Robust, repeatable, and easily taught processes are the foundation of good outcomes. It therefore makes sense to consider the factors that separate good processes from poor ones, the effective from the ineffective.
The measure of the process has two parameters:
- The outcome is repeatable, it has become the way things are done, so has an element of “automatic” about it.
- In apparent contradiction to the above, effective processes must also be sufficiently agile to accommodate the short term stuff that just happens, and flexible so that they can evolve to continue to deliver optimum results in response to the changes in the environment in which they operate.
Over 35 years of participating, observing and analysing processes, there appears to me to be a small number of enablers that drive effective processes. The weighting of these factors is different from situation to situation, but all are evident to some extent in every successful location.
- Deliberate Design. Successful processes are the outcome of a deliberate design. Sometimes the design comes after a process has evolved, and it is modified and optimised post birth, other times, the design is a deliberate response to a situation that requires a process.
- Infrastructure support. Processes do not survive in a vacuum, so the organisational and operational infrastructure, and the culture of the organisation play a significant role in their success. Without any of these three infrastructure foundations, a process will become sub-optimal.
- There is an “owner”. This is just another way of saying that someone in the organization takes specific responsibility for the effective management and support of the process. The more important the process, the more senior the process owner should be. In almost every situation, a process adds to other broader processes, and each component should have its own owner. Eg. An inventory management process has many sub-processes, from the documentation of deliveries to the appropriate allocation of purchase order numbers and general ledger postings. The “Inventory Management” process may be owned by the CFO, but the supporting components will be owned by others at the more operational levels.
- Process metrics are in place. The old saying, “you get what you measure” is accurate, without performance measurement against current criteria, as well as some that may reflect how the organisation expects the process to evolve, it will solidify at sub optimum performance levels.
- Process improvement. Continuous improvement of processes is a feature of successful businesses, the environment in which businesses operate is subject to ongoing change, and therefore the enabling processes need to evolve to best reflect the environment. In an apparent paradox, improvement is really only possible in a situation of stability. To improve a process you need to be able to identify the impact of a change in the process on the outcome, and you can only do that when the impact of all the existing variables are known.
Ronald Coase was first to recognise and articulate the economic relationship between individuals and the co-coordinating structures necessary to organise the work of individuals, coining the term “Transaction costs” in his 1937 essay “The nature of the firm”
Coase in his original paper set up the theoretical framework for the huge cost reductions now possible, enabled by the tools of the web 2.0, which are gathering momentum at a huge rate.
What he did not spend too much time thinking about, because it was not relevant at the time, were the costs imposed by a redundant status quo. Cultures of organisations often require that costs to be absorbed simply because the operating environment has not evolved sufficiently to allow the collaboration tools now available to be used to their potential, leaving co-ordinating overheads to do the work now possible with a mouse, and a bit of nouse.
The possible competitive advantage to organisations, particularly ones with widespread operations is huge, as most of the competition will have trouble making the leap.
Let them pay the cost of yesterday, you have the opportunity to grab the future in recognising the power of the new collaboration tools.
“Gemba” is a Japanese term, literally “the real place” and is a term used extensively in lean management, meaning, in effect, go to where it happens and look to understand. This originally meant the manufacturing floor, but just as easily translates to anywhere real work happens.
So often I see people doing dumb things, not because they want to, but because that is the way the process was designed, usually by someone who had not done a “gemba walk” but who had relied on a model that seemed sensible for some reason, but bore little relationship to the way things worked in real life.
Most things I see that lead to problems are caused by self indulgence, ego, and isolation, not incompetence or lack of care, so next time, stop yourself, and do a “gemba walk” to see how the users will interact with and use whatever it is you are designing.
Lean is at its core a management system, a holistic way of looking at the way an enterprise manages itself through a culture tuned to improvement, group and personal responsability, while six sigma is a quantitative process of managing in quality by getting it right first time.
Six sigma quality requires 99.997% perfect, or 3.4 defects/million. When you are manufacturing and supplying to customers even simple products, this is a very high bar indeed.
Motorola was the first US company to recognise and articulate the challenge in the face of Japanese competition in the 80’s, and they boomed, becoming the gold standard for western manufacturing, and inspiring thousands of others to lift their performance, from which we have all benefited. The article that first bought Motorola to public attention is this Fortune article from 1989, and it started a revolution.
Now the revolution appears to be over as Motorola is broken up into two separate listed companies after almost 2 decades of failing to build on the foundations built in the eighties. The leadership that followed those that built the foundation did not recognise the importance of the management systems necessary to support the continued improvement and Motorola fell back into the trap of conventional management accounting where inventory is an asset, cycle time and flow ignored as core metrics, functional management over-rides bottom up innovation, and all the other stuff that makes a lean environment work, got squeezed out.
As I work with clients on improvement initiatives that usually start with marketing and strategy, my patch, the necessity to improve operational processes to support those that engage with the customer is always a major driver, and the failure of Motorola after being the icon it was simply drives home the difficulty of not just improving current performance, but in the process, building the management and leadership processes that make the performance improvement process self sustaining.
Some time ago I mused that perhaps the worm was slowing if not turning, in relation to local manufacturing, rather than buying in from China as the default option.
The crisis in the US, far worse than anything in this country, had to lead to structural change in the US economy, as the sort of structural change necessary usually only ever occurs when there is little option but to change, as continuing on is simply not an option.
It seems the swallows are appearing in the US, the early trendsetters are thinking twice about the downside of “offshoring”. Loss of IP control, sovereign risk, long and inflexible supply chains, transaction costs in the supply chain and management, and so on.
It makes economic and social sense to manufacture amongst the network of services and capabilities required to be sustainably successful, rather than taking the short term apparent cost reduction that really ends up costing more.
With China suffering increased inflationary pressure, their western export markets tightening wallets, an undervalued currency, and increasing domestic pressures around human rights, pollution, and the distribution of the new wealth, something has to break, somewhere. Wise businesses appear to be weighing the costs and benefits of offshoring, Vs building local capability, considering the long term benefits of development of clusters of innovation and service providers, and lean operations including shortened supply chains, and coming to the conclusion that some things are better done locally.
It will take a long time for the tide to turn, and it will turn very selectively, as many commodity, low value, low technology items will always be cheaper from a low cost environment, but the manufacturing that adds real value will start to trickle home.
The next time you hear an argument that justifies moving Australian manufacturing to a low cost country in order to compete, refer to this post on the Evolving Excellence blog describing the work practices in a Toyota’s Kyushu plant.
Labor is much more than a pair of hands doing a repetitive job, it is an opportunity to improve processes and identify and solve problems before they can impact on the customer, or even the next bay in the production line.
It may be hard to get to this point in Australia, but you will have no chance of making the changes necessary in a contract manufacturers plant in a “low cost” country. The accountants will generate their numbers, which can be pretty persuasive until you recognise that they do not account for the things that make a difference in the market, or count the wasted time, emotion and energy in their “productivity” calculations.
When an abundant country like Australia becomes a net importer of food, we have a real structural and strategic challenges in our demand chains that urgently need to be met, and the sooner we recognise the scale of it, and do a bit more than just mouth platitudes, the better.