By Lawrence Rosier Principal Management Consultant September 3, 2014
This Technical Guide to Company Reform was written in support of ABC’s "Made In America" segment on ABC TV.
Why manufacturers need to Reform themselves to be more effective and efficient?
Toyota developed Enterprise Lean to bring all office and production line employees into the process of making the company efficient. Thousands of Toyota employees in Lean Teams make continuous improvements to their jobs every day while competitors like General Motors only use a few hundred engineers to make nearly all improvement decisions. The result is that Toyota has improved its quality grabbing market share from the Big Three. See also Article 15. Bringing Life to a Manufacturing Company’s Dead Zone
Objective:
To provide a simple method for implementing changes in a company that will make it competitive in the business world and less vulnerable to pressures to close its doors. This Guide is for obtaining the most effective and efficient internal company operations. But this is only part of the answer management must make sound external business decisions to remain competitive.
Understanding Efficiency and Effectiveness
There is a common misunderstanding of “effectiveness” the design and development of a manufactured part or a process which is done largely by Engineers and “efficiency” in the assembly of the part or operation of the process. The effectiveness of a part or process design nearly always comes before the efficiency of use and assembly is considered. The Lean approach empowers employees to implement changes in the design of the part or process to facilitate efficiency.
Company office Systems
In reference to office systems I seldom refer to efficiency without adding effectiveness, a system can be efficient and still not be effective in doing a job right. A common failure by Company Management is to only implement Lean Six Sigma studies for high level systems and fail to understand that employee Enterprise Lean Teams provide the effectiveness and efficiency of supporting systems. I recommend that manufacturing Companies wishing to be competitive put together a Lean Six Sigma team of trained managers to study and fix their high level systems. This is to be followed by the implementation of my General Reform Model which builds on the data developed by the implementation of Enterprise Lean in the first part of the Model.
The approach of using Lean Six Sigma on high level business systems and Enterprise Lean on office subsystems will make both high level systems and subsystems effective. But to actually get the highest efficiency possible you must use the data developed by the Enterprise Lean Teams to Right-Size the supporting functions making sure all personnel have a full time job. The Lean Team data should also be used to develop bottoms-up budgets which identify the actual cost of a systems functions. This is also the data needed to manage a company’s work by balancing its work load making sure no employee has to wait on another employee to do his job. I recommend that all office systems be developed manually before being automated using the latest technologies.
Implementation of the General Reform Model
Phase 1. Establish a Company Lean Committee
I recommend that a “Company Lean Committee” Be established in the Corporate Auditor’s Office to have oversight of the implementation of Enterprise Lean and other reforms. The Company Auditor will need to provide Analysts on loan to the Company Enterprise Lean Committee reporting to and trained by the Principal Consultant to implement Enterprise Lean and other reforms. The Analysts will support Enterprise Lean until it has been implemented in its entirety throughout the Company. When the implementation has been completed the Analysts will maintain the new Bottoms-up Budget databases. Prior to this proposal the Auditor was charged with only the auditing of funds now a new responsibility will be to monitor company office activities for lost man hours. The addition of auditing financial loss due to lost man hours is made possible through the development of the Lean data and the new Bottoms-up Budget databases.Phase 2. The Training and Organization of Enterprise Lean Teams
The first act of the Company Lean Committee is to implement several high level Management Lean Six Sigma Teams and employee Enterprise Lean Teams throughout the company. Planning for Lean Training should done by the Committee meeting with the counsel of the Principal Consultant. I recommend that a Enterprise Lean Training specialist be brought in from a local University to Kick off the implementation with training seminars. Planning issues related to Lean training, Facilitators, Analysts will need to be resolved. Lean training should begin immediately by the Company’s training staff. I suggest that the normal training curriculum be suspended and an all out effort be made for Enterprise Lean Training. Training should be made first for staff members followed by management, Lean Facilitators and general employees.Lean Facilitators organize and train each employee functional Lean Team work group which meets for one hour on a weekly basis. I suggest that the best Facilitators besides Analysts may be borrowed from HR staff but I have also had success with secretaries and even copy machine operators.
Management Lean Six Sigma Teams
There are two major Lean Team groups, high level Management Lean Teams and at-the-work-place Functional Lean Teams. Management Lean Teams are organized and lead by members of management who have attended Lean Six Sigma Classes at a local University. They are tasked to study individual high level systems within the Company and those that interact with other Departments mostly document flows. A third possible task is in the Consolidation of company Services Model. A key element of the High level Lean Teams is their role in management when converting from the bureaucratic organization to the Team Managed organization.
Implementation of the reforms can be done at minimum cost to the Company using an Enterprise Lean professional trainer from a local University in a train-the-trainer project and a Principal Consultant familiar with the General Reform Model. All other implementation staff are borrowed and trained from the Company’s existing personnel using the Company’s own resources. This has significant advantages with trained personnel remaining in key jobs with the Company when compared with implementations involving a high number of expensive Consultants who leave when the implementation is completed taking critical knowledge with them.
Phase 3. Review of Lean Team Results and Collection of Lean Data
After a period of about three months most Functional Lean Teams, those that were organized and trained by Facilitators, should have their Value Stream Analyses completed. I have had success with doing the flow of the current method on long white butcher or brown wrapping paper taped around a conference room on the walls. The steps of the current method is completed first followed by the proposed improved method done directly under it. This is done to highlight the differences between the two methods. I suggest that some Functional Lean Teams with significant savings present their improved method to management. After the presentation the rolled document is given to an Analyst to document the savings from the proposal in a spreadsheet. Analysts are trained by the Principal Consultant and are part of the implementation staff.Phase 4. Activities of the Principal Consultant
The Principal Consultant will play a key role in being sure that the Lean teams are properly trained and in the selection and approach of the high level Lean Teams. The Principal Consultant will insure that the activities of Analysts can determine the correct staffing level through Work Measurement. Some Analysts may find the proper staffing for variable processes difficult to determine, the Principal Consultant will make this determination when necessary. This data combined with the number of occurrences of the function over time, obtained from a daily log kept by each Lean Team, provides the basis for an accurate functional budget. The data from the rolled document will be kept on a spreadsheet by the Analysts and summarized in a database where all of the Company’s functional data is stored. The activities of Analysts are important and will be followed closely by the Principal Consultant.The Technical Reform Process
The technical reform process begins after the decision to implement Enterprise Lean and after the functional Lean teams have completed their Value Stream Mapping studies. The important data that is necessary for reform is the functional cost data developed by the Functional Lean Teams from their individual functions.
The data will be collected by the Analysts using electronic tablets or 2 way laptops using a spreadsheet program specifically designed for this process. All tablet spread sheets will be continuously updated using a special Google App (application). The Principal Management consultant will provide on the job training of Analysts in the collection of this data and all subsequent reform steps.
Lean Team Data that is collected and allowed to accumulate
The following steps show how the Lean Team Data is collected and allowed to accumulate in the spreadsheet program and how the summarized data is used.
1. The VSM for each function will be documented in the spreadsheet.
2. All labor and expense cost data will be documented and allowed to accumulate as functions are added to the spreadsheet until all functions have been accounted for.
3. The names of the employees working on the function will be documented with any special expertise they are using in performing the function. Each employee’s labor hours expended in doing the function will be documented and allowed to accumulate. This data will be used during the Right-Sizing process.
4. Where there is interaction between several employees during the performance of the function as a part of the VSM a work load balancing chart will be a part of the documentation. This work load chart can be used later to balance the function’s work load.
5. When all of an Company’s Functions have been logged into the spread sheet the final labor hours and expense numbers will have been automatically tallied in the spread sheet along with the total hours worked by each employee in the particular function.
6. A key question asked of employees is the estimate for the number of times that the function is done per week and recorded in the spread sheet. This number is authenticated by history and other knowledgeable personnel including the enumeration of purchased goods consumed by the function.
7. The total annual accumulated functional hours is at 100% productivity and must be converted to provide a realistic number at 75% productivity. To make this conversion you will add 25% more time to the total or multiply the total time by 125%. This becomes the labor hours for staffing and budgeting and is what is referred to as a Gross Load among consultants. When all of the Agency’s functional labor hours have been accumulated at 125% and we add in the total annual expenses we have what I call a Bottoms-up Functional Budget.
8. Next we want to compare the Bottoms-up Budget with the current Company Budget. To do this we remove all management and overhead expenditures from the Company’s current Budget to obtain an equal expenditure. Then we compare the Bottoms-up Budget with the remains of the current Budget. The Bottoms-up Budget should be 20% or more less than the Top-Down Budget. If this is not the case then we may have introduced an error more than likely in the number of times that a Function is being performed annually. This should be resolved by reviewing the Lean data in the Company’s spreadsheet for anomalies.
9. We can now do Right-Sizing using the employee accumulated Lean data from the spreadsheet. As a rule of thumb the employee accumulated hours is separated between those who have accumulated more than 20 hours per week average and those who have accumulated less than 20 hours per week. Those who have accumulated less than 20 hours per week are considered to be redundant and slated for layoff. Their accumulated hours are spread among those with more than 20 hours per week increasing their hours to at least 37 hours per week. This involves reviewing each function and reassigning tasks to employees according to their capability and availability.
10. We now need to review the spreadsheet for those jobs noted as occurring on a random basis. These special jobs need to be separated form those jobs that occur on a continuing basis. An individual employee is specially trained to do the job of Work Planning, forecasting scheduling these jobs on a weekly basis.
11. The spreadsheets are stored on thumb drives for each Agency and protected. The labor data for each function is stored in a Database at 100% to be used for calculating productivity where required. The Database also includes the staffing and bottoms-up budgeting data. I recommend that the data be protected by an independent organization such as the Company Auditor. This allows availability of the data for all who want to review the actual labor and expense cost of an function including the Company’s Bottoms-up Budget.
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