From the Sponsor’s Desk – Ten Steps to Lean Success
In my last post, Beware the Change within a Change, we looked at the damage done when one organization didn’t pay sufficient attention to a change within a change. It’s easy to get distracted when dealing with a major project, like an acquisition. But, as we learned, being busy with a big change is no excuse for ignoring other significant changes that are going on concurrently. Appropriate oversight and diligence is always needed.
In this post, we’ll review the approach new owners took with a successful, forty year old, formerly family owned manufacturing company to improve bottom line results. They used just the right blend of project and change management best practices and lean techniques to transform the organization and improve performance while retaining and growing their customer base.
Thanks to D.N. for the details on this case.
This manufacturing organization had been recently acquired by a private equity firm. The acquirers justified the acquisition on a number of factors: the company had a long history of success, profitability and growth; it had a diverse and loyal customer base; it had narrow but very competitive product lines; the family wanted to sell. In addition, there was an expectation that profitability could be boosted significantly by improving manufacturing productivity and quality and offering a suit of new products.
The purchasers installed a new CEO and board. In the first few months of the new CEO’s tenure, he did a lot of walking, looking and listening, with his management team, his customers, his engineers and design staff, with staff on the production lines and with his suppliers. He even chatted with a few of his competitors.
What he discovered confirmed the private equity firm’s hopes – there was lots of opportunity to increase profits. The company was functionally structured, with bottlenecks galore. There was very little tracking of unit costs, production times, defect rates or new product time to market. He also found very knowledgeable and loyal staff and mostly satisfied customers who all had lots of questions about the future direction of the company under the new owners.
The new owners challenged the CEO to quadruple bottom line results over four years by improving performance of existing product lines and adding a range of new products. The new product offerings would be supported by capacity freed up from productivity and quality improvements on the existing lines. In addition, the organization should be capable of continuous improvement and renewal at the end of the change as a by-product of the project experience.
The CEO had previous experience with lean practices as a way of enhancing customer value and building organizational performance and agility in the process. He contacted a lean expert who he had worked with previously and discussed the challenges and opportunities. The lean expert supported the CEO’s views and suggested a session with the company’s management team to introduce the project’s mandate and lean concepts – the identification and steady elimination of waste resulting in quality improvements and reduction in production time and costs.
The lean expert ran the company’s senior executives through the eight-step process for guiding the implementation:
- For each product line, identify the value delivered from the customer’s perspective.
- Identify all the steps in the process and eliminate those that do not create value.
- Organize the value-creating steps in tight sequence so the product flows smoothly to the customer.
- Empower all stakeholders to discover and deliver the new processes, starting with the customers.
- Deliver change in small, tightly defined increments.
- Tackle the highest risks/challenges first.
- Capture lessons learned and leverage in subsequent iterations.
- As wasted steps are removed and value is enhanced, begin the process again.
The CEO added his own personal stamp – every senior executive in the room as well as their direct reports would be held accountable for achieving the target results and for their personal support and commitment to the project over the four years. Apparently, there was a bit of discussion about the goals, the mandate and the doability of the undertaking. In the end, however, all the targeted executives endorsed the plan. The lean expert was designated as the program director.
The lean expert worked with the executive team to identify the project scope and priorities. Product lines were assessed on a number of key factors to establish priority. Factors included customer complaints and returns, time to delivery, total product line revenue, estimated profit margins, perceived defect rates, competitive positioning and management and staff judgements on the size of the improvement opportunities.
Once product line priorities were established, the lean expert formed a team comprised of his own staff and subject matter experts from the first product line selected. For the first project, they analysed the entire end-to-end process, identified the areas of waste, and redesigned the process to eliminate the bottlenecks and detours. They then put together a release plan that would tackle the highest risks and opportunities first. The focus was on key pieces of the process that could be implemented in three to four months.
The program actually ran for five years rather than the planned four because the opportunities just kept on coming and the CEO kept on approving the incremental funding. Net profit after four years had increased over seven times versus the four times target. Three new product lines were implemented with no incremental costs because they were able to leverage resources freed up from the existing product lines. Customer satisfaction improved substantially across all product lines as did repeat business.
The original lean expert and his team departed after eighteen months but were called back to consult on a couple of occasions. The new organization formed to manage overall product line process performance picked up where the lean expert left off and carried the project to a very successful conclusion. In addition, a number of new projects were spawned in the spirit of continuous improvement. There were absolutely no layoffs during the lean transformation in spite of the significant productivity gains realized and the capacity freed up as a result. In fact, after five years, staff numbers were up 15% to handle increased product demands.
Finally, the culture of the organization did indeed transform. There was a collective obsession with customer value and end-to-end process performance. Corporate communications echoed and reinforced that obsession, focusing on process performance metrics and featuring customer, supplier and partner comments and insights. The private equity firm was most pleased with their investment!
How a Great Leader Delivered Amazing Results
The organization achieved its goals through a consistent and focused change program that succeeded because of the following ten factors:
- Committed sponsor – the CEO was the sponsor, the program initiator, the chief booster and the dominant communicator. He listened. He talked openly and honestly about the challenges ahead, the issues encountered as well as the successes achieved. He acknowledged key contributors throughout the endeavor and responded personally to issues and concerns raised by individual staff.
- Full decision-maker engagement – all senior managers (VP’s and directors) were challenged to make the project work and to support their staff in the changes they would be going through. They were also incented based on their perceived personal contribution and real results achieved. There were no laggards!
- Crystal clear goals – the new management team knew exactly why they were undertaking the change, what they were willing to spend and what they were intending to achieve. That information, along with monthly progress, was communicated widely and frequently throughout the change period. There wasn’t anyone in the company that didn’t know.
- Rational priorities – senior management looked at the comments and concerns from their customers, the moves from the competition and their own organization’s performance across its product lines. They tackled the biggest risks first. Everyone understood the rationale for the planned sequence.
- Frequent small wins – this project was a big cultural shift for the organization, going from a functional orientation to an end-to-end process perspective. Picking and delivering small, incremental changes helped the organization learn and evolve while improving service to its customers and delivering incremental bottom line value. With this mindset, even the occasional failure was celebrated as a valuable lesson learned.
- Staff engagement – engaging all staff, asking for their help and support, facilitating the contribution of their knowhow and ideas and addressing their issues and concerns created an amazingly open and forthright environment. Talking openly about the disruption in staff’s working lives resulting from the project and guaranteeing no layoffs during the change period helped reduce resistance and garner active support.
- Method experts – the company had no experience with lean practices so they brought in an expert. The expert’s mandate wasn’t just to deliver improved performance. His primary focus was actually on helping the organization transform itself, building internal knowledge and skills and putting an organization in place to sustain the changes.
- Clear roles and responsibilities – there was full understanding throughout the organization on who was doing what, from the CEO down to the newest recruit. That left no room for finger pointing when things didn’t go as planned. The individual responsible was the one doing the explaining and taking corrective action.
- Outstanding communication – perhaps the most critical component of the project’s success was the communication program that was put in place at the start and refined on an ongoing basis. At its core was a multi-way dialogue that engaged all corners of the organization and beyond. It established every stakeholder’s commitment to the endeavor and reinforced that on a continuing basis.
- Sustaining lessons learned – one of the key goals of the project was the transformation of the organization to a process oriented, continuous improvement culture. That goal was achieved in large part because of the new organization structure and roles that focused on process ownership and managing and leveraging lessons learned. Best practices were catalogued, communicated and celebrated. Every new project was framed by potential practice reuse. Reuse and refinements were targeted, measured and reported. It became the new way!
It’s clear. If you’re involved in an organizational transformation, a process re-engineering effort or a lean undertaking, make sure that these ten factors have been addressed and are sustained throughout the change effort. In fact, these factors are essential and relevant to just about any kind of project or change. So, put these points on your checklist of things to do in future endeavours so you too can be a Great Leader. And remember, use Project Pre-Check’s three building blocks covering stakeholder, process and decision area best practices right up front so you don’t overlook these key success factors.
Finally, if you have a project experience, either good or bad, past or present, that you’d like to have examined through the Project Pre-Check lens and published in this blog, don’t be shy! Send me the details and we’ll chat. I’ll write it up and, when you’re happy with the results, Project Times will post it so others can learn from your insights.
Don’t forget to leave your comments below.