Archives for August 2011

Performance improvement consulting

by

Implementation of change is sometimes strategic and sometimes more tactical in nature. Managers in most organizations have a general responsibility to control, and often reduce, costs and improve performance. Understanding the responsibility to do that is more common than
managers knowing how to do that.

The first trigger of the need for performance improvement for most managers is a report indicating performance that does not meet expectations, usually the budget. In that regard, many managers use financial reports to manage operations. The problem with financial reporting for operational performance management is that many organizations do not budget at a detailed enough level to be useful for most operational management. As a result, many managers find that costs, either material or personnel, are higher than expected, on a gross or per-unit basis, and must start an examination of the operation to identify the real, root cause of the problem. Many managers have neither the training or experience nor the time to successfully perform such an analysis.

Many organizations collect data and keep it in inaccessible forms, often paper. To successfully identify root causes of problems, or even identify the actual rather than the perceived problem, organizations need ready access to historical operating and financial data. Ideally, organizations will develop and maintain an electronic data warehouse that provides easy access to every piece of data that the organization collects. For too many organizations, nearly 30 years after the introduction of the PC, the only data warehouse they maintain is a decentralized set of filing cabinets.

A serious look at sustainable performance improvement takes more than a plan to chop the payroll. The 1950s through the early 1980s saw the rise and the beginning of the fall of so-called productivity consulting firms. Some of these firms did good work; I worked for two such firms, but many simply sold the client a promise to reduce costs by reducing payroll, often in a predetermined ratio to the firm’s billing. The good firms improved productivity by actually improving the processes of the client operation.

As the world entered the 21st Century, consulting firms and clients faced a reality that they had already capitalized on most of the easy improvement opportunities. Since at least the most recent turn of the century, performance improvement has been more sophisticated, more strategic, and more tactical. Lean and Six Sigma tools provide great insight into improvement opportunities. Rigorous data analysis, in many cases relying on data stored in 4-drawer vertical file cabinets, archaic data warehouses, adds substance to the scope and scale of the opportunities and provides evidence of actual change.

Operational improvement that is strategic usually appears in the company’s financial statements somewhere. Some improvements may appear
in human resource, environmental, or other non-financial sources. Because today’s performance improvement consultants generate results that are not limited to payroll costs, a Balanced Scorecard or management dashboard may be useful to many companies seeking performance improvement. Whichever the company selects, the reporting tool should have a view or a report or page that highlights the financial and non-financial impact of performance improvement efforts.

In 2007, eProcesses Consulting helped a mining client develop a dashboard that included links to dozens of performance improvement projects, some of which the consulting team initiated and some of which the client initiated. The dashboard included a summary page showing the status of each project and allowed drill down to each specific project to facilitate timely examination of each project’s detailed history and plans. The dashboard linked each project to corporate and location-specific goals for the year. The dashboard also enabled the management team to identify new projects to address new needs and opportunities.

The next generation of this dashboard will include a workflow automation tool to help automate semi-manual processes while providing real-time process reporting. The dashboard of the future will include built-in diagnostic to alert managers of the need to focus attention on specific performance anomalies. The next generation may be closer than you imagine.

Enhanced management tools

by

Almost 30 years since the introduction of the personal computer and the subsequent introduction of a plethora of networked devices, too many managers of private and public, large and small enterprises seem to rely on non-timely, accounting-dominated data, rarely in the form of  accessible, actionable information, for management decision making. Why?

One of my first managers, somewhat tongue in cheek, used to tell me that he liked to let small problems become big ones because he liked to solve big problems. That was not Bud’s only philosophical oddity. Many managers, by design or by default, effectively operate like Bud. Sadly, not only is it generally ineffective, it is also stressful and expensive.

In 1985, I created my first management dashboard for a client, the general manager for a textile plant in South Carolina. The dashboard provided him with daily and week-to-date comparisons of actual versus planned performance for each of the plant’s operating and support functions by shift.  In 1986, I provided the head of another processing facility in North Carolina with a similar dashboard.  Neither of these dashboards were true balanced scorecards, formally introduced to the management vernacular by Frick and Frack in 199x, because in neither case did the view extend beyond the immediate facility to monitor, for example, environmental or customer metrics. In both cases, however, icustomer metrics beyond backlog and on-time delivery measures were beyond the control of the facility because sales and marketing reported to a separate, central location.

In 2007 and 2010, I had the opportunity to introduce gold mining clients in South America and West Africa to an electronic balanced scorecard application. In each case, the application pulled data from a variety of sources and formats and displayed data by shift, by day, by week, and by month with comparisons against plan and tabular and graphic displays of data available. In the 2007 example, the basic technology was Microsoft Excel and it was a prototype for the 2010 example.

The general manager of the gold mine in Ghana had reasonably good information available and wanted to improve the detail available while eliminating the one hour daily he needed to create his existing dashboard. The general manager in Chile wanted a tool to supplement his daily meeting with his management team; he did not have a self-created dashboard to replace. As crude and tedious as the monster Excel spreadsheet was, it was better than daily oral reports with limited written reporting from each department.

The ideal dashboard or balanced scorecard would focus managerial attention on indicators where performance warrants managerial attention. It would help distinguish an anomaly from a problem and a one-time episode from a trend. It would also provide insight and status on key goals and objectives along individual and organizational performance improvement initiatives. Although nobody seems to have such a dashboard, it would seem to have great potential for improving manager effectiveness.

Too many MBAs?

by

A recent Time article tried to make a case for companies essentially firing all their MBAs because MBA graduates in the workforce had taken the collective eyes of business in the West off risk, innovation, operations, and creativity. That may be a valid point. The bigger concern for and  threat to a thriving and sustainable economy may be the apparent willingness of U.S. society to accept second place, or lower, and to condone degrees and certificates and diplomas that may increasingly be irrelevant, if not meaningless.

Over the past few generations, people in the United States have grown lazy and self centered. We look for the easy path. We check the box and see if we can stretch the lower bounds of the minimal require,nets and expectations in our academic and non-academic pursuits. As a consequence, degrees and diplomas are more uncertain in their meaning.  Prospective employers and academic admissions officers find themselves in positions where they must either do a more thorough job of vetting candidates or risk accepting lower quality, less qualified, perhaps minimally prepared candidates.

It is not the MBAs who are the problem with American business and it not strictly our elected leaders. Rather, it is the lazy attitude of barely
acceptable that is so endemic that drags us down.  The educational system in the United States simply reflects what society and culture establishes as norms and values. If we want something different for ourselves as a destiny, or a future, we need to adjust our current norms and values so that our path is also different.

We need to value education and create  a business economic climate that makes education valuable.  Why stay in high school if I cannot get a job or enter post-secondary education afterwards? Why go beyond minimal expectations when exceeding expectations adds no perceived value to my future? If actually learning something during an MBA, or other degree, program gets me no farther than taking the path of least effort and resistance, why bother?

Our humaneness motivates U. S. society to meet certain basic needs of our citizens or residents. We provide an opportunity for basic education and, to an extent and upmto a certain level, that education is not optional. We provide some measure of healthcare and financial support so that the sustenance and shelter needs, but not necessarily the wants, of most have some sense of floor or foundation from which people can live, but not necessarily thrive. The challenge for policymakers, educators, and society is how to avoid disincentives to exceed minimally acceptable while somehow ratcheting up our collective expectations, norms, and values.