New Learning With Costs

I have been away from the Lean blogosphere this semester and focusing on AC 626 - Cost Accounting for Managerial Decision Making.  While I have done this type of work as an Industrial Engineer, I think this class tied together some loose ends that I was not aware that were swinging in the breeze.  While I will try to not geek out on you I think this has enhanced how I look at the impact that reducing cycle time has on your operations and eventually your customer, no matter what method you choose to use.

I think in this case Work-in-Process absorbs so much time and energy (that you have to pay someone to worry about) and the fact that our complex systems are not helping us reduce the cost of operations, we "enhance" the links between our employees and our systems with further complex processes.  This has a direct effect on unit cost and, if not managed correctly, will make us run our operations into the ground.  I think we have seen this with the automobile industry.  Why do we reward poor performance with bail-outs and loans that will never be repaid?

While I do not aspire to do Lean with all the cost improvements that we can eat, the focus is still cycle time and unit cost is a reflection on doing the right things right and making the right decisions.  In future writings I will address these with deeper detail.

In the mean time let you mind be aglow with whirling, transient nodes of thought careening through a cosmic vapor of invention!

Ditto.

Bi-Polar Working Environment

Looking back on it, the highs were high and the lows were low.  Does work seem like an endless roller coaster?  Do you run from one fire to another, double-booked status meetings, or was that another failed review with the originator pulling out of the parking lot for the weekend?  You think you get off the ride at the end of the day when you leave the gate, or is that just the part of the ride that is not doing loops?

What is in your mind when hear "a steady flow of work"?  A gently flowing stream that pops with trout hitting the surface and the water is bubbling through the rocks?  No, that is supposed to be a vacation.  Did I just hear someone's cell phone buzz while we are fly-fishing?

How many of us walk in to the build and put on our fire fighting gear?  Go ahead and put your hands down, I'm not taking a survey.  Our never taking off the gear is an indication that we do not have a workflow control system.  Everything is hot and/or late.

Getting out this mode of operation requires everyone on the team, including the coach, is making a conscience decision to stop treating everything as a fire.  And we have to start learning from our mistakes.  The solutions that support the learning must also be appropriately applied.  Anchoring the entire organization because of ethical or technical issues does not help foster trust between management and employees.

Operational Excellence is about the journey, not the destination.  We learn and grow while building trust through relationships.  You may not see it at first, but when you realize the roller coaster is no longer running you can see organizations are made up of people, not systems and tasks.

Change Fundamentals

“Change makes me feel uncomfortable.”

“Change is hard.”

“We don’t need to change, everything is fine.”

I’m sure you have heard these before, maybe even said something like this.  But now you are in a position of Leadership or you are responsible for the activities of a team and you see that you’re not reaching the performance levels you need to get ahead.  Money Girl may be scheduling meetings with you twice a week to discuss your budget numbers.  You could be meeting twice a day and that is not going to solve your problems.

This model is used help align groups of people to specific results and keep them within the left and right boundaries of their tasks and responsibilities.  The Beliefs of the individuals on the teams will lead to the Behaviors which drive their Actions that produce Results.  This helps to show why people think “Change is hard” and you do not see the Results.  Turning the team around is not only your responsibility; it’s in your skills toolbox.

The first step is the hardest because the team’s lack of momentum has anchored them to the past.  Did they win a team performance or safety award ten years ago?  Does your team currently perform the best in the branch but their internal competitors should all be sent back to the farm team?  You may find the team is the “cream of the crap” and this is never a nice realization.

You need to find out what the team Believes.  Do they really know their performance or want to know?  Do they believe they have the ability or permission to make change?  Do the team members have the skills, knowledge, and ability to perform the work that is being asked of them?  And there are more questions you could ask based on your industry or location.

Beliefs are the hardest to change; many were shaped by past experiences.  You will be battling against previous good or bad managers, corporate cultures, left-wing professors, and perhaps an undesirable work ethic.  Some team members will be easy to shift and a small number, if any, will probably need to be released back to wild.  Jim Collins talked about having people in the right seats on the bus, assuming they are on the right bus to begin with.

Tools to help Leaders re-align the individual’s and team’s Behaviors are the Company’s Vision, Mission, Goals and Objectives.  Do your team members know how and where they fit in the Vision and Mission?  This may take some exploration with the team and your Leadership.  I have seen teams try to determine how they fit, review this with Leadership and are sent back being told to try again.  This is not a catastrophic event as long as you can show you are learning from the experience.

Goals and Objectives play a large part by providing a basis for measuring the team.  Remember that not every team will have Objectives for every Goal, and try not to overthink your importance to the site but be open to how everyone fits together.  Goals should link Objectives to the Vision and Mission.

Measuring the team’s current performance to the Goals and Objectives can be an enlightening event that will drive the team to Action.  Don’t just print the chart and stick it on the wall, share it with the team and ask questions that lead to sustained high performance.  Using A3 Thinking helps to document what the team is experiencing and how they can learn by evaluating the low and high performance times.  This learning is documented in the team’s standard work, SOP, or Desk Guide and is used for training new team members.

These Actions will create Results with increased performance, higher levels of predictability, and increased team moral.  We are not just robots moving paper from one pile to another pile; we are thinking creatures with drive and a desire to make customers happy with the products we provide.  The processes we work in will not improve on their own, they require the ingenuity and creativity we have in all of us to make change.  It is there, just waiting to flourish.

How have you seen or experienced a change in hearts and minds?

Costs Saved or Avoided?

Improvement opportunities in the office are everywhere; document reviews and the resulting rework, quarterly or monthly tasks that are late, and the amount of money spent on printing paper that ends up in the recycling bin, just to name a very few.

Sometimes Continuous Improvement teams have to justify their existence so they set financial targets.  Usually something bold like 1-2% of budget or 5-10% of salary (that's not really bold).  These become very interesting when the Lean Guy asks how much is a minute of downtime worth in our office processes or to show the metrics?  This turns into Lean Transformation only by project, not at the enterprise, and starts the familiar battle between two obvious allies, the Lean Guy and the Money Girl.

When charters are created and signed off by the Project Sponsor, we have to go create the "business case" for the projects.  This is usually a half dreamed up estimate with a shaky basis to a disco beat.  Enter Money Girl with her list of questions and the first one revolves around how much money can she have back at the end of the project.

Lean Guy's or Project Sponsor's first response is, "This is all cost avoidance".  Which is code for, "You ain't getting any of this money back" or "You slashed our budget last year".

Let's first have a common understanding of the terms, and this will work in almost any environment whether it's manufacturing, health care, design, government, or services.
1.  Cost Avoidance - This is where we decide to keep any money saved to use on other projects, or we were already overrunning budgets and this project brings us a step closer to even.
2.  Cost Savings - This is where we are going to return some amount of the savings back to the provider.

Cost avoidances can show up as improvements to Cost of Poor Quality.  This cost is usually comprised of rework costs, repair costs, and scrap costs, and all three of these are comprised of unplanned labor and material.  In the office processes rework will outweigh the other two as they are usually associated with manufacturing.

As we consider the amount of rework in our processes we use the amount of time we are actually touching the things we are creating and was kind of material we are using.  Material is easy to calculate as it is the number pages you printed before you stop seeing your document return for more rework, multiplied against the printing costs per page.  This number can be found online or provided by your handy-dandy IT Helpdesk friends.  Try not to pass out when you see the number and when blood is pumping again into your head, don't call the IT people to scrap all the printers.  Think about how to make information portable.

Another will come from the variation in the different ways the different team members perform the same task.  This may be measured in minutes or hours, but this needs to be one of your measures.  You can pull time & date stamps if you use an automated work-flow control system or email.  When you have a well documented baseline, share it with the team, maybe pull out a fishbone and ask why a few times.  When you begin developing a solution remember that email is not an automated work-flow control tool.

Cost savings arrives in the form of performing better than budgeted or projected.  This will be simple to calculate and defend if this can be applied to the cost of the product going to the paying customer.  If the new performance does not manifest increased demand, then you may find yourself overstaffed.  This is a great opportunity to think about other ways to add value to the internal products, or see if opportunity exists elsewhere in the firm.

Keep in mind that LEAN is not an acronym for Less Employees Are Needed.  I have seen this model used without improving the flow or scope of work tasks and within a short time the number of people were back to original levels.  This type of activity reduces the trust in you from your team members and would be labeled as L.A.M.E., a concept developed by Mark Graban, a blogger at Lean Blog.

If we are going to sell your improvement as a cost savings, there should be a reduction in the final price of the product for manufacturing or service organizations, or elimination of unneeded assets, or reduction in the tax rate for tax payers.  If the money is "intercepted" and used somewhere else, this is no longer a savings.

Although money is a great way to talk about projects, Lean Transformation is reflected in the Customer and the employees working in the information processes.  Don't ignore elimination of the other wastes just because you cannot quantify a financial figure.  If reducing the wait time a report experiences in the flow improves customer satisfaction, then you learn what you can about the flow stopper and improve your process.

What are your thoughts and what have you experienced?

What Are the Right Measures to Use In the Office

It's Friday afternoon and it's quiet, almost too quiet.  Your phone rings and it's the boss telling you to come to her office, now.

What is it now?  I'm almost done with my TPS report and I have big plans this weekend!

You find your pen and something to write on, and head to her office.  It's like this every last Friday of the month, a panic discussion about the end of the month metrics.

We're overrunning our IT and overhead budgets, what sales orders can be closed before the end of the month, and which suppliers we put off paying for another 30 days?

It's the same panic-attack every month, and the last branch chief was worse.  We should be able to predict these things instead of going through all this drama.  Some way of looking each week to see how we are doing. But we don't work on a manufacturing floor, we push paper around the office, we are completely different.

Wow, I think we have seen this situation play out more than once.  The key here is not only figuring out how to avoid the panic attack, but to be able to predict how the month will end with plenty of time to respond.  This journey certain starts with recognizing who the customer is and what do they want.  If the thing we are working on goes to a customer whether inside or outside, we will use the Voice of the Customer (VOC) to develop our metrics.  If there are corporate or team objectives we reaching for, we will use Voice of the Business (VOB) to develop the metrics.

The VOC conversation starts with something like "what are the things about my product that need to be perfect?".  The "things" may focus on delivery, quality, cost, performance characteristics, or any other "thing" that may be on the customer's mind at that moment.  You will need to guide the conversation based on some feedback you may have or you will spend weeks in the weeds chasing rabbits. These conversations will help improve the relationships with your paying customers and provide a creative outlet for the team to work toward instead of the day-by-day painting of rocks trying to find the color the customer wants.

The VOB conversation is based on those corporate objectives that come down at the beginning of the year, newly created government regulations, or corporate governance policies.  The boss is giving you signals that you probably should not ignore and some exploration of details of how to execute policies can provide insight on how to measure the execution.

Take this information back to the team and explore their input on what those measures are and how that data is collected.  Do you have systems that you work within that collect time and date stamps, who is contributing to or approving steps in the work flow, track travel budget or sales totals?  These may be sources of data needed to create the metrics that can show if the team is on track or not.  It may take a little time to create a baseline, but you will soon be on your way to avert being blind-sided.

When you have the metrics created, don't just hide them on the corporate share-point servers.  Share them with the team, talk about the performance and maybe some root causes if the performance is not where it should be.  Teach the team how to talk about performance improvement and don't use a bunch of Japanese or Six Sigma words to show everyone how enlightened you are.  This is not a finger-pointing session.

In the mid-90's I worked for a telecommunication company in prototype manufacturing, building typical quantities from 1 to 10 with the median quantity being 2 or 3.  Our model was Low Volume/High Mix and we were in the change-over business.  The boss kicked-off one of our weekly staff meetings with the question, "Where is the waste in our processes?".  This was an odd question, and instead of someone asking what he meant by "waste", the two main factions began to attack each other.  The meeting did not end well, but it did start me thinking about how we transform information and material into circuit boards.

We had business goals (VOB), build prototype work orders in 3 days and pilot production work orders in 7 days.  This was easy to think about in manufacturing, but I was leading the machine programmers, we were creating software programs and reports.  In reality we had about 2 hours to complete our work that fed into the next steps of the process that eventually provided engineering with test results to a final customer that was buying our stuff.

Ultimately we had to show that we were helping to improve our processes and we did this through the use of metrics over time.  Metrics that were reviewed on a weekly basis with the actual team doing the actual work.  When we were aware of a problem, we would convene on that problem, talk about root causes, determine what to do about it, and update the deskguide we used for how we performed the work.  And all this was tracked in our metrics based on the reports we were producing.

As you begin looking at what you do and what metrics are relevant, what you finally decide to use may be very different compared to what you started with.  This is part of the journey, finding the right roads to take you where you are going.  And if you want something quick and dirty to start with, three popular measures are On-time Delivery, Percent Complete Delivered, and Quality Yield. Remain positive with the team, some emotions will rise up and remind everyone that we are in this together.