “chop” practice – is, as we pointed out, hardly a Chinese only practice. Intelligent, clear delegation of authority increases a vital Best Practice characteristic – ownership by those who perform a business process or work flow.

Also, delegation of authority without appropriate dual controls, periodic audits and other controls that enable the delegation to work without exposing the company to risk of theft (“corruption”) is also contrary to Best Practices. The two work together. Again, this is not unique to China, the US, or anywhere in particular.

Changing Organization Culture

Those who are faced with a business situation where the culture must be changed to bring Best Practices into daily use have the same challenge. To change them involves the same process, regardless of whether the culture present comes from local traditions thousands of years old, from other sources such as habits that never changed, a hostile union/management relationship that has festered for decades, or other source.

They key steps we have identified in this process involve:

Leadership by example - those in charge must “walk the talk.”

“Servant” leadership – appears to be the most effective style in bringing about change in people. This is the orientation by managers that it is their primary job to find out what their people need to be successful and then get it for them – to enable them to be successful.

Explanation – in often personal terms, candid and frank about how a new practice affects personal security, social standings and status, and other seldom-talked about “sacred cows.”

Benefit – how the company will benefit, and how the individual will benefit from the change.

Assurance – support, via actions, more than words, that the person who accepts and adopts the requested change / practice will not be “left out in the cold” or abandoned.

In conclusion, we suggest that you undertake, as additional reading, W. Edwards Deming’s 14 Points. These were articulated by him in the 1950’s and 60’s during his work with Japanese companies, which had, at the time, a highly autocratic culture. This changed, slowly, but dramatically. Deming became a national hero in Japan as a result.

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Best Practices Q & A - Part 8

2007-04-27T15:31:00.000-07:00

Question: “I used the check list in your last news letter on Best Practices cultures and realized that our company came up quite short in a number of areas. Where should we begin to make improvements?”

Answer: “While to a degree it may depends on what, specifically is missing, we have found that the best way to start is by simply speaking and discussing openly the truth about the situation. However, it should be emphasized that it is very, very easy to fall into simply complaining, which does not work. Always, always place the discussion in a context of a clear intention, a clear vision of having the company perform better. This vision and intention has the effect of allowing others to skip the complaining and whining (if you prefer), and get on with the action steps that are needed.”
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Best Practice Cultures

2007-04-24T13:26:00.000-07:00

This article continues the discussion of how to create high sustained levels of engagement by those that comprise an organization. Here we detail the concept of Best Practice Cultures, one of the 4 Essential Factors on the Path to Best Practices. Included are characteristics of the way people that comprise an organization are led, the way they interact with each other, and the inner, human, ‘from-the-heart’ motivations and inspirations that cause them to devote significant portions of their lives and energy to the organization for which they work.

Essentiality of Leadership – Recap
What a Best Practice Culture is.
Where to start; moving forward now.

In previous PROACTION Best Practice Newsletters, we previously discussed three of the 4 Essential Factors, including:

Effective systems and processes
Effective continuous improvement programs
Education and training

The fourth Essential Factor is Effective Leadership and Culture. In the previous Newsletter we focused on the Essentiality of Leadership, along with empirical research validating the idea that investing time and money in this “soft” area pays substantial returns in measurable performance – higher sales volume, better profitability, quality, customer satisfaction, lower turnover, and others.

Essentiality of Leadership – Recap

From this starting point, we will next explore what other characteristics must be present in an organization’s culture for a sustained, Best Practice Culture to emerge and endure over long periods of time. To recap, the key elements of leadership in this context are:

Driven by leaders – effective leaders set difficult, almost “unreasonable” goals that require real striving by everyone.

Vision driven – consistently articulate a compelling vision of the future.

High performance-driven environment – highly focused, high-energy work environments – striving toward clear objectives.

Simple structures and processes – effective leaders avoid complex organization setups; clear, simple accountability lines enable everyone to function well, knowing exactly what their role is.

World-class skills – also called “operational excellence” – this is a striving for high performance in every area of the organization.

Strong people systems – clear, strong focus on performance and motivation of and assigning the best people to critical jobs.

What a Best Practice Culture Is

With effective leadership driving and role-modeling these characteristics to others in the organization, the next question is to identify what the other, somewhat more detailed aspects of a Best Practice should one either look for, or strive to create in one’s current organization. As this is a potentially “large” topic, for brevity we will present this as a checklist, aspects or characteristics to look for, together with a very brief explanation that will help understand each.

These are:

Employee commitment – related to high levels of engagement, for everyone, not just managers and supervisors. Individual, “front-line” employees are motivated, even inspired, to work for the company and its goals.

Fully empowered employees – Authority for action has been sufficiently delegated so individual employees have enough authority to act on their own, without having to seek “supervisor approval” for a long list of activities that are an integral part of their normal work flow or job responsibilities. Another word for this is “autonomy” – independently responsible.

High integrity workplace – The actions of leaders and people at all levels is such that everyone’s “word is their bond.” It is expected that promises made, will be kept. This enables all participants to avoid time-wasting, discouraging “CYA” actions, reports, memos, and approvals. If a leader, especially, has to “go back on his word” he/she understands that this will be regarded as a serious breach of trust by others, and so will go to great lengths to “make it right” with everyone.

Strong trust relationships – Closely related to high integrity is strong trust relationships, up/down the structure of the organization and laterally. People at the same level in this context, view their co-workers as team-mates, whom they can count on to do their part, be straight shooters, honest, and to not leave their co-workers “hanging out to dry.”

Highly effective leadership – Key part of the overall culture; repeated here to emphasize that this means leadership at all levels not just the C-level managers, but first line supervisors, mid-level managers, lead people, people in a supportive role such as Quality Assurance people with a “dotted-line” reporting relationship to others.

Effective systems and processes – any problems with basic daily work flows are worked out, resolved, so that everyone may focus on getting the work done without a myriad of error-producing exception conditions, inaccurate/untimely information, and other factors that clog the work flows. This means a certain, basic level of effectiveness has been established, and is re-established quickly after any reorganizations or realignment of responsibilities, such as might occur with implementing a new enterprise software system. It is distinct from the continuous improvement process in that it assumes at least a certain, minimum standard of effectiveness has been establish for all processes, including minor ones.

Performance-based compensation and reward programs – bonuses, profit-sharing, stock options, and the like, all keyed to revenue and profitability and/or other goals are in place, so that everyone who helps accomplish these goals has the opportunity to benefit personally from their achievement. Ideally, the reward/compensation system is designed to be responsive to work groups or units that an individual person can relate to, not just the company as a whole. o

Customer-focused – everyone understands, and “gets” that the company, its performance, products, services are entirely driven by customer needs, desires, and that the purpose is to create “delighted” customers, beyond just “satisfaction” in a minimal sense. This is a feeling, pervasive in the way people act, both internally, between each other, and externally, to customers and suppliers.

Effective 360-degree communications – the review process includes one’s subordinates and peers, as well as just “keeping the boss happy.” In many job situations, it may be appropriate to seek in put from those outside the company, such as customers or key suppliers with whom the person regularly interfaces. The benefit of this is not only expanded understanding of how a person is functioning so managers can make better assessments, but for the person’s benefit as well, to support and drive personal and professional improvements as well.

Commitment to learning and skill development – This characteristic is integral to one of the Four Essential Factors – an ongoing, effective education and training program for everyone. For a fully effective Best Practice culture, it is vital that those doing the jobs, and the improvement process, themselves continue to improve over time – to “improve the improvers,” so to speak.

Emphasis on recruiting and retaining outstanding employees – realizing that highly effective people are critical, Best Practice cultures pay close attention to who is doing which jobs, so that each job can be performed as well as possible. The key to this is careful, effective recruiting, and then working hard to retain the best people possible. Significant turnover is a sure sign of culture difficulties.

High degree of adaptability – Like the US Marine slogan, “improvise, adapt” – the effective Best Practice culture participants do not cling to established work structures, job assignments, etc., but embraces the truth that change is desirable and required for the kind of success everyone is seeking. So, it is expected that learning new skills, technologies, ways of interacting and working together are all part of this steady march forward to success in today’s arenas, and tomorrows which may not have even been innovated yet.

High accountability standards – key to integrity and trust is the notion that people are responsible for delivering on what they commit to doing. The organization’s work flow, and social process depends upon this high standard of personal, work team, organization, and business unit accountability. If extraordinary efforts are required, it is assumed that these will be taken if necessary. It is a ‘no-excuses” environment.

Demonstrated support for innovation – An essential aspect of a Best Practice culture is a pervasive thought-process of always developing, trying out, experimenting with new, potentially better ways of doing things, for both products and services, as well as “purely internal” functions as well. So, in addition to obvious things such as new, exciting products, a Best Practice culture will experiment with internal functions such as self-service employee benefits intranet web sites.

Where to Start – Moving Forward Now

In order to make an “get started” action list, we suggest that you take this list in hand, or at least in mind, and compare it with the working environments, the cultures, of companies and organizations you have work with, worked for, or served in a leadership role.

Think about each one, comparing it to what you perceive, and the result will be a “gap” list – a list of where to start. Bear in mind that very few organizations exhibit all of these characteristics at a high level.

The key insight is that the more of them, and the more completely they are evident, the stronger the culture will be, the more resilient, adaptable, and “count-on-able” it will be to produce high performance results, in quality, revenue/sales growth, and above industry-standard profitability.

Finally, remember that even small improvements will bear fruit, will show results you can measure.

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A Proaction Approach to Best Practices

2007-04-19T14:57:00.000-07:00

Companies and organizations can be grouped into three basic categories:

· Innovators – those who are literally at the leading edge of process development; often have failures associated with risk taking, but the "wins" are big enough to offset these.

· Best Practice seekers – those who work to achieve high performance with minimum risk; by adopting practices and methods already demonstrated to work well, typically in another company and/or industry.

· Strivers – below average performing companies that are working to "keep up with the pack."

Where is your company? Unless you are an innovator, operating at the leading edge in a number of areas, your company is vulnerable to someone else who is or becomes one.

A given company may be to some degree, in all three categories. To create an example, a company could be highly innovative in its go-to-market strategy and execution. At the same time, in its R&D and product development area, it could be utilizing known, proven best practices. In its manufacturing area, for a variety of reasons, this area could be characterized as a "striver" with significant areas that are well below known best practices.

Competition is increasingly global as most company leaders are all to aware. Consequently, those with foresight seek to achieve quantum improvements in their company’s performance.

The most powerful way is to seek out Best Practices and adopt them as quickly as possible. Those who follow this path often have been able to achieve substantial performance improvements.

PROACTION provides comprehensive assistance to bring proven Best Practices into use in a wide variety of areas. The Path to Best Practices is part process, part content. Simply knowing what a best practice is for a given area is just a starting point, of course. It must be implemented correctly to gain the expected operational and financial results.

We urge you to bookmark the PROACTION web site and return regularly, or better still, subscribe to our RSS feed. Valuable information available either at no cost in the Free White Paper section or our web site, or at very moderate cost in the PROACTION Best Practices e-Store is continually being expanded and updated. The next update could contain an item that proved very valuable for you and your team. Quick links:

· Free White Papers
· PROACTION Best Practice e-Store
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Best Practices Q & A - Part 7

2007-04-17T13:34:00.000-07:00

Question: “What do you think of the “kick a__, take names” approach? Doesn’t this serve as a strong reminder of who is in charge, that work is serious, not just a game?”

Answer: “These myths seem to persist for a variety of reasons. However, close examination of the cultures of the most consistently high performing organizations over time, will consistently reveal that these practices are a sign of immature managers. Even in the military this practice is not deemed acceptable any more, but is a sign of weak leadership.

The basic reasons are that it forces those being “managed” this way to pay more attention to “keeping their noses clean,” to covering their actions with memos, reports, and political alliances than to the actual value added by their work. All of the CYA activity is essentially organizational waste – it is not value adding work, but only serves to deflect criticism, potential punishment, or worse.
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The Essentiality of Leadership

2007-04-12T13:32:00.000-07:00

This article continues the discussion of how to create high, sustained levels of engagement by those that comprise an organization. Here, we discuss what true leadership is, the behaviors that comprise it, and how effective leadership is an essential, must-have, management Best Practice for a sustained, high-performance organization. Topics include:

Research validation of leadership
The 6 leadership attributes of high performance companies.
How a leader leads

Previous discussion of the essentiality of engagement for generating a Best Practice organization demonstrated its dependence on effective, true leadership. So how does leadership generate engagement? Are there specific aspects of varying leadership methods and styles that lead to high, sustained levels of engagement?

Research Validation of Leadership

The short answer is “yes.” Among the most unambiguous research on the relationship between leadership, engagement and sustained high performance is work done over many years by the leading consulting firm, McKinsey & Company. There are three critical management Best Practices validated by this research. Each of these practices, on its own, leads to a clear outcome or result to enhance the effectiveness of the organization.

However, put together, each interacts, reinforces and strengthens the others in a synergistic way to substantially increase the power of their effect. These three Best Practices are:

Clear roles – this means that everyone has a very clear understanding of what they are working toward, the vision that drives the whole organization, as well as its specific aspect in their work area. They know what is expected of them – when they are making good progress and when not – and on their own, not by “checking with the boss” every five minutes.

In this context, a person knows what skills can be enhanced to good work result effect, and which may be irrelevant. He/she can prioritize time allocations in a way that makes sense and supports high performance levels.

Inspiring vision – When conveyed by an effective leader, the organization’s vision brings alignment between the vision, its details, and what people are actually doing. A powerful vision moves people beyond “motivation” and “incentives” to inspiration – activity that gives meaning to their life. A compelling vision is a good answer to the question of “what are we giving our life for?”

Open, trusting culture – people cannot function effectively if they have to constantly second-guess what they say and do, fearful for reprisals, insults, reprimands, or punishment. If their co-workers are scheming for their jobs, or there is withholding of information to strengthen personal power positions, there will be severely blocked flows of information, communication and collaboration that are essential to high performance.

a Put another way – an open, trusting work environment eliminates all of the thought, time and energy that has to be devoted to simply protecting one’s self, to second-guessing, gossiping, the grapevine (always vigorous in dysfunctional cultures), and jockeying for power. This time and energy can then be devoted to the value-added tasks at hand, that advance the individual effort, work team, and organization towards its vision. Other efforts simply go in a circle, in effect, degrading forward progress.

The 6 Attributes of Leadership

There are many ways to look at, describe, and otherwise convey the idea of leadership. In the context of Best Practices, we can focus on those characteristics that have been found in research with hundreds of companies to be key factors in generating sustained, high levels of performance. Leadership in politics, sports, religion or other areas have other aspects and characteristics in those contexts. Here, we focus on behaviors by leaders at every level in these high-performance companies. This research has identified and validated these attributes:

1. Driven by Leaders – There is usually an “unreasonable” aspect to goals and targets that are set by these highly effective, visionary leaders. It is important to understand that these goals are not completely unreasonable. They do require, though, real focus, real effort, and for everyone to grow themselves and the organization in the process. The word “challenge” applies here.

If goals are perceived as unattainable, most of us give up before we even start. So there is a delicate balance between pushing too far out, and not far enough to stretch for.

2. Vision Driven – these leaders consistently, repeatedly articulate a compelling vision of the future – what “there” looks like – around which strategies, tactics, improved management processes, systems and actions can be focused.

3. Highly performance-driven environment – these leaders create a strong, intensely focused, energized work environment – focused on results. In this context, clear roles and high levels of accountability come into play. People throughout the company work hard, focused on goals they stretch for, feel accountable for, and that involve some risk taking. The result is growth – personal, work team/group, and for the company.

4. Simple structures and processes – if the path by which one’s efforts affect movement towards the vision is complex and convoluted, discernment of what and how to do things is harder. Effective leaders simplify organization structures for clear communication and accountability. Management processes must be understandable, workable, efficient and reliable to be effective. Continuous improvements in this area are part of this pattern of high performance as they simplify and standardize processes that provide communication and direction at every level.

5. World-class skills – Effective leaders at these high-performance companies encourage their organizations to not only do many things well, but to become absolutely the best – world-class competence – in at least one major functional area. There is a consistent focus over time on continuously improving, building skills and expertise at how the company is managed. These skills and competencies are seen as an essential part of the company’s competitive edge.

6. Strong people systems – There is a clear, consistent focus on performance and motivation, not just assigning people to jobs. It is understood that placing the best people in the most critical positions, then ensuring that they do well are essential to success. As a result, there is considerable thought and care put into knowing who the organization’s people are, their strengths, weaknesses, beyond just each manager’s direct reports, but several levels down. Everyone understands that building a “strong bench” is a top priority.

How a Leader Leads

Having established that having, and being an effective leader is essential for sustained high organization performance, and for engaging its people in the purposes and vision of the organization, the next question may well be “what does a leader do that makes him/her a leader?” When is a leader leading, and when is he just “managing?”

The behaviors and actions of an effective leader, in the Best Practice generating context fall into two rough categories – personal behavior and communication:

Personal Behavior - Key attributes of effective leadership behavior include:

Self-knowledge – displays a consistent alignment between what is said, the values articulated and demonstrated in behavior and principles – “Walks the Talk.”

Takes responsibility – strong leaders step up and take responsibility decisively, displaying courage when things don’t go well or fall short. Blaming others is a clear sign of weakness, and a lack of courage.

Leads by example – understands that others “get” what is demonstrated, what is implicit in actual behavior and actions, not just words. This may involve making a difficult decision in a crisis, or by actions as simple as just being punctual, or always following up when something is promised. The leader is very aware that others are observing his/her actions and will pay more attention to the actions than words spoken.

Integrity – effective leaders display and exemplify honesty and integrity, demand it of themselves and others, not only personally, but in official company actions.

Creates more leaders – sets processes in motion to empower, strengthen and grow other leaders within the organization at every level. This is a key measure of leadership effectiveness as it is the only real way to leverage a vision, and insure a sustained level of high performance. Without it, a popular “leader” may be nothing more than charisma.

Takes people risks – bets on growth, expansion in assigning people to key roles, and projects. When a person is assigned a role that involves more than they have previously done, there is an implicit statement of confidence that helps people grow and strengthen in their abilities.

Leadership Communication - The communications, the messages generated by a good, effective leader include these characteristics:

1. Tells it like it is – realistic, factual, no “mushrooming” - important facts, including bad news, is not sugar-coated or withheld. This produces a feeling that “we’re all in this boat together.”

2. Makes change exciting – reinforces each win to create more wins. As this strength grows, setbacks and failures are easier to take, accept and move through. A “spirit of adventure” energizes the whole process, making it more exciting. Key – all improvements are change. There is no way to improve performance without becoming OK with regular change.

Honda has a famous annual celebration of the largest failure during the previous year. This is obviously occurring in a spirit of fun – generated by the company’s many wins. Which makes more changes easier, which in turn allows more risk, which in turn – you get the idea.

3. Compelling vision communication – this involves:

Paints a picture - speaks in images, something people can visualize.

Simple – no jargon. Clear, unambiguous language is key.

Repeat, repeat, repeat – the leader must consistently restate the vision message. It is a thread that runs through every key communication.

Deal with uncertainty and risk head-on – when risk and uncertainty are articulated up front, this activates the inspirational aspect of challenge in people.

Uses all mediums of communication – meetings, emails, memos, personal interactions. The same vision, consistently articulated and conveyed in personal statements in all contexts and situations spreads it throughout the organization.

Leadership then, is clearly distinguished from management, with its emphasis on detailed direction, controls, punishments and reward systems. The drive to achieve is something that comes from within each of us, and cannot be coerced very effectively, but is called forth by inspiration.

Finally, while many of us have intuitively believed these ideas for a long time, we now have hard-nosed, empirical research which clearly and emphatically validates that effective leadership is a requirement for sustained high levels of engagement, and that high levels of engagement are a requirement for true, world-class, Best Practices high performance levels.

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Best Practices Q & A - Part 6

2007-04-10T16:12:00.001-07:00

Question: “Last week you wrote about the Gallup study which showed that 75% of the 8,000 managers at the 400 companies studies were not actively engaged in their company’s purposes. This seems impossible, given that all of the companies are going concerns, even dominant in their fields. How is this even possible? It seems completely counter-intuitive.

Answer: “What this research shows, essentially, is the amount of potential improvement available to an organization, should it decide to improve in this area. All improvements are like this – they are something that is currently not being done, and if it were, would have a better result. Companies survive and thrive for many reasons, but the most important is to just be better than their competitors. It is the size of this latent, untapped potential that provides the endless opportunities for improvements, new Best Practices – whether done internally, or by a competitor.

Truly mediocre companies often survive for years, simply because no one else has entered the field. But when a better one does, the mediocre operations are doomed unless they change – fast. The corporate landscape is littered with the carcasses of once-dominant companies that are no longer with us. We’re sure you can think of many yourself. Just make sure your company is not among them by working relentlessly to generate improved practices, processes, and methods – true Best Practices for your company and industry.”
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Engagement & Leadership

2007-04-10T13:01:00.000-07:00

Article Summary

Engagement – the “power source” for Best Practices
Leadership & engagement – one insight source
Questions to test engagement
Gallup research linking engagement & high performance
Action steps you can take

The 4th Essential Factor on the Path to Best Practices is Leadership and Culture. However, to understand why leadership is needed in a Best Practice culture one must first address the issue of how, and to what degree, people who comprise the company’s organization are engaged with its goals and objectives.

Here we present some research that clearly supports the close relationship between high levels of engagement and high levels of performance – an essential aspect of the Path to Best Practices.

Engagement – the Power Source

We continue to be amazed at the extent that otherwise sharp and knowledgeable managers of companies express the thought that “what does this have to do with our business?” There are a group of similar or related thoughts which we hear such as:

“Our people are engaged of course – if they aren’t they get fired!”
“Morale – they have a job don’t they? They should be grateful for it.”
“Management has its prerogatives – to decide what, and how everyone’s job is to be performed. It is part of each employee’s job to follow these directions.”
“We don’t have time for all that airy-fairy stuff. Our industry is too competitive to allow time for all that mushy junk.”
“A real leader ‘kicks butt, takes names,’ to get important things done.”

Our favorite version of this line of thinking is “The beatings will continue until morale improves.” The amazing thing about this attitude is that it reflects the belief in some kind of military-style “discipline” that even the US Army abandoned decades ago – the idea that the leader decides everything, and that it is the job of others to simply “follow orders.” It assumes that people are so driven by fear that even if they are treated poorly, insulted, demeaned, left out of decisions that affect their lives – that these actions will have no affect on their behavior.

Effective Leadership – Modern Origins

First, let’s demolish the “military efficiency through discipline” notion. During the Korean war, US Army leadership was faced with a very challenging, difficult combat situation, in the form of terrible weather, difficult terrain, and being simply outnumbered by enemy troops. A series of studies were done during actual combat operations to try and find out how objectives were being taken, whenever they were. The discoveries were amazing and illuminating, and included these findings:

Almost all soldiers (80+%) simply tried to not get killed, just to stay alive, by taking cover, laying low, or even hiding, rather than aggressively pursue the enemy and attain the objective.
Small groups of dedicated, professional soldiers in each group were actually responsible for taking the objective – be it a hill, fortified installation, or other objective.
It was abundantly clear that motivation, at an individual level, was a critical problem among the troops. The average soldier, in terms of our discussion here, was not engaged with the mission.

While it took the US Army a long, long time to fully ingest this information, revise training and thinking, it eventually did so. First, the curriculum for leadership training was changed considerably. Then, and only then, could the new thinking work its way into the actual leadership practices and culture (behavior). By the time the of the Gulf War and Iraq War, the whole way the US Army and US Marine Corp operated had changed.

At the center of this new focus is insuring that each soldier is fully engaged, strongly motivated, even inspired – the very opposite of the “blind obedience to orders” mentality of the old order. The result of this has been the creation of the most effective, on a man-for-man basis, combat force the world has ever seen. Mission assignments are given only in general terms to field units, with local commanders and combat teams figuring out the rest as they go forward. No more micro-managing from the rear headquarters. And, in this spirit, at meals, the officers wait until the troops have eaten first.

Consider this – if effective leadership can get people to literally risk their lives for something, to risk being killed, wouldn’t it be equally effective or even more so in getting people to work in organizations together for sustained high performance?

Engagement Questions

Now, having read this little story – consider the environment in the companies where you have worked during your career? A few questions to consider:

Am I working towards expectations I understand?
Do I have the resources I need to do a great job? Or am I handicapped by inadequacies of equipment, materials, or other support?
Do I have a feeling of excellence?
Am I acknowledged, recognized or praised when I do well?
Do I have times when I feel like I just don’t matter here? Do I sometimes feel like a “cog” in a machine?
Is anyone interested in my personal and professional growth at work?
Am I able to express my opinions – and do they contribute or count?
Is quality work important to my coworkers?

If you are a manager, and have negative answers to these questions, consider the effect you are having on those who you are leading – by your example. However, if you do, you are not alone.

Engagement & Performance Linked – Research

In a remarkable piece of research, Markus Buckingham at the Gallup organization studied engagement, using question like these, among 8,000 managers at 400 companies, described in First, Break All The Rules. (Marcus Buckingham & Curt Coffman, Simon & Schuster, 1999) The findings?

26% - Engaged – actively working for, support, advance company’s goals. 55% - Not engaged – Just coasting; not enrolled, don’t know what is wanted of them. 19% - Dis-engaged – Actively working against company’s goals. What’s going on here? What are all of these otherwise intelligent, experienced managers missing? What are their managers missing?
People working what they consider to be well run, successful companies are usually jarred by these numbers – often rejecting them outright – “we’re much better than that. People here really care about their work.”

But is there a solid, objective basis for these thoughts, or are they wishful thinking? If no independent, anonymous study has been performed, then the correct answer is “we don’t know; we have no facts on the extent of the actual engagement of our people.”

One of the companies studied was Best Buy. Its stores are virtual clones of each other, with identical procedures, processes, job descriptions, products, training and assignments. A few stores in the study dramatically outperformed others. The connection? An unusually high degrees of engagement among managers and staff-level employees. Further investigation uncovered all kinds of small innovations to notice, celebrate and acknowledge people even for small “wins.” The difference was real, personal-level leadership in every case.

Looping back to our initial observation, it would seem to be a fair statement that the managers of all of the other Best Buy stores probably felt like they were doing a decent job. But the facts are what they are. Most, it turns out, are mediocre – even though the organization as a whole does relatively well, thanks to its strategy, systems, training, products and other macro-factors. But what if ALL of their stores did as well as the best led ones?

Our message here is that the issue of engagement leads to the question of leadership because without effective leadership the level of engagement is low, sometimes very low, as we saw in this research. (“Leadership” here as distinct from “management.”) And if the engagement level is low, the possibility of a Best Practice culture is equally low.

Action Steps

We suggest that as you return to your work situation, that you consider the research here, questions asked, as they apply to yourself, and to others, and pay attention to the insights that come to you. Think about how you, and your coworkers might, in this context, feel about making changes in how things are done that might endanger their sense of security (or yours).

If your sense is that “changes are difficult here,” then you are on the right track to understanding what to do to change this pivotal issue – where do we have to start to create a climate where improvements, i.e., Best Practices that will help your company perform better – to become something we consciously and competently pursue and successfully implement.

In subsequent PROACTION Newsletters we will expand on the essential role that leadership plays in creating a Best Practice culture – one where innovation and continuous improvements have a permanent place, and where your people can effectively use information about how things might be done, so your company can increase its level of control over its long-term survival and generate sustained, high-levels of performance.

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Best Practices Q & A - Part 5

2007-03-23T16:10:00.000-07:00

Question: “Isn’t it true that with effective systems, good products, and proper training that a company can dominate its market and make good profit margins – even without good leadership, a “best practice culture” and all of that stuff?”

Answer: “Yes, it is true. However, remember that competition in an industry, within a given time frame, may turn out to be who is ‘least worse.’ The old saying ‘in the land of the blind, the one-eyed man is king’ applies in this context. The reality is that there are many, many factors that make a company successful – many areas where top—notch Best Practices that lead their industry can be in use, all while other aspects of the organization are way behind the ‘power curve.’

The point that we’d like to make here is that any area that is not being worked on with innovation and improvements, remains a vulnerability, through which a competitor, or an external factor can come to cause trouble. The true world-class (that over-used phrase) companies pursue excellence in every aspect, every area of their business on a relentless, never-ending basis. This gives them a degree of predictability, of business and financial security that others simply do not have.”
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Improve the Improvement Process - Education

2007-03-20T15:29:00.000-07:00

Article Summary

Education – key to Best Practices
How to get the most value from your program.
Improving your “improver-ers” – greatest leverage.

Once one understands the value of on-going (continuous) improvement processes, it may occur to you that upgrading the effectiveness of the improvement itself affords potentially huge leverage.

Our considerable experience with education and training programs strongly supports this view, while explaining why many education and training (E&T) efforts produce little in the way of visible results.

The improvement spectrum runs from no improvement process at all through companies like Toyota. Most are somewhere between these two poles.

In this article we will explore how to make sure your E&T program supports the improvement of the improvement process (and people) itself, and as a result, moves the company towards the positive end of this spectrum.

Education – Key to Best Practices

Why have an E&T program at all? Any continuous improvement team will eventually “run out of gas” at least to some extent. This is simply because of the inherent human tendency to settle into a stable way of perception. Waste in a process may be blindingly obvious to one person, yet completely invisible to another. Why? A difference in perceptions.

Similarly, one group of people may just accept a given quality level of a process as normal, acceptable, and not something any action could or should be taken. Another perception may regard the same process quality level as completely unacceptable and an occasion for high-priority action. Same cause – a difference in perceptions.

At the very leading edge of Best Practice generation are highly innovative companies who have mastered the improvement process, such as Toyota and Honda, who steadily generate new, never-seen-before ways of doing things. Honda, for example has an annual celebration for the most spectacular failure during the previous year. This sounds completely insane to many more traditionally minded managers, who think failure is to be identified and punished – the bigger the more severely. But who is gaining market share over whom in this industry?

Most of us must start from where we are – by study, internal growth, by putting more tried and true Best Practices into use – gained from education, case studies, benchmarking, hiring and other methods. Innovation, trial and error can be added to the mix at an appropriate time.

This learning takes the form of education and training. Done properly, on-going education provides the “fuel” for evolving, widening perception processes among improvement program participants, and provides specific, direct information about Best Practices that have a successful track record, and the thinking they are based on.

How to Get the Most Value from Education and Training

Your E&T program should generate a measurable return on investment, not just become part of some nebulous benefit to employees that essentially just increases indirect costs. So, how do we get this to happen?

The overarching key is to closely and integrally connect the E&T process to an effective continuous improvement process which utilizes what is taught.

Our view is that not having a continuous improvement program is a luxury your company cannot afford. If your company is not improving consistently over time, it is in essence, living on borrowed time. It is just a matter of time before a competitor or new entrant to your primary market pushes your company out. In the meantime, though, it can seem stable and comfortable – seducing management and employees into a complacent mind-set – until it’s too late.

We urge you to get started now to get an effective continuous improvement process under way in your company, and to provide the “fuel” for it with an effective, appropriate E&T program. These have the following characteristics:

Regular, on-going – the E&T program has regularly scheduled sessions, with content appropriate to what the participants are working on. Someone at the company is responsible for managing the content, schedule and participants.

Part of everyone’s job – professions such as nursing, real estate, CPA’s and many others require Continuing Education Units at specific levels. The same reasoning applies to everyone at your company as well, as nothing stands still in this world. Your people are either growing in their ability, or diminishing – smart money is on the growth path.

Small, incremental – large, intensive seminars are occasionally appropriate. Generally, though, learning is best done in smaller, “digestible” increments. Ideally, a class is the “lecture” portion of the learning, while actual improvement and job work is the “lab.”

Closely related to current improvement efforts and work – new conceptual education, or proficiency training in new tools or methods need to be reinforced by real-world use either concurrently with the courses, or very soon thereafter. Otherwise the learning is soon lost.

Distinguish between education and training – course content should always be clearly understood as providing either new ideas, a new viewpoint, a case study of a similar company’s practice in a given area – which we term “education” from “how-to” work such as operation of a specific software function, or applying a technique such as statistical process control (SPC).

Practical, lecture and lab orientation – the objective here is to produce improvements in the performance of the business. Accordingly, each section of content should be presented with how the learning will be applied kept in mind. This can be accomplished by “homework” questions or projects, by bringing the work content into discussion during the course itself or other ways. Otherwise, it’s just “info-tainment.”

Measure results – some form of measurement of relevancy and support for specific performance improvement goals should be maintained over time for all education and training content.

Properly done, an effective E&T program fuels the improvement process that will enable the company to not only just survive, but to prosper and grow over the long haul.

Greatest Leverage – Improve the “Improv-ers”

The most reliable way to improve performance is via a strong continuous improvement program – right? Well, with that in mind, consider the enormous leverage that comes from improving the improvement process itself. And how does one do this? By constantly upgrading the perceptions, knowledge, and skills of those who ARE the improvement process – the participants.

First, remember that the improvement process is only as good as the people participating in it. Secondly, bear in mind that it is very, very easy for heavy handed management to derail even the best improvement process. Teams with many successes can come to a complete halt when a new senior manager arrives who likes the “command and control” method, and hands out punishments to those who make mistakes, or worse, does so publicly.

In summary, then we can see clearly that it is only through a well integrated program of education, training, and “lab” or practical, real-world work that people become progressively more proficient at the improvement process itself. The process is both sturdy and resilient, yet fragile and very easy to stop or reduce.

Short-cutting or stepping on any aspect of the continuous improvement process in your company is like eating your seed corn – these are the seeds of future success, that must be planted, nurtured, and encouraged to reach full bloom over time. Education and training, as we have briefly summarized above, is the means by which an effective performance improvement process is itself improved over time, and works best in a context of supportive, wise leadership.

Subsequent PROACTION Best Practice e-Newsletters will continue the discussion of the 4 Essential Factors on the Path to Best Practices in more detail as well as other closely related topics. Also, you can, at no charge, participate in a Get Started Webinar, and receive free White Papers on various topics of interest to you. We encourage your to explore these paths today.

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Best Practices Q & A - Part 4

2007-03-20T15:23:00.001-07:00

Question: “Why does my company regard attendance at educational seminars and classes as a “perk, something you earn the privilege to?”

Answer: “This common situation evolves from misunderstanding of the purpose of an education and training program. Typically, these are not connected to an organized, systematic improvement program, and so accomplish very little in the way of measurable results. Many companies have a long history of command and control cultures, in which changes are something that managers direct, not something the hands-on employee participates in.

Also, while the industry seminars at annual conventions can provide real insight and value (we think attendance at these should be an organized project to glean the most benefit by members of improvement teams), often they are just a form of vacation, which is unfortunate. There are other factors that can cause education and training programs to be a waste of money, of course, but this is the most common.”
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