Continuous Improvement CI squared TQM

TQI, Etc

They basically represented the same things with different names. What we are going to do now is take the same issues and add one thing…..SPEED, SPEED, SPEED, Speed is the focus of cycle time reduction…it’s that simple.

Let me ask you a question…Is quality a competitive advantage?

Our experience is that today quality is not a competitive advantage. I usually hear a rumble in the crowd when I say that. THE ABSEN CE of quality is a competitive DISADVAN TAGE. We have been through the quality revolution. If you don’t have it you’re not even in the game. Quality today is more the price of admission.

Once you’re in the game, how do you compete? You compete on flexibility, adaptability, and speed. An example of this can be seen at Toyota, they have mastered the idea that the key ingredient to competition is SPEED, Speed, Speed. Toyota was the one that originally developed the Lean concept. They can provide a car, from order to delivery in days where some U.S. manufacturers are still out to weeks.

Where does cycle time fit? Cycle time does not take anything away from quality. You will continue to use and build upon those strategies that have allowed you to achieve your current level of success. The difference is the added element of speed. Quality must remain the number one issue. You can’t sacrifice quality do something faster. That would be totally inappropriate if not down right stupid. However, speed is not number 2 or 32. It is 1A. It is that close to being number one! A friend of mine is a fanatic car racer. One day his wife approached him with the statement that she thought that he loves racing more than he loves her. To which he responded that this is absolutely not the case. “I love you more than I love racing, but only that much more.” (Holding his fingers up about an inch apart.)

Quality is still the most important thing, but only by that much. After all, what good is the best product or service if it can’t be delivered on time and to the customer’s specifications? Or, if you’re not the first one to market, but rather the second, third, or fourth, you have just lost 60% of that market. Chrysler was the first to come to market with a four door mini van. It took GM two years to match it. Ford still ahs been unable to produce one. Chrysler will own 60% of the four door mini van market for life provided that their quality and ability to deliver does not falter. Speed is the competitive advantage.

The neat thing about cycle time reduction is that it builds upon and reinforces those quality initiatives and training that have preceded this focus. Total quality provides the umbrella, the philosophies, the team focus, and the basic skills of problem solving. Cycle time provides the added element of SPEED. You don’t have to reinvent the organization, that would be stupid. You just have to take the next logical step if you are currently using a TQM strategy. If you are not, cycle time can also be a stand alone. The beauty is that it is self funding, less structured, custom designed to fit your nomenclature, and dynamic. It is a tool. It is an investment. The returns can be astronomical. For example, we have taken a manufacturing process from 21 days to 6 days, taking $300,000 out of the process per month. It is not at all uncommon to see ranges from 10 to 20 to 30 to 50 times a return on investment. These are the kind of numbers that come back.

How can it be self funding? An example is that most businesses think about the cost of doing ISO, documenting their processes, or raising their quality. Yet, I tell clients that if we use lean/cycle time process methods while documenting them for ISO (or other documentation) that it will more than pay for the whole process.

The ability to achieve these gains is a function of how you diagnose your processes. We believe that it is important to stray from the traditional flow chart and look at the process through the eyes of how the product/service flows, AND how the people flow. By separating the two, you are forced to see different things. You might see the product/service sitting, while the people are very busy, as evidenced by high energy and frenzied activities. This is part of the 0.05%-5% Rule. High activity, but no value-added work being done. The traditional flow chart may show you that you are messed up, but it doesn’t indicate where and why. Our approach does and it does so by separating what the people are doing from what is happening to the product. This is particularly important when working with business processes such as, order entry, cash flow analysis, new product development, where it is difficult or impossible to see what is actually happening to a piece of paper. Production processes on the other hand are a little simpler, since you can actually see things moving or not moving. They can be timed, weighed, or measured; however, separating people from product is still a valuable way of getting an accurate picture of what is actually happening.

As you begin to look at cycle time many will think that you want them to work harder, or are thinking that you are initiating some other devious method to cause them pain. So let’s take a look at what CTR is not.

o It is not about throwing additional resources at a process to make it happen faster. o It is not about rushing the process, or turning up the assembly line speed. o It is not about working harder o It is not about working longer hours.

 In fact these are all counter to what CTR is all about. As an example, an organization that we are familiar with wanted to go paperless in their accounts receivable department. Before they threw technology a this process they decided to first examine the process to understand what they are actually doing. What they found was that their process was completely messed up. They determined that they routinely were spending 80% of their time processing mistakes. If they had gone paperless with a process that was structurally flawed, they would have spent all their time looking to correct errors with no paper to help them. It would have been a total nightmare. Throwing resources or technology at a problem is not the answer. Technology will not correct mistakes if the process is inherently flawed. Correct the process first then apply technology. If new product introduction is a problem, hiring more engineers and scientists will only result in taking twice as long to develop a new product. Let me ask you, what would happen if you work longer and harder in a process that is flawed?

Quality might go bad and frustration off the charts. You’ll also wonder where management’s head is. This is what has been done traditionally. We can’t do it any longer and expect to survive. There is so much waste in a process that is stupid, but the tendency is to change things that are actually adding value and change them, rather than looking at the 80+% things in a process that produce waste, cause complexity, are redundant, or are non-value added steps.

An example of wasteful processes occurred in an organization that had a problem in the mail room.

Each day the mail was delivered to the company by 8:30 a.m., but it didn’t get distributed until 2:30 p.m. the following afternoon. Everyone was unhappy, but no one did anything about it until they looked at the process.

Here is what they found. One person in the mail room weighed the mail that was delivered each day. This activity took 2 ½ hours every morning to complete. After the mail was weighed the mail person wrote a report that was distributed to 7 layers of management throughout the organization.

Why was this process put into place? Our guess was that a bunch of years ago someone wanted to justify an additional headcount and used this form of measurement as justification. We don’t really know for sure if this is correct but neither does the company. No one knew how this got started, but it eventually took on a life of its own and soon became policy. If you were to ask why they are doing it that way, they would probably say, “Because we’ve always done it that way.”

If you do the math this becomes frightening, 2 hours per day, 220 days per year, that’s 440 hours per year which equals 11 weeks spent weighing the mail and writing reports that no one reads and it was done for the last 16 years.

What a waste! I would be willing to bet there is not a company in this country that does not “weigh their mail.” They may call it something else, but they are “Weighing the mail.” Wasted time. Non-value added time. Doing things right, but doing the wrong things, because we’ve always done it that way.

Consider these numbers. Our experience in working with organization to help them analyze many core processes indicates that on average a person wastes 2-6 hours per 8 hour shift. That is not to say that they are goofing off, nor does it mean that they are not busy. However, it is important not to confuse activity with productivity, or doing things right versus doing the right things.

As organizations and individuals, we do this all the time. We once asked the president of one of our accounts, how many people work here? His response was about 10%.

We now ask how many are employed. When people challenge us with “Hey I work my butt off, what do you mean I’m not working?” Ask how much time do you spend walking around looking for something, calling someone back, putting out recurring fires, handling customer complaints, attending recurring meetings where there are no agendas and no outcomes?

When you truly examine your use of time, if you’re really good, you’ll probably find that you get 1-3 hours production out of an 8-hour shift, or if you use the 0.05%-5% rule, you’ll only get a good 3 to 24 minutes of productive, value-added work per day.

I just had a recent client that when I showed him how to double his entire business in just a few weeks, he balked. At first I couldn’t understand why anyone would not want to double his business and his income. The bottom line: his thought was that doubling his business would mean more work. As the business owner, he was putting in 12 hours a day and making less than $100/hour. Once we all understood his concern, we were able to show him how to double his business and do it in less than 8 hours a day, and at over $250/hour.

More often than not, the initial interest in CTR comes about as an interest in achieving efficiency or productivity-more with less. However, there is a huge gain as well on the effectiveness of a process. The basic premise is that I can’t make as many mistakes in 10 steps as I will in 100. Therefore, take the chances of making mistakes out of a process. The fewer mistakes the higher the quality and the higher the organization’s effectiveness. Every time there is a hand-off there is a chance of making a mistake. Cycle Time Reduction, when properly implemented, will improve both effectiveness and efficiency.

However, the real reason to do cycle time reduction is the third reason, to become more adaptable. Customers are more demanding and more sophisticated today than ever before. Therefore, to survive you must become more adaptable. As an example: Wal-Mart is the second largest purchaser of goods in the U.S. the federal government is number one. To do business with Wal-Mart you must meet their demands: put it on a skid with so many boards going in this direction, the product must be stacked only to a certain height, the bar codes must be at a specific location, you must deliver the order at a specific time and if you’re late you will be charged a late fee, you will be paid when we sell the product and we will not place an order, you must know when we need it. If you can’t do it, no problems, we’ll go someplace else. If you want to do business with us and sell volume you’d better get better fast and be more adaptable.

McDonald did not build their business on the quality of their product; they built it on how fast they get it to you. They created an expectation on the part of their customers that speed is a given. As a result of their performance, how long will you wait in line for a burger” I don’t know about you, but if there are more than 5 people in line ahead of me, I sometimes won’t even pull into the line of cars. While effectiveness and efficiency are important, I believe that the last, adaptability, is the most important reason to look at speed as a strategy, because your customers are getting wackier and more demanding.

The results of CTR are universal; improvement in employee morale, reduction in costs, improved on-time delivery, improved efficiency, greater effectiveness, greater adaptability, better understanding of the cost of each process sand the ability to better satisfy your customers. Many organizations make the mistake of thinking that improving processes for the sake of improving the process is what cycle time reduction is all about. They see it as a program. In truth, what is important in analyzing a process is to improve what comes out at the end of the process? Measurements of outcomes are critical. We used to believe that measuring activity such as the number of teams that are active, or the level of internal customer satisfaction was important. However, we have seen 10-30 teams in a company meet for over a year with no outcomes and having seen processes that were totally screwed up to satisfy an internal customer, with no regard to the outcome of the process, has lead us to conclude that measurements of activity levels and internal customer satisfaction alone are not valid measures in judging the effectiveness of an improvement process. The activity and internal customer satisfaction are important but only as a means to the end. Measurement must reflect what comes out of the process not the activity within the process. Therefore, process outcomes or results must be the central focus as the means of satisfying the external customer. They are your final judge.

It is important to look at the whole issue of reducing time by analyzing the resources that are used in a given process. The goal is to reduce the amount of time it takes to complete a process. In order to reduce process time a team must reduce the number of steps and hand offs, which will reduce the opportunity to create errors, which will minimize delays, which will enable you to maximize your most valuable assets, your people, by promoting a better understanding of the interrelationships of the process pieces and their impact on results. You’ll know when this has been accomplished because the process is made easy to use. Cumbersome or difficult processes either et circumvented, making them worse, or ignored. An example of a cumbersome process was the hiring process in one of our accounts. It actually took 3-4 months to put someone on the payroll even though the position was authorized and open. Because it was so difficult it was circumvented. Our new hire had been working a month or two before their first pay check caught up with them due to the process. Additionally, the attitude of the person that was eventually hired went from happy about being hired to frustrate. The frustration of those who ere doing the hiring was also extremely high, because it made them look ineffective to their new hire. When asked why this process was put into effect, the answer was that they didn’t know, but that it has been going on for at least 10 years. To put a dollar figure on what this process cost that organization would be difficult, but in terms of lost productivity, frustration, and low morale it would be a formidable number. It is all a matter of good people working in a bad process that is not easy to use and one that actually diminishes the use of assets.

Another major objective is that the process must be customer friendly. I n our approach, the customer is the external customer, period. We used to think of internal and external customers, but we started to see some of the most convoluted processes that were designed to satisfy the internal accounting customer> Therefore, the focus must be on designing processes that satisfy both, internal AND external customers.

We discussed the changing customer needs and providing a competitive advantage. Because of the ineffective use of resources, after the microscope has been placed upon a process, it is not uncommon to hear that 50 to 90% of the resources in that process had been removed. These resources are expressed in terms of people, space, and materials. That is how messed up most processes actually are.

Enable the company to focus on the customer. Initially, cycle time reduction focuses on processes not people. Dr. Deming said that 85% of your problems are process problems and 15% are people problems. Therefore, cycle time focuses on the part that is producing 85% of your headaches. By focusing on processes you must consider and measure the external customer, since we exist for them, the outcomes of the processes should be designed with them in mind. Without this external focus, we tend to design what we believe to be best for us. This focus more often than not will cause major problems. You know when a company has this internal myopia when you as a customer go to them with a problem and their response to you is, “But this is our policy, there is nothing that I can do about it.” The grim reaper is at their door step.

Can better predict and control change. Organizations that change management, rather than managing change will often mess up and lose a bunch of customers. As customer expectations change, so too must the organization modify their processes to reflect changing expectation. You don’t have any choice if you are to stay in business. Cycle time therefore is an outstanding model to drive change into an organization.

Effect major changes in complex activities in a Rapid Manner. The most complex processes are often the best candidates for cycle time reduction. Because the more complex the process the more screwed up it usually is. Often people within a complex process do not have a clue of either the outcome of a process, or what goes on before and after them in the process. As a result it is virtually impossible to manage the hand-offs if no one knows what is expected. When you don’t manage the hand-offs, the process becomes totally convoluted, confusing, and “silo” focused. Each person only does their job with little regard of results or for the ultimate user.

Effectively manages interrelationships. By understanding who is the hand-off’er and the hand-off’ee makes managing interrelationships more understandable both vertically and even more importantly horizontally. The horizontal relationships are critical, since that is how the work flows through the organization, across departmental lines, and this is how the external customer ultimately will best be satisfied.

Provides a systematic view of organizational activities. The traditional way of managing, defines the organization by department (sales, marketing, accounting, operations, and R&D). This philosophy produces and rewards “silos” and is counter productive to process (horizontal) management. Instead, it is important that we view these departments as part of interrelated processes that join together to produce results that fill customer needs. This then becomes a systems view of the organization and builds upon the interrelationships that make p the organization.

Additionally, cycle time will help to maintain focus on process, prevention of errors, and provide a measure of poor quality and develop a measurement system  that will focus on prevention and correction. It has been our experience that many organizations measure the wrong things. They do not measure those things that represent their future strength as defined by customer satisfaction, i.e., waste, on-time delivery, warranty claims, complaints, etc. Even if these things are being measured, we are finding that there are no processes in place to prevent them from recurring. In one organization that we recently visited, we asked them what they measured. The answer was quickly give, “We measure everything,” and we were shown a thick printout. When then asked, what do you do with that information? The answer was write reports. If you were to go back over the reports, you would find the same issues continuously recurring. If you were the customer, how satisfied would you be if you were forced to deal with the same errors, over and over?

In addition to defects we typically have no idea of how long it actually takes us to perform each function within a process, particularly in business measurements systems processes. Do you know how long it takes to enter an order, or how long it takes in accounts receivable, new product development? We don’t know. Often measurement systems for defects and corrective activity are non-existent or at best greatly flawed.

Helps the people understand how input becomes output. CTR helps everyone in the organization understand how input becomes output. Quality output is a result of good input throughout the process. It is impossible to achieve desired results unless everyone who provides input does it correctly. As Dr. Deming said, fi there is a problem at the end of the process, work up-stream, the problem is usually there. The computer saying of garbage-in, garbage-out becomes very clear as teams look “up-stream” in a process to better control the outcomes. The focus is on results, not just activity.

Helps people understand how good the company can be and how to get there. This is probably one of the greatest benefits the Lean/Cycle Time reduction process brings to a company. Very few people have any clue as to just how fast the process CAN be, or SHOULD be. Sometimes, just having that guideline will speed the process up several times. People left to do it the way it has always been done, or just to drift until it is done just won’t be as fast as someone trying to hit the standard.

The goal should be to become as good as you possibly can become rather than to achieve an arbitrary percentage improvement. Under our system, the teams will later set a specific goal on how good they can become after the process is understood and they know what they are up against. Why set a goal for 2 days when you might be able to get it down to two hours:? One manufacturing organization is now producing 50% more units per shift with 60% fewer resources as measured by people and square feet of production and warehousing. When they began their cycle time reduction approach they never thought they could get that good. Didn’t have a clue. That is why an organization should never begin this process with a specific goal such as reducing a process time by 20%. An approval process in an insurance company was reduced from 13 days to 1. If thy had set an arbitrary goal of reducing the time by 20% they would never have gotten as good as they have. As an aside, they now think they can get it down to 15 minutes and it is the people in the process that are making the call. Had management set the goal to go from 13 days to 15 minutes people would have wondered what they were smoking.

We have discussed what CTR is, what it is not, why you should get involved, now let’s consider its value. First of all, customers are demanding speed and flexibility. The results are exceptional, they are overwhelming. Since customers are demanding speed, this then will become the means of competition. When a customer wants a product or service and they have a good idea of how long they are willing to wait to get it. If you are to remain a player, you need to meet those expectations or you start to lose your customers.

Significantly reduce the cost to do business. There is no question that speed will significantly reduce the cost of doing business. I don’t use the term significantly lightly. It results in big dollars which drop to the bottom line quickly. Often the savings have been used to fund additional programs in the same fiscal year. It can be new found money.

And, in today’s international markets, much of the U.S. competition is the $0.90/hour workers in Asia. Just think what would happen if you could double your output, cut costs, cut inventory, and at the same time deliver the product in days instead of the 8-10 weeks products coming from Asia take by sea.

Customer retention, 5-1 ratio. Customer retention is also positively impacted. A fact that few organizations realize is that a customer is more willing to forgive a product failure than a service failure by a 5:1 ratio. If your car breaks down that is bad. But if you take it to a dealer to be fixed and it isn’t, that can be fatal. You have a 5 to 1 greater chance of losing a customer because of bad service rather than bad quality. As a result, organizations that are serious about growing their businesses must look at their service processes in order to improve their customer satisfaction. Additionally, it costs 5 times as much money to get a new customer as it does to retain existing customers. Therefore, strictly from an economic perspective, put your money on keeping existing customers happy. Speed and responsiveness will help do that.

Minimize customer defects and maximize use of assets. We had previously discussed these issues as a means of developing measurements and establishing processes to correct the defects/complaints. Assets are maximized as employees’ skills and knowledge are brought to bear on solving a problem and fixed assets are better utilized by cutting out the redundancies, waste, and rework.

Due date integrity. Due date integrity is yet another matter. When you order a product or service you want it on time. The customer doesn’t want to hear that your policies or processes will not allow you to deliver when it is wanted. One company that understands this concept is Adelphia Cable. They will install their cable service within one hour of the time you that want it, or the installation is free. You pick the hour and they will be there. Your time could be 2:30 a.m.; it doesn’t matter to them, because they know people work different shifts and different hours. Therefore, they adjust their processes to satisfy their customer’s wants. By the way, they haven’t given away many installations. They understand.

A competitive advantage. Speed will certainly provide a competitive advantage, we have explored that point.

It’s easy. In my opinion, the key point here is this last point, it is easy. The basic premise is that this is not hard work, but you must work hard at understand what your customers want, how you produce your products and services, and how you measure your progress. You don’t just wave your hands and it is done. You need to commit time and resources to make it happen, but it’s not difficult.

Think about the benefits to you as a company: improved capacity, reduced space, improved quality, greater flexibility, reduction in inventory, more effective use of time, improved on-time delivery, elimination of major expenses in processes, improved ROI, etc. The list can go on and on. My question is what other single improvement initiative could you bring into your organization that can give you all of these benefits? The answer is none. The pay backs are outrageous.

Think about the benefits to the customer and the benefits to your employees. There are no losers in this.

If it is all that easy to do and if it has all of those benefits, why doesn’t it work?

The greatest obstruction to a successful implementation of speed is absence of management support. This is the case with any change process. If top management is committed to the planned change, it will work. If they are only compliant, doing the absolute minimum, or their behavior is inconsistent with their words, not walking the talk, it is difficult to have a sustained successful change process.

Lack of specific direction. If there is no stated logical strategic reason for CTR there will be no focus or direction and the organization will be confused. They will view it with suspicion as some new management trick designed to make their lives miserable or to promote downsizing. So back into the fox holes they all go until, hopefully, this too shall pass over.

No measurements. What is measured is what gets managed, and what gets managed, gets repeated. The measurements must be consistent with what you are trying to achieve strategically. If management says that they are adopting a CTR strategy, but the results of increasing speed are not measured, then CTR goes right to the “Another great idea that didn’t work” cemetery. The impact that this has on the organization is to replace skepticism with cynicism. Skepticism is good. Cynicism is deadly. Cynicism is the result of having been lied to too many times.

Mass Training. Training everyone in the use of tools or techniques without immediate application gets lost from the time of training to application. While many consulting/training organizations may advocate this, a better approach would be ‘just-in-time” training, and even applying it to projects and processes in conjunction with the training. Use the process to train on and learn the steps.

No Expert Resource. While CTR is not difficult to implement; however, it is important in the initial stages of implementation to have an expert to assist. This will help to properly lay a foundation upon which you can build. The expert however, should be used to impart learning into your organization, rather than coming in and doing it for you. There are two types of outside experts, the “smart” ones and the “dumb” ones. The “Smart” ones spend all of their time telling you how dumb you are and how smart they are. Their recommendation will usually not stick because they saw your people as the problem rather than part o the solution. Additionally, the “smart” resource typically does not use or develop your internal assets to better understand the processes that would enable you to develop the long term strength of the organization. On the other hand, “dumb” experts believe that the answers to all of your problems can be found inside your own organization. The only reason that you haven’t found the answer is that you haven’t used the right tools or asked the right questions. Using the “dumb” expert is superior. They impart learning to your organization, they use your people to develop solutions, they work themselves out of your organization, and the knowledge can be used for additional improvement.

Education before Enlightenment. Without an understand of why CTR is being implemented it is difficult to get buy-in at all levels of the organization. The enlightenment must be at three levels, the organizational level, the customer level, and the personal level. The questions that must be addressed are: Why are we doing this and what is in it for me?

Slow Return on Investment. This has been one of the biggest and most legitimate raps that have been leveled on many quality improvement initiatives. Too many meetings and too slow to implement. Since speed is our focus, the CTR teams must get in and get out FAST.

By understanding these seven sings and designing an implementation process that eliminates each will allow you to strengthen your competitive position and to take advantage of your markets rapidly changing conditions and expectations.

If these sins are overcome, what in addition to the results we have already discussed can you expect to gain? To answer this question we might point out the following:

To get this kind of results and sustain the strategy requires:

• Monitoring progress against the vision, and emphasizing the gap that still exists.
• Involving key managers in ownership of the improvement of the critical business indicators.
• Impart learning in the organization, so that team members from one team can use their experience to attack other core processes.
• Align the recognition programs with the measurements that are being improved.
• Communicate the principles, objectives and measurements to everyone again and again.

To quote Yogi Berra, “The future ain’t what it used to be.” For you to compete in the future you can’t be what you used to be. Neither your competition, nor your customer will be the same so you really don’t have a choice if you are serious about growing your business.

Get fast or fall behind…..Your call!

The Leader’s Perspective
Helping People and Companies Worldwide Reach Further Than They EVER Thought Possible….FASTER