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Lean Roadmap Newsletter
Becoming a World Class Organization 
32nd Edition   
 
The topics for this edition are: 
  • Do You Want Teamwork in Your Organization? Here are the Four Requirements Necessary for Teamwork to Develop in any Organization. 
  • The First of Five Strategies for Competing in the U.S. and the Global Economy for Small and Medium Size Organizations (SMMs have < 500 people). Strategy #1 - Competing on Price Only

Free Lean Webinar Schedule

A complete schedule can be found at www.wcmfg.com

Seminar - Policy Deployment & Lean Implementation Planning

Two-hour Seminar - The most powerful Lean activity your organization will ever accomplish! Learn how the "Policy Deployment" process links your Lean activities directly to your organization's goals.
 
Hosted by: Tooling & Manufacturing Association (TMA), 1177 S. Dee Road, Park Ridge, IL 60068 on Wednesday, July 14th from 8-10 a.m. CST.  
 
For More Information or to Register:  
 
http://guest.cvent.com/EVENTS/Info/Summary.aspx?e=2abc9877-b236-4cfc-96b1-40dde4af0710  
 
The Four Requirements for Teamwork to Develop in any Organization 
Teamwork doesn't develop in organizations by accident or because we "wish" or "hope" it will. Teamwork, like the success of the organization itself, develops because the company Leadership Team plans for its development.

by Larry Rubrich 

 
The four elements required for teamwork to develop in an organization are:
 
1) High levels of two-way communication
 
2) Team members with diverse backgrounds
 
3) Common purpose/motivated by mission
 
4) Common goals/measurements 
 
Element #1 - two-way communication. Understand that there is no teamwork in any organization without communication. When top managers are surveyed, 99% say that teams and teamwork are important to the success of their organization. Yet these same organizations have few, if any, successful teams. Teams, easy to say, but hard to do! Or is it?
 
While top managers "mouth" the need for teams and teamwork, their actions against these requirements indicate something different.

For a team to develop and be successful, everyone in the organization must have a copy of the playbook. The team playbook outlines the organization's goals (win the Super Bowl) and the activities (plays) that the team must execute to achieve the goals. The team has measurement systems (scoreboard) to track their progress. The quarterback and coaches (Leadership Team) are constantly communicating verbally and visually with the team and sub-team members (offensive line, defense, special teams, etc.). The team makes adjustments along the path to their goal. One can only imagine the results of a football play where the quarterback only communicated the "play call" to two team members instead of all ten in the huddle. Yet this is most often the norm in American business.
 
Great two-way communication not only impacts teamwork but it impacts productivity also.
 
Several universities have done studies on what factors in the workplace produce the highest lev­els of productivity. These studies discovered that only two factors were required to produce the high­est levels of workplace productivity. When high levels of job satisfaction and high levels of two-way communication existed, productivity was at it peak. A chart, showing the results of these stud­ies is shown below

8 General Wastes

How do we define these factors? High levels of two-way communication in the studies agrees with the definition above. It means that everyone knows what's going on in the organization, and they feel comfortable and confident with their organizational knowledge. Rumors about the company are elimi­nated or at least minimized.
 
High levels of "job satisfaction" means that the associate or associates are in their "dream" job. If they could pick any job, it would be the one they have.
Here's the rub. Other studies of the American workforce found that only 17% of American work­ers are in their "dream job." This means that the highest levels of workplace productivity can be achieved with only 17% of the workforce. So what do we do for the other 83% of our workforce?
 
Most managers get this part wrong. When given the choice of picking what level of factors determine the second highest level of productivity (affecting 83% of the workforce), managers gener­ally pick low levels of two-way communication and high levels of job satisfaction, which is actually the third level of productivity. Why does this oc­cur? Primarily because managers find it easy to blame the people: "They applied for a job they re­ally didn't like, how were we supposed to know?", instead of understanding that 98% of the prob­lems in business are related to the management created "systems," and look at the systems first (the system of communication, in this example).
 
Ninety-eight percent of people in organizations want to take care of their customers, they want the company to be successful, they want to have jobs at the company in the future. To access these resources, an environment (culture) must be created where these 98% know they are valuable members of the team. Communication is the start of the process.
 
The question for top managers is: Do you want 6-8 managers trying to achieve the company's budget, plans and goals, or do you want the entire organization doing that?
 
Element #2 - team diversity. The most creative, best problem solving teams are those with team members that have diverse backgrounds. Diversity allows the composite team to view problems/opportunities from many angles or facets - a 360 degree/global view. Every person working on a problem sees the problem from "their angle," facet, or frame of reference. This angle is determined by the person's background, education, experiences, and culture (BEEC). These factors force a person into viewing the problem from that angle or frame of reference. If there are 10 people on a team (or think of it as 9 clones of the same person) and they all have similar BEEC factors, great or even good creativity or problem solutions will not occur because the problem/opportunity is not seen in its entirety. Will the cloned BEEC team come up with a solution, yes. Will it ultimately, in time, be viewed as a good solution, no.
 
Elements #3 - (common purpose/motivated by a mission) and #4 (common goals/measurements) are usually lumped together. Everyone in the organization must have customer satisfaction as a common purpose and goal so all will pull in that direction. What things prevent everyone from pulling in the direction of customer satisfaction?   

Departmentalization and the lack of "system thinking" are two of them. (We talked in our previous edition about how departmentalization inhibits common purpose and goals). We broadly define the system as the processes required from the time the customer places the order for a product or service, until the service is performed, or the product ships. System thinking requires that all decisions/improvements in an organization are made based on its impact on the 'system efficiency.' If a suggested improvement will improve department efficiency, but will negatively impact the system efficiency, it is not done.
 
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Certified Lean Facilitator Training Session

 
This standard Certified Lean Facilitator training session will be hosted by Alliance Laundry Systems in Ripon, WI.  
 
You can attend just one class or start the journey to becoming a Certified Lean Facilitator by attending all 3 weeks.
 
Session dates are:
 
Week 1 = July 19, 2010
Week 2 = August 16, 2010
Week 3 = September 13, 2010
 
For scheduling, call Gloria at 260-637-8064 or e-mail gloria@wcmfg.com
 
  The First of Five Strategies for Competing in the U.S. & the Global Economy for Small and Medium Size Organizations (SMMs) 
Strategy #1 - Competing on Price Only
Combining Lean business improvement activities with solid marketing strategies can make your organization competitive. Mix and match these upcoming five strategies to meet the satisfaction requirements of your customers and regain your business from your domestic and foreign competitors. 
 
by Larry Rubrich 
 
Competing on "price only" with an undifferentiated product or service that is considered a commodity is the most difficult strategy of all. But, it may be the only strategy available if the organization lacks any Intellectual Property (IP) in it's processes or procedures which would allow it to differentiate itself from its competitors. 
 
Organizations operating in this market arena tend to focus on "transactional relationships" with their customers - they take orders for a service, product, or part, and then produce or supply it. Examples of transactional organizations are the local clothing dry cleaning store or a tier 3-4 parts manufacturing company. Transactional organizations tend to view opportunities to improve competitiveness as being limited to reducing supplier costs (i.e., raw materials),  reducing labor costs, or as a last resort, reducing profit margins. Unfortunately, the focus on labor costs, and the impact this may have on the capability and quality of our workforce, restricts other opportunities to compete in the "price only" market place.  
 
Value Added Innovation (VAI)
 
In Lean, we define "value added" as anything the organization does that the customer is willing/desires to pay for. We must always remember that the customer always defines what "value added" is. Anything we do in the organization that the customer is not willing to pay for is considered "waste."
 
In the case of the dry cleaning store, I want a pressed, "fresh smelling" suit that is delivered in a timely fashion (which I define as 24 hours) at a competitive price. As a reward for meeting my expectations, the organization makes a profit from my business, which pleases me since I want them to stay in business to meet my future dry cleaning needs.
 
Value Added Innovation (VAI) is about organizational innovation directed to maximize the organization's value added time it provides to its customers. When we maximize value added time we ensure that this value is supplied to our customers with the minimum of resources. This provides the necessary customer value at the lowest cost and price.  
 
To be clear, improving an organization's value added time never means employees are working harder, it does mean that employees are always working smarter. Working smarter means concentrating everyone's efforts on doing what the customer is willing to pay the organization to do. 
 
In the case of the dry cleaners, I don't want to pay for the fact that my suit was handled and moved around the company 8 times from the time I dropped it off until I received it back. I'll pay for handling it twice, once into the process, once out of the process, the other 6 times the suit is handled are "waste."      
 
For most organizations, the amount of time spent on customer value added is low because first, we don't measure value added time (you can improve only those things you measure), and secondly, we confuse any "work" we do in the organization (moving my suit around 6 extra times, for example) with customer defined value added time.  
 
Typically, an organization's value added/productivity chart looks like this (or worse):

Work - Waste Confusion

The bad news is our productivity, as defined by the customer, is very low. The good news is that we have huge opportunities to reduce our costs and prices.

(If you believe this data does not represent your organization, create work logs and ask 2-3 of your people (volunteers) to fill out the logs (categories of what they did and how long they did it) for a day. This should be done before you define "customer value added" activities to your employees so you get a true measure of what they are working on.)      

Using VAI to improve productivity and compete on "price only" requires the full understanding and participation of the organization's entire workforce in VAI activities. In the past, our employees only needed to use only their arms and legs to do their jobs - now we need them to use their brains also. They must understand what the customer defines as value and innovate solutions to eliminate waste and increase their value added time. How do we eliminate the 6 extra times we handle the suit?

Depending on the organization's culture and hiring practices, full employee VAI participation may be very difficult. For example, we know of a small (<100 people) manufacturing "job shop" in the Chicago area who hires legal immigrants because they will work for the wages the company wants to pay. Unfortunately, most of the immigrants do not speak English.    

 

This idea of focusing on low-cost labor can be confusing for SMMs because if they use large organizations, like McDonald's as a business model example, major process and service improvements (VAI activities) are developed at McDonald's corporate level, while the individual store concentrates on low-cost labor that requires the use of only arms and legs. This may make it seem like low-cost labor by itself equal business success.
 
Competing on "price only" for the long term, requires the full involvement and participation of the company's human resources/people in VAI activities, so customer value can be maximized and required resources minimized.   
 

Competing Globally: The Seeming Insurmountable "China Price"

 
There is some good news for company's trying to compete globally: the "China price" has gone up. Not because Chinese company's have raised their prices (although some of this is occurring also), but because American companies have found that they have not accounted for all of the costs of doing business in China. 
 
The "fully landed" costs of imported parts and products are higher than expected (quality, lead-time, communication, travel, customs, agents, shipping costs, etc.) have some organizations looking at "on-shoring."  
 
When combined with quality, short lead-times, and on-time deliveries, it may be now only necessary to get within 30-50% of the "China price." For many organizations, this still requires a hefty dose of VAI activities to reach these costs and prices.
 
   
 
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Next Edition 
 
  • The Second of Five Strategies for Competing in the U.S. & the Global Economy for Small and Medium size Manufacturers            
    Strategy #2 - Moving Up & Down the Supply Chain to Find More Places to Add Value
  •  
  • Combating "Can't"
  • Larry Rubrich
    WCM Associates LLC
    2010 WCM Associates
     
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