Business Process Improvement

Articles published by 180 Systems:

• Re-engineering no longer code for ‘you’re fired’
• Spreadsheet Over Reliance
• Best Practices

Warehouse Automation--What's Really Working For Pallet, Case, and Piece Pick Operations

January 2007 from the Aberdeen Group – “Warehouse Automation” is a broad term that encompasses many different individual technologies. The following is a list of the primary technologies Aberdeen has analyzed for this benchmark report:

Bar-Code Scanning
Bar-coding has been used in distribution centers for decades, and it remains the most commonly adopted form of warehouse automation today. It is reliable and relatively inexpensive. Bar-coding is typically used in a real-time environment, with data being transmitted back and forth via a Wireless Local Area Network (WLAN).”

Voice-Directed Picking
Voice-Directed Picking was widely introduced in distribution center environments in the 1990’s and now is used heavily in certain industries such as grocery distribution. It is used in areas where workers benefit from being able to use both hands to perform their work, without ever having to take their eyes off of the task at hand.

Cart-Based Picking
Cart-Based Picking is both a technology and a methodology. Cart picking excels in cluster pick operations, where several orders are picked at the same time with a single pick path through the warehouse. Keeping track of which items belong in which orders can be challenging; hence, cart-based cluster picking often involves secondary technology such as bar-code scanning, voice-directed picking, and pick-to-light systems…”

Aberdeen has broken out its Best in Class framework according to three key metrics:

• Labor cost reduction
• Percentage of on-time and complete shipments
• Pick accuracy

Very few companies were Best in Class for all three categories – meaning that there is more than ample opportunity for even those considered top performers to improve their operations…”

180 View – Warehouse management means many things to difference companies. Many ERP systems have the basics, but don’t include features such as cart-based picking and other technologies discussed in the Aberdeen report.

The Power of Process

December 18, 2006 from Business IT Alignment News and Analysis – “As of late, the IT industry has been peddling various solutions to understand, monitor or optimize that nebulous beast called “process.” So what is a process and why should every CIO be focused first and foremost on business process?

Most of us have seen the now overused IPO diagram: the three boxes arranged in a line, and connected by arrows like the boxcars in a train. The first box contains “Inputs,” which move into the next box titled “Process,” which subsequently flows into the final box, titled “Outputs.”

This diagram is a model of simplicity, yet exposes a flaw in current thinking. Two thirds of the diagram is concerned with inputs and outputs, placing priority on “stuff” rather than how we actually change one form of “stuff” to another. While a simplification that fits neatly into the world of flowcharts, in the real world we often focus too narrowly on moving and changing “stuff” versus why we are changing inputs to outputs, and determining how to efficiently and portably change that “stuff.”

Process is the “why” to any business problem. IT has embraced process more than most other business units, at least on a superficial level. We are familiar with how to diagram a process, and nearly all of the project methodologies provide a provision for capturing, diagramming and understanding the “as-is” process, or the current state of affairs, before we seek to intervene and bring about a new state of affairs.

We also have myriad tools at our disposal for improving a process, either by increasing its speed, efficiency, accuracy or repeatability, in the form of powerful technologies from ERP systems to entire process management toolkits and software.

What we often lack however, is the ability to separate content, the inputs and outputs, from the process itself, which has hampered the ability of IT to implement successful projects that deliver the business benefit they initially sought.

IT has been built around content, both in terms of hiring and developing its staff, and in how it approaches IT projects in cooperation with a business unit. We hire and evaluate people that are experts in a particular technology, which is just another content area. We then approach a particular business problem as an issue of content. Why are our competitors more efficient? It must be due to their ERP system. Why did a new entrant to a market outfox us? They must have better decision support systems, etc.

We see a business problem as one of bolting new technology onto existing processes, wrongly assuming that by changing the content of the process, the process will change as well. This can only be expected when we have built organizations around experts in a particular area of technical content, and business experts familiar with the rules and nuances (more content) of a process, experts in the "how" rather than the "why”…

180 View – IT does typically suggest new technology as the solution unless they have a vested interest in maintaining the status quo. It would be great if IT also considered business process improvement as a way to enhance efficiency or effectiveness. But let’s not forget about human resources (how do organizations structures, job definition, and skills impact the process?), policies and rules (such as the approval process), and facilities (workplace design, infrastructure, computers…).

Business Process Improvement Survey: Creating Smarter, Faster, Cheaper Processes is IT's Main Mission

October 2006 from CIO Insight – “Improving business processes is the top priority for many IT executives, especially at small and midsize companies. Most companies are hoping to boost productivity and cut costs by revamping their business processes with the help of IT; smaller companies are also aiming to increase revenues. Not surprisingly, that's spurred an increase in the number of BPI projects across the board. Integrating timely information into work processes is also important: 83 percent of respondents say one of their primary BPI goals is to deliver critical information to employees while they are carrying out the company's business processes. But CIOs aren't just seeking to improve operations like logistics and customer service; they are also looking to improve the ways that managers and knowledge workers do their jobs, since managers as well as rank-and-file employees are under great pressure to work more efficiently and effectively. Financial, compliance and strategic planning processes head the list of today's top three BPI priorities.”

180 View – IT can help Business Process Improvement (BPI), but should not be the driver. First, IT can have its own agenda, which may not be aligned with corporate strategy. Second, BPI is achieved not just by investment in IT. Motivation, organizational structure, and business process design can also have a huge impact.

Cross Functional Alignment in Supply Chain Planning: A Case Study of Sales & Operations Planning

July 2006 form Harvard Business School – In this scholarly paper, we read that “In 2002, Leitax, a niche consumer electronics company, suffered serious supply chain planning mishaps due to poor cross-functional integration in the supply/demand planning activities. The poor integration resulted from organization differentiation among the functions and an unsophisticated approach to integration…

The coordination system requires specific organizational devices to promote integration that facilitates decision-making across functions and the general resolution of ensuing conflicts to the approximate satisfaction of all parties and the general good of the enterprise.

A common organizational arrangement for achieving integration across differentiated functional areas is the integrating department. Lawrence and Lorsch (1986) found that six factors determine the effectiveness of such integrating groups. Three of these factors relate to characteristics of the integrating group. Specifically, integrators tend to be successful to the extent that they (1) are seen as having the most important voice in cross-functional decisions, (2) are evaluated and rewarded in accordance with the overall performance of cross functional decision making, and (3) have a departmental structure and orientation midway between those of the other functions.

The DMO had these attributes of a successful integrating department. The DMO was publicly mandated to improve demand planning. The case study recounts a growing influence of the DMO over demand and supply planning due, in part, to their competence and experience in managing these processes. The DMO’s incentives were based on forecast accuracy, which Fowler had realized early on was in principle a cross-functional goal. The DMO exhibited flexibility and the ability to communicate with both extremes of the organizational orientation spectrum, as reflected in its ability to take in detail sell-in forecasts from the SDs and long-term aggregated global demand forecasts from the PPS group.

The other three factors that determine the effectiveness of integrating groups relate to interactions between integrators and functional specialists. Effective integration is supported when (4) the managers in other departments feel that they have influenced decisions, (5) this influence is concentrated at the managerial level where decision-making knowledge is available, and (6) conflicts are confronted rather than avoided…

Finally, the details of the coordinating system (responsibilities, structures, and processes) put in place by Leitax make it clear that more is required to achieve true integration than the implementation of an information sharing tool and the efficient information flows that result. For researchers in the supply chain management area, the case illustrates the organizational and behavioral dimensions of coordination systems, dimensions that, to our knowledge, have not been explicitly addressed before. The coordination system is more than the definition of responsibilities, processes, and structures to bring together multiple functions and organizations; it is also the explicit consideration of the social and organizational dimensions of the process by which alignment is achieved.”

180 View – As the case study shows, business process improvement is not just about new systems but also includes motivation, organizational structure and business process.

Strategic Systems - This overused term is at risk of losing all meaning. What's truly strategic?

August 25, 2006 from CIO - "The word strategic is used so freely these days that it's at risk of losing all meaning. People attach the S-word to their pet project hoping it will help gain others' approval. "Ooh ... ahh ... wow ... it's strategic!" people are supposed to say. "Yes, let's do it without any further justification!"

With such overuse, the word has come to mean little more than "nice"-a bland superlative. He's a nice guy. This project is strategic. Yawn. This is a serious problem, because it's imperative that IT and business leaders know what truly is strategic in order to focus scarce resources on really important, high-payoff initiatives…

When we discuss "strategic systems," we generally are referring to IT solutions that contribute directly to clients' business strategies. IT solutions create business value at a number of levels.

As IT climbs the stair-steps, it contributes successively more strategic value. Up through Level 3, the benefits are simply enhanced productivity. At Level 4 and above, technology allows the business to do things it otherwise could not do-termed "value-added" benefits.

Operations
At Level 1, IT is just keeping things running. While this has value-indeed, most firms cannot survive without it-no initiatives at this level can be considered strategic. For something to be strategic, it has to be a means to some new end, not just essential to maintaining the status quo. This doesn't mean that investments to "keep the lights on" are unimportant by any means; it just means they're not strategic to IT or to clients.

An example of an investment at Level 1 is the replacement of IT infrastructure that's at the end of its life.

IT Efficiency
At Level 2, investments in IT pay off by making future IT products and services less expensive. These initiatives may be strategic to IT (if the IT strategy is focused on lowering costs, which isn't always the case, as discussed above). But Level 2 initiatives will not be considered strategic to the business.

Examples of a Level 2 investment are a migration to a new infrastructure platform that will significantly improve IT's cost structure, server consolidations, process improvements like ITIL, and IT organizational improvements.

Business Efficiency
Level 3 initiatives spend money on IT to save even more money by making clients' business operations more efficient. These investments are only strategic if the clients' business strategy focuses on reducing costs. That's a big if. Unless clients are in a commodity business where product cost is the primary buying criterion, clients' strategies are more likely to focus on innovation, product differentiation through features or quality, market image or customer satisfaction.

Examples of Level 3 systems are those that improve bargaining power with suppliers (such as supplier e-commerce), increase inventory turns, reduce administrative workloads and optimize logistics.

ERP generally delivers value at Level 3 (with spin-off benefits at Level 2). Even most business process improvements that are triggered by the implementation of ERP do little more than improve efficiency, though certainly there are examples of higher levels of value when ERP is triggered by strategic changes in the business rather than the other way around.

Business Effectiveness
Level 4 investments in IT make clients more effective. IT tools may enhance individual creativity, thinking and decision-making abilities or communications effectiveness. IT solutions may also enhance collaboration within teams, or improve corporate-wide alignment. By helping clients do their jobs significantly better, IT may create value within any business strategy.

Examples of IT solutions that deliver Level 4 value include the gamut of end-user computing tools when they're applied to specific human thinking and collaboration needs. My first book, The Information Edge, included 60 case studies that illustrate Level 4 benefits. Mary Boone's follow-on book, Leadership and the Computer, described a series of case studies where end-user computing tools enhanced executives' ability to lead their organizations.

IT business applications may also deliver Level 4 benefits. For example, at Abbott Laboratories, an Electronic Laboratory Notebook helps chemists share research findings in the drug discovery process, precluding redundant experiments and improving collaboration. It also helps secure Abbott's intellectual property by documenting discoveries in an organized form.

Customer Relationships
Level 5 solutions enhance the relationship between the corporation and its external customers, improving customer satisfaction, loyalty or reach.

Customer loyalty programs, pioneered by American Airlines' frequent flier program, are a classic example of Level 5 systems. A great example of this concept is WelcomeAddition.com, provided by the Abbott Nutritionals Division. It gives new and expectant parents access to a wealth of information about pregnancy and babies' first years. Participants can connect with other new parents, read articles and research questions, and interact with baby experts. The site encourages healthy living while building loyalty to Abbott's infant nutritional line of products.

As another example, my stock brokerage firm provided me with a trading tool that allows me to monitor markets, analyze strategies and enter trades. Now that I've got it set up the way I like it, I'm not going to move my portfolio to another brokerage house to save just a few cents per trade.

ERP and CRM may deliver benefits at this level if they allow separate business units to come together and treat customers holistically (rather than viewing them as a set of separate contracts)-an IT patch for a corporate sales function that's divided by product line rather than by customer.

With regard to customer reach, e-commerce delivers Level 5 benefits by allowing firms to enter new market segments without a physical presence.

Product Value
Level 6 is the most lucrative, and the most elusive, form of strategic value. At this level, IT enhances the value of the corporation's products to external customers.

When IT is part of the product, this level is obvious. Examples are found in any IT service provider. ADP provides payroll services, and any improvements in its payroll applications improve its product. At the consumer level, Internet banks are learning that the ease of use and capabilities of their websites are as important to customers as their rates.

A very interesting example of Level 6 value is found in the automobile auction industry. Two major companies auction fleets of used cars for manufacturers and rental companies. Since the price they get for the cars is equivalent-it's a highly efficient market&151;they compete on service. A significant portion of their service is the information they provide to their customers about the market and the transactions. In other words, they compete based on the ability of their information systems to package and format data coming from the auctions in a way that's most useful to their customers.

180 View - We take a slightly different approach in identifying strategy. We ask our clients to define their critical success factors (CSFs) - what they must do well in order to be successful. Strategic value is directly related to the extent IT allows an organization to achieve its CSFs.

Inside Microsoft Windows Vista Release Candidate

September 2, 2006 from PC Magazine - "It's been a long time coming, but Windows Vista Release Candidate 1 is finally here. As Microsoft starts to collect feedback from a broad spectrum of users in one of its largest test programs ever, the company will soon be in a position to decide whether the product is solid enough to meet announced ship dates of November for enterprise customers and January 2007 for consumers.

Earlier this week, I started using Vista build 5568, a version that Microsoft says should be virtually indistinguishable from the actual RC1 code. Since recent Vista revisions have been focusing on improving performance, compatibility, and stability rather than adding features, there's not a lot to highlight that's truly new. Instead, I've compiled a walkthrough of 100 screen shots recapping what Vista looks like from top to bottom.

The most pressing question for RC1 is whether it shows that Vista is good enough to ship. In my experience so far, it's getting a lot closer, but it's not quite there yet. Microsoft representatives acknowledge that the term "Release Candidate" might be slightly confusing, as it implies a non-zero probability that the code might be what actually goes into production-which clearly isn't the case for RC1.

With build 5568, I've encountered recurring problems when resuming from sleep, anomalous network behavior, and some performance issues. That said, for the most part, the experience is remarkably good-enough so that I'm thinking I may finally be able to start using Vista as a production platform. Most of the flaws I've encountered are minor nuisances rather than showstoppers.

Some of the improvements RC1 offers over beta 2 are substantial. Installation proceeds much more quickly-about 30 minutes on a newly-formatted partition, versus an hour or so in the past. My hardware devices have all been recognized during or immediately after the installation process. (Microsoft claims to have dramatically improved hardware support lately, particularly for wireless devices, printers, Serial ATA controls, and Media Center tuners.)

The UAC (User Account Control) security feature has been tuned to be far less intrusive-it can no longer steal focus from an active application, for example-and there's an easy way to turn it off if you find it unbearable. RC1 also lets non-administrator users install ActiveX controls approved by corporate IT.

Bundled applications like Windows Media Player 11 that were flaky in earlier builds have so far proved solid. Of a few dozen third-party software packages, only a couple have shown overt compatibility issues.

Vista now exhibits a level of interface polish and consistency that wasn't present in earlier versions. In some cases, it seems like minor features whose capabilities weren't quite solidified have simply been removed.

On the whole, I've found performance and stability in the builds leading to RC1 to be tolerable-and dramatically better than beta 2-but not yet what I'd expect from a release-quality product. Resuming a machine from sleep is especially slow, and I sometimes encounter cases where the Windows shell lags.

Although Vista doesn't explicitly include a lot of the core features that Microsoft initially touted, from the WinFS file system to the NGSCB (Next Generation Secure Computing Base) security infrastructure, it nevertheless incorporates a substantial portion of their capabilities and is clearly a step beyond Windows XP in many ways. But whether it's really ready to ship in the next couple of months will depend on what the larger ecosystem of PC software and hardware developers, system OEMs, enterprise customers, and consumers has to say about its experiences with RC1."

180 View - Vista is less about changing the user interface and functionality and more about improving compatibility, stability, and performance. I have not heard any stats on whether Microsoft has achieved its goals.

It's time to stop measuring and start doing...

May 2, 2006 from Silicon.com - "Over the past few years I have been working in companies and other organizations including those in the health and education sectors where the introduction of performance metrics has had a profoundly negative effect.

In every case there has been a liberal application of simplistic thinking that has resulted in a vastly reduced overall performance with a combined increase in operational costs. How come? Very often those to blame are in political office and under pressure to show the electorate they are earning their elected position.

For sure, if you are to manage anything effectively you need measures, and if you are to improve performance you need metrics. But the first question to ask is: does it actually need managing and is there any space for improvement?

It is unfortunately a truism that most managers don't see that they are often in the way, can add no value and should just get out of the way. An awful lot of processes and activities just don't need managing in the first place. For those that do, they require a liberal application of intelligence and understanding. If you give people targets, they will achieve them; if you demand a change in performance from managers, they will show you one. In the first instance they will try and do your bidding but in the second they will resort to embellishing the truth, polishing the numbers and plain fiddling.

In the worst areas infected by the (modern) metrics disease we see irrelevant or conflicting requirements and targets, and more managers of metrics than those actually trying to achieve them.

The real killer? People stop becoming effective and turn the metrics game into a full-time career. In many countries we have police, medics and educators spending more time reporting than doing! So the supervisory overhead is very often the dominating portion of the overall spend and budget. This is a surefire route to failure in any system. Admin really ought to be less than 10 per cent and not 80 per cent of the budget.

So what is the solution - beyond good management that is? Once a set of sensible and minimal performance targets and metrics have been decided and agreed, automation is the only route to success. Just because something can be measured and recorded doesn't mean it should be!

In the worst case people will always resort to telling lies, gilding the truth and interpreting results in their favour. So most of the information created by such human systems is a travesty, waste of time, detrimental distraction and expensive hobby! In contrast, our machines will only tell it the way it is, provided the entry of data is also fully automatic.

All of this begs the question: why isn't modern management and politics up to the job? Simple! They are operating in some 18th century regime of quill pen and parchment thinking. Until we see the application of game theory, war gaming and situation modelling, combined with automated data recording, gathering and analysis, we will continue to see the waste and disruption continue to accumulate.

We have the technology but it seems we don't yet have the wisdom.

180 View -SMART (Specific, Measurable, Actionable, Relevant, and Timely) metrics should solve all the problems above.

Benchmark production planning and control processes

"This free, 20 point "ABCD checklist" allows you to benchmark your company's production planning and control processes against current best practice... The 20 point checklist does not cover every area of business performance but it is our experience that a company's score on these 20 points give a strong indication about the company's overall business performance." Click here for the article

180 View - We have not used this checklist ourselves or on behalf of a client, but heard good things about it in an online forum. It looks like a good tool to evaluate your business processes. Please let us know what you think.

Are CFOs Up to Technology Task?

April 27, 2006 from AccountingWEB.com - "Younger accountants, the ones in their 20s and early 30s, seem to be entirely comfortable with using computers and expect to use computers in their work. The older ones, say in their 50s and up, went to school at a time when personal computers were just not around. Unless [the latter] make a special effort to learn how to use them, they are not necessarily comfortable with them,” Canadian-based technology consultant and writer Richard Morochove says in a recent report on the technology services industry portal E-Channel Line, echannelline.com.

Morochove, who has been a featured speaker at accounting software conferences held in the United States in recent years, says he has noticed that when accountants reach senior positions they tend to feel that they do not need to use information technology and applications. He has observed that some CFOs mistakenly take the position of "'let my assistants do the number crunching and I will review their findings.'” For the article, click here.

180 View - We think that many CFO's would strongly disagree with Morochove. We also disagree that CFO's need to do the number crunching. But CFO's are missing big opportunities by not embracing some of the technologies available. For example, Online Analytical Processing (OLAP) would give a CFO instant access to information across multiple dimensions with graphical representation at the press of a key or drill down to more detail. Why wait for someone to retrieve information only to find out that more information is required leading to more delay. As well, electronic dashboards are now very popular in accounting and ERP systems and can provide vital information/KPI's in real time as well as dirll down for more information.

Why Your Employees Are Losing Motivation

April 10, 2006 from Harvard Business School - "Most companies have it all wrong. They don't have to motivate their employees. They have to stop demotivating them. The great majority of employees are quite enthusiastic when they start a new job. But in about 85 percent of companies, our research finds, employees' morale sharply declines after their first six months—and continues to deteriorate for years afterward. That finding is based on surveys of about 1.2 million employees at 52 primarily Fortune 1000 companies from 2001 through 2004, conducted by Sirota Survey Intelligence (Purchase, New York).

The fault lies squarely at the feet of management—both the policies and procedures companies employ in managing their workforces and in the relationships that individual managers establish with their direct reports...

• Equity: To be respected and to be treated fairly in areas such as pay, benefits, and job security.
  How Management Demotivates
  
• Achievement: To be proud of one's job, accomplishments, and employer.
• Camaraderie: To have good, productive relationships with fellow employees.
  

For the article, click here.

180 View - The best system with the best business practices can't compete with motivation in improving business process.

Use internal benchmarks

2006 from McKinsey Quarterly - "While a company must know what its peers are achieving, it's a mistake to measure its performance against the competition: these benchmarks are typically just samples of data with little explanation behind them. Companies that use external benchmarks are often frustrated to find themselves off by a factor of five to ten, positively or negatively.

Using external benchmarks compounds the internal difficulties that service companies face in normalizing activities and the data that define them. Consider a measure such as costs per unit of information processed: some companies include allocated costs, such as corporate overhead and salaries; others don't.

Internal benchmarks deliver more detailed metrics, allowing a company to find its own best practices and to see where and how they are achieved. It can then have access to all relevant information to assess differences among business units and accounts. In defining internal benchmarks, for example, a company can determine which costs are included or how asset costs are allocated — details that get lost in external benchmarking. A company can see what's really possible within the organization by using its own benchmarks." For the rest of the article, click here.

180 View - The benchmarks should be metrics or key performance indicators that align to Critical Success Factors - those things that must be done well in order to be successful.

Standardization of infrastructure and business process

March 13, 2006 from BPM Today - "Anderson explains that back in 2004 the pressure was on to get economies of scale, and to drive efficiencies and new business opportunities -- which meant real-time information and automation. But that in turn required visibility and standardization -- bringing data together and making it accessible. And to do that, a well-managed and cohesive I.T. and network infrastructure was needed.

"We didn't have that," he says. "From PCs to the ERP system, we needed to do some serious work to get the infrastructure sorted out, settled and stable. So that's what we concentrated on first."...

"Also, if we stayed with it, we would be forced to follow expensive upgrade paths that would involve considerable rework simply to replicate existing functionality. We would have spent over £1 million (US$1.7 million) over two years just to stand still." Clearly, not good news, and there was another classic issue. "People were using departmental spreadsheets and workarounds. They were doing a great job, but it's a lot of effort to get information that's out of date."

The bottom line: "We had to standardize: We wanted to maximize consistency and minimize support costs," says Anderson. "We looked at our existing spread of ERP systems and they're all mid-tier applications, and we're a mid tier company, but although they were all doing an OK job, none would do everything we wanted off the shelf."

So he looked at the big guns. "We had the perception that the likes of Oracle and SAP would be too expensive. But we established very quickly that there's a lot more to be had out of a Tier One application suite." He also found that price and the software vendors' focus were not as he'd thought and eventually selected Oracle." For the rest of the article, click here.

180 View - It's the classic Best of Breed vs ERP debate. In the case of the article being discussed, it sounde like the business processes were similar enough to have 1 system do it all. Although the article says the company being discussed is a "mid tier company", a little research showed that the "APi Group employs over 5,000 people and performs annual revenues in excess of $900 million."

Three Myths of Management

March 27, 2006 from Harvard Business School - "In a new book, Stanford professors Jeffrey Pfeffer and Robert I. Sutton assail popular yet shaky—maybe even harmful—management practices. Our excerpt starts with a hot trend: benchmarking...

There is nothing wrong with learning from others' experience—vicarious learning, as contrasted with direct experience, is an important way for both people and organizations to learn how to navigate a path through the world. After all, it is a lot cheaper and easier to learn from the mistakes, setbacks, and successes of others than to treat every management challenge as something no organization has ever faced before. So benchmarking—using other companies' performance and experience to set standards for your own company—makes a lot of sense. In the end, good or bad performance is defined and measured largely in relation to what others are doing.

The problem lies with the way that benchmarking is usually practiced: It is far too "casual." The logic behind what works at top performers, why it works, and what will work elsewhere is barely unraveled, resulting in mindless imitation...

In these and scores of other examples, a pair of fundamental problems render casual benchmarking ineffective. The first is that people copy the most visible, obvious, and frequently least important practices. Southwest's success is based on its culture and management philosophy, the priority it places on its employees (Southwest did not lay off one person following the September 11 meltdown in the aviation industry), not on how it dresses its gate agents and flight attendants, which planes it flies, or how it schedules them. Similarly, the secret to Toyota's success is not a set of techniques but its philosophy—the mindset of total quality management and continuous improvement it has embraced—and the company's relationship with workers that has enabled it to tap their deep knowledge. As a wise executive in one of our classes said about imitating others, "We have been benchmarking the wrong things. Instead of copying what others do, we ought to copy how they think."..

The fundamental problem is that few companies, in their urge to copy—an urge often stimulated by consultants who, much as bees spread pollen across flowers, take ideas from one place to the next—ever ask the basic question of why something might enhance performance. Before you run off to benchmark mindlessly, spending effort and money that results in no payoff, or worse yet, in problems that you never had before, ask yourself:

• Is the success you observe by the benchmarking target because of the practice you seek to emulate? Southwest Airlines is the most successful airline in the history of that industry. Herb Kelleher served as CEO during most of Southwest's history and remains the chairman to this day. Kelleher drinks a lot of Wild Turkey bourbon. So does that mean that if your CEO starts drinking as much Wild Turkey as Kelleher, your company will dominate its industry? Get the point?
• Why is a particular practice linked to performance improvement—what is the logic? If you can't explain the underlying logic or theory of why something should enhance performance, you are likely engaging in superstitious learning and may be copying something that is irrelevant or even damaging.
• What are the downsides and disadvantages to implementing the practice, even if it is a good idea? Are there ways of mitigating these problems, perhaps ways your target uses that you aren't seeing?
  

For the rest of the article and the other 2 myths, click here.

180 View - There are many levers to enhance performance. Technology is but one of them. The best way to enhance performance is through motivation just as Southwest did by not laying anyone off in the bad times.

Activity Based Costing Survey

"In July 2005, a study was conducted among BetterManagement members to determine the state of Activity Based Costing. An on-line survey was completed by 528 participants from companies across various industries, sizes, geographies and job levels. The specific objective of the research was to determine how Activity Based Costing is used in the organization. The participants in the study came from a variety of industries. The manufacturing industry had the highest representation with 24%, followed by financial services at 18%, public sector at 16%, and communications at 8%. Other industries accounted for less than 5% each.

Small business under $100 million in revenue accounted for the largest group in the survey sample (42%). Midsized businesses ($100 million to $1 billion) made up an additional 33%, while enterprises of $1 billion or more in revenue accounted for 25%. A good portion of the respondents (10%) reported annual company revenue over $10 billion.

Over half of the respondents (55%) indicated that their companies are currently using Activity Based Costing either actively or in a pilot, with another third (32%) considering use. Only one in ten (11%) has not considered use of ABC. A very small portion of companies (2%) are no longer using Activity Based Costing. Not surprisingly, the use of Activity Based Costing increases with company size. While only 42% of small businesses are using or piloting Activity Based Costing, 58% of midsized and 71% of enterprises use some form of ABC. Overall, roughly nine in ten companies of all sizes are spending money on ABC
or considering it." For the rest of the article, click here.

Using KPIs to Keep Performance Improving

From Better Management - "Key Performance Indicators (KPIs) are used by organisations both to measure individual employee performance and to measure overall organisation performance... The acronym of SMART frequently appears when commentators discuss KPIs. It means that KPIs need to be Specific, Measurable, Agreed to, Realistic, and Timely. More recently, there has been a trend to turn SMART into SMARTA, by adding the requirement that KPIs be 'Aligned'." For an explanation of each SMARTA component, click here.

Survey Shows Two-Thirds Of Improvement Initiatives Are Bound To Fail

From Better Management.com - "A new survey by nexus at Cranfield School of Management, shows that two thirds of public and private sector organisations manage their business improvement initiatives in a disjointed way, increasing their chances of failure. Responses from senior executives and project managers at major UK financial institutions, IT/telecoms and public sector organisations showed that where it is vital for departments or organisations to work together there is little ability to pull together to deliver the desired outcome. As a result, rather than delivering solutions, the initiatives themselves become part of the problem.

In the private sector, delivering improvement initiatives is about getting different departments to work together, to collaborate rather than compete, and to integrate more closely with critical stakeholders such as customers and suppliers. In the public sector, changes are meant to bring about cohesive policy implementation. For instance in the Criminal Justice System this means closer integration between courts, probationary services, police and prisons. In the Health Service, this means greater cooperation between, among others, GPs, hospitals and Health Authorities. Yet, the survey shows that two thirds of these organisations work in a disjointed way, allowing each initiative to develop its own language, use different and conflicting methods, and employ different teams and consultants.

Ashley Braganza, Director of nexus and Senior Lecturer at Cranfield School of Management said, "Our survey begins to explain why so few improvement initiatives actually succeed in delivering tangible results. Different improvement teams end up competing with one another especially where they have to contend for resources to progress their initiative. Each team is allowed to develop its own methods and values which may not always accord with those of other teams."

The results also show that the strategy of most organisations provides little direction or support for improvement initiatives. More than two-thirds of the senior executives and project managers polled stated that their organisation’s business strategy does not incorporate change implications necessary to fulfil the strategy. This begs the question as to the rationale for the improvement initiatives in the first place. Says Ashley Braganza: "The use of the phrase ‘strategic’ to describe large projects and initiatives should be banned unless improvement initiatives are integral to strategy implementation." For the article (although all of it was reproduced) can be accessed by clicking here.

Business Process Review Revisited

Mid September 2005 from The Bottom Line and written by Michael Burns - "Business processes evolve over time and the reasons for the way things were originally designed may no longer apply. Most organizations are organized by department or function such as Accounts Payable and Purchasing. Business processes are often optimized for a specific department at the expense of other departments. There could be bottlenecks that delay the process or too many people doing something that could be better done by one person. Each step in the business process should add value. A good way to document business process is by using what is called swimlane diagrams. Swimlane diagrams are drawn so the activities performed by each business function, department, or location are in different horizontal rectangles, or lanes-giving rise to the swimlane name." For the article and an example of a Swimlane diagram, click here.

Change Management

From Peter de Jager - I recently attended a seminar by Peter and liked what I heard. Here's a sample of his writing in a review of Jim Collin’s book , “Good to Great - "Why do most companies encounter resistance to change? And how do a handful of companies, get to the point where the concept of “resistance to change” has no meaning?

In a way, Collin’s entire book is an attempt to provide an answer to this question, but there’s one of his findings in particular which I think points most forcefully towards the answer. On page 79 Collins, within the context of a tiny section titled “Lead with questions, not answers” writes;

Leading from good-to-great does not mean coming up with the answers and then motivating everyone to follow your messianic vision. It means having the humility to grasp the fact that you do not yet understand enough to have the answers and then to ask the questions that will lead to the best possible insights.

This flies in the face of the whole notion of “buy-in”. Everything about the term “buy-in” screams that management has the answer, management and only management knows the correct path, management know what’s best for the company and if only the employees would buy management’s solution, then all management’s problems would go away." For more, click here.

Why Thick Monthly Reports to Management are Going the Way of the Five-Year Plan.

August 31, 2005 from CFO.com - "When Frans Spaargaren arrived at Gemplus, an €865 million ($1.041 billion) Geneva-based maker of smart cards, it didn't take him long to realize that not everything about the company was smart. Internally, managers and executives were drowning in data. The finance team foisted reams of information on them every month, churning out huge reports stuffed with rows and columns of numbers. "It was a data dump," says Spaargaren, who took up the Gemplus CFO job in June 2004 after three years running joint ventures at Philips, the Dutch electronics giant. "We basically reported everything, giving them 40 PowerPoint slides full of tables — thousands of numbers in total — and expecting them to pick out key messages and key information. It was much too much to take on board."

Spaargaren spent the bulk of his early months overhauling the internal reporting process, stripping out "irrelevant" details to focus on "what really drives the business." A year later, his corporate analysis team produces a slim booklet, half the size of the former report. The data found inside is more focused, more graphical and more colorful, with major deviations against budgeted targets marked in green and red ink. He has also pumped up the non-financial data, and reports now include metrics on operational efficiency and customer satisfaction, along with progress updates on groupwide initiatives such as the implementation of customer relationship management (CRM) software and supply chain rationalization, among other things." For the article, click here.

Nothing to do with Technology / Improve your Listening Skills

From The Wall Steet Journal - Forget everything else but listen to this "Good listening is crucial to effective communication and career success. Studies show, however, that only about 10% of us listen properly. Most of us don't know how to listen intelligently, systematically and purposefully. Think about your most recent conversations at work. If you remember what you said better than what you heard, you've probably developed some bad listening habits. Instead of really listening, you let your mind wander while others were talking. You were thinking about what you were going to say before the others had finished." For ways to improve your listening skills, click here.

Lean Manufacturing Case Study

June 10, 2005 from Baseline - If you're intersted in lean manufacturing, kanban or how to develop ROI, read on. "One of the first U.S. devotees of the lean manufacturing concepts pioneered by Toyota, Danaher doesn't trust the reordering of parts for its factory floor to the projections of a manufacturing resource planning (MRP) system. Instead, it uses the Japanese "kanban" method of factory floor control, in which an almost-empty parts bin triggers a just-in-time replenishment order.

"Our operations have been divorced from technology intentionally," Mathis says, because one of the first things kanban experts tell factory operators to do is "unplug the MRP system." In fact, the controls division uses an MRP system, Mapics, but more to track inventory and orders than to drive the process, on the theory that a computer projection will never be as accurate as a measure of actual consumption...

Traditionally, when a bin of nuts, bolts, plugs or LED displays was depleted from a factory floor cell, a worker known as a "pacer" retrieved a paper kanban card from the bin. The pacer would then deliver stacks of these cards to the factory's materials buyers, who would use the supplier, part number and quantity information printed on the card to reorder each item. That's a lot of work, given that each of the division's factories uses 30,000 to 40,000 parts.

In the electronic kanban system Mathis decided to move to, the inventory database would go online. The kanban card would provide the bar code used to look up a computerized record. Instead of the card being carried to the purchasing office, the card could stay on the shop floor and the order would be created electronically...

For this project, the major task would be to make Mapics exchange data with SupplyWorks. The inventory database would become more important, since the data printed on the kanban cards was being reduced to a bar-code label. But the benefit of that change was that cards wouldn't have to be reprinted when details like the part supplier or the quantity to be kept in each bin changed. The new information would be updated directly in the database.

Just eliminating the time spent updating kanban cards and replacing lost ones would free up 28 minutes per day for Gurnee's staff, Mathis determined. For the pilot project, he developed a series of these measures of "non-productive time," which added up to 105 hours per week or 90% of their time. Through automation, he aimed to reduce the time spent on routine tasks and expand the time available for strategic efforts. The SupplyWorks pilot in Gurnee was limited to a portion of the parts inventory, but results were encouraging. In a January 2004 Webcast presentation for SupplyWorks, Mathis cited a 75.6% reduction in the time buyers spent on the "waste" activities he had identified. Click here for the article.

Characteristics/Attributes of a Lean Operation

From Tefen, an international operations consulting firm - "Just what does a lean operation look like? How do we determine how far we have come in our lean journey? The following list is intended to address these fundamental questions.

Fundamentals in Place

• There is a designated place for everything and everything is in its place. No time is wasted while looking for things. The organization looks clean and everyone is required, encouraged and motivated to keeping it organized.
• The distance traveled by operator(s) and/or a specific part is less than the perimeter of the facility.
• There are on-going reports easily assessable to everyone that provides timely feedback for individuals and groups.
• Quality is achieved by controlling the process, not by checking parts. Rework and quality returns are rare occurrences.
  

Evident Flow

• Everyone is aware of the status of the subsequent operation/step.
• There is a clearly visible, easy to follow path through all steps.
• External set-up time has been eliminated and everyone follows consistent set-up procedures.
  

Balanced Lines/Processes

• Everyone is aware of and executes to takt time (pace of production required to match demand from the next operation/step).
• To handle mix issues, the schedule is properly leveled to minimize the impact of both inventory and set up time. In addition, the required pitch (i.e. increments of work) is regularly determined for the pace maker operation/step.
  

Pull vs. Push

• There is one single point for scheduling (i.e. pace maker) – scheduling is not done at multiple or at every operation/step.
• There is no or limited number of batch processes – whenever possible, a continuous flow. One key clue to look for is presence of inventory.
• In spots where batching is necessary, FIFO pull system is in place with proper inventory levels. The amount of overall inventory (in equivalent number of days) should be approximately or slightly higher than the average of lead time (in days). Any discrepancy results in excess inventory and/or part shortage (which in turn impacts customer service level).
• Customer service level is not directly impacted by forecast accuracy. There are no official “expeditors.”

Organization Alignment

• There is an acceptance for trying new ideas and concepts. Desire for continuous improvement is very strong. Maintaining status quo is not an option.
• There is constant communication channel between workforce and the management. Award and recognition are based identifying, implementing and sustaining improvements (on time, quality, customer service and/or cost).
• The workforce is empowered and motivated to self-direct daily operations/tasks with minimum input from management.
• There are clear, proper, objective and timely measurements available for everyone to view. Any degradation is identified and addressed immediately.

Simply put, in a truly lean organization, each step in the entire value chain processes only what the subsequent step requires – this is done at the right time, in high quality and at the lowest cost possible. All seven types of waste have been identified and eliminated – the only remaining work should be those that are needed to change form/fit and/or function a customer is willing to pay for."

For the article which has been reproduced in its entirety, click here.

The Worst Thing About Best Practices

June 21, 2005 from MarketingProfs.com - "The problem with best practices is this: That approach lulls people into thinking that a best practice really exists that can be successfully transplanted. Starting any project with a canned solution stifles the innovation customers expect from their suppliers. When you import best practices, the team's thinking immediately focuses on how to do the work, rather than first addressing what should be done and why. If you start with a predetermined solution, it's easy to gloss over more innovative approaches. Granted, best practices can jog your thoughts and maybe even inspire you. But as a tool for guiding strategic initiatives, it's a real loser. One company's best practice can too easily become another company's sunk cost.

Here are four reasons you should dump best practices:

1. They rarely work. A company's best practices work in the context of its business processes, culture, systems and people. Plucking a best practice and trying to graft it onto another organization will produce unpredictable results. In one instance, a company forced its entrepreneurial salespeople to adopt a tightly controlled sales process, with automated tools for all large accounts. The company mandated the new process and system because it was touted as a best practice in sales force management. After a year of trial and error, the company's salespeople dumped the tool, complaining about declining sales productivity. For the company, it was a multimillion-dollar mistake.

2. It's a follower's strategy. In an era of demands for innovative products and services, why give your customers recycled answers? A company that really wants a customer order process that looks like everyone else's is likely to lose the battle of market differentiation. Relying on best practices will doom your customers to mediocrity in the long run, and hurt your reputation as well.

3. Change comes from within. People rarely respond well to implementing some other company's ideas. In fact, having best practices come down from on high usually causes resentment. Let people create their own solutions using their in-depth knowledge of the company's customers, suppliers, employees and processes. That will result in ownership of the ideas and determination to get results.

4. They don't come with a manual. Business books and benchmark reports are full of snippets about best practices, yet they rarely explain what to do with them. You may have read that it's a best practice to process a customer product return in 24 hours, but there's little guidance for meeting that objective. It's also quite possible that the organizational change necessary for your customer to achieve the goal isn't even remotely feasible."
   

Click here for the article. Finally somebody who agrees with us about Best Practices. See our article on Best Practices by clicking here.

Metrics: A Lifeline for Process Owners

June 2005 from BetterManagement.com- "External comparative benchmarking is essential to manage any business,” said Chris Gardner of the American Productivity & Quality Center (APQC)... One challenge, however, is finding comparative data quickly and cost-effectively. According to a recent market assessment, many sources charge in the range of $20,000 to $50,000 per process for benchmarking data. Thus, APQC applied its 26 years of process improvement experience and 11 measurement-related research projects to answer the S.O.S. It developed the PowerMARQTM measurement database, which has more than 200 available individual metrics that cover 15 processes and functions in accounting, human resources, IT, facilities management, and knowledge management." For this article click here. However, when I went to APQC's web site, I could not find anything on PowerMARQTM. I sent an email asking for help, and was told "PowerMARQ was re-branded some time ago. It is now called the OSBC (Open Standards Benchmarking Collaborative) database... There is no cost to participate, and we will compensate each participant company with a full report including a detailed gap analysis and all the key performance indicators to aid in improving processes for each module in which you participate. Three of the Shared Service areas we will be benchmarking are Supply Chain, Finance & Accounting, and Human Resources."

Best practices

June 2005 from The Bottom Line and written by Michael Burns - "Have you ever wondered what Best Practices really mean? You will find generic explanations that best practices improve efficiency and effectiveness and achieve operational excellence. But what does this mean for a specific organization? You're going to have a hard time finding anything specific to your industry.

Even if you do - be careful. The so called best practice may be great for another company but a disaster for you. The costs to implement the best practice could be prohibitive. It's not best practice if the costs outweigh the benefits. It turns out that best practice is not about specific things you should do to improve your business. It is about learning from others. It's about measuring how you're doing compared to history or others, and most importantly doing something about it." Click here for the article.

Efficiency Gains: Can You Prove It?

May 2005 from Optimize - "Some say the gains are never realized, or "If we don't fire someone, we don't achieve any benefits." Much of this skepticism is a direct result of the hype and promise of the dot-com era. As a result, many companies count only the direct benefits of their IT projects. They treat productivity and other indirect gains as false promises better left unacknowledged. Yet, those managers are missing valuable gains. IT's productivity and other indirect gains are real. In fact, according to 100 technology-ROI case studies published by Nucleus Research, fully half of all financial value related to IT comes from indirect or productivity-based benefits"

The author of the article provides guidelines to building a business case:

"Identify the benefits: The first step in building a business case based on indirect benefits is to simply identify them. List all the benefits you expect, and then prioritize them in order of most direct to most indirect. Be specific. For example, don't just say, "The sales managers will be more productive." Say whether you mean the sales managers in North America, Europe, or Asia-Pacific. Also, quantify how much more productivity you expect... Focus on time savings first, and then correct your estimate to reflect the impact you can reasonably expect. For example, if you expect a time savings to boost productivity, we recommend using a productivity-correction factor. This is a number between 0 and 1 that's multiplied by the expected time savings to quantify the expected additional productive time worked. In other words, time saved doesn't translate directly into additional time worked. Humans, after all, aren't super-efficient machines. Employees who save one hour per week may actually work only an additional half-hour per week. In general, 0.5 is a good correction factor to start with.

Quantify benefits using your best data: Identify the data components needed to quantify each benefit you listed. For example, if you expect a more productive North American sales force, ask: How many salespeople will likely be affected? What's their fully loaded cost to the company? How much more productive will they become?

Plan for the best—and worst: After you've quantified the key benefits and costs of the project, you'll want to calculate the expected ROI, and then the expected and worst-case ROI scenarios.

Set benefit-delivery milestones: ROI milestones are critical points during the deployment that help you keep the project on financial track. There are also critical points after deployment that can help ensure that the project achieves its promised benefits. You'll want to set both. To be effective, ROI milestones should be clear and specific. Here are two good examples: "The sales staff will be fully trained and using the system within six months of a project start," and "At least 75% of the sales staff will use the system on an ongoing basis for the first three years."

Click here for the article.

The great business process handoff

May 9, 2005 from InfoWorld - "During the past 15 years, standards such as Java, Windows, and TCP/IP have made it much easier to outsource various aspects of IT, spawning a huge IT outsourcing industry. But that trend may pale in comparison to the next outsourcing wave: BPO (business-process outsourcing). Companies have offered limited BPO for decades, such as ADP’s payroll processing. But only recently have the floodgates opened. Today, companies are outsourcing a broad array of processes, including finance, accounting, and HR. The BPO industry is growing at double-digit rates, with Gartner predicting a $133-billion market for BPO this year.

“More and more people are saying, ‘Why am I buying accounts payable from a software vendor if somebody can just come and do it for x cents per check?’ ” explains Vinnie Mirchandani, CEO of Deal Architect, which helps enterprises secure offshore contracts. “They’re saying, ‘I’m tired of SAP, and maybe Infosys (an India-based company) can give me the results I need at much better price points.’ ”. For the article, click here.

It's our opinion that BPO will not make sense for small and mid sized enterprises that don't have the economies of scale to make BPO practical.

How to Implement a balanced scorecard in 16 weeks

April 5, 2005 from BetterManagement.com - There is some good advice here not just for Balanced Scorecards including:

Focus on the critical success factors - Too often time is spent debating the "perspectives", their names and the design of the scorecard. The senior management team loves this time of intellectualising however it does not create much value. It is easy to get carried away with the debate, spending months ascertaining the perspectives while making little progress on defining the critical success factors (CSFs). The CSFs are the facets "that determine the organisational health and vitality" and where the organisation needs to perform well. KRIs, PIs and KPIs are the actual performance measures, which naturally cascade from these CSFs. It is crucial that the senior management team focus on providing the project team with CSFs. If this is done well winning KPIs are much easier to find.

Characteristics of a good KPI:

• Measured frequently e.g. daily or 24/7 (KPIs are not measured monthly)
• Acted upon by the CEO and the senior management team on a daily or 24/7 basis
• All staff understand the measure and what corrective action is required
• Responsibility can be tied down to the individual or team
• The KPI has a significant impact on the organisation e.g. it impacts most of the core critical success factors and balanced scorecard perspectives
• Positive movement affects all other performance measures in a positive way
  

"Just do it!" - The exact structure of result indicators, performance indicators and KPIs is rarely "right first time". Kaplan and Norton agree with Nike and say "Just do it". The facilitator, senior management team and KPI project team need to ensure that the project culture is a "just do it" culture. Whilst the project team will need to do research and up-skill themselves this needs to be balanced with the need to achieve the deadline. A carefully chosen facilitator is the key here. The facilitator should ensure that the team is familiar with the manual "Implementing KPIs, 2nd edition" and with The Balanced Scorecard. A "just do it" culture brings the belief that the project team can do it. To this end the project team need to be empowered to make many of the decisions. The senior management team can reverse them 6 to 9 months down the track when they better understand the concepts and operations aspects. A "just do it" culture means that the team will not have to rely on external experts to run the project. CEOs are often wary of large projects that they perceive to be managed by expensive international consulting firms. The last decade is littered with six or seven figure consulting assignments, which have not delivered on the value expectations." Click here for the article.

The psychology of change management

From McKinsey Quarterly - "Over the past 15 or so years, programs to improve corporate organizational performance have become increasingly common. Yet they are notoriously difficult to carry out. Success depends on persuading hundreds or thousands of groups and individuals to change the way they work, a transformation people will accept only if they can be persuaded to think differently about their jobs. In effect, CEOs must alter the mind-sets of their employees—no easy task.."

The article describes and elaborates on the "Four conditions for changing mind-sets" which are "Employees will alter their mind-sets only if they see the point of the change and agree with it—at least enough to give it a try. The surrounding structures (reward and recognition systems, for example) must be in tune with the new behavior. Employees must have the skills to do what it requires. Finally, they must see people they respect modeling it actively. Each of these conditions is realized independently; together they add up to a way of changing the behavior of people in organizations by changing attitudes about what can and should happen at work." Click here for the article.

Changing user behaviour is one of the most challenging aspects of a system implementation

March 17, 2005 from Globe and Mail - "Businesses get caught up in calculations of the dollar costs, timelines and expected returns of a project, and often neglect to work out a plan to get employees to actually make use of the things being installed. How many IT upgrades ultimately fail to bring the promised rewards simply because people don't change their routines and do what's necessary to make the new stuff go?

A lot, apparently. According to IDC Canada's research vice-president Joel Martin, it's No. 2 on the list of pitfalls encountered by Canadian companies installing CRM systems, second only to problems related to tying the system into necessary databases. The problem is that CRM and ERP are all about information. If databases aren't kept up to date by employees and business partners, it's like having a high-performance engine that's starved for fuel."

The article is light on on how to change user behaviour, but does suggest getting buy-in and training. Click here for the article - but you will need to pay for the article unless you're already registered.

Change management

March 14, 2005 from Harvard Business School - "Why is change so hard? First of all, most people are reluctant to alter their habits. What worked in the past is good enough; in the absence of a dire threat, employees will keep doing what they’ve always done. And when an organization has had a succession of leaders, resistance to change is even stronger. A legacy of disappointment and distrust creates an environment in which employees automatically condemn the next turnaround champion to failure, assuming that he or she is “just like all the others.” Calls for sacrifice and self-discipline are met with cynicism, skepticism, and knee-jerk resistance...

In our studies of successful turnarounds, we've found that effective leaders explicitly reinforce organizational values on a constant basis, using actions to back up their words. Their goal is to change behavior, not just ways of thinking. For example, a leader can talk about values such as openness, tolerance, civility, teamwork, delegation, and direct communication in meetings and e-mails. But the message takes hold only if he or she also signals a dislike of disruptive, divisive behaviors by pointedly—and, if necessary, publicly—criticizing them...

In dealing with the chiefs, Levy chose an approach that blended a strong dose of discipline with real-time, public reinforcement. He developed guidelines for behavior and insisted that everyone in the hospital measure up to them. In one of his earliest meetings with the chiefs, Levy presented a simple set of "meeting rules," including such chestnuts as "state your objections," and "disagree without being disagreeable," and led a discussion about them, demonstrating the desired behaviors through his own leadership of the meeting. The purpose of these rules was to introduce new standards of interpersonal behavior and, in the process, to combat several dysfunctional routines...

When two members of his staff disagreed on a proposed course of action, Levy triggered an open, emotional debate, then worked with the participants and their bosses behind the scenes to resolve the differences. At the next staff meeting, he praised the participants' willingness to disagree publicly, reemphasizing that vigorous debate was healthy and desirable and that confrontation was not to be avoided. In this way, employees gained experience in working through their problems on their own."

Click here for the article.

The view from the boardroom

The McKinsey Quarterly - Are you interested in what directors of public companies want to know? You should be as it's the same information that any good business person should be asking. "The principal finding of a McKinsey Quarterly survey of more than 1,000 directors is that having focused for a time on accounting-compliance issues, they are now determined to play an active role in setting the strategy, assessing the risks, developing the leaders, and monitoring the long-term health of their companies.

Although the survey shows that directors focus primarily on financial matters reflecting short-term corporate performance, they wish to expand their reach into issues that shed light on the longer-term health of their companies (Exhibit 1). Indeed, fully 70 percent of the directors want to know more about customers, competitors, suppliers, the likes and dislikes of consumers, market share, brand strength, levels of satisfaction with products, and so forth. Upward of half want to know more about the state of the organization, including the skills and capabilities needed to realize the corporate business strategy, both now and in the future. Two in five respondents are eager for insights into external networks, such as the nature and level of regulatory and government risk, as well as public, media, and community attitudes toward the business.

There's a lot more to this article that you can access (requires free registration) by clicking here.

What is interesting is that much of what the directors want to know is outside of the financial system. How many systems do you know that provides "the likes and dislikes of consumers, market share, brand strength, levels of satisfaction with products, and so forth"? Look to Business Intelligence systems for a possible solution.

Why You May Be Working with the Wrong Measures

From BetterManagement.com - "Show me a company that thinks it is using KPIs, which are measured monthly and quarterly, and I will show you measures that do not create change, alignment and growth and have never been KPIs. Many companies are working with the wrong measures, many of which are incorrectly termed "key performance indicators" (KPIs). Companies with 20 or more KPIs lack both focus and alignment, and are underachieving...

Key Performance Indicators represent a set of measures focusing on those aspects of organizational performance that are the most critical for the current and future success of the organization. They have certain characteristics

• Measured frequently e.g. daily or 24/7 (KPIs are not measured monthly) - KPIs should be monitored 24/7, daily and a few maybe weekly. How can a KPI be measured monthly, as this is "shutting the barn door well after the horse has truly bolted".
• Acted upon by the CEO and the senior management team on a daily or 24/7 basis
• All staff understand the measure and what corrective action is required
• Responsibility can be tied down to the individual or team - In other words, the CEO can ring someone and ask "why". Return on capital employed has never been a KPI as it cannot be tied down to a manager; it is a result of many activities under different managers.
• The KPI has a significant impact on the organization e.g. it impacts most of the core critical success factors and balanced scorecard perspectives
• Positive movement affects all other performance measures in a positive way
  

Click here for the article.

Where Are You on the ABC Learning Curve?

From Business Finance Mag.com - "No cost management technique has more potential for boosting companies' bottom line than activity-based costing (ABC) does. Organizations that have successfully incorporated ABC into their business processes agree it's had a profoundly positive effect on their cost containment efforts and overall profitability. Yet many companies balk at implementing an ABC program, citing the time, money and effort required to do it right and keep it going. So how prevalent is ABC? And how are businesses that have implemented an ABC program meeting the challenges the methodology poses? To answer those questions, in July 2004 Business Finance and ALG Software conducted a survey of 270 finance and IT professionals at companies in a broad range of industries with annual revenues ranging from less than $100 million to over $1 billion. The survey covered a wide variety of topics including ABC initiatives' projected and actual benefits, implementation issues, and practitioners' use of ABC-generated data as input to their business performance management (BPM) system. The survey results provide a comprehensive picture of how finance pros are leveraging this powerful costing tool."

We looked at the results, and have trouble with the ABC hype. One graph in particular jumped out. "Forty-seven percent of respondents -- the largest proportion -- said that showing how ABC would benefit their organization was the most important issue they faced in implementing their ABC program." That's amazing - almost 1/2 the respondents had trouble justifying their investment in ABC.

One of the respondents said "The biggest problem with our ABC implementation has been taking all of our cost centers and tagging them into the right cost buckets in order to track everything. It's been overwhelming in terms of the amount of data. We're still struggling to get a handle on it and have been for some time now. Everyone says it's important, but other things end up requiring more immediate attention." However the respondent goes on to say that ABC data has already helped the company realize significant cost savings and that the information is used in talking with business line managers about their group's costs and as ammunition in contract negotiations with vendors and suppliers. Hopefully the "significant cost savings" are real and net of the the costs to implement ABC. Click here for the article.

The myth of market share

December 9, 2004 from ProfitGuide - "The key to business success is to capture as much of the market as you can, then wait for the profits to roll in, right? Not so fast. As Richard Miniter writes in The Myth of Market Share, "From the stylish offices of the failed dot-coms to the grimy steel mills of western Pennsylvania, this model has failed to deliver." An obsession with sales above all else can lead to reckless discounts, mindless brand extensions and pointless mergers. In contrast, profit leaders such as Dell, Ryanair and Hoffman-LaRoche plan for profitable growth and then let market share come to them. Their key strategies include:

Innovate your way into more profitable lines: In 1985, market leader Intel moved away from memory chips because it realized the real profits were in processors. It could do so only because it had the know-how to reinvent its business, thanks to a heavy investment in research-and because it had the guts to abandon a field where it was No. 1. Without that move, there would be no "Intel inside" today.

Control costs ruthlessly: This is one of those humdrum but mission-critical tasks that profit leaders do extremely well. Ryanair has the lowest costs per mile travelled of any airline in the world-and the highest profits-thanks to an ultra-flat management structure, low staffing levels, fast turnaround of planes, avoidance of frills (it doesn't even give passengers free peanuts) and flying from secondary airports with cheap landing fees.

Smash barriers between departments: In most companies, the chief executive can talk to anyone he or she wants, and executives feel free to address their peers in other units. But in profit leaders, managers and even line employees communicate freely with people in other divisions to solve problems. Incentives such as employee share ownership plans and productivity bonuses can help break down barriers. A manager at America Online, which has an employee share plan, keeps AOL's stock price as a screen saver on her computer, so "when someone e-mails me a problem, I think about that number."

Get the evidence needed to bring foot-draggers on board: Roche Diagnostics Systems, the medical testing division of Hoffman-LaRoche, suspected poor customer service at its 800 number was the main culprit behind an anemic bottom line. But many of its managers hid behind the rationalizations "Aren't all customers hard to please?" and "Maybe we aren't so bad after all." Roche invested in customer-service research that made it painfully clear its 800 service was indeed getting killed by the competition. That convinced managers to stop denying the need for drastic change.

Focus on short-term profits: Loss leaders only lead to losses. Good luck trying to make up the profits later, because competitors are rarely so obliging. Ryanair never opens a route that doesn't promise to be immediately profitable. And Dell sells its computers at low prices-but never at a loss.

Click here for the article (although we have included the entire article)

Business Process Improvement (BPI)

December 2004 from the Bottom Line - "In the past, BPI was called Business Process Re-engineering (BPR), which many people think is a euphemism for layoffs. BPR was also supposed to involve radical change. Today, you hear less about BPR and more about BPI because BPR has bad connotations. BPI is not about layoffs or radical change. BPI is about gradual improvement of business process. A business case should determine whether the change is warranted. BPI is not just for large organizations. There are opportunities for BPI everywhere in any sized organization. But often these opportunities are undetected or ignored. Why?... " For the article written by Michael Burns, click here.

Innovation Performance Management - The New Frontier

November 13, 2004 from Intelligence Performance - "Innovation is hot (or "cool"), right? Innovation is the new business reengineering; it's focused on top-line revenue growth rather than bottom-line cost cutting. Glossy magazine stories laud current innovators. Governments are throwing money at innovation; states and regions are actively measuring their innovation capacity and capability; businesses are cooperating to create networks, which they hope will foster innovation; and everyone's patenting everything. HP, Microsoft, and Apple are among many vendors that don't want to be technology companies any more. They want people to perceive them as innovation factories. But even given this climate, is IPM a myth or a mandate? ..." Click here for the article.

Business Process Review and Evaluation

Many companies realize that they are not operating as efficiently and effectively as they could. However, these companies don’t fix the problems because of lack of time, lack of expertise, or lack of an independent source to evaluate the problems and potential solutions. Vendors will often suggest new technology, but the vendors may be biased as they have much to gain by their recommendations. 180 Systems can help. Click here if you're interested.

Collaborative Benchmarking

July 2004 from Business Finance - "CFOs wanting to know how their organization's performance stacks up in comparison with that of their industry peers and leading-edge organizations worldwide can access a valuable new resource. A group of large corporations, government organizations and consulting firms has joined forces with the American Productivity & Quality Center (APQC), a Houston-based nonprofit, to form the Open Standards Benchmarking Collaborative. The organization will create and promote a publicly accessible framework for defining business processes and measuring enterprise performance...

The initiative will provide a comprehensive, publicly accessible business-process taxonomy and a database of standardized metrics and benchmarks. "In the past, there have been many proprietary best-practices frameworks, but they have focused on particular functional areas -- for example, finance and accounting -- and none has reached critical mass," says Carla O'Dell, president of APQC. "This initiative aims to cover every major business process. It will provide an overall view of the enterprise, including where value is derived and costs are consumed, in a variety of business models."

Companies can contribute their performance data to APQC's online database and receive aggregated data from other participants with which to compare their performance, understand best practices and identify their weaknesses. "This is free, open data -- high-level, protected and aggregated," says O'Dell. The information will help businesses "accelerate the cycle of improvement," she adds. "Everyone will be able to help everyone else work faster and better." For the article (although there's not much more information), click here. For a link to APQC, click here.

We think that benchmarking is a great start to evaluating your business process, but caution is required. Benchmarks may indicate that you're over spending compared to other organizations, but perhaps the benefits outweigh the costs. Also, the participants may have a different way in calculating some of the numbers. If nothing else, APQC will give you some good ideas on what to measure.

Optimizing business processes

June 11, 2004 from InfoWorld - In this brief article, the author gives some practical advice - "First and most obvious, when analyzing business processes and designing technical solutions, involve and listen to key users of affected systems. Some technologists still fall into the trap of masterminding broad organizational change behind closed doors...The best way to get started on these projects is to walk around, observe what people do, and ask questions. Of course, you also need formal meetings and fact-finding projects to understand how and why current processes are the way they are." I think not involving and listening to key users is a big mistake in any project involving change such as the selection of a new system. Not only do you want to make sure that you have not neglected key requirements, you also want to get buy-in at a later date, which is unlikely to happen unless the key users are involved. For the article, click here.

Employee Productivity in Technology Companies

May 11, 2004 from CULPEPPER - Are you interested in metrics used to measure productivity in technology companies? The article contains some interesting information - "Forced to streamline after the bubble burst, software companies reduced headcount by 12.8%, from 2001 to 2003. Accompanying this drop in headcount were healthy increases in employee productivity. Revenue per employee climbed by 7.9%, from $191,000 to $206,000. Gross profit per employee increased by 5.9%, from $135,000 to $143,000, higher than that of any other tech sector." For the article, click here.

Where are the most likely opportunities for business process improvement?

Managers will typically optimize the efficiency and effectiveness of their own area of responsibility, but have little control or accountability over inter-departmental activity. Thus we often hear of silos within an organization, in which each silo or department operates independently of each other. In an article on TechnologyEvaluation.Com, we read that "In the early 1990's the American Productivity and Quality Center (APQC), Houston TX, conducted a number of pilot projects to determine methodologies for improving white-collar productivity. One of the major findings of the study was that real, measurable improvement in productivity occurred only in those pilot projects that were designed to work on problems in the interface between organizations." The article also talks about IT alignment and ROI and how "Proactive IT Managers Can Make a Difference". For a link to the article, click here.