Tag Archives: continuous process improvement

How to Devote More Resources to Value-Added Work

Our previous post defined the concept of “value-added work” as being work our customers would be willing to pay for if they knew what we were doing. That post also noted it is common for 50% – 80% of all work within an organization to be “non” value-added!

Here are four ways to devote more resources to increasing the amount of work that is value-added within an organization:

1 — Work On The Bottlenecks
When we work on many things that have a small effect, we will have a small impact. The way to increase value most substantially is to work on the bottleneck, or constraint. All improvement effort that is off the critical path will have a lower impact on increasing the value add. If the bottleneck can be widened even just a little, it provides a pure increase in value.

2 — Increase Understanding of And Alignment With What Customers Truly Value
One of the biggest wastes is when the products or services we offer do not align perfectly with the customers’ needs and values. Errors are possible in two directions:

  • Bundling a feature into the product or service that the customers do not really need or want
  • Overlooking ways we could leverage our capabilities to solve a problem that the customers may not even have articulated to themselves

3 — Get At The Root Causes
Replace the constant working on problems and symptoms with lasting solutions by drilling down to root causes. For example, the sales force of one company needed to better understand the value of additional services they could provide to customers. Rather than addressing the issue / opportunity in each proposal, they developed a calculator to make it quick and easy to help the customers (and themselves!) see the value provided by the additional services.

Another example is data accuracy issues in software that helps a company develop routes for drivers. Any error in the data input will create errors in the routes — inefficient or even impossible routes. The underlying cause is errors in the data input, but the root cause is somewhere in the process through which the correct data should be identified and entered. Studying the input process to identify where and how errors are made will help lead to and address the root causes and greatly reduce the amount of resources NOT creating value for the customers.

4 — Eliminate The Non Value Adding Administrative Work
A great deal of time in most organizations is spent on emails, meetings, and reports that do not produce additional value for the customers or the organization. Finding ways to reduce email clutter, improve meeting management, and streamline reports are just a few examples of how this non-value-added work can be reduced or eliminated.

Improve Sales By Focusing On the Customer/Supplier Relationship

Satisfied and delighted customers are the lifeblood of any organization. Our professional lives are more rewarding when customers love what we do or provide for them.

Providing customers with the highest quality products and services at the best possible price starts with clearly understanding the customers’ needs and requirements and then designing and implementing processes that consistently deliver value. But there are two types of customers:
• external customers
• internal customers

It’s important to recognize that both types of customers are important and have needs that must be met. External customers are the people who pay for our products and services. As Dr. Deming said: “No customers, no orders, no jobs!”

Paying attention to the external customers’ requirements is essential and helps us keep the entire organization focused on doing value added work (i.e., “work the external customer would pay for if they know what we were doing”).

However, to effectively meet the external customers’ needs, we must also work with our internal customers. Understanding and meeting our internal customers’ needs and requirements helps the process of producing our product or service to flow smoothly, be problem-free and deliver the highest quality at the lowest total cost. When we work with our internal customers we are, in fact, “internal suppliers.”

Of course, this customer-supplier relationship extends to our external suppliers as well. From our external customer’s point of view, we are responsible for what they buy from us; and our suppliers are part of the system.

It is increasingly important to build strong customer/supplier partnerships that ensure that we get exactly what we need, in the right quantity, at the right price to be able to meet our external customers’ needs.

Studying Our Work to Improve…
If we’d like to increase sales by improving our “sales” process, we should begin by studying our work. As a first step, identify our top customers’ 3-5 “must-have” requirements. As requirements are identified, it helps to understand their relative importance. What requirements does the customer consider “musts” versus “wants?” The chart below might help with the analysis of identifying measures we must track to determine how well we are meeting customer requirements.

Studying Our Work

Keep in mind that customer requirements are constantly changing as well, and yesterday’s “wants” may become tomorrow’s “musts.” So, we must continually analyze (and improve!) our work – paying attention to both “internal” and “external” customers, as indicated by the “Deming Cycle.”

Culture & Performance Management

Our previous post focused on building a high performing culture, and it noted that doing so is nearly impossible without significant contributions of time and energy from senior leaders. It was noted that a well-defined performance management process is a pre-requisite as well.

Performance Management is all about how leaders orient their organizations around working on the right things in the right way.

When we asked our Partners In Improvement to define Performance Management and to discuss how it impacts an organization’s culture, we heard a range of perspectives. Generally, everyone agreed that performance management a key driver of organizational culture because a well-defined and executed performance management process promotes effective prioritization, accountability, and engagement. However, definitions were more varied, and included:

  • the strategic orientation of the organization
  • process performance management
  • setting of goals and objectives
  • individual performance appraisals
  • daily direction and feedback to reinforce desired behaviors
  • providing tools and coaching to help people be successful
  • rewards and recognition

From the strategic perspective, performance management begins with the identification of what’s vital to the organization, the Partners said. If these priorities are not clear and it is not clear what role everyone plays in the priorities, the rest is unlikely to mean much.

Several of the Partners pointed out that performance management refers to both process management as well as people management. While there are clearly a wide range of views about how to manage the performance of both people and processes, several excellent best practices were generated during our discussions:

For example, everyone agreed that frequent observation and feedback is more helpful to people than formal annual reviews. Frequent communication about what an organization needs and wants greatly increases the odds that the organization will get what they need and want.

In addition, most reported that group rewards encourage teamwork, while individual rewards encourage an individual to optimize his or her own goals even if it may sub-optimize the organization as a whole.

Everyone agreed that tying money directly to performance appraisals can be a two-edged sword – raising stress and reducing the intrinsic rewards and personal satisfaction from doing a good job for the team.

Everyone also agreed it was important to avoid what was described as “managing through rear view mirror.” In other words, avoid “Monday morning quarterbacking.” Instead, leaders should be involved in a systematic performance management process that is ongoing and timely so that outcomes can be influenced rather than discussed after-the-fact.

Here is a simple infographic that depicts one approach:

The CEO & Enterprise Engagement

Leadership

Since our inception we have stressed the fact that an organization’s leadership must champion a Continuous Improvement (CI) effort if it is to become cultural and if it is to succeed in a sustainable fashion.

Along similar lines, the Enterprise Engagement Alliance has shared data as well as experiences indicating the same holds true for engaging employees and customers; and just like a culture of CI, a culture of engagement generates a measurable return on investment.

“A CEO-led strategic and systematic approach to human capital management can enhance performance and create a better experience for all,” an article on the Enterprise Engagement Media website states.

“Without the leadership of the CEO, it is impossible for an organization to fully engage all its stakeholders in its brand, mission and goals—customers, employees, distribution partners, vendors, communities, shareholders, etc.—or to achieve measurable ROI.”

The Enterprise Engagement Alliance was the first to give a name to this strategic and systematic process to connect and align all stakeholders toward a common brand, mission, values, and goals, naming it “Enterprise Engagement.”

“Selling” the Concept of Change

change is good, but never “easy!”

The point has been made, in prior posts, that “change” is not always perceived as being good, and instead tends to promote fear, uncertainty, doubt; and even resentment!

Consider that, in organizations of all types people tend to look with skepticism at new policies and procedures, and look with deep concern at new compensation plans or updated benefits programs. Similarly, in their daily quest for new customers, sales people constantly struggle to overcome buyers’ comfort with the status-quo; and people at all levels regularly cringe at the suggestion that there might be a different or better way to do their jobs!

Yet without change comes stagnation… and potentially worse things too. Current-day examples include Polaroid in instant photography, Blockbuster in video, Xerox in copiers, or the Yellow Pages! Each of these household name enterprises experienced significant declines, or worse, as competitors introduced new and better alternatives.

The cassette tape replaced the eight-track, but was then outdone by the compact disc, which was undercut by MP3 players… and the list can go on.

A Selling Mission…
If we’re to learn from these examples, then we must accept the fact that change — either in the form of innovation, continuous improvement or both — is a critical component of growth and ongoing success. Without innovation and change we run the risk of losing our competitive position or potential obsolescence.

“Whatever made you successful in the past won’t in the future,” said the late Hewlett Packard CEO Lew Platt.

But if people tend to resist change as previously noted, how might managers or business owners best go about getting the team to accept it — to buy in? How can we help people more readily embrace improvement programs, try new protocols, accept new pricing models or generally believe in the up-side of change?

Simply stated, we must sell it.

Just like the sales and marketing experts who create the “new and improved” ad copy, slogans and selling presentations, we must sell the concept of change to our staff members before trying to present or roll-out new policies, procedures, campaigns, programs or plans.

And just like any sales mission, this will require forethought and planning.

We might start by identifying how the team will benefit from a proposed change. What’s in it for them? What are the consequences of not changing? What will it cost? What opportunities might we lose?

What’s the competition doing?

The next step is to determine how to properly position a proposed change. Since we know there is a tendency toward defensiveness, it’s important to make people understand that they are not the problem. In other words, a change in policy or approach need not mean that the team has been doing things the wrong way. Rather, it means the world is changing and we must change too, lest we fall behind.

Finally, once the presentation is made and the new whatever is launched, there must be follow-up reinforcement and assessment. Has everything worked as we’d hoped? Should we modify the new plan? Are there unforeseen consequences? While we don’t want to send a message indicating we’re not resolved to the new program or approach, it is also a good idea to let everyone know we’re fair and open-minded — that at the end of the day we’re all on the same side.

Change may be unsettling, but without it our futures are at risk; and there are clearly ways to minimize the negative effects. It will require effort, planning and, like any selling mission, persistence, as behaviors and attitudes are not easily influenced.

Margaret Thatcher may have summed it up best when saying, “You may have to fight a battle more than once to win it!”

Confirmation Bias – Has it Happened to You?

CONFIRMATION BIAS AT WORK

It has happened to most of us. Has it happened to you?

That is, has there been a time when data supported a decision you knew to be the right one, but for some reason or reasons you did not get the outcome you expected?

Perhaps you find an exciting investment opportunity like the winners you have spotted before, but it yields mediocre or poor results. Or despite your experience and successful track record when judging candidates, a person you just “knew” would be a good fit turns out to be a bad hire.

With experience can come wisdom… but also confirmation bias.

Confirmation bias is the tendency to pursue and embrace information that matches our existing beliefs. We tend to seek out and enjoy people who write or say exactly what we think. We gravitate toward these sources not for information but for confirmation.

Researcher and writer Thomas Gilovich posits the “most likely reason for the excessive influence of confirmatory information is that it is easier to deal with cognitively.” It’s easier to think what we think!

Yet confirmation bias in business can be especially hazardous and costly to highly-experienced and successful individuals. These minds are adept at spotting patterns, learning from experience, scanning the horizon and connecting the dots. If that describes your talents, take a look at this classic puzzle nicely presented by the “The Upshot.”

If you attempted the puzzle, how did you do?

For those who opted out, in this puzzle participants are given a numerical pattern and are asked to determine the underlying rule. The pattern is quite simple, and participants can test their theories as often as they like before specifying the rule. Yet 77% of participants fail to identify the rule because as soon as they find a pattern that supports their theory they conclude it is the correct rule.

In other words, 77% of participants succumb to confirmation bias.

This is a common occurrence in business. When trying to solve problems or make decisions we overwhelmingly look for patterns that support our theories rather than looking for data that would clue us in that we have missed the mark. And with each piece of data that does not refute our theory, we become more confident in our belief.

This exercise shows how people tend to work at proving their theories right, instead of robustly testing the theories to prove them wrong. Once we have seen enough supporting evidence to confirm we are right, it is far more natural for us to fully embrace our premise or idea.

For instance, maybe we are tasked with determining why a certain work process is not being done well. Is the work done less well by inexperienced employees, or when the machine is overdue for maintenance, or when the materials have a certain characteristic?

We could test all three of these ideas with data. But our natural confirmation bias makes us far more likely to look for evidence that the idea we favor is correct than to look for ways it may be mistaken. So, we start testing the idea we think is most likely and as soon as we find enough evidence to support it, we risk diving into the solution and excluding the other possibilities; and we could very well be headed down a path of action that is sub-optimum for our organization.

In our next post we’ll take a closer look at examples of confirmation bias in the workplace and steps that can be taken to avoid it.

Conventional Wisdom & Utilization

As you are most likely aware, “utilization” is a measure of the actual number of units produced divided by the number possible when machines and people work at full capacity.

Conventional wisdom says that the best way to maximize profits is to encourage every department within an organization to achieve 100% utilization. Like so much of conventional wisdom, this has a ring of truth to it; and it has the added beauty of simplicity. We can evaluate and reward each department independently of one another, and if everyone is given incentives to get as close as possible to 100% utilization, then the company will surely be maximally profitable.

But this premise will fail us in the real world… a world riddled with variation.

For example, let’s say a company has three operations:
• Glass Blowing
• Filament Insertion
• Cap & Wrap

Utilization of the 3 departments is 50% in Glass Blowing, 100% in Filament Insertion, and 80% in Cap & Wrap. So where do you focus your improvement efforts? The natural conclusion is that you would focus on increasing utilization in Glass Blowing: either by increasing production (which would simply increase the inventory of bulbs waiting for insertion) or by decreasing capacity.

But if you look at the throughput of the process as a whole, you see that Filament Insertion is the bottleneck. At 100% utilization, they are unable to produce enough to keep the next operation, Cap & Wrap, fully utilized. Furthermore, Glass Blowing, despite the lousy utilization numbers, is already piling up inventories of bulbs waiting for filaments. The utilization numbers suggest that Filament Insertion is the last area needing improvement, but to improve the process flow, it must be the first area to improve.

If the world were perfectly predictable, we could reduce the capacity in Glass Blowing and Cap & Wrap to exactly match Filament Insertion to achieve 100% utilization. But if we did so in ‘Murphy’s world,’ any variation in glass blowing production — such as machine downtime, absenteeism, yield deterioration, material availability or quality issues — will not only impact Glass Blowing utilization numbers, but the bottleneck — Filament Insertion —will also be idle! Production opportunity lost at the bottleneck is lost forever. Instead of trying to optimize individual operations, identify the bottleneck and make sure there is enough capacity in the feeder operations to ensure that any disruptions do not impact the utilization of the bottleneck capacity. Instead of aiming to maximize utilization at each operation, as conventional wisdom would have us do, we must find and eliminate waste at the ‘bottleneck’ or ‘rate-limiting’ step in order to increase profitability.

5 Ways to Enhance CI Success

Our previous post summarized three of the most common reasons why CI efforts fail. Today’s focus is on how to avoid those pitfalls and increase the likelihood of success.

Generally speaking, in order to ensure on-going success, an organization must make sure that its measurement systems, rewards, recognition, and communication systems support CI. But more than that, one must make sure that management behavior itself supports CI.

Our Partners in Improvement groups identified the following five best practices for making an enterprise-level CI effort more successful:

  1. Top Management Support: Senior-level leadership must visibly support CI efforts. It’s best if management meets with the teams and individuals regularly for the specific purpose of seeing how the improvement project is going and what can he or she do to support the effort and speed progress.
  2. Team Training: During our Partners discussions it was agreed that nearly everyone in the company needs some basic training. But team leaders need to be very well trained, so that they can ensure that the team follows the methodology, asks the right questions, gathers the right data, and stays on trac. It was also noted that team leaders should be very carefully chosen.
  3. Diligent Upfront Work: Project planning, even before the launch, as critical to success. This involves defining the right charter, problem statement, scope, time frame, and team.
  4. Once an enterprise-level CI plan is launched, the first principle is that nothing succeeds like success. Starting out with carefully selected projects staffed with highly qualified people is a good way to promote that success. Giving the earlier projects careful guidance and support (as referenced in bullet #1 above) is another best practice that increases the likelihood of some early wins. Making “speed to success” a priority should also be part of the plan.
  5. Communication is the next most important thing. If a team applies the CI methodology to great success but no one hears about it, the goal of making CI a cultural way of doing business will not catch on. In other words, “advertising” is important! Intranet, newsletters, presentations, story boards, discussions at staff meetings and formal recognition programs are all ways to communicate success and make sure that everyone learns from successful experiences.

All About Run Charts

Run Charts are simple line graphs of data plotted over time. They are used to better-understand the performance of a process, as they help people distinguish between random variation and special causes, or to track information and predict trends or patterns.

A run chart can also reveal whether a process is stable by looking for a consistent central tendency, variation and randomness of pattern.

One of the most common CI tools, a run chart is easy to interpret and does not require tedious calculations or special software to produce.

Sample Run Chart

How to create a run chart:

    1. Identify the question that the run chart will answer and obtain data that will answer the question over a specified period of time. For example, if you were looking at how long it takes to complete a task, you will make note of the time taken (in minutes) to complete it over a specified period of time.
    2. Gather data, generally collect at least 10 data points to detect meaningful patterns.
    3. Create a graph with vertical line (y axis) and a horizontal line (x axis).
    4. On the vertical line (y axis), draw the scale related to the variable you are measuring. In our example, this would include the complete range of observations measuring time-to-completion
    5. On the horizontal line (x axis), draw the time or sequence scale.
    6. Plot the data, calculate the median and include into the graph.
    7. Interpret the chart. Four simple rules can be used to distinguish between random and non-random variations:
      1. Shift – 6 consecutive points above or below the median
      2. Trend – 5+ consecutive points going up or down
      3. Too many/too few runs – too few or too many crossings of the median line
      4. Astronomical data point – a data point that is clearly different from all others (often a judgement call)

All About Pareto Charts

The Pareto Chart

Simply stated, a Pareto chart is a bar graph that represents problems or opportunities in order of descending magnitude or frequency.

Considered one of the seven key quality and improvement tools, it is named after Vilfredo Pareto, an Italian engineer, sociologist, economist, political scientist, and philosopher. He made several important contributions to economics, particularly in the study of income distribution. He is most well-known for his observation that 80% of the land in Italy was owned by about 20% of the population – now referenced as the “Pareto Principle” or “80/20” rule.

Pareto charts are used for a number of purposes, such as to analyze the frequency of defects in a process, to look at causes in a process, to figure out what the most significant problem in a process is, or to communicate data with others.

Here are seven simple steps for creating a Pareto chart:

  1. Decide what categories you will use to group items
  2. Decide what measurement is appropriate. Common measurements are frequency, quantity, cost and time.
  3. Decide what period of time the Pareto chart will cover: One work cycle? One full day? A week?
  4. Collect the data, recording the category each time, or assemble data that already exist.
  5. Subtotal the measurements for each category.
  6. Determine the appropriate scale for the measurements you have collected. The maximum value will be the largest subtotal from step 5. (If you will do optional steps 8 and 9 below, the maximum value will be the sum of all subtotals from step 5.) Mark the scale on the left side of the chart.
  7. Construct and label bars for each category. Place the tallest at the far left, then the next tallest to its right and so on. If there are many categories with small measurements, they can be grouped as “other.”