Tales from the Pyramid – the torn pyramid

Post after post in the Tales of the Pyramid series I describe what happens to the corporate hierarchical structures, usually pyramids.
This time the pyramid is torn. Half of the organization moves ahead and backs up the project while another half resists change.

Typical example is a broad market strategy change that requires to renew products and/or customers portfolios, discontinuing products that do not fit into the scheme anymore, stopping to serve some markets segments, etc.

Forecasting, procurement, production, marketing and shipment usually have no problem embracing this kind of change, but sales seldom welcome it.

Salesforce has strong incentive about sales and disrupting their bonus-process with a new deal is no fun to them. There are those easy-sales that yield bonus without big effort. There are products the customers are accustomed to and make them change to an alternate requires big effort while being risky.

Salesforce often fight to keep the portfolios as they are best for them, regardless to the overall interest. If they can’t convince, they often do not (totally) stick to the decisions and new objectives, letting customers order products bound to disappear and still visiting customers which are no more desirable.

As unwanted orders keep being fed into the process, the pipe never totally dries up and portfolios are not renewed as decided.

Remote subsidiaries play the same game justifying their play with local rules and constraints.
Sales are not the only division that can tear off the pyramid, but I witnessed it often with them.


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Measurement is the first improvement step

Chris HOHMANNIt’s a kind of magic and it works every time: setup some indicators to measure something and this very something will automatically start improving, without any other action.

Well, it looks a kind of magic but is a very human trait. People pay attention, stick to the rules and behave from the moment they can be spotted not doing it.

Indicators, dashboards, measurement systems are such means used to surface and analyze problems down to their root cause, including behaviors and deviations.

As nobody wants to be singled out as an ugly outlaw, those who did not always stick to the rules or behave, inclined to be messy or sloppy will straighten their behaviors and adjust to the rules.

If they don’t do it wholeheartedly, they do it to avoid (personal) problems.

People generally choose the easiest path; if sticking to the rules and behaving is “easier” than trying to get around, they’ll stick and behave.

Setting up some measurement means keeping an eye on something and as soon as it is known, behaviors change and things improve. I have witnessed this often.

  • Spare parts inventories are not accurate ? Setup measurement of inputs and outputs and by whom or at least when, the latter often being enough to focus on (a group of) individuals, and the inventory will instantly be kept better. Everybody will sign for the parts issued and won’t take more than really needed. Those still “forgetting” to book parts will soon be discovered and they’ll learn it’s faster and easier to book parts than to give explanations to the boss.
  • OEE (Overall Equipment Effectiveness) is low? Set Up a poster with OEE value per shift and the split of productivity losses and OEE will improve without even starting any other action. Most of the time, the first thing team members do (if applies) is stop taking more rest time than allowed. Thus having more run time, OEE improves.

Installing proper measurement is simple and yields quick results. A trick known by seasoned practitioners.

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Tales from the Pyramid – Head first

Imagine a bold general in front of his troops, commanding the assault against the enemy.
Spurring his horse to assault he dashed.
Alone.
His troops didn’t move.

It’s more or less how some top executives must feel, when confident about the tactical moves and their overall strategy, they order the decisive manoeuvre but the bulk of the forces does not follow.

In organizations and companies, giving orders and dictating rules and procedures doesn’t guarantee they will be carried out, applied and followed.

Employees nowadays are less obedient than the previous generations were. Today employees want to be associates in every meaning of the word, not only pawns on the big chessboard.

Management turned employees into intrapreneurs, rewarded individual performance, turned many of them into bounty hunters and mercenaries.
The latter go to battle heartily when success is easy and reward alluring, but may stay put or even run away otherwise.

Other internal forces may play against the big plan, like labor unions for example or some influential managers not sharing the chiefs’ beliefs.

Another factor for the mass to move or not is the speed the instructions, explanations or invitation cascade down the pyramid. The larger the organization, the slower usually the diffusion and the greater the risk of distortion as the messages are passed along.

Or it looks like another flavor-of-the-month idea/program/project. Disillusioned staff just waits for the next big idea and goes on like usual, unimpressed by the top fuss.

There are many reasons the mass will not move on, top managers like generals better check about all possible hindrances before throwing themselves head first into the big fight.

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What is Theory of Constraints?

The very minimum to know about Theory of Constraints

In order to define Theory of Constraints (ToC), it is necessary to define what a constraint is. A constraint is anything that limits the system (organization, enterprise, group, process…) from achieving higher performance relative to its purpose.

  • A constraint does always exist, otherwise the system would be infinitely successful, constantly achieving higher performance.
  • A constraint can be part of the system or lying outside of it, e.g. supplies limit the transformation of material, dull market limits the sales, regulation limits operations, etc.

Theory of Constraints is a “business philosophy” or “management paradigm” that takes into account the existence of constraints, focuses on the one that limits the performance of the whole system and strives to achieve more of its goal (patients treatment, sales, throughput, sales, whatsoever).

The constraint is often referred to as the weakest link of the chain (metaphor for the whole process), which limits the performance of the chain. It is therefore useless to improve any other link as long as the weakest has not been strengthened. ToC claims to focus on the most critical factor (the weakest link), while Lean in comparison is often deployed in unfocused way, wasting resources to improve any link of the chain without really improving the whole chain.

The notion of constraint is generally easier to understand using the bottleneck metaphor or the piping system.

 

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Once the constraint is identified, Theory of Constraints proposes consistent methods, tools and thinking processes to get the most out of the system, despite the constraint.

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What is Six Sigma?

Beside Lean, Six Sigma counts among the most popular performance improvement approaches. Based (and named) upon statistical data and tools, Six Sigma’s aim is to speak with data and facts. It is the most “scientific” methodology in the Theory of ConstraintsLean – Six Sigma (TLS) trio.

Once thought to replace Lean, Six Sigma rather completes it. Despite a certain overlap, many comparisons try to clearly discriminate what is in the Lean and what in the Six Sigma pigeon holes. The following presentation is a nice summary for both Lean and Six Sigma.


 

When Lean increase costs

It happens once in a while, top management is disappointed by Lean assessment results.

Assumptions and expectations

Almost all testimonies about Lean initiatives report savings and gains, which is both a blessing and a curse for Lean.

On one hand, savings and improvements fueled Lean’s fame and attractiveness in the eyes of top managers and decision makers, on the other hand Lean became synonym of cost cutting which is reductive and misleading, more a curse than a blessing when going shop floor.

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Many decision makers thus launched Lean initiatives in order to reduce costs, savings in their understanding is more about cost cutting then turning wasted resources into value-creating ones.

You may also like Six differences that distinguish cost cuttings from cost reductions

Their expectations were to reap the 20 to 30% savings a Lean program usually yields.

Opposite outcome

It happens once in a while, top management is disappointed by Lean assessment results.

Instead of listing all the possible savings, me and my team would strongly advise to increase spending in order to return some critical resources to their nominal state.

This means fix safety issues or retrofit machines too long deprived of proper maintenance for example.

I witnessed several times new plant managers or general managers ordering a Lean / performance assessment and discovering through our findings that the previous manager in charge cut costs for maintenance in a way critical resources are nearly worn out and/or dangerous for workers.

These short-term savings endangered future production and competitiveness, lead to productivity drops (machines stoppages, breakdowns, longer repairs, slower production rate, higher scrap, etc.) and discouraged users as well as maintenance teams.

Worse, in some cases, the pressure to achieve production objectives lead to endanger workers because of makeshift repairs, poor or no problem solving, etc.

The same can happen to manual work, the extended resource being people. Luckily this is far less frequent, for what I saw.

In order to secure operations and continuity of business, the recommendation is to mend and fix, retrofit and sometimes replace costly parts, return to preventive maintenance with adequate frequency and content, and so on.

This means temporarily spend more, which was not the initial intent.

For the manager who ordered the Lean assessment, it looks like Lean increase costs.

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