Sunday, 13 September 2015

Why do Lean initiatives fail in some organization?

  • Lack of CEO and Top Management involvement
  • Not educating or creating awareness about Lean and its purpose
  • Delegation to down without support
  • Changing priority based on the production volume
  • Not understanding the Big picture of organizational problem and prioritization
  • Keen on technical knowhow of tools and not on implementation
  • Lack of people involvement or engagement
  • No Indepth implementation of tools
  • Lack of facilitation and patience
  • Aversion to experimentation and trial

Misconception about Lean

There are some misunderstandings about lean and its application .Some of the misconception about lean are

  • Lean means cost cutting
No.Cost cutting means cutting down the expenses whether it is essentially required or not .Lean focusing more on cutting down the waste or unnecessary expenses, which is not adding value to business

  • Lean is for manpower productivity
Partially true. Lean is focusing on waste elimination or reduction in any form like man, machine, material, and method. By eliminating or reducing wasteful activities in format, manpower, material, machine, or process efficiency is improved. Hence, it is not only on manpower productivity alone.

  • Lean is applicable for manufacturing organization only
No. As said, lean is all about waste elimination. As long as activities are there in any organization, waste will be present .Wherever waste is there, Lean is applicable. It is not only applicable for manufacturing.

  • Lean can be implemented only in large organization
No. One of the assumptions is that implementing lean requires investment and only large organization can afford lean. Actually, understanding the lean concept, tools, and techniques is easy and does not require investement.Lean thinking and practices can be implemented in any size of the organization. In fact, Lean can be easily implementable in small and medium scale organization because of its size and activities involved.

  • Lean is all about 5S and Visual Boards
No. Most of the people think that doing Housekeeping (5S)  and putting display boards is lean manufacturing.Ofcourse fundamental requirement for waste elimination is housekeeping , ie keeping the workplace in order ,but that alone is not constituting Lean system. Lean is beyond implementing housekeeping practices.Similary visual management is one of the elements of lean system in which display and control boards are part of it. Hence, Lean is beyond 5S and visual boards or even it is beyond any lean tools and techniques. It is philosophy and way of conducting daily management.

  • Lean is for during lean seasons
One of the most misconception is that lean implementation is for not peak season as everyone is busy with activities and lean is for during lean season. Lean is nothing do with the busyness of people either peak or lean period. Lean is for waste elimination or reduction. In fact, implementing and practicing lean concepts during peak period may give more savings.

  • Lean can be useful during recession
Same as above assumption. There is no right time as recession or booming economic environment. In fact, if Lean is understood well and lean thinking is implemented internally, external factors will not affect the organization much

  • Lean is only for automobile and ancillary organizations
No. As said, Lean is nor for specific to any industries. Wherever there are activities involved, Lean can be implementable. Why it is popular in auto and ancillary industries is that the lean concept was evolved and tested first in auto industries.

  • Lean  implementation is time bound
No. No organization can claim that they implemented lean system thinking ,because fundamental of lean is zero waste, zero accident , zero defects and it is impossible to achieve and thus it calls for continuous improvement or excellence journey .Lean implementation is a process or journey .. It is not a destination.

What is Lean and Lean Manufacturing ?

         Lean is achieving “More with LESS”. It means achieving more with given resources or  achieving more with less resources .Mainly it is elimination  or reduction of waste .

         Lean manufacturing system can be understood by relating to the human body. If the person is lean means general understanding is that he/she   is free from unnecessary FAT in the  body, hence free from unnecessary side effects  like BP, Pain in joints, laziness etc.  And the person is perceived as healthy, more flexible, active etc.. The same way if the  Lean manufacturing  means , manufacturing system  is free from unnecessary fats like high inventory, high rejection, high breakdowns or line stoppages factors etc  which leads to more flexible in delivery, less lead time ,First time right , low cost of manufacturing and free flow of communication etc .

         Similarly, Lean System  or Lean Organisation means  free from unnecessary waste in the entire value chain starting from extended supply chain  system to  customer, even after sales service system .

Lean system Thinking is more than application of Tools and Techniques. It is a culture  or a way of working  or mindset of  everyone working for the organization.

Monday, 7 September 2015

How effective are you on managing assets?

         One of the factors for profitability is how you are managing the assets effectively. The assets can be your machines, buildings, facilities and of course your people. Let us discuss the depreciating assets like machines, equipment, and facilities. Effective utilization of asset helps you to serve your customer on time and best cost.In turn, it ensures the profitability. If you are not managing the assets well, you are incurring overhead cost of capital depreciation as well as on revenue expenses like maintenance, consumables, and power. It is the prime responsibility of business leaders to ensure he gets a high return on asset investment.

        Some of the pitfalls in managing the assets effectively

  1. Only concern on utilization, not on efficiency
  2. Not  much attention on basic maintenance activities
  3. Poor management of spares and consumables
  4. Idle time taken as granted as way of working
  5. Lack of training on usage of assets

Some of the indicators of poor asset management

Ø  Frequent breakdown
Ø  A Long machine idle time for setting up of tools / fixtures
Ø  More accidents and unsafe practices in and around  facilities
Ø  Actual production  output not matching with standard output
Ø  More rejection on produced output
Ø  Not able to release the facility for preventive / regular maintenance

The solution is that first understand where you are  in the overall effective utilization of facilities, then  understand the causes for the losses and write counteractions. Be aware of your revenue generation capability  per hour from your facility in line with market condition. That will bring many insights!

Why 1-1 coaching is required for CEO or Business Head ?

            Any transformation in the organization starts with leadership at the top.People follows the leader.Once the leader changes his mindset, beliefs, values, behavior and aligns the action in line with the higher needs, the entire organization starts follow. Even though the leaders are aware of the transformation process from various sources like books, training programmes, interaction with successful people etc still the real change should happen within. For some people, it is difficult to inculcate new thought process and evolve from self.They need trusted external source to guide and facilitate the transformation process with personalized format.The coaching process helps the leader at personal level to get transformed.
When 1-1 coaching is required:

When the leader wants to take the organization to the next level and willing to make it happen, but there is a gap between what he wants and what he is now.The 1-1 coaching process will help the leader to bridge the gap through personalized support   and professional help.

The following benefits the leader gets during the coaching

  • Clarity on what  he really wants to achieve
  • Knowing more about the self  in terms of strength, area for improvement
  • Identifying the beliefs which are holding or pulling down from achieving goals
  • Identifying the behaviors which are affecting the growth
  • Getting personalized help to convert the limiting beliefs into empowered beliefs
  • Getting hand holding during the change management process
  • Getting a constructive critique  on behavior which affects the growth 

Who has to change first for transformation ? Leaders or Employees?

            Most of the small and medium organization wants to transform the organization for breakthrough growth. Breakthrough growth happens only when there is radical thinking and execution happens on the way it does business on a daily basis. The person at the top thinks that people working for them have to change for transformation. However, the truth is first the leaders have to change their mindset, beliefs, and action for breakthrough growth. Transformation starts within or from inner to outer world. The organizational culture or the way it behaves is largely dependent on the leaders. People tend to follow the leader.

           First, it requires for a Leader like CEO or Head of the organisation. They need to change their beliefs towards transformation. They need to get convinced  about the need, the process of change  and its management.Once they mentally prepared for transformation, the team or employees need transformation  on beliefs and the process of change management.

           Hence the organizational transformation requires both leaders and employees  transformation

Are you running your business effectively?

Answering to the question of whether you are running your business effectively, most of the business leaders connect to profitability. If the profit is moderate, then they think   that they are running the business effectively. However, profitability is one measure, and consistent profitability is a function of many parameters.

On a dipstick level, we can measure the effectiveness of running the business effectively. Some basic measures are the indicators of the effectiveness.

Customer order fulfillment: 

                     Customer order fulfillment is one of the most important measures of your effectiveness i.e. How you are servicing your customer’s requirement on time every time. Meeting the customer’s demand on time with 100 % fulfillment guarantees to some extend about your business's longevity. Servicing the customer’s requirement is the reflection of your internal process robustness and the culture of the organization. In most of the small and medium size companies, meeting the customer requirement itself is the biggest concern.Inability to service the customer on time would eventually affect the profitability and survival. Fulfilling the customer’s requirement is hygiene factor that should not be compromised. If you are delivering the customer’s requirement on time and every time, then you can assume that you are running the business effectively.

Quality target fulfillment:

             In today’s competitive environment, delivering the product or service with quality requirement is assumed as a way of living from the customer’s perspective. Meeting quality target is a reflection of your internal quality assurance and control systems. One of the major irritant from the customer‘s point of view is delivering the products with inconsistent quality. If you are meeting customer‘s quality target with your internal quality control and assurance system, then you can assume that you are running the business effectively.

Cost Efficiency:

 You may be meeting the customer’s delivery, quality target, but if you are not making decent net profit, then you are not effectively managing the business. The reason could be your cost of running the business may be more than the revenue. Creating the surplus in the form of profit is vital for long term sustainability of business. Cost efficiency reflects how you are running the business effectively.

People engagement:

Ultimately, people working for the organization are a real asset and they determine the growth of the organization. If the people engagement is high, eventually it drives better order fulfillment, quality targets, cost efficiency and safety environment. If the loyalty and employee engagement is high, then you are running your business effectively.

   Relook your organizational existing customer service level,quality targets achievement, cost efficiency and people engagement level to assess your effectiveness level of running the business effectively.

Seven Principles for Sustainable Profitability

Irrespective of the economic environment and competition, it is possible to make SUSTAINABLE PROFIT if  the CEO or Business head  conducts the business in line with the following seven principles.

  • Drive Business with numbers
  • Communicate Business Target to Team
  • Delegate and Review Key Performance Indicators (KPI)
  • Keep the Cost Structure LEAN
  • Invest in People
  • Focus on Big Picture & Be flexible
  • Process Mindset

Principle 1: Drive business with numbers

                             The renowned management guru Peter F Drucker said “What is measured improves”.You cannot manage what you do not measure.In business, any outcome can be quantified and measured.For example, you can measure your entire year effort in terms of sales achieved or the profits achieved.Setting a business goal with numbers  brings the following benefits.

  • You are mindful of what exactly you require
  • It drives your behavior and action
  • You can always measure your performance against the target set  at any point of time and take corrective action
We have observed that  that almost all business owner or leadership team have the top line and bottom-line target for the business every year.But that alone does not drive the organizational action to achieve the result.You need to have target measurements for all the supporting functions  like manufacturing, purchase, quality, service, new developments, sales and marketing.If you have goals for each function with clear quantification in line with your top line and bottom-line, it will bring more focus down the line in the organization.
The point is that it is not only sufficient to have measure at top line and bottom-line and you need to have measurable across the functions and across the activities. Once you start to look at your entire organizational performance in terms of measurement, you become aware of the direction it is going and you can able to take action at the earliest.

Principal 2: Communicate business target to team

                                 Communication to all stakeholders is very vital to the business profitability.It may look strange or soft issue, but from our experience with small and medium business houses, we have found that lack of  communication or poor communication process within and outside the organization affects the daily deliverables.
 When we refer the term communication, it ranges from sharing   business targets to the routine day-to-day sharing of key information within a team. We have witnessed in most of the SME‘s the day to day functional information is held up with a few people and never communicated to relevant people. Any held up information or delayed communication only makes confusion, speculation and in turn low work performance.
 Most of the SME’s Business owners are not communicating their goals, business aspiration to their second level and down the level. In addition, top management is not showing enough interest or effort to communicate the business challenges, past performances etc to team. One of the reasons could be their inner fear about sharing the goals or not having awareness about the power of shared goals.
The advantage of shared goal and challenges is that it will bring the possibility of achieving faster than if they do not. The benefits of having regular, systematic communication process are as follows

  1. It brings top and first line people together and it increases  relationship
  2. When people are involved, engagement increases.
  3. There is scope of idea generation to meet the business challenges

Depending on the organizational size and structure , communication process need to be structurally designed at each level .That  can be  regular meeting forums, reviews and reporting .Management should also ensure the communication process through regular, systematic reviews, suggestion scheme, cross-functional activities, personal touch etc.

Principle 3: Delegate and Review Key Performance Indicators (KPI)

                            In most of SME business, the business owner or top management team will be performing all the work even though they hold a second tier backup. The reasons could be lack of delegation, the tendency of doing all by self. This attitude will affect the growth and the engagement of people in the will be relatively low.Even some management delegates the responsibility to down the level, but they will be lacking on monitoring the progress with key performance indicators. Both delegation and tracking people performance through KPI reviews should work hand in hand.Delegating responsibility without measurement or measurement tracking without people ownership does not serve the organization to accomplish business ends. As we have discussed in principle 1 on driving the business with numbers, each function, activities, and person in the organization must be measured with key indicators. Management must review the key performance indicators (KPI) against the target.

As we said in Principle 2, through the effective communication process, those KPI ‘s can be reviewed.In the absence of measured KPI  and delegation, meetings become one way communication.
The benefits of tracking and reviewing KPI’s
  • It provides  the status of the organizational performance at any point of time
  • Brings people together on common goals and enhances engagement
  • Allows the management to take counteraction on time to bring back the performance

Principle 4: Keep the cost structure LEAN

          One of the key reasons, the business struggles with profitability or loss is  its inability to keep the cost lean.Lean cost structure means that incurring the expenses that are essentially required and eliminating unnecessary cost elements or low return expenses. Each expense in the organization must have a reasonable rate of returns. Waste or unnecessary expenses make the cost structure very fat and overall product cost becomes uncompetitive in the market especially in the buyer’s market.

Approaches to keep the cost structure lean as follows.
1.      Track the each expense
2.      Get convinced about each expense and its  return on investment
3.      Set the cost efficiency target for each cost element 
4.      Continually look for waste elimination  opportunities

One of the trap most of the small and medium business slips is an  increasing overheads due to asset acquisition and utilization. From our experience with hundreds of business owners, they are very enthusiastic in going for expansion when they see the light of opportunities. When there is indication for new business or incremental volume, the tendency of business owners is to add the capacity even at the cost of borrowing .While it may be logical to go for investment when opportunity comes in, but the hidden fact that the existing equipments or facilities are not even effectively utilized 85 % as a rule of thumb for capacity utilization in manufacturing industries. Without effectively utilizing the current asset and adding new assets with the same efficiency loss, the business overhead would become fat. When the business environment is flourishing, the cost can be absorbed, but if the business is in recession or even the competition is aggressive on pricing, the  business cost structure will not be attractive in the market.You will be losing the opportunity as well your internal cost will go up. So next time, when you think about investment in capacity or facility, think twice, ensure that you are effectively utilizing the existing asset.

Principle 5: Invest in People

                           One of the highest return on investment is investing in people. Competition can copy your technology, process, cost structure, marketing strategy and it cannot copy your organizational culture. The positive, winning culture is cultivated only by  people working in  the organization. Investing in people consists of four components viz
  1. Recruit right people  for the position at best cost
  2. Develop the person's competency on technical, managerial and behavioral skill
  3. Engage them through aspirational organizational targets
  4. Empower them for extraordinary performance
 It is common in many of small, medium business to recruit people of any background just to fill the short-term need. This creates imbalance in organizational requirement and people capability which will affect  business profitability.While recruiting people, do the double check that job requirements  match with person ‘s potential, past performance  to deliver the result.Enhance your standard of expectation from people and your affordability to better pay to attract the best talents.

Most of the SME‘s owners have the wrong belief that providing training and education make the people to leave the organization for a better job opportunity. Remember that if you are not spending your energy., Money, time to develop your people on technical up gradation, managerial skill development and positive behavioral aspects, people anyhow stay in the organization and deliver lower performance.
One of the research findings on people engagement reveals that people like challenging environment and looks for new learning’s from work.People are leaving the organization when they feel that there is less scope for learning and less challenging environment, even though the pay and perks are relatively better.Engage your team through shared organizational aspirational goal and empower each one doing their job with freedom and accountability.
Compared to any physical assets, only human asset is not depreciating as years go by and this is the only asset brings more returns on investment and profitability to the business.Invest on it…!

Principle 6: Focus on big picture & be flexible

             Most of the small, medium business remains  in the same category for a longer duration  due to  the leader’s mindset and their focus on daily  routine management.As business owners  are pride about their core skill competency and they enjoy spending their most of the time in micro management.Managing a business is all about balancing all aspects of marketing, development, manufacturing, people, sales and finance management. As business owners, you must overview all aspects of business management and ensure that you are taking the organization to the next level with your big picture perspective rather than behaving as functional experts.

Simple rule to remember that LEARN TO UNLEARN and do not forget that the micro management, which brought you to this level may not guarantee you for next level growth. Hence, focus on business development, exploring new opportunities, people development, and finance management rather than managing your core functional expertise.
Also, be flexible and open enough to accept the latest trends in technology, marketing techniques, customer’s expectation, manufacturing, and quality assurance systems. Change your management practices in line with market expectation rather than only cherishing on legacy, which may not guarantee profitability and growth. Valuing legacy with futuristic thinking does your business fit.

Principle 7: Process mindset:

                       While  the organization is small, it is manageable with SOME HOW mentality.But it is difficult to manage all the cross functional deliverables without PROCESS BASED APPROACH while organization  is emerging into big.Even in small organization for sustaining the profitability, consistency of process is essential. The process can be manufacturing, customer quality, internal quality assurance ,recruitment , development , order fulfillment etc. . Establishing standard processes, educating the people in the process, ensuring process adherence is the prime responsibility of business owners for achieving sustainable profitability and taking the organization to next level growth.
Some business owners even use to argue that process and system is affordable for big businesses only as if it is a fancy element of business. Please remember that because of the process and system adherence only, business becomes BIG and not the other way round.

Bringing process excellence approach may take time and energy, but the result is significant and enables you to think on principle 6, big picture thinking, and really taking your business to next level growth...!

Paradigm shift on the purpose of the organization

      When we ask the question to  senior people in the organization, the most of them responds as “making  profits”. Of course it is one of the objectives and vital for survival. If CEO also thinks in the same direction, somehow the organization can fulfill  the  objective. But the sustainability becomes vulnerable. Hence, the CEO needs to redefine his definition of running an organization as “To Enhance the value to all stakeholders.” 

This paradigm shift in thinking process will guide the CEO and his team towards Process Excellence and stakeholder’s centric in whatever they do..

The stakeholders can be customers, employees, suppliers, financial institutions, Government, and statutory regulation bodies, and so forth. Each stakeholder is expecting a different value of the organization.

For example,

The Customer is expecting value from the organization in terms of  best product with superior quality and best price etc.

The Employee is expecting value in terms of pleasant / safe working environment, good pay and career growth and learning experience etc.

The Vendor  is expecting value in terms of regular schedules / order inflow, regular payment and cordial relationship etc.

The Financial institutions are expecting value in terms of credit worthiness and repayment of loans etc.

The Government /Statutory bodies are  expecting regular revenues from taxes, employment opportunities and cordial industrial relationship, environment preserving  etc.

   Even though the value expectations of each stakeholder are different, it can be met only when the business is creating SURPLUS in the form of PROFIT

The central challenge for CEO or business owners is to generate profit in a sustainable manner irrespective of outside factors like competition, macroeconomic condition, supply demand balance etc and enhance the value of all stakeholders.

Thursday, 3 September 2015

Why do organisations find difficult for transformation?

Business transformation is a radical change in turnover or profitability or culture change inside the organization.

The Head of the business or CEO's  involvement  is vital for the business transformation initiative.

The following factors contribute to business transformation

1. Compelling need or urge to CEO or head of the organization to transform. This need can be SURVIVAL threat or Pressure from customers or market to be competitive

2. Strong belief in  the future prospects of the business

3. Willingness to learn new and experimental 

4. Buy in from the second level leadership team about the transformation process

5. External Person or Facilitator is required to teach, facilitate, guide and criticize the team 

In the absence of above,the organization finds difficult to pursue any business transformation initiative.

Business Transformation- Definition

What is Business Transformation ?

Caterpillar to Butterfly-Transformation

Business Transformation is a radical change in either one  or all of the following parameters

1. Business Turnover Increase
2. Business Profitability Increase
3. People 's Thinking and Attitude towards Business 

Business transformation happens in stages, after which there is look back to old stage. 

Business transformation is not a

1.Small, incremental productivity improvement in a localized area
2.Small, incremental mindset change in  one segment of people in the organization