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Implementing a lean/World Class Enterprise (WCE) is not a bottom-up or middle-out implementation. Successful and sustainable implementations are strictly top down! Having said that, it is important to note that top management by itself cannot make a company world class.
Once top management has provided the proper support and foundation for a WCE implementation, companies become world class when every person in the facility understands why becoming world class is important to their customers, the company and ultimately to them.
This common goal/mission creates a foundation for everyone to pull in the same direction (teamwork). This lack of a common goal/mission and teamwork is why bottom-up or middle-out implementations cannot change the entire company.
Enthusiastic (about WCE) managers or supervisors have been known to make major improvements in their area of control even without the support of top management. Unfortunately, without top management support, sustainability is a problem.
The manager gets moved, promoted or changes jobs, and suddenly everyone remaining is left with the question “Why are we doing this?” To get back into their comfort zone, and with the support of the new manager, the group then puts everything back the way it was before the former manager changed it.
In John Kotter’s book, “Leading Change”, he identifies the five change implementation prerequisites that management is responsible for successfully completing before change can begin:
Creating a sense of change urgency
Creating/developing a company change guiding coalition or alliance
Developing a vision of the required company future state and a strategy to achieve it
Communicating the vision and strategy to the entire workforce
Creating an environment in the company where associate empowerment can evolve
Whether the change is to our personal lives or our business lives, change does not occur without a sense of urgency to do so.
In fact, John Brandt, a contributing editor to IndustryWeek magazine and CEO for The MPI Group, noted that the common thread in the 10-plus years of IndustryWeek’s “Best Plant” awards is that all of these companies had a “near death” experience.
The reality is that all businesses today are under a tremendous amount of competitive pressure from the global economy. The pre-global economy selling price model was:
Selling Price = Cost + Desired Profit
Rolled up in the cost of the product or service were all the wasteful activities that occurred in the business (scrap, rework, unnecessary overtime, equipment downtime, searching, hunting, looking for stuff, unnecessary motion, reconciliations, supplier invoices, counting inventory, receiving inspection, and on and on and on). This formula has been replaced in the current global economy by:
Profit = Selling Price - Cost
The selling price is now set by the customer/consumer. If this is not what is happening in your business today, it’s down the street headed your way. Companies today can control profitability only by controlling their costs. WCE is the technique that can accomplish this control.
To create this sense of urgency to change, top management must tell all company associates (that means everyone) in a company-wide meeting what the current market conditions are in a professional, non-threatening fashion. Remember, the goal of this communication is to create a sense or urgency, not the potential panic reaction to a threat.
Company associates (98 percent of them anyway) want to take care of the customer, want the company to be successful and want their jobs secured in the future. In many cases, associates already recognize the competitive nature of the current business environment. If properly presented, this common mission and common goal provides the basis for everyone pulling together in the same direction (teamwork).
Now that a sense of urgency exists, the tools/ability for the team to participate in relieving this current sense of urgency must be presented.
The purpose of this “guiding coalition” or alliance is to help guide the company and the associates through the required changes. Additionally, the coalition enhances company-wide, two-way communication in three vital areas of the WCE implementation. These areas are:
Visual and verbal updates to the entire company on the status of the WCE implementation.
Honest feedback from all areas of the company on how the implementation is proceeding. It includes successes as well as suggested improvements.
Making and communicating WCE implementation course adjustments along the way. This results from the fact that most companies are only successful with 70 to 80 percent of their implementation efforts, and market conditions can change over the years what a WCE implementation can take.
With these purposes in mind, members of the guiding coalition must include/represent:
All levels within the organization
People who are trusted by their peers
Good communicators and team players
Individuals with a strong desire to participate in securing the future
A good mix of both leaders and managers. Leaders drive the changes and managers control the process. Too many managers on this team results in the team members from the lower levels in the organization eventually not being heard.
Top company management, with their high-level view of customers and markets, must develop a visual picture and verbal description of what the company must look like at some point in the future (three, five or seven years) to insure the company is still competitive and still in business.
This vision must include both people and processes, as well as products and services. The reality is this: Becoming a world-class company by itself does not guarantee a company’s future. The company must still produce a product or service that customers want. For example: If a company was the world-class producer of buggy whips or steam engines, would it still be in business? Probably not.
The strategy to become world class has two parts:
lean to eliminate waste and efficiently run the processes that provide what the customer is willing to pay for (value-added processes); and,
a sales/marketing plan which is always in touch with the “voice of the customer”.
This is where American management fails miserably! Creating the vision and strategy can be done successfully – even superbly. Somehow, however, it is believed that if six or seven of the top managers know what the plan is, it will become a reality. To use a football analogy, it’s like the quarterback going into the huddle and telling only the wide receiver and the halfback what the play is and then expecting the play to be successful. The entire team must know the play to be successful.
We are fully expecting our people to do the right thing, and they will beyond our expectations, but we must communicate to them what the customer wants them to do.
Yes, evolve is the correct word. Associate empowerment is an evolutionary process, not revolutionary!
All the tools and techniques of WCE are designed to eliminate business waste. Like tools in a tool box, each tool has a waste identification or elimination specialty. Unfortunately, the WCE tools are in a “locked” tool box unless associates are empowered to open the box. This is a key point. In the above example of only communicating the plan to six or seven managers, these six or seven managers could make some changes and improvements in the next 12 months. Could these improvements make the company globally competitive? Probably not.
Instead of just communicating to the six or seven managers, communicate to the entire workforce – say 400 people. Communicate the company vision and strategy, teach 400 people the WCE tools and techniques, and ask them to make small improvements in their work area every day. After 12 months of this, the company has now made huge improvements.
The company may not be globally competitive yet, but if you stand on a foot stool, you can see world class from there!
The problem is that this level of empowerment and participation takes years to develop because of the evolutionary nature of empowerment. This means that creating this environment must start today!
But what are the elements of an empowered environment? They are:
Associates are recognized as the most valuable resource. World-class companies recognize that their associates can differentiate them from the competition. While the competition may be able to duplicate their facilities and equipment, they may not be able to duplicate the participation and motivation of their people.
Teamwork is utilized throughout the organization.
Decision making is delegated to the lowest possible levels in the company.
Openness, initiative and risk-taking are promoted.
Accountability, credit, responsibility and ownership are shared. Ownership means psychological ownership, which is far more important to empowerment than just stock certificate ownership. Psychological ownership develops as a result of associates feeling like the 50 square feet they work in everyday is “their part of the business.”
A better understanding of what empowerment is can be developed also by knowing the barriers to empowerment. The common thread through all of these barriers is a lack of communication. The barriers are:
Lack of trust
Poor communication – can lead to lack of clear expectations, lack of trust, fear
Fear – people fear the unknown and, therefore, resist change
Lack of training – inadequate training leads to confusion, frustration and anger
Lack of measurements – align all company systems to the vision. First, you must measure the current performance of any activity that you wish to improve. No measurement, no improvement. Second, to implement WCE, you must revise the company’s associate evaluation systems, promotion systems, pay increase methods and bonus systems to support WCE implementation goals. There cannot be mixed messages in any company systems. For example, people who do not support WCE won’t get promoted.
WCE Kickoff Meeting: The initial kickoff meeting, which includes creating the sense of urgency and discussion of the company vision and strategies, must come from the top manager in the organization. There cannot be any question about the company direction and the only way people can be assured of that is to hear it from the top person.
To prevent rumors from developing and spreading, these meetings should include all company associates and should occur in as short a time period as possible.
This communication should include a deployment plan and timetable so company associates know when they will become involved.
No Layoff Policy: A “no layoff policy” as a result of WCE improvements must be implemented on day one. This does not mean that if the company loses a major customer or the economy goes into recession layoffs cannot occur.
It does mean that no one goes out the door as a result of the major productivity and other improvements that occur with WCE. Only normal attrition can be used to reduce the number of associates.
There is a very practical reason for this. WCE is a people-based improvement activity. Eighty percent of the ideas and improvements that occur in a company’s world class journey will come from the people in the company. If people think that they or other associates will be laid off as a result of their ideas, there will not be any more participation in making improvements.
So, what do companies do in this transitional period between being a traditional manufacturer and growing the business as a result of improved competitiveness that moving toward WCE brings? First, they “in-source” jobs, operations and material that had previously been out-sourced to suppliers.
Secondly, and some companies do both, the extra people are moved into additional/other WCE activities. This accelerates the amount of improvements that can be made.
The American Licorice Company reduced this transitional period by almost immediately converting quality and productivity improvements that their associates made into product price reductions to their brokers and customers. Improved visibility as a candy supplier and improved sales were the result.
Understand that this no layoff policy only applies to the WCE implementation. If the company loses a major customer or the economy goes into recession, layoffs may be necessary to protect the survival of the company.
Lack of top management support for a WCE implementation can be an extremely costly and, if left unaccomplished, fatal mistake. Management must prepare the foundation for this change to WCE, and then let the associates make the company world class.
About the author:
Larry Rubrich is the president of WCM Associates LLC. For more information, visit www.wcmfg.com or call 260-637-8064.