Economic Crisis Survival Kit
Like everyone else, we at The Center for Excellence in Operations, Inc. (CEO) have been thinking a lot about the economic crisis. Despite administration changes, political promises and bailout plans, no one really knows where this economic meltdown will lead us, when it will end or what conditions our organizations and retirement accounts will be in by the time we achieve some economic recovery. I’m convinced that no one has the answers to all of our organizations’ specific business challenges, and we at CEO are moving forward with new, creative ideas to improve our offerings and competitive position to our clients. One thing is for certain: Sticking steadfastly to how you currently operate your business is a prescription for disaster. If you are watching your revenue and profits fall while waiting patiently and hopefully for the economy to turn around, it is time to step up and rethink your business model. The things that got all of us here will not get us through this economic crisis. Business process improvement in a down cycle requires a different focus and approach.
Globalization has brought with it a myriad of business challenges, socio-political problems and an unending list of other uncertainties that require us to be much more conscious of what is happening and run in fast-forward mode. We are all on this treadmill of survival. If you are not improving your business every day, then some other competitor is, and your organization is falling behind. Like it or not, this is the world we live in. Business process improvement through such strategic initiatives as Kaizen, Lean and Six Sigma are now needed more than ever before. Even if your organization is involved in these process excellence initiatives, it’s time to take a closer look at efforts versus results. In this economic crisis, orgrtanizations cannot afford political improvement debacles and fad improvement activities with questionable benefits. Only enhanced creativity and innovation in our business process improvement efforts will relieve the pain points in our businesses.
In this economic crisis, a well-structured and executed business process improvement initiative that integrates all improvement tools (e.g., Kaizen or Quick-Strikes, Lean and Six Sigma) and is selectively deployed to the highest impact opportunities creates a rapid, winning strategy. However, many organizations are too slow to reset and leverage their business process improvement course for more rapid results.
First, Recognize the Organization’s Limitations
To survive in today’s economic crisis organizations must rise to the challenges of their particular business environments, customers, suppliers and competitors and reinvent themselves with more creative leadership and intelligent thinking at the moment of opportunity. Yet most organizations actually exhibit less responsiveness and urgency because of a few common factors:
- Organizational Leadership: It’s always easy to blame leadership. However, many executive teams struggle when it comes to anticipating changes, defining and laying out the right corrective actions clearly for the organization, empowering and engaging people to lead and participate in change and finally "cutting-to-the-chase" and getting the right things accomplished rapidly. The worst thing a leadership team can do is make their organization feel paralyzed, intimidated and helpless by what is happening around them.
- Organizational Planning and Scanning: In many cases, organizations find out about their operating problems after they have occurred or when a disturbing call is received by their Customer Service department. This is a sure way to lose customer credibility and miss out on significant internal improvement opportunities.
- Organizational Infrastructure Controls: This economy is perpetuating several bad effects on organizations, their people and their culture. Although leaders act with the best of intentions when trying to control costs, their actions and behaviors also send very strong mixed messages to promote the status-quo, avoid risk, ignore teaming and empowerment and lessen the importance of strategic improvement initiatives such as Lean and Six Sigma to some other crisis of the moment.
- Organizational Staffing: Many organizations are full of industry-bred employees and managers who operate on an expected company and industry model. If left too long in their daily jobs, people develop a sense of myopic thinking. They become very procedural and locked in their routines, and they lose any ability to be creative. When involved in the recruiting process, these people attract candidates similar to themselves. I recall an executive meeting a few years back when the CEO commented, "There is over 100 years of experience in our industry around this table. Why do you think your organization can help us?" I was caught off guard and quickly replied, "If that was the prescription for success, we wouldn’t be here having this meeting to discuss all of your operational problems. What you need is injections of new thinking, skills and experiences from outside your industry." I expected to get the boot, but after the initial emotions settled, we were awarded the contract.
- Organizational Investment Expectations: In this economic crisis, organizations must be much more selective in how they invest in their futures. This may mean choosing a soft investment (i.e., an outside firm that focuses on improving operations and reducing costs) over a new piece of equipment, or pulling the plug on some questionable new product plans.
Business Process Excellence: The Fusion of Kaizen, Lean, Six Sigma, IT and Cultural Transformation
Up to this point we have used the term "business process improvement." A better choice of words is "business process excellence" because it inherently means a never ending pursuit of perfection through business process improvement. When we use the term business process excellence we are referring to the survival kit that represents the fusion of Kaizen, Lean, Six Sigma, IT and Cultural Transformation. Beyond the improvement tools, we integrate the key enablers of Cultural Transformation: Leadership, Customer Focus, Change Management, Information Technology, Performance Management, Teaming and Empowerment, Customized Education and Behavioral Alignment. We are also talking about a selectively-planned and well-orchestrated deployment. Finally, we are talking about highly focused successes, one business process improvement project at a time—where failure is not an option. Exhibit 1 provides an overview of Business Process Excellence.
Business Process Excellence
For a specific example, one of our clients started their Business Process Excellence journey in early 2007 and has already achieved over $15 million in savings. Beyond the financial benefits, this is a totally different organization in terms of leadership, employee engagement and culture. The strategies and selective deployment actions of Kaizen, Lean and Six Sigma have worked extremely well for this company. Ask yourself, "How much revenue would be needed to add $15 million to the bottom line?" Do you understand the need and the power of business process excellence in this economy yet?
In this economic crisis there is probably nothing with a higher ROI than a well-structured, well-executed business process excellence initiative. When people work on strategically important improvement efforts, it makes them feel important. Business process excellence provides an escape from worrying about what they can’t control. Business process excellence enriches team members by allowing them to think beyond their own responsibilities and beyond the box (by the way, we like the term "beyond-the-box" vs. "out-of-the-box" because many of the things in the box are good). Business process improvement allows all employees, young or old, from various functional areas and backgrounds, to pursue common interests and become energized from each other. Business process improvement facilitates the values of dignity, respect, trust, collaboration and a shared commitment of success.
I Am The Organizational Leader: What Should I Do in this Economic Crisis?
This economic crisis has brought with it a wide spectrum of competitive challenges. It is impossible of late to have a conversation with co-workers, family, friends or even strangers at the airport without mentioning or dwelling on our turbulent economy. We are all in the same economic boat, personally and professionally. If the answers were easy, we wouldn’t be talking about the economic gloom and doom we see on the news every night.
Despite all the bad news that surrounds all of us about the economic crisis, there are several actions that we can pursue to make things better.
Lead Your Organization Like You Have Never Lead Before
Creative, intelligent visionary leadership is the new norm. CEOs can no longer afford to be involved in the details of new product development or a particular customer order. That’s what we pay other executives and managers to do. The CEO must spend more time as the visionary for the organization. Intelligent, proactive leaders are literally all over this and focused on what the organization needs to do better. They are creative visionaries, they encourage their organizations to raise the bar every day, they hold people accountable for breakthrough results, and they celebrate the successes. One of my favorite executives always praises his teams for their successes and always ends with statements like, "How good do you think we can get?" or "What are you going to do next?" He also translates their efforts into the specifics of how they have improved the business.
Establish a Rapid Deployment Business Process Excellence Initiative
Forget the buzzwords of Kaizen, Lean and Six Sigma. Fact is, all organizations can and must improve significantly to survive this economic crisis. A formalized, effectively lead, selectively deployed and well-executed improvement initiative will take some of the pain of the economy away. Think about our current economy as the new norm. How will your organization rise to the leader in your markets? This will certainly promote more rapid, beyond-the-box thinking.
Improve How Your Organization Plans and Scans the Environment
Another area where organizations must improve is in monitoring their internal and external environments more effectively, mining out opportunities that predict and prevent issues that can dramatically impact the business. Rather than waiting for bad news, great organizations constantly scan external expectations, benchmark successful organizations and define improvement needs ahead of customer and market needs. Organizations that do this well have a hopper of queued-up improvement ideas ready to be assigned.
Use More Data and Fact-Driven Discretion on Controls
Today, most employees have their heads down, waiting to see what else is going to happen. Bottom line: This is a great time for everyone to come out of the foxholes and squeeze every improvement imaginable out of the organization. I’m talking about the non-people assets and the mountains of hidden waste in most organizations that add zero value to the customer. For many organizations this is millions of dollars, but they are too busy trying to control the pennies and nickels to the nth degree!
In terms of investment, organizations need, and deserve rapid ROIs on your investments, whether it is a new machine or a Six Sigma deployment. Make sure your organization prioritizes limited opportunities to invest and conducts a super-tough due diligence to ensure a rapid payback. Otherwise investments with a longer-term payback may lock the organization into a particular course of action. Great organizations are much more discretionary and targeted on their investment (internal and external) and control efforts.
Hire for Flexibility and Value-Add
Two key aspects of staffing in this economic crisis are to hire outside of your industry and to keep an open mind in the selective use of the right outside resources. The best time to deploy the structure, methodologies and improvement tools of business process excellence is now, but it is amazing how improvement resources are one of the first casualties in the belt-tightening efforts. Executives panic themselves and others around them into a paralysis frenzy, and their actions become a self-fulfilling prophesy with respect to business process excellence. They selectively cut back on the very people who can save the day, because there are no funds in the budget for improvement. Some of the "across-the board" halts on spending lock out many of the very external professional resources that could add more value in this economy than dozens or even a hundred of your own internal employees.
CEO’s clients achieve a demonstrated ROI equal to 10x-30x of our fees within the first 12-18 months. It’s unrealistic to expect that from internal resources in this economy. One executive we know is holding his organization accountable for achieving millions of savings from Lean and Six Sigma (they have not started an official effort yet) and at the same time places a freeze on all outside resources. This type of "go figure it out" leadership frustrates the hell out of people who genuinely understand the magnitude of what needs to be done and want to accomplish their objectives.
Bad times are creative times. Great things happen in a economic crisis. Great opportunities emerge in an economic crisis. Although most of us are uneasy with the economic crisis, it forces us to rethink and try things we might have never dreamed possible. It forces us to push the limits of our thinking and achieve successes beyond what we thought were impossible. Enhancing value during a down cycle provides warp speed on the back side once the economy begins to accelerate. Organizations that do this successfully will become the emerging industry leaders at the other end of the economic crisis.
This economic crisis has certainly created more innovative service delivery strategies in our firm, particularly in the area of ROIs for our clients. We are now delivering a "Rapid Deployment Improvement™" offering. This uses the tools of Kaizen, Lean and Six Sigma and strives for rapid benefits in a 60-90 day time-frame; however, it excludes the activities of Lean and Six Sigma certification in our previous, larger scale deployments. In today’s economic crisis, be selective. Go for the high impact, rapid successes that are low risk improvements. Remember that 99 percent of business process improvements are no/low risk because the risk of doing nothing in this economy is much higher.
There is no room for complacency or waiting for things to change in today’s economic crisis. Fact is, the economy beyond this current meltdown will have much higher customer and market expectations. Many organizations have much more control over their specific business challenges than they think. Leading organizations "knuckle down" and use this time to search for and eliminate the hidden, non-people wastes in their processes. They take a more aggressive approach with their business process excellence deployment because they see it as the key enabler to reduce costs, improve competitiveness, or accelerate growth.
It’s time for all organizations to rethink how they have been managing themselves through this economic crisis, stop the insanity of conflicting short-sighted actions and reset their improvement strategies for their own prosperity and success. The choice is simple: either organizations must step up and pursue Business Process Excellence as a competitive strategy, or sit around in "ain’t it awful" mode and become victims of a competitor’s business process excellence successes.