Corporate Culture en The CFO and Finance Team are Skeptical About Benefit of Lean and Six Sigma - Part 2 <div class="field-ugc-expert"> Ask the Expert <a href="/expert/ask-expert-lean-leadership">Ask the Expert: Lean Leadership</a> </div> <div class="node-body question_and_answer-body"><div></div>What do you do when the CFO and finance team are skeptical about -- in fact, resistant to -- engaging in lean, Six Sigma or other operational excellence initiatives? (Part 2)</div><fieldset class="fieldgroup group-user-info"> <div class="field-ugc-user-email"> <span>Your Email:&nbsp;</span> <a href=""></a> </div> <div class="field-ugc-user-name"> Posted by Jill J. </div> </fieldset> <div class="field-ugc-expert-answer"> <span>Answer:&nbsp;</span> <p>Wasn&rsquo;t it refreshing last time to have a question from a CFO who wanted to help drive excellence but couldn&rsquo;t get his operations counterpart to engage? That was an easier one to swing at than the more typical reticence of the CFO et al.</p> <p>Not unexpectedly we got some immediate feedback and follow-up questions regarding how to cope with the more normal situation. I submit that there is so much common ground here where logic and good business sense should make strong partnerships between operations and finance. The improvement opportunities are simply enormous.</p> <p>So why is it so difficult in reality to make it work? I choose to take the position that it&rsquo;s simply a broad-based case of ignorance on both sides and decades of mind-numbing paradigms that take time to overcome. That said let&rsquo;s get to the typical situation of conflict between finance and operations.</p> <p><strong><em>The more &ldquo;normal&rdquo; situation is that the CFO and the finance team are skeptics at best and actively resistant at worst</em></strong>. My guidance is for us in operations to park our defensiveness at the door and walk into the finance leader&rsquo;s office and ask them for both barrels on what concerns/skepticism they have. That&rsquo;ll start a great list of joint projects to work on that will serve everyone&rsquo;s purpose. It will also create the opportunity to help educate away their ignorance on the requirements for operational excellence and begin to attract some believers.</p> <p>We can provide them with a whole new vision of why their work is so important to improving the business. The worst possible outcome is when operating people get discouraged and throw up their hands and abandon the journey.</p> <p><em>See Also: <a href="">What is the lean leadership role of plant managers?</a></em></p> <p>As operations leaders we should approach our discussions with our finance counterparts along these lines:</p> <p><strong>1. First, <a href="">go back and read my last entry</a>,</strong> which responded to a CFO who was frustrated by the lack of interest on the part of his senior operations counterpart. As you read it again simply reverse the roles as if the question came from an EVP of operations. The counsel provided there is equally valid.</p> <p><strong>2. Include key finance people in your education and training sessions with the CEO&#39;s support. </strong>They all need a basic understanding of the thinking behind the CI journey, the collaborative team culture that is necessary across all functional areas, how integrated all of the business processes are and, thus, how integrated all our behaviors and process improvements need to be. They should also be given a &ldquo;Lean 101&rdquo; course so they are at least conversational on basic terms/tools such as: value streams/maps; the importance of flow and constraint management; the purpose of kaizen events and how they are planned, executed and documented; the thinking behind 5S and visual management; the data-driven processes to be used for problem elimination e.g. DMAIC; problem-solving tools such as fishbone diagraming, Pareto analysis, 5 Whys, poka-yoke, etc. Using an exercise such as with Legos or the like is useful in providing simple but powerful hands-on learning about the positive impact of new thinking and new tools on the business. This experience is also a great catalyst for cross-functional team building.</p> <p><strong>3. Invite finance leaders to participate in your CI steering team at the business and/or plant locations.</strong> Also invite them to your conferences to stimulate more positive working relationships as well as to continue to &ldquo;drip on the rock&rdquo; with learning opportunities.</p> <p><em>See Also: <a href="">Is a director of lean initiatives (or something similar) a positive or a negative?</a></em></p> <p><strong>4. Be open and straight-forward in conveying your understanding of why they are skeptical.</strong> In many cases they have good reason to be. For example:</p> <p class="rteindent2">Traditionally there are serious problems with data integrity -- the old &ldquo;garbage in/garbage out situation -- because of poor data accuracy. Operations is griping about getting incorrect data to work with and the finance teams knows that operations is the source of much of the wrong data. Our response: &ldquo;Guilty as charged&hellip;.and here&rsquo;s what we&rsquo;re going to do about that with your help Ms. Finance Mgr.&rdquo; Launch a joint project, analyze the key processes that aren&rsquo;t working, find and eliminate root cause and move on to the next one. Then build on the success project by project.</p> <p class="rteindent2">Traditionally, if the factory and accounting people even knew what the accuracy was for bills and routers, it wasn&rsquo;t nearly good enough to maintain accurate cost or inventory records. So accounting requires that the business shut down and take a physical inventory every quarter and/or year so they can reconcile the books. Why? Because a physical inventory had better accuracy (at least in the minds of the accounting folks) than to reconcile against the book value of inventory. Why? Because there is no confidence in the accuracy of bills and routers not to mention the reporting accuracy issues noted above. Again, operations is typically guilty as charged.</p> <p class="rteindent2">Who in accounting, sales, marketing, engineering, operations, etc. doesn&rsquo;t want more accurate costs? Of course everyone does. Standard cost systems are notorious for providing costs that subsidize the &ldquo;dog orders,&rdquo; i.e. hard to make &ldquo;B&rdquo; and &ldquo;C&rdquo; items, high scrap, short orders, etc. while penalizing the &ldquo;A&rdquo; items where competition is the most fierce. Well with engineering, production scheduling, accounting, marketing, operations help let&rsquo;s clean up the bills and routers, reporting accuracy, etc. as noted above so that we have the best information possible under the traditional cost accounting system. That said, there are typically lots of &ldquo;allocated costs&rdquo; that don&rsquo;t necessarily tie directly to all the products taking the allocation. It&rsquo;s done because the standard system does not know -- because we don&rsquo;t know -- what the true costs are.</p> <p class="rteindent2">Enter the discussion about improving flow and the accompanying performance benefits; convert operations from running large batches through a series of &ldquo;traditional departments&rdquo; into smaller batches that have organized products by common routings, i.e. creating manufacturing cells wherever possible and &ldquo;virtual cells&rdquo; when there are &ldquo;monuments&rdquo; in the process that simply aren&rsquo;t economical or practical to move. The general positives that begin to appear on day # 1 are many. Who doesn&rsquo;t want less working capital, (read CASH) tied up in unnecessary inventory? Who doesn&rsquo;t want excess inventory eliminated so problems can be seen and solved closer to real time? Who doesn&rsquo;t want improved cycle times to improve service to customers? Who doesn&rsquo;t want more accurate costs that are now tied to discrete value streams with far fewer allocations? Who doesn&rsquo;t want skilled operators, mechanics supervisors and engineers all working in a line-of-sight flow to spend more time improving the process instead of chasing down missing materials, mechanics who can&rsquo;t find parts, missing supplies, etc.</p> <p><em>See Also:</em> <a href=""><em>Ask Larry your lean leadership question!</em></a></p> <p>We could of course go on and on with more examples but the key take away is this: We are challenging several decades of traditional factory mindsets and practices that were wrong-headed and stodgy on their best day. The finance team, top to bottom, has justifiably grown up in their own paradigm over this period much like the inspectors in the old factories. &ldquo;We can&rsquo;t trust those manufacturing guys to do the right thing and they don&rsquo;t want our help so we&rsquo;ll create as many controls as we can&rdquo; to reconcile the books every quarter and satisfy the audit committee, the IRS, the SEC, GAAP, FASB, Sarbanes Oxley, etc. etc. etc.</p> <p>We need to help them elevate their thinking about the important contributions they can make to actually improving the business!</p> <p>With the huge progress that results from the collaboration and focus described above, we will have changed our relationships with our finance team counterparts. Why? Because we have set the example with holistic business thinking (not &ldquo;silo&rdquo; thinking) that we&rsquo;ve brought to the table on issues important to the company.</p> <p><strong>Big Mistake: Lean Accounting Too Soon</strong></p> <p>At that point it is my strong belief that we can engage in a very positive discussion, for example, about using the standard cost system to create a much more accurate value stream costing system for all products.</p> <p>I think one of the biggest mistakes companies make is to start pushing &ldquo;lean accounting&rdquo; too soon. To think CFOs and audit committees are going to go from the current paradigm to lean accounting the first year or two of the journey simply isn&rsquo;t going to happen. So don&rsquo;t expect it and, most importantly, don&rsquo;t throw in the towel because of this. It may take years to transform this part of the business infrastructure.</p> <p>Work harder at getting the things done that are important to the business and that require a joint effort. &nbsp;My experience has been that value stream accounting only makes sense when the correct process infrastructure is in place &hellip; and that most companies have much work to do there before they worry about changing the cost system.</p> <p>I&rsquo;ve spent much of this response trying to understand and defend the finance team&rsquo;s lack of interest in our lean revolution. Now that our finance leaders understand that we understand, I&rsquo;d ask one thing of them: Please grab an oar and start rowing!</p> <p>&ldquo;Obstacles are things a person sees when they take their eyes off the goal.&rdquo;</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; --E. Joseph Cossman</p> </div> <div class="field-ugc-qa-workflow"> Accepted </div> <div class="og_rss_groups"></div><p><a href="" target="_blank">read more</a></p> Lean / Six-Sigma Corporate Culture Finance Operations Tue, 15 Apr 2014 17:19:46 +0000 116451 at The Global Manufacturer: Workplace Safety: Small Failures and the Occasional Catastrophe <div class="node-body article-body"><div></div>What makes a manufacturing leader these days? To the list of flexible, innovative 
and efficient, be sure to add ethical and safe. </div> <div class="og_rss_groups"></div><p><a href="" target="_blank">read more</a></p> Competitiveness Corporate Culture Corporate Responsibility Safety Gold Mon, 14 Apr 2014 21:46:00 +0000 115471 at The Manufacturer's Agenda: Fixing Our Workforce Education and Training Mistakes <div class="node-body article-body"><div></div>After decades of ignoring manufacturing and production knowledge and skills development, the U.S. is starting to pay attention. National programs to recruit students to consider manufacturing careers and Bureau of Labor Statistics is tracking manufacturing-related skills. </div> <div class="og_rss_groups"></div><p><a href="" target="_blank">read more</a></p> Education / Training Corporate Culture Labor / Employment Policy Recruiting / Retention Strategic Planning & Execution Gold Fri, 11 Apr 2014 21:53:00 +0000 115481 at <p>The Bureau of Labor Statistics now tracks the value of manufacturing-related skills.</p> Lean, Continuous Improvement Strategies Take Center Stage at the 2014 IndustryWeek Best Plants Conference <div class="node-body gallery-body"><div></div>Manufacturing operations executives will discover the successful strategies from manufacturers who are the best of the best, the winners of the IW Best Plants Award program.</div> <div class="og_rss_groups"></div><p><a href="" target="_blank">read more</a></p> Change Management Customer Relationships Lean / Six-Sigma Process Improvement Corporate Culture Engagement Product Development Quality Growth Strategies Information Technology Strategic Planning & Execution Supplier Relationships Teamwork Robotics Leadership Operations Thu, 10 Apr 2014 14:32:00 +0000 114911 at Lessons from the Road: Build Culture Deliberately <div class="node-body article-body"><div></div>Is your company culture an accident? These three tactics can help you build 
the culture you really want.</div> <div class="field-content-focus"> <span>Content Classification:&nbsp;</span> Influencer </div> <div class="og_rss_groups"></div><p><a href="" target="_blank">read more</a></p> Lean / Six-Sigma Corporate Culture Mon, 07 Apr 2014 21:58:00 +0000 115491 at A Little Bit of Everything: Lean Leadership, IW Best Plants and a Request <div class="node-body blog-body"><div></div>Have you downloaded the 2014 IW Best Plants competition application? Visited our Ask the Expert: Lean Leadership feature? Read the latest column from new contributor John Dyer? Have you shared what you'd like to see on <a href="" title=""></a>? </div> <div class="og_rss_groups"><ul class="links"><li class="og_links first last"><a href="/blog/labor-operations-leadership">Labor &amp; Operations Leadership </a></li> </ul></div><p><a href="" target="_blank">read more</a></p> Change Management Lean / Six-Sigma Corporate Culture Engagement Maintenance Quality Growth Strategies Safety Strategic Planning & Execution Teamwork Leadership Workforce Labor &amp; Operations Leadership Fri, 28 Mar 2014 14:37:00 +0000 115101 at Does Your Manufacturing Plant Excel? <div class="field-deck"> If yes, then it is time to participate in the IndustryWeek Best Plants competition, IW's annual salute to outstanding manufacturing facilities in North America. </div> <div class="node-body article-body"><div></div>If yes, then it is time to participate in the IndustryWeek Best Plants competition. This annual salute to outstanding manufacturing facilities in North America recognizes plants that are on the leading edge of efforts to increase competitiveness, enhance customer satisfaction, and create stimulating and rewarding work environments.</div> <div class="og_rss_groups"></div><p><a href="" target="_blank">read more</a></p> Change Management Lean / Six-Sigma Corporate Culture Engagement IW Best Plants Quality Teamwork Supply Chain Workforce Wed, 26 Mar 2014 18:08:00 +0000 110071 at The Role of Finance in Manufacturing Excellence <div class="field-ugc-expert"> Ask the Expert <a href="/expert/ask-expert-lean-leadership">Ask the Expert: Lean Leadership</a> </div> <div class="node-body question_and_answer-body"><div></div>How do I get finance and operations to work effectively together to use Lean/Six Sigma tools to improve operations?</div><fieldset class="fieldgroup group-user-info"> <div class="field-ugc-user-email"> <span>Your Email:&nbsp;</span> <a href=""></a> </div> <div class="field-ugc-user-name"> Posted by Jill J. </div> </fieldset> <div class="field-ugc-expert-answer"> <span>Answer:&nbsp;</span> <p>This question comes from a former CFO who now is semi-retired and consults part-time.&nbsp; His mindset on the role of finance in manufacturing excellence is enlightened and current and I appreciate his interest in raising this question:&nbsp; &ldquo;How do I get finance and operations to work effectively together to use Lean/Six Sigma tools to improve operations?&rdquo;</p> <p>First let me say congratulations for your interest in leading the finance function to become more involved in achieving and sustaining excellence!&nbsp; That&rsquo;s so refreshing but unfortunately very rare in my experience.&nbsp; It&rsquo;s frustrating to see so much ignorance and resistance from a group that should be providing generous support and participation.&nbsp;</p> <p>With the comments that came along with your question you have a great grasp of the importance of these cross-functional relationships and their integration around a common objective, i.e.&nbsp; growing the business and making it more profitable.&nbsp; After all, isn&rsquo;t that &ldquo;<em><u>The Goal</u></em>&rdquo;?&nbsp; (Per Eli Goldratt&rsquo;s book!)&nbsp; Doesn&rsquo;t a deeper level of understanding and involvement by the finance team bode well for the businesses&rsquo; customers and other major stakeholders?&nbsp; Doesn&rsquo;t that help secure as well as grow manufacturing jobs in the U.S.?&nbsp;</p> <p>So how do Manufacturing/Operations and Finance leaders partner to change the paradigm and deliver continuous improvement (CI) for the business?</p> <p>Frankly, I&rsquo;m surprised your operation&rsquo;s counterpart hasn&rsquo;t reached out to you.&nbsp; That&rsquo;s a bad sign in my experience in terms of whether or not the senior ops person really &ldquo;gets it.&rdquo;&nbsp; This person should be banging on your door to educate/train up the CFO to get their &ldquo;light bulbs&rdquo; turned on brightly in support of CI.&nbsp; That said, why don&rsquo;t you take the initiative and set up a meeting with just the two of you and start the meeting with &ldquo;what are the big picture objectives and how can I help?&rdquo;</p> <p><em>See Also: <a href="">Ask the Expert - Is a &ldquo;director of lean initiatives&rdquo; (or something similar) a positive or a negative?</a></em></p> <p>You may get suggestions on a variety of topics where operations doesn&rsquo;t feel much like your customer on a number of the things you require, do or don&rsquo;t do, etc.&nbsp; So go into the meeting with big ears and listen first.&nbsp; And make a commitment to ask for operations&rsquo; help by participating on a finance team&rsquo;s project to improve a process.&nbsp; Perhaps someone in manufacturing can teach your folks how to do a Kaizen event or how to construct a value stream/process map.&nbsp; That will provide tangible evidence that you &ldquo;get it&rdquo; and are committed to help.&nbsp;</p> <p>Following that collection of ideas/concerns about how finance can improve processes to help operations, go prepared to talk about the major drivers of cost/waste from your perspective.&nbsp; For example, if you look at how much it costs the company each year for scrap, communicate the size of the opportunity if, together, you could reduce that number in half.&nbsp; How would that convert into improved sales and margin?&nbsp; Into new constraint capacity without investing capital?&nbsp; In other words, help to surface where the major spending is occurring on things operations can impact significantly, and often quickly as well.</p> <p>Or, perhaps, the company is in an acquisition mode or has high capital spending forecasts for the next 2-3 years.&nbsp; An infusion of cash would be very helpful to the business.&nbsp; So take in information re: how much working capital (read CASH) is tied up in inventory.&nbsp; How much of a one-time cash harvest is available if total turns in operations were 12 instead of 3?&nbsp; Or 50 instead of 12?&nbsp;</p> <p>Since senior executives always speak in the language of money, help provide the details as well as the resources to help wherever appropriate.&nbsp; Be responsive to opportunities where you may be able to provide more actionable metrics or possibly help support operations with the IT group to quickly provide easier access to data, friendlier formats, etc. for use in problem-solving.</p> <p>Finally, communications are key to continue to develop the relationship.&nbsp; Schedule a 30 minute meeting with your operations counterpart once a month just to touch base on the joint agenda you&rsquo;re working. Routinely invite the operations executive to participate in your quarterly or annual conferences of finance leaders and ask the operations executive to extend an invitation to you and/or key contributors on your staff who may be directly involved in providing important support.&nbsp;</p> <p>This will also send powerful signals to the rest of the finance and operations organization how important it is for both teams, top to bottom, to embrace the fact that we&rsquo;re all on the same team and trying to accomplish the same important improvements for the company.</p> <p>&ldquo;The greatest danger for most of us is not that our aim is too high and we miss it but that it is too low and we hit it.&rdquo;</p> <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Michelangelo (1475-1564)</p> <p>Larry E. Fast</p> </div> <div class="field-ugc-qa-workflow"> Accepted </div> <div class="og_rss_groups"></div><p><a href="" target="_blank">read more</a></p> Change Management Lean / Six-Sigma Corporate Culture Quality Finance Tue, 25 Mar 2014 16:32:36 +0000 114631 at Manufacturing in America Videos: Gary Hamel's Hierarchy of Human Capability at Work <div class="node-body page-body"><div></div>Hear leading management thinker Gary Hamel discussing why it's important to create an work environment in which people are willing to bring their intellectual gifts to the job every day.</div><div class="og_rss_groups"></div><p><a href="" target="_blank">read more</a></p> Corporate Culture Engagement Innovation Tue, 25 Mar 2014 14:18:55 +0000 114601 at The Most Ethical Manufacturers in the World [SLIDESHOW] <div class="node-body gallery-body"><div></div>Ethical lapses can spell financial disaster for companies. The manufacturers in the 2014 World's Most Ethical Companies list work hard to mitigate such risks with programs to protect people and the planet.</div> <div class="og_rss_groups"></div><p><a href="" target="_blank">read more</a></p> Competitiveness Corporate Culture Corporate Responsibility Fri, 21 Mar 2014 18:24:00 +0000 114081 at