2011 Wrap-up

It's already the last week of 2011 and it's time to review the year that was.

ASQ CEO Paul Borawski's blog mentioned some of the disappointments and successes of the year, most significantly the ending of Federal funding of the Baldridge award. As an aside, I think that that issue shows the lack of understanding of quality and performance excellence in the United States. As I've ranted before and before and before, we've lost something in the U.S., and it's more than just our edge in manufacturing. We've lost the edge in business leadership. Yes we have powerful, innovative companies in the U.S. but they are the exception rather than the rule. Even the most innovative, successful American company (arguably Apple) does their manufacturing in China and was led to such a high level of performance by the personality of one man (look at Apple before Steve Jobs returned to lead it). I'll have more to say about that in 2012....

In the beginning of 2011 I made the following commitment for the year: "For 2011 my goals for quality include learning to listen more closely to my customers, coach my team more effectively and motivate my colleagues to make improvement." I made that commitment while working for an American automotive supplier in rural Georgia. Now, I work for an American electronics company in Shanghai. Needless to say, the dramatic change in my environment (halfway through the year) had an impact on the execution of this plan. However, the overall direction was the same.

Working in Shanghai I've had the experience of listening to my customers, all of whom are either foreign companies or joint-ventures of Chinese and foreign companies. Their needs and expectations are remarkably similar to the U.S. customers with whom I worked in the first half of the year and my Japanese customers from 2007-2010. It seems that the world is becoming smaller in regards to Quality, especially in the automotive world. All of the companies are trending toward a singularity of Quality: zero defects. Companies continue to recognize that quality is more of a competitive advantage in the market, even more than price. Otherwise, how to explain the success of Apple? A company that charges more than its competitors and can still hold such a high market share. Quality is not only reflected in manufacturing (of which Apple's Asian suppliers truly excel) but, more importantly, in the innovation of the customer experience. The design of the product, how it works, how intuitive it is, is as much a reflection of quality as its durability. This is as true for the automotive industry as it is for electronics. Some companies excel in durability (e.g. Toyota) while others in performance (e.g. BMW) while others in exclusivity (e.g. Ferrari). But none excel in all three as Apple does in electronics. There is something to be learned here: quality must be more than product durability and meeting quantitative specifications, it must be about the value of the total user experience. Cost-cutting, reorganization, outsourcing, insourcing, etc. should only be pursued with that idea in mind: keep the goal of increasing the value of the total user experience. Again, Apple is probably the best example of this in the 21st century.

Coaching my team also took a twist when I changed companies, jobs and locations. In my current position I am the ultimate coach. I have no direct reports yet I am responsible for the quality of products produced in six sites in three different countries and indirectly responsible to manage close to a thousand associates through different layers of management. Having no direct authority of the processes yet being responsible for the outputs is truly a learning experience. I have to find ways to coach my site Quality Directors and their direct reports in order to steer the Asia region toward the overall company goals and toward meeting the customer's expectations. I am learning how to leverage my knowledge and experience to do just that, with the support of my colleagues in Asia and other locations. Coaching in this environment involves leadership as much as knowledge and experience. Being a leader is the first step to being a coach. You must have credibility and your subordinates must see your value before they will accept your advice. Bringing value to your subordinates and internal customers is just as important and bringing value to your external customers. If you work in quality then usually the only way that you can truly bring value to your external customers is by helping your internal customers do their jobs better.

Motivating your colleagues is closely related to coaching. Now I work with colleagues in Engineering, Purchasing, Operations and Design; most of them are Chinese. I have to bridge the cultural gap to motivate them to bring more value to the customer (thankfully they all speak English). Motivating people from a different culture is a challenging experience. The key is to find the common ground of understanding and build on that. All of my colleagues want our business to be successful and they also see my value based on my position and experience. Showing your value to your colleagues, what you bring to the table, is just as important for motivating them as it is for motivating and coaching your subordinates.

Honestly, I've met with varied success for each of my goals in 2011. I intend to keep the same goals for 2012 and continue to work on them. How did you do with your 2011 goals? What are your goals for 2012?

World Quality Month

I think that some ideas must be emphasized and "lived" everyday of our lives and since I work in the Quality profession and this is World Quality Month and my blog is about quality, I want to focus on quality and why it's important to live it everyday.

So, what is QUALITY? There are various definitions, from the metaphysical (Persig) to the practical (Juran, et. al.) to the casual. For our discussion I want to consider two aspects of quality, subjective and objective. Ask someone, "does this have good quality?" and point to anything in your environment. If you ask several people, you might get different answers based on their experience, education and field of work. This is known as subjective quality. On the other hand, if you have a specification and you measure a product against it (e.g. an ink pen with plastic barrel OD of 4 +/- 0.1mm) and it is within the specification then you can say that it also has good quality. This is objective quality. Our business, our life, is a combination of these two aspects of quality and there are endless books, articles and lectures available to explore either or both aspects. I think that the subjective aspect, measured qualitatively, gets short shrift in business as the inane mindsets of "you can't manage what you can't measure" and "if you don't have data you only have an opinion" rule the business world. Life is more than quantitative measures and business--as part of life--is also more than quantitative measures. Qualitative/subjective quality is a big part of our lives, so the better question is not "what is quality?" but "what is quality to you?".

For me, it means adding value to the world, to society. Making people's lives better, in even tiny ways. I've worked in manufacturing for almost 14 years with most of that time in some kind of "Quality" function in the automotive industry, arguably one of the most regulated and competitive industries in the world. My role in the Quality department has changed over time with changing business conditions and the responsibilities of my specific positions. My thinking also changed for those reasons and due to my experience and education. Now I see that even though I play a large role in a large company the direction that I give and the actions that I take influence only a tiny part of the world. My sphere of influence includes several dozen people directly, and my audience includes several thousand through this blog and my postings on Twitter, LinkedIn and Facebook. The results of my work affect the drivers of certain automobiles in global markets and the patients in some hospitals. All of this influence, added together, is but a small drop in the ocean of the world. However, I know that it does make people's lives better and, for now, it is the limit of my influence and voice. I will never stop trying to add value and improve the condition of the world, in big or small ways.

What about you? What does quality mean, from your heart? What do you do about it? What do you want to do?

Passion for Quality

I accidentally became involved in Quality at the end of 1999. I was working as a team leader in the Production department and I thought that the inspections and audits done by the Quality department were very interesting. It looked like they knew what they were doing and could handle difficult situations, even arguing with the Supervisor if necessary. So I applied for a position and I was accepted. I started as a Quality Engineer in early 2000 and since I was the lowest level person in the department I was sent to the customers when we had quality problems. I had a lot of experience in dealing with irate customers and finding solutions to their problems. Typically the solutions that I would define, together with Engineering, would involve either changing the design or adding a new machine to the process. I was clearly told by my Manager that either option was not possible and that I would have to find a different way to solve the problem. It was at that time that I started to hone my problem solving abilities by finding simple, often unorthodox, ways to solve problems. They weren't pretty but they worked well and they were cheap. That was really the start of my passion for quality, when I discovered that I could use my creativity to solve customer problems.

The more that I worked in Quality the more I was able to apply my reasoning and creativity to causes further up the manufacturing stream, into Purchasing and eventually Design. I found that it was much easier and cheaper to fix a problem in the Design phase rather than in the Production phase. After I was trained as a Six Sigma Black Belt I learned that statistical tools could not only be applied to manufacturing processes but also could be applied to product and process design. In fact, it made more sense to apply them there rather than in production. This also sharpened my thinking about problem solving and led to looking for ways to prevent problems. During this time my passion for Quality continued to grow.

Working in Japan for more than three years, as Head of Quality for an automotive supplier, really refocused my attention on meeting customer expectations. The automotive customers in Japan are the most demanding in the world, and it took a lot of effort for me to learn their unique style of working and also to adapt my thinking to the Japanese style. The effort was worthwhile and I can say that my thinking about Quality, and many other things, was permanently altered by my experience there. The Japan office was also a Design center so I could directly influence the design of the products with my ideas about Quality. I also better understood the challenges of the Design group. I came to see Quality with a greater passion than before, seeing how it truly linked with all aspects of the company.

Now I am in China working with a new team and with new challenges. I see the tremendous opportunities in this country and I see the tremendous difficulties. I will work here in Shanghai for the next three years and I am sure that my thinking will be influenced again by this new culture. Starting in Michigan and then working through Japan and now China, I continue to learn; now I can teach others based on my education and experience. I think that learning and teaching will help me to continue to grow my passion for Quality now and in the future.

A Mandate for Improvement

In ASQ's blog this month guest contributor ASQ Managing Director Laurel Nelson-Rowe asked an interesting question. Do companies need to face some dramatic event in order to refocus themselves on the basics of performance excellence? I think that the answer is a resounding "no". Companies are like people, they all have problems. The management of companies have to decide how to handle their problems: ignore them, face them head-on, delay solving them, etc. The results of those decisions will be felt sooner or later in the company, for good or for bad. Is it best for a person to "hit bottom" in order to finally do something to solve their problems? Of course not. Anyone who has gone through that sort of experience knows how difficult and painful it is. Sometimes people never leave the bottom, just like some companies go bankrupt or otherwise fade away. It is best for a person, and for a company, to face their challenges and overcome them quickly. To allow them to accumulate until there is a major failure is very risky and very painful for all involved. Whether it is alcoholism, gambling, unresolved quality problems or decreasing market share people must take action early to reduce the risk and drive improvement. This is a mandate for our personal lives and this is a mandate for the business world. There is really no difference.

The Past and the Future

Paul Borawski, in his blog, recently lamented the lack of knowledge about quality history in some of today's quality professionals. He also pondered the thoughts and feelings of those professionals under 35, vis-a-vis the future of quality. I fear that every business field (including management) has lost track of their history, their heritage. These are not topics that are discussed in boardrooms and production floors, especially when so many companies are simply fighting to survive.

 

I asked a colleague of mine about the future of quality; he is not only under 35 but he is Chinese. He is a full-time internal quality auditor and member of the QMS Department (our site has 4000+ employees). His comments were related to quality becoming more automated with electronic systems helping to guarantee compliance with QMS standards. I think that he has a good point, as long as companies see the value in having a QMS (!!) and then see the value of automating it. I don't know how long it will take to reach that point, given that QMS resources (i.e. auditing) seem to follow closely behind training on the cost-cutting chopping block. But I think that it will come eventually.

 

I think that the key to linking the past and the future lies with the understanding and use of technology. In his book Here Comes Everybody Clay Shirky outlined the future (and present) of technology's use to business and society. One key to implementation is that the mindset of the business has to change first. They must be able to culturally manage the new technology; blindly implementing it most likely leads to disaster. Social media and "Internet 2.0" (or 3.0?) is in full force now and those who do not understand nor use it are only better than those who do not understand but use it anyway. This new arsenal of marketing and information tools can be very effective in communicating specific messages to large groups of people; establishing dialogues comes as a natural progression.

 

ASQ has a vested interest in protecting and promoting the philosophical basis of our field of knowledge. In fact, I believe that it is one reason why ASQ exists. And what better way to do that than to fully understand and embrace technology specifically intended to convey messages to people worldwide. Paul raised a good point about seeking out the under-35 demographic but I am more interested in the under-15 demographic. How to reach the future engineers and managers who will meet the quality challenges of the next decades? They are already online, they are already connected, we need to reach them. We have the tools, we have the desire, what is stopping us? We are only stopping ourselves. ASQ has social media out there (this and other blogs are examples) but is it enough? For those of you who are old enough, does your 15 year old son or daughter understand quality? This is a field of knowledge that impacts all other fields, not just manufacturing. Do they know about it? Of course they know about Twitter, Facebook, etc. Then why don't they know about ASQ and the impact of quality on our lives?

 

I think that ASQ should start a new initiative related to disseminating the knowledge of quality in the world and a more thorough understanding of its philosophical basis. The social media tools are there. The audience is there. We have to reach them, now, so that they can continue the growth and development of quality in the next 20 years. And lead to a brighter future for all of us.

The Customer is Calling

Nowadays we live in the Age of Cost Cutting. Companies are looking for easy and/or “proven” methods of saving money such as layoffs and elaborate improvement programs (see my previous posts). However, this single-minded focus on wringing costs from companies often clouds the most important aspect of the business: the customers. I once saw one of those “anti-motivational” posters that showed a telephone with cobwebs on it. The caption said something like, “Customers: if you don’t answer the phone, eventually they’ll stop calling.” Let’s look at this idea of customer satisfaction from several points of view: the first from the father of economics Adam Smith, the second from the Japanese perspective of customers and the last from the perspective of many western automotive companies.

Adam Smith, in The Wealth of Nations wrote: “Consumption is the sole end and purpose of production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer….”. He understood the real reason that business exists, to meet the needs of the market; more specifically, the needs of the customer. If a company cannot do that then they cannot continue to exist in the long-term. No amount of lean six sigma or LCC sourcing can stop that erosion. Just ask the pair of American automakers that went bankrupt when the market changed too quickly for their bureaucratic cultures to handle. They continued to lose market share to foreign companies that were more in tune with their customers. And then they simply failed.

The Japanese have a unique view of customer satisfaction. I visited Japan this past weekend (actually, I am writing part of this blog at Tokyo’s Narita airport). I went to my favorite cheap haircut place to get a haircut, since I haven’t found a barber in Shanghai yet. I was amazed again by the experience. The place is bare-bones, no TV, no radio, no plants. They don’t sell shampoo, they just cut hair. Two guys in their mid-20s quickly and skillfully cut hair for JPY1000 (USD12.73). You pay your money in a machine (exact change), get your ticket and wait your turn on a plain bench. And they do a great job. I was reminded, while the guy cut my hair, of the key to Japanese success in business. It’s something that I’ve mentioned in passing before but it really came to me during this weekend. The Japanese excel where many companies struggle: execution. They have near-perfect execution of their activities. You see this everywhere, from the general cleanliness of their cities to a $10 hair cut place. Everywhere they execute their activities flawlessly. Of course they make mistakes and sometimes their activities are not desirable; but whatever they do they do it very well. This also applies to customer service. They really treat their customers like a god (a common saying in Japan). You see this everywhere; the convenience store, the train station, the hotel, the bank, the airport. Japanese consumers are some of the most demanding in the world. Japanese automotive customers are also the most demanding, even more so in Japan. Their expectations are simple: just give them what you say you will give them. If there is a problem, understand it and fix it as soon as possible. This is how they run their companies and this is what they expect from their partners. I’ll continue this discussion in another blog series on how to work with Japanese customers. Suffice to say that the Japanese give the highest attention and service to their customers.

In contrast to the Japanese company culture about customers, many Western automotive suppliers treat their customers as one (or more) of the following:

•  Adversaries that need to be outwitted or strong-armed. 
•  Dupes to be tricked into accepting something that they shouldn’t. 
• Interlopers who try to interfere with the company’s business. 
•  Unreasonable, unknowable strangers (usually Japanese customers).

They fail to see their customers as Adam Smith and the Japanese see them. They refuse to accept their economic need to satisfy the customer—even the smallest customer, even the most difficult customer. Sometimes they even fail to acknowledge the customer when they are planning their activities. They usually personalize the customer to be the person with which they have the most interaction. The Salesperson sees the Buyer as the customer, the Engineer sees his/her counterpart and the Quality Engineer sees the plant supplier quality engineer. Each person sees their direct counterpart as the “customer”; this personalized customer is then placed into one of the above categories. This is the first mistake that these companies make, they personalize the customer. The customer is the company, not the individual person. No matter what they think about the individual person they should give their full attention and support to the customer. The second mistake is too much internal focus by all levels of the company, but especially the Management (the top level of the company/location/factory). Lean events, six sigma projects, 5S audits, layered audits, internal metric reviews (especially financial), etc. take so much time of most management members. If they pay any attention to their customers it’s either through dry performance metrics (which are practically arbitrary, like customer PPM) or through price negotiations (because it’s money). They rarely talk directly with the customers, they rarely visit the customers and they rarely think about the customers. Why is that? I think that it’s easier to focus on internal issues. It’s easier to deal with people who must accept that you are the BOSS and treat you as such. When I see the amount of attention and effort given to things like lean six sigma (as outlined in previous posts) and the absolute lack of attention given to customers I am really amazed. Customers are begging for updates on open issues, asking unanswered questions and are being generally ignored by various levels of the organization. And what does the Management do? Hold another lean event and try to squeeze a few more coins from the organization because it’s easier and it’s more interesting. Nobody wants to visit a customer and listen to them complain. But if you don’t listen to your customer’s complaints, you can guarantee that someone else will listen.

So how can companies meet and exceed customer expectations? A few ways are so basic, they shouldn’t need to be mentioned: answer the customer’s questions (in the way that they want, not the way that you want), give them attention (visit their office, visit their plant) and respond quickly to any comment/request/suggestion (even if the response is negative). Even though these are very basic, many companies still forget them. After the basics are covered, there are two main ways to win and keep customers (for manufacturing but especially automotive): consistency and innovation. Consistency is the core of quality management and so-called improvement philosophies such as six sigma. REDUCE VARIATION, REDUCE COST. Reducing variation is important for the internal functioning of the company and is important for the customer. Customers just want to know that you will consistently meet their expectations. Reducing variation helps you to do that. If you can do that, you are already ahead of some of your competitors. Innovation helps you to keep the business that you have but also helps you to win new business. It is the opposite of consistency in that it is a form of variation, but it is controlled variation. It must be contained within a structure of consistency; within those confines it is allowed to roam free. Innovation wins the heart of your customers; quality keeps them from wandering away in search of a new love.

Customers can be fickle, demanding entities. They have their own environment to work in and you are an important part of that environment. Don’t be disruptive to them and don’t ignore them. If they ask a question, answer it quickly. Try not to give so much focus on your internal activities and completely ignore the customers. Go ahead and hold your lean event, but take at least as much time to give your customer attention. Visit them, call them, and ask your team to send you a copy of their open issues. Pay attention to them and show your team that you will do so. This effort will pay multiple benefits to your customer and to your company.

Lean Six Sigma Revisited Part 2

This post is the second part of a two part series about revisiting lean manufacturing and six sigma in the 21^st century. Before reading this post, I encourage you to read the post immediately below which is part one in the series. In this post I will discuss six sigma and my recommendations for management.

 

Six Sigma

 

Six Sigma™ as a brand is simply the repackaging of several statistical tools that have been developed over decades; the only difference being the sequence with which they are deployed. The marketing of six sigma over the past fifteen years has been phenomenal. Huge companies like GE and Motorola trumpeted their success with six sigma and the business world scrambled for it. Books were written by the truckload, consultants hired and people trained by the boatload and a huge revolution in improvement was started. At least that's the story that most people want to believe and most consultants and authors sell. There are several problems with this story; I'll highlight two big ones: the deployment and the results.

 

Deployment

 

Six sigma is typically deployed in a company in the following way:

 

l        Hire a consultant to do training

l        Train people as follows:

n        Upper management - introduction only, maybe two hours.

n        Middle management - Champion training, maybe four hours.

n        Master Black Belts/Black Belts (MMBs/BBs) - full-blown 6+ weeks of training in all of the details of six sigma, including leading projects and mentoring other "belts".

n        Green Belts (GBs) - 2-4 weeks of training, not as involved as MBB/BB but still pretty deep.

n        White Belts/Yellow Belts - some exposure, maybe the same as introduction or Champion training but meant for the remainder of the workforce.

l        Define some projects (usually done in parallel with the training so that the trainees have a "real-world" application during their learning)

l        Track the projects

l        Complete the projects and start counting the money

 

This deployment plan leads to several problems; let's look at some of them.

 

Capacity

BBs and MBBs are dedicated full-time to implementing six sigma and leading projects. GBs and Champions are expected to dedicate a certain amount of their existing work time for their projects. This is the first problem with the deployment of six sigma: GBs and Champions are expected to take time to work on six sigma but there is no subsequent increase in overall resources. The thinking is: "they can take 10% of their time and work on six sigma projects" but that translates into an additional half-day of work per week (or more). For someone who is already working in a downsized department this 10% more work can be a deal breaker. Something has to give and it's usually the six sigma project, especially if their manager is interested in something else.

 

Knowledge Gaps

And that's the second problem with the deployment: the Champions do not have the same level of knowledge about six sigma as their GBs (fours hours of training vs. four weeks of training). In the worst case, the manager is unaware of the importance of this activity (due to poor top-down communication) and doggedly assigns the GB to work on other things, like their "real" job. Who can effectively mentor GBs?

 

Unclear Direction

The BBs/MBBs can mentor GBs but their main work is leading multiple six sigma projects per year (usually in parallel). They are measured by the number of projects completed and the amount of cost savings that they "produce", not the number of GB hands that they hold. This means that they are more focused on doing their main job and less on mentoring other people.

 

What does all of this mean? Unlike lean manufacturing, where there may be only one dedicated person and no part-timers, almost everyone is expected to participate in six sigma. Lean likes to have "Kaizen events" where they recruit some people, do an activity and then let the people get back to work. Six sigma, on the other hand, must have a virtual army of specialists available for any and all projects all of the time. This thinking causes the biggest burden of implementation to fall on the GBs and their Champions, already adding to their workload. And when (if) the projects are completed, what are the actual results?

 

Results of Deployment

 

Most companies are able to actually complete several six sigma projects; especially if they've hired several top gun BBs/MBBs to support their deployment. They get all of the way through the DMAIC process, get approval from their Champion and close the project. What happens after that? It all falls apart. The "C" at the end of DMAIC stands for "Control". In this phase of six sigma, the improvements made during the project are documented, stabilized and handed over to the owners of the process. Out of all of the phases of six sigma, I think that this one is the weakest (followed closely by the Define phase). I think that it's the weakest because from my own experience, and the experience of other BBs, I know that many projects soon fail after being handed over to the process owners. This may be for several reasons but most of the time the owners don't really understand what the GB/BB did to their process and revert to old methods. This leads to the interesting phenomenon of multiple projects for the same problem. I don't know how many times I've heard "oh, we had a six sigma project on that last year" when discussing some significant manufacturing problem. What is so wrong with a philosophy/method/system that can allow so much effort to simply evaporate within a short time period? Obviously, measuring immediate cost savings or other metrics and then walking away is not the answer.

 

Recommendations and Conclusion

 

So what can management do to really make lasting improvement in their company? I have to admit that there are many valuable tools embedded in lean six sigma and the manager who wishes to ignore them in their entirety places his/her company at an extreme competitive disadvantage. It's not the tools themselves that are the problem; it's the mindset that tries to implement them. I think that companies that are truly successful with lean six sigma are simply successful companies in general. Their management had the correct mindset for improvement, lean six sigma just happened to be the vehicle that they used to implement their thinking. And that's the key: the mindset of the management. Is the direction to cut costs or, even worse, pretend to cut costs by playing with numbers? Or is the direction to be competitive in a global marketplace? And how do these lean six sigma tools help with that direction?

 

I believe that the core lean tools (pull, kanban, jidoka, poka-yoke, SMED, TPM, etc.) should be taught to all of the manufacturing engineers and manufacturing supervisors. The manufacturing engineers are responsible for planning and installing the manufacturing process. Their understanding of lean tools is crucial so that they can set up a production line using the best methods available, from the beginning. Why set up a line, run for a few years and then decide to do a kaizen event to streamline it? Just set it up that way in the first place. The supervisors face the daily challenges of pulling everything together, they have to manage and use the tools given to them from the engineers to create value for the company. Their understanding of lean tools, equal to the engineers, will guarantee that they will properly supervise the manufacturing operation. As for the existing lean group, make them a manufacturing engineer, manufacturing supervisor or manufacturing manager. Take the knowledge that they have and allow them to implement it every day, instead of when there is a kaizen event.

 

Six sigma also offers a lot of valuable tools that can aid in manufacturing. Like lean, the tools should be trained to a more general audience such as the quality engineers and manufacturing engineers. Don't bother with Define and Control; just teach the core tools in Measure, Analyze and Improve. Make a "six sigma project" out of one of your new product development activities. Just like lean, use the tools to analyze and improve the manufacturing process before it even exists. You have plenty of time and resources, that's what APQP is all about. And as for your existing BBs and MBBs: quality engineers and manufacturing engineers. Their deep knowledge of statistics and analysis will be invaluable in those roles.

 

In conclusion, you need to embed the core improvement tools of lean six sigma into your company; don't separate them into a special group with colorful job titles and ambiguous responsibilities. Dispense with internal marketing and exhortations for change. Change yourself and lead others by example. And let your competitors chase the end of the lean six sigma rainbow.

Lean Six Sigma revisited, part 1

Introduction

This is not your typical lean six sigma (LSS) blog. It’s not a rah-rah marketing message from some consultant trying to make a living. If you want that, there are thousands of other blogs you could read; this post is about revisiting LSS, its meaning, purpose and future. I detail my concerns of both lean and six sigma as deployed by many companies today and then I give my recommendations for improvement. 

This post is the first of two parts, in this part I will explain the reason why LSS doesn’t fit with an efficient company structure and also the foibles of lean manufacturing. In the second part I’ll discuss six sigma and my recommendations for management.

Line and Staff

 

Companies typically have some kind of “line and staff” organization. The “line” is the group primarily responsible for the operations of the company. In a manufacturing company this group would be the Manufacturing department and probably the Sales and Design departments. The “staff” group is responsible for supporting the line and includes Accounting, HR and IT. The staff group typically reports to someone at the top of the management team (e.g. the CFO). (In ISO 9001 process-speak: the line represents the Customer-Oriented Processes and the staff represents the Supporting Processes.) The line’s purpose, fundamentally, is to execute the strategies of the company with the support of the staff. These strategies often include goals and objectives measured in terms of months and years. In a relatively good company everyone knows the targets (e.g. sales growth, profit, customer complaints, etc.) and they do their best to meet the targets.

One way that a company tries to improve this situation is by adding a group responsible for “continuous improvement”. This continuous improvement group is usually your friendly neighborhood LSS team. So how does this group actually fit into the line and staff  structure of the company? Typically this group has a separate reporting structure from the rest of the company, an additional line reporting directly to the CEO. This is to show the “importance” of the group to the remainder of the company. This importance is also usually shown by spending a lot of money on outside consultants, doling out tremendous internal marketing (hats, banners, stickers, stuffed animals, etc.) and grand pronouncements of fundamental change in the organization. This activity may be further promoted with public announcements, customer presentations and large gatherings of people from various plants/locations/countries to promote the company’s good intentions. What is the goal of all of this hoopla? TO SAVE MONEY. LSS, when implemented in various ways, aims to save money. But do the management of these companies and the practitioners of these methods really understand their meaning? And do these methods really save money?

Lean Manufacturing

Lean is an adaptation of the production-side of Toyota’s management system, known as TPS. TPS is a part of their management system; it is not the entire system. That is a key factor to consider. Toyota is not successful because of TPS. Toyota is successful for a variety of factors, one of which is TPS. TPS at Toyota operates within an overall management system that is driven by a company culture. This company culture was developed over many years as a reaction to the absolute devastation of Japan during WWII and the Japanese national culture. I lived there for more than three years; Japanese culture is unique in the world. The combination of national culture, re-building from nothing and the support of American business consultants (outlined in The Puritan Gift) led to the success of Toyota and other Japanese companies. It is wrong to believe that TPS was the main factor in Toyota’s success. It was a part of it but certainly not the main part.

To try to recreate Toyota's success most companies, supported by well-paid consultants, do lean training and start marching down the road of continuous improvement. Their consultants may actually coordinate their projects or they may do it themselves. Either way, they fully believe that this is the path to cost savings. They’ve been told by their consultants (who are trying to make a living) and the authors of many books (who are also trying to make a living) that this is the way that it is done. This is the path that many, many companies have taken to more efficient operations and significant cost savings. Nobody tells them that TPS is only a part of the success of Japanese companies. Nobody tells them that these tools are backed, primarily, by a very different national culture from most other countries. Think about this. Have you ever visited a Japanese company’s manufacturing location in another country? I’ve visited several Japanese automotive OEM and Tier 1 companies in various countries; I even worked at one for a short time. What is one thing that is common for all of them, regardless of the country? There are Japanese people everywhere, mostly managers and engineers. Japanese companies know that the only way to implement their operations in a foreign country is to manage it as if it was in Japan. If lean manufacturing, or any other Japanese idea for management, was so easy to implement then why do Japanese companies run their foreign locations in this way? Because the CULTURE is the primary reason for their success and they know that. They pay an unbelievable amount of money to have Japanese people on the ground in their locations because they are not only transferring technology and knowledge to a foreign country, they are transferring their CULTURE. Lean was not developed in a vacuum and it cannot be deployed in a vacuum. Anyone who says otherwise is trying to sell you something.

So does lean, when implemented as in most companies, actually save money anyway? Let’s look at some common measures of a lean project’s success: reducing people, freeing up floor space and reducing inventory. Reducing people is an easy one, just rearrange the machines, add some additional work to a person or two and voila! Immediate “headcount reduction” and cost savings. Project closed, kaizen finished, happy ending. But, did you actually fire that person that you reduced? Probably not, you know that if you fire them that it will de-motivate the remaining workforce. So you found something else for them to do, maybe on that new line you are building…if you are building a new line. Otherwise, that person can do something else. But unless you can immediately put that person to work on some valuable activity, an activity where you would need to hire someone to do it, then you didn’t save any money by removing them from the production line.

How about freeing up floor space? That’s an interesting metric, “our project freed 2 sq meters of floor space” or something similar. This freed space is gleefully converted into currency/sq unit and fed into the cost savings measurement. The calculation is based on the building lease amount per sq unit or something similar and you have some nice tidy cost savings. But how are you actually saving any money? Empty space does not add any value to the company. Until you put something valuable into the space and use it, there is no benefit to the company at all. Did your Lease Company or bank agree to lower the monthly payment on the property by an equivalent amount? Freeing up space by itself saves absolutely no money.

Reducing inventory actually has some hard cost savings behind it. When I worked in LSS I would tell people to go out to the warehouse and see the piles of money sitting there. All inventory represents a cost to the company that has not been recovered from the customer by selling the product; just big piles of money, sitting in a warehouse. Anybody would want more of that money in the company coffers rather than having it sitting there doing nothing. The risk here is not directly financial but the indirect cost of reducing inventory too quickly. You are probably familiar with the analogy of the boat and the water. The water represents inventory and as long as it is high then the boat just sails along happily with no problems. However, as the water level/inventory level is reduced all sorts of rocky protrusions such as bad quality, machine downtime and inefficient process start to crop up and risk grounding our happy ship. Once the ship hits those rocks all of the savings from reducing inventory, and then some, is spent in expedites, scrap, rework and customer complaints. Reducing inventory levels is the LAST thing you want to do as an improvement activity. Fix all of your other problems first (including TS and customer audit findings) before you even think about lowering your inventory in any significant way; to do otherwise leads to a big risk for your company.

Summary

Companies typically implement lean without any understanding of its place in the success of the company that created it. They also track their progress using ambiguous or outright bogus cost-savings metrics. In this situation, the only people who come out ahead are the consultants and the authors. They promote and sell this mindset to managers who want to find an  easy way to fix their problems. But there are no easy ways to fix problems. The members of the line are responsible to find and fix the problems, not rely on some outside group (internal or external to the company). I'll discuss six sigma and my recommendations in my next post.

Quality, Strategy, Execution

I enjoyed ASQ CEO Paul Borawski's interview with Tata's J.J Irani regarding how Tata has implemented quality throughout the company. I am very pleased to see someone at Dr. Irani's level promote a quality culture for this company. I already believe that companies that are serious about quality should have a CQO position at the top, to fully support improvement and customer satisfaction. If that's not possible then having someone at the top who is a strong spokesperson is the next best thing.

So how do we develop a quality culture at a company, in an overall fashion? Quality is about strategy and execution, just like every other important aspect of an organization. That's right, quality must be a strategy, a way to differentiate an organization from its competitors (speaking about for-profit organizations). That's the first step. If quality is not a strategy, discussed at the top of the company, then further discussions are almost pointless. It is a main strategy, but not the only strategy, various market-related and technology-related strategies are just as important (quality isn't everything in any organization). However, for quality, if you lose it, one of your competitors will pass you and they will beat you. Cost-cutting is not a way to grow a company, it is not a way to compete. Focusing on the "bottom line" is pointless if you do not focus on your "top line". Quality grows the top line through customer satisfaction. Quality also helps with the bottom line, but that is secondary to its main purpose of satisfying the customer. So, quality must be a STRATEGY.

The second question is that even if we have defined quality as a strategy, how do we implement it? The other key activity of business, EXECUTION, is just as important as strategy. Top management must communicate the strategy (all of it) to all layers of the company all of the time. The people at lower levels of the organization are responsible to implement it. But if they don't know what it is or how it relates to their job, how can they do that? Especially the "lowest" people in the company as they are often (surprisingly) the main interface to the customer. Think about it. If you work in a manufacturing company the people actually making the parts are probably at the "lowest" level of the organization but their activities directly impact your customer, every minute of every day. How important is it that those people fully understand and can implement the strategy of the company? It's the MOST IMPORTANT thing. The function of management, starting with the first-level supervisor up to the CEO, is to support THEM. Communicate the strategy and give them the tools to implement it, all the way down the org chart. That is the key to EXECUTION. Without that, you can start down a slippery slope and not even realize it, especially if you only focus on costs.

To close, quality must be a key strategy for an organization, one of the best examples is shown in a motto from Newport News shipyards: "We shall build good ships here. At a profit - if we can. At a loss - if we must. But always good ships." This is a clear statement of quality as a strategy. However, strategy is not enough, execution must be done with the proper mindset from management. Together, this overall culture of quality can lead to higher customer satisfaction and business success.

Head of Quality and...?

I just watched with interest the interview between Ford's Group VP of Quality and New Product Launch, Bennie Fowler, and ASQ's CEO, Paul Borawski here.

While the questions and answers were interesting in themselves I was more curious about Mr. Fowler's role at Ford, and similar roles at other companies. I noted above that Mr. Fowler was the Group VP of Quality and blah blah blah. Why, oh why, do so many companies feel that if they have a high-level person in Quality (and many don't even have an executive or higher level position with "Quality" in the title at all) that they have to make them in charge of Quality and something else? Isn't Quality enough of a job to have an executive level position responsible for it and only it? In my experience the highest "Quality only" role that I've seen is some kind of regional role. Anything higher (Director, Executive Director, Senior Executive Director, VP, Group VP, etc.) is always Quality AND New Product Launch or Quality AND Program Management or Quality AND Health, Safety, and Environment (!!!). WHY? Why is Quality always delegated to share a seat with some other function in a company? How can Quality remain relevant in this way?

I propose that companies that are serious about Quality create a C-level position dedicated to Quality in their organization. A Chief Quality Officer, responsible only for Quality, would be a strong message in any industry but in particular in the automotive industry. Toyota comes close (of course) with their regional Chief Quality Officers but I would like to see someone sitting at a table of a major, global company (preferably automotive) who has the title and responsibility and authority of Chief Quality Officer for the company. Until that happens, how can Quality ever rise above the status of "Head of Quality and....."?