QUESTIONS DIRECTORS SHOULD BE ASKING CEOs ABOUT IMPROVING OPERATIONS.
Value Stream Solutions, LLC
How Do We Know We Are Working to Improve the Right Things?
Common sense tells CEOs to look for improvement in the heart of core operations. Our experience is that this common sense approach results in overlooking better opportunities up and downstream from the core.
We know of a $300M manufacturer who invested significant resources to optimize the scheduling and operation a large piece of equipment only to discover that pre and post processing wastes 1/3 of value. They have been able to move from three shifts per day to two shifts a day without reducing profit.
Suggestion: Focus on customers first. Look at operations secondly. Is management first focusing on eliminating activities that don’t add value in the eyes of customers?
Do Our People Have the Time and the Incentive to Implement Operational Improvement Changes?
Too often management focuses on the introduction of a particular type of process improvement as the major headline. There are almost as many process improvement techniques as there are ice cream flavors. The good news is many can help -- but not all the time, or under all circumstances. Of equal importance is who is getting involved and committed to improvement. Is it just the senior management group? What about middle management? Are they on board? Do people have the time to implement? What are the reward structures for those who successfully implement, including those who find their jobs eliminated?
What do we plan to do with ‘found’ time and money?
Is the goal merely to provide savings to the bottom line? Compare Toyota and General Motors. GM has spent considerably more resources than Toyota in implementing Toyota’s key lessons.
Toyota shares knowledge and benefits with its suppliers and partners. Toyota has a plan for the freed-up resources. Toyota continuously reinvests its savings from the elimination of waste. In effect, they are using ‘found’ money to finance future efficiency. They are creating a beneficial cycle of value for shareholders.
By contrast, GM process improvements fall to the bottom line as one-time savings. The benefits are not shared with suppliers.
Peter Ickes is a Principal of Value Stream Solutions, LLC, a Boston and Toronto based consulting practice specializing in improving processes in healthcare and the operating companies of private equity firms. He can be reached at ickes@LeavnVS.com or 617-484-8121.