Continuous Improvement -- Impatience As A Virtue

Dec. 21, 2004
Quick hits should hit the bottom line.

Every operations manager I've ever met has a list in his or her head. It's what pops to mind when someone asks, "What are you working on?"

Today's crisis may be at the top, but below that is a list of the projects they have going that they hope will move operational performance forward over the next 12 months. The list includes upcoming kaizen events, new technology implementations, ongoing Six Sigma projects or simply "areas of opportunity" targeted for improvement.

The trouble with many such lists is that the projects are scattered across the operation, crisis points clamoring for attention, far removed from the profit objective of the business.

After such problems are fixed, too many manufacturing company CEOs are left wondering, when they see and hear about all of the great things happening in the factory, why nothing is showing up in the financials. If you don't factor in the bottom-line impact of such initiatives, it's impossible to know where to start.

Whether you hire someone to help or go it alone, when it comes to transforming business processes with the bottom line in mind, there are some lessons to be learned from consultants. John Kim, chief operating officer at Iowa-based Simpler Consulting, talks about "pay-as-you-go results."

Offering an example, he says a pair of week-long kaizen events with two teams of six people -- 12 man-weeks of labor plus the cost of a consultant -- should deliver a 90-day payback. Any longer than that, and the consultant starts being viewed as a cost rather than an investment.

Sure, consultants have to continually justify the value of their services to their clients, sometimes to the detriment of longer-range initiatives. But that's no reason why operations managers shouldn't set similar targets and show a similar impatience when it comes to their own process-improvement projects.

There are a number of approaches to ensure a quick and lasting payback. Kim says he asks clients to identify the two measures that, if they were to improve by double digits in the next 12 months, would have the biggest impact on the success of the business.

It might be a productivity increase, a labor-cost reduction, freed-up capacity or improved cash flow. If management's response is increased sales or more volume -- as is frequently the case -- he asks them to identify what would drive more sales. A price cut? A reduction in order-to-delivery times? Quality improvements? Quicker new-product introductions?

If sales alone is tasked with boosting revenues, that "makes the entire organization outside of the sales and marketing group, say 'It's not my problem.'" Kim observes. "You have to earn the right to increase sales, and that right comes from delivering better value to the customer."

Once those key factors that will deliver better value to the customer have been identified, the problem areas that, when fixed, will have the greatest impact on the business, tend to reveal themselves.

The trick is prioritizing your initiatives so that they build upon one another, incrementally delivering results that roll forward in a snowball effect. That's when the returns really start to show up in the form of dramatic cost reductions and, if customer value has been enhanced, increased sales.

It's a common lament that short-term thinking is at the heart of everything that's wrong in American business. Bottom-line thinking isn't short-term thinking. Getting a company back on course or transforming a culture requires a long-term commitment.

Just because something requires a long-term commitment, though, doesn't mean you should have to wait very long before you start seeing results. Quick bottom-line results, in fact, will reinforce a long-term commitment. When it comes to your process-improvement efforts, CEO buy-in is just as important as employee buy-in. The journey may be long, but it should pay for itself.

David Drickhamer was IndustryWeek's Editorial Research Director.

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