QUESTION: How do I get finance and operations to work effectively together to use Lean/Six Sigma tools to improve operations?
ANSWER: This question comes from a former CFO who now is semi-retired and consults part-time. His mindset on the role of finance in manufacturing excellence is enlightened and current and I appreciate his interest in raising this question: “How do I get finance and operations to work effectively together to use Lean/Six Sigma tools to improve operations?”
First let me say congratulations for your interest in leading the finance function to become more involved in achieving and sustaining excellence! That’s so refreshing but unfortunately very rare in my experience. It’s frustrating to see so much ignorance and resistance from a group that should be providing generous support and participation.
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. growing the business and making it more profitable. After all, isn’t that “The Goal”? (Per Eli Goldratt’s book!) Doesn’t a deeper level of understanding and involvement by the finance team bode well for the businesses’ customers and other major stakeholders? Doesn’t that help secure as well as grow manufacturing jobs in the U.S.?
So how do Manufacturing/Operations and Finance leaders partner to change the paradigm and deliver continuous improvement (CI) for the business?
Frankly, I’m surprised your operation’s counterpart hasn’t reached out to you. That’s a bad sign in my experience in terms of whether or not the senior ops person really “gets it.” This person should be banging on your door to educate/train up the CFO to get their “light bulbs” turned on brightly in support of CI. That said, why don’t you take the initiative and set up a meeting with just the two of you and start the meeting with “what are the big picture objectives and how can I help?”
You may get suggestions on a variety of topics where operations doesn’t feel much like your customer on a number of the things you require, do or don’t do, etc. So go into the meeting with big ears and listen first. And make a commitment to ask for operations’ help by participating on a finance team’s project to improve a process. Perhaps someone in manufacturing can teach your folks how to do a Kaizen event or how to construct a value stream/process map. That will provide tangible evidence that you “get it” and are committed to help.
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. 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. How would that convert into improved sales and margin? Into new constraint capacity without investing capital? In other words, help to surface where the major spending is occurring on things operations can impact significantly, and often quickly as well.
Or, perhaps, the company is in an acquisition mode or has high capital spending forecasts for the next 2-3 years. An infusion of cash would be very helpful to the business. So take in information re: how much working capital (read CASH) is tied up in inventory. How much of a one-time cash harvest is available if total turns in operations were 12 instead of 3? Or 50 instead of 12?
Since senior executives always speak in the language of money, help provide the details as well as the resources to help wherever appropriate. 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.
Finally, communications are key to continue to develop the relationship. Schedule a 30 minute meeting with your operations counterpart once a month just to touch base on the joint agenda you’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.
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’re all on the same team and trying to accomplish the same important improvements for the company.
“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.”
Larry E. Fast