Sunday, May 21, 2017

Driving Improvement Through Systems Thinking

"Management of a system requires knowledge of the interrelationships between all of the components within the system and of everybody that works in it." W. Edwards Deming 

One important discovery people make when they start on a lean journey is how much they still need to learn about their business.  Although they may have extensive knowledge about individual parts of their products, processes, markets, etc., lean thinking forces them to connect the components as a system, which is something many organizations have never done before. 

When starting an improvement effort, I usually ask about the minimum target the team is attempting to achieve.  The answer is often something made up on the spot or a generalization, like as much as possible.  Improvement efforts should generally be driven by the actual requirements of the business.  For example,  if a company determines that the time between a customer placing an order and receiving the product is too long, it should determine an improvement target based on what the business needs.  If it currently takes 42 days and customers expect to receive the product in 22 days because of their needs or what competitors are offering, the minimum improvement needed is 20 days.  Although the gap appears to be significant, people will look at it as if it is based in reality, rather than a target that management dreamed up.  So,  instead of thinking of it as an impossible target, it becomes possible and something that the business needs to survive.  Attempts to go beyond the 22 day target can be attempted later, but should still be based on strategic reasons. 

Although the concept appears simple, it can become much more difficult when applied to something deeper in the business than a product lead time.  In an oil and gas operation, for example, suppose it is taking too long to change out filters on a compressor.  Setting an improvement target would require first understanding what "too long" means.  This involves quantifying the compressor's contribution to the overall system, and includes things likethe overall production target; uptime of the facility required to meet the production target; uptime of the subsystem where the compressor is located in order to meet the facility uptime; the compressor startup time after maintenance; the current uptime of the compressor; and the time needed to change the filters.  By understanding how all of these elements connect and contribute to the production target, it becomes easier to accurately determine the gap between the required time to change out filters and the actual time. 

The more people learn the connections the components have with each other to achieve the overall business objectives, the easier it will be to see the problems and set improvement targets based on reality rather than gut feel.  It is not enough for people to know that the work they do contributes to the organization's purpose and objectives - they must know how.  This comes through a continual focus on coaching and basing improvement activities on learning, which happens through questioning, discussing, and connecting to gemba. 

Sunday, April 30, 2017

Short-Term vs Long-Term: They Both Matter

Over the years, I have found many organizations the lack the ability to effectively balance short-term pressures with long-term improvement.  The situation causes frustration in people because, in the end, the short-term virtually always wins while the focus on the long-term suffers. 

There are a number of reasons for tendency toward short-term thinking.  First of all, people tend to be measured and rewarded based on achieving current year targets much more than long-term improvements.  Another factor driving a short-term focus is the targets are right in front of people.  The gaps are easy to see and it's clear that, if the problems are not addressed immediately, meeting the targets may not be possible.  Long-term gaps are also more difficult to measure and it's easy to justify dealing with them later. 

Which is More Important? 

So how should people deal with this type of situation?  We can't ignore the short-term targets because they are often necessary to assure we will be around for the long-term.  On the other hand, the more we ignore the long-term, the more we jeopardize our survival.  Regarding the question of which is more important, the answer is actually they're both important.  Customers, as well as investors and fellow team members, rely on our ability to deliver what we promise. 

Assuming that annual targets were set based on current capabilities, we should be able to meet them with enough focus and daily problem-solving.  After all, we made a commitment, so we should feel compelled to meet it.  On the other hand, if the targets do not have some semblance of reality, the company has much bigger problems, and meeting them most likely won't happen with or without a heavy focus and effort. 

When a problem arises today that will affect meeting short-term targets, it is difficult for most people to ignore it.  People will naturally jump in to address the problem and get performance back on track, especially if nobody else is available or a particular type of expertise is needed. 

The real problem for the organization occurs when people get so consumed with short-term problems that the long-term becomes an afterthought.  In reality, it seems that the poorer we are at taking care of the long-term, the more short-term problems we battle year-after-year. 

Implementing the 80/20 Rule 

I have found that the best way to assure we take care of both short- and long-term objectives is to consciously split time between the two, and in the most general terms, the split to be 80/20 (80% on the short-term and 20% on the long-term).  This is a general rule because the closer one is to where direct value is created (e.g., the factory floor in manufacturing, the sales counter in retail, or the wellhead in oil and gas production), the more time is focused on short-term objectives.  For example, a team member working on an assembly line has to focus most of his or her day on performing work within takt time that meets standards.  Although problems will regularly arise that the person will need to address, they are generally related to short-term safety, production, quality, and cost targets.  For this person, the split may be 95/5. 

Long-term projects, whether new or carried over from previous periods, should be apparent at the start of year when annual plans are being developed.  Making sure that these projects make their way into the 20% is important at this point, as is assuring that they require no more than 20% of the person’s effort.  Catchball and careful planning is critical to align expectations in the split between short-term and long-term focus, as well as the specific projects that fall into the 20%. 

As with any project, whether related to the short-term or long-term, clear objectives are needed along with a detailed and measurable plan.  The better and more measurable the plan, the easier it is to ensure progress.  Implementing a rhythm for regular reviews is necessary to assure the project is progressing according to the plan, and to determine whether changes in the plan, priorities, or resources assigned are needed to get it back on track.  We all know how to measure the short-term targets – it's the longer-term projects that require serious thought to determine the right measures.  Measuring progress to a project schedule will help but measuring quality of deliverables along the way is even better. 

Applying the 80/20 rule and ensuring that short-term and long-term objectives are met requires that managers be close to team members and truly understand what is going on in the workplace.  Rather than hearing about delays when it is too late to help make adjustments, managers must have enough awareness to provide help to get the project back on track before targets need to be changed. 

Intention is Everything 

It should be noted that none of this applies to an organization where meeting short-term targets is everything and commitment to the long-term consists of nothing more than words.  If the environment is so toxic that shipping defective products or cutting corners just to meet short-term targets is the norm, it has much deeper problems and attempting to manage through an 80/20 split will do little to help.  Like most things in business, long-term success begins with an obsession around understanding and meeting the needs of customers. 

Just like short-term objectives, long-term projects need to have targets based on successfully progressing plans, and these targets must be reviewed regularly – at least monthly – to ensure they are on-track and understand if help is needed.  If the split generally follows the 80/20 rule, and long-term commitments are taken as seriously as short-term targets, the chances of success will increase.  Discipline is needed to fight the tendency to put off developing or maintaining the measures and to skip the reviews now and then.  Like much of lean thinking, the concept is simple, while making it work effectively requires a lot of focus, effort, and consistency in behavior.