Self-Guided Reengineering

INTRODUCTION

A COST EFFECTIVE BREAKTHROUGH TO BUSINESS IMPROVEMENT

I believe you’ll soon discover that this is a different kind of business book that explores a different approach to reengineering programs and process excellence solutions. I am not an academic or subject matter consultant with a bias towards a particular approach or viewpoint. I’ve spent years as a corporate worker bee toiling in the bowels of the Fortune 200, working on reengineering initiatives and adding savings to the bottom line as a core function.

This book is about a cost effective, simplified approach to business improvement through easily applied, SELF-DIRECTED process excellence principles distilled down from the most widespread and effective programs used throughout the Fortune 500 over the last thirty years.

MY EXPERIENCE

As a mid level finance director/manager, I performed a dual role as both employee performing my 9 to 5 responsibilities as well as actively participating as a team member in most (if not all) of the major reengineering initiatives employed in varying degrees in over thirty companies over the last forty years.

These were company-wide operational excellence initiatives ranging from Drucker’s TQM programs to Horizontal Line Management practices to Quality Circles to Dr. Deming’s 14 Points to Statistical Process Controls to the latest in Six Sigma programs and Lean Manufacturing techniques to Toyota’s Productivity System with any number of other lesser known programs.

Often, these programs were designed and developed by people who were never responsible for the success and productivity of the front line operations of a Fortune 500 company. In addition, the consulting folks who were hired to implement these programs where themselves ‘professional implementers’ and were not supervisors or managers responsible for the day to day operations of an ongoing enterprise or business.

These folks would fly in, and for the most part ignore those who actually did the work, do their magic reengineering voodoo and then fly out again, usually after charging millions of dollars in consulting fees. They didn’t own anything lasting, except for their shined shoes and their briefcases.

I strongly advocate a different approach to business process and technology reengineering - one that will deliver a sustainable improvement at low cost. That is why I wrote this book - I believe you can do for yourself – effectively with lasting results - what you would have to pay thousands of dollars employing others to do for you.

Please Note: All schedules, diagrams, illustrations and examples that are displayed in this book are also available for free PDF download from my website.

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SECTION ONE:

THE FIVE MAJOR COMPONENTS OF SGRE FORMULA

(1). THE RIGHT KNOWLEDGE: The Ten Guiding Principles: Utilize the right information of the Ten Guiding Principles of SGRE distilled down from all the major programs (Six Sigma, Lean, Deming, Drucker, TQM, etc.).

(2). THE RIGHT FORUM/PLATFORM: The JSW Workshop: Utilize a proven method for implementing them at low cost – self-guided joint-solution workshops. Work together for practical improvements in the right arena or forum for group synergy. (i.e., the JSW-Joint Solutions Workshop:

(3). THE RIGHT TOOL: Process Mapping: Group process mapping for business process deconstruction, analysis and reconstruction for sustainable solutions. You can do just as much if not more than what you’ve been paying high-priced consultants big bucks to do. In this approach of self-guided reengineering: least cost does not mean least effective

(4). THE RIGHT PEOPLE: The Process Owners: Use your people as partners and participants in the reengineering process - formally ‘mine’ the knowledge and experience resident within your own organization. These are the right people (your process owners) empowered to be a design reengineers.

(5). THE RIGHT LEADER: The Facilitator: Use a skilled internal champion as the facilitator who will bring it all together, by applying these easy to use techniques in a group setting with informed process mapping for business analysis and solution development. The knowledge and skill of basic process mapping is a critical component of what the facilitator will do.

The next few chapters in this section will deal with explaining what these components mean and how they can empower you to do for yourself what you’ve been paying high priced consulting firms big bucks to do.

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CHAPTER ONE

WHAT IS REENGINEERING ANYWAY?

Reengineering is a bit of a made up word. During the 1980’s and 90’s, it came into vogue as a way to describe the process of redesigning and revamping existing business processes to eliminate waste, redundancy and non-essential activities. Many factors contributed to making reengineering an attractive concept. With increasingly sophisticated competition from outside the US, the continuing threats of recurring recessions, high inflation and domestic market pressures gaining momentum throughout the eighties, many initiatives spearheading improvements in the quality and delivery of goods and services through changed or re-engineered functional processes were undertaken by most Fortune 500 companies.

For the purposes of communicating complex ideas in a simple way, over time it eventually was described as Finding better ways to do things which usually meant doing things more cheaply and much faster with more robust results.

REENGINEERING IS ONLY A TOOL

Reengineering is a tool that focuses on reducing inputs or efforts to achieve greater outputs resulting in sustainable improvement, but like all tools, it can be misapplied or applied without skill or intelligence. Even when these concepts are applied with skill, they usually result in someone losing their job – albeit for the right reasons. Consequently, that is the temptation. Historically, the easiest (and least intelligent) form of reengineering has proven to be cutting headcounts.

I hate to use the term Doing More with Less. In my experience, it never failed to send shivers down the back of every organization where it was applied as a reengineering slogan. Whenever anyone in the rank and file heard management whether in business or in government use the iconic words We have to do more with less, it translated differently. To them it meant, You (but not me) have to do a lot more work by working much longer hours for much less pay, and by the way, be thankful you have a job.

Often that is how it’s understood, and misused, today. Slogans are a symptom of lazy, unintelligent management – and the workers (whether factory, office or middle management) know it. And no amount of ‘Change Management’ consultants can smooth over or change this perception among the soon-to-be reengineered. When management uses the reengineering umbrella to reduce costs without intelligent effort by blindly cutting staff jobs and closing facilities, how else should one react?

I am not ignoring that we all live in a competitive world and chances are if you’re not working to continually improve, somebody else probably is – and often it’s those who you’re directly competing against for market share. So in order to stay competitive, a continuous commitment to improve and reduce costs is necessary for survival. This should answer the question of Why should one reengineer in the first place? Although another answer can be that it is just basic common sense to continually search for better ways to do things, which in itself is a good thing to pursue. But reengineering must be done thoughtfully and intelligently.

Nobody (unless you’re psychotic) likes to achieve productivity by letting people go, even when it’s necessary. Clearly, improvements can be achieved in many other areas of expense and business practice within an enterprise – not just in the elimination of the tasks that involve people doing work. The focus on improvement should be on the entire enterprise and the subsequent, qualitative value of its functional components within all of its process areas. Greater efficiency in purchasing materials can result in lower costs in purchased cost per unit through purchase partnership contracts, improved shipping initiatives, greater contract-based incentives and so on. Improvement is not just about reducing headcounts, but reducing the costs of doing business – all the costs.

ADDING VALUE

The bottom line to almost every reengineering program from Lean Manufacturing to Six Sigma to Dr. Deming’s 14 Points can be summed up in two core questions: does the action or activity result in added value? If it doesn’t, then it’s just waste. In addition, to further clarify, does the activity add value in itself but it does so inefficiently by creating water or unused excess?

The answers essentially boil down to waster making the object of reengineering waste elimination. This can be accomplished through minimization - eliminating all activities, conditions, environments, resources, inputs or practices that do not add value or result in excess usage of resources or are over-valued through expensive infrastructure costs. This includes bottling up cash or assets in inventory as safety nets against failure or waste. Said another way, the underlying principle governing all REENGINEERING is that all process activities, actions and points of work must add value in some way or why do them?

In addition, the quality of the value is also questioned. A specific activity or process might add a great deal of value but is there opportunity to add more value? Can the process be made to be more efficient, more effective, more streamlined, less costly, etc?

Above all, for any type of reengineering program to achieve lasting results that realistically reduces costs, it must be applied with intelligence and skill – with the intent that the entire institution receives benefit; all levels management and labor, as well as the customers of said enterprise. If the program does not in itself add value but in actuality is disruptive, confusing, overly complicated or just plain dumb – then hope and pray that your management teams will realize it before they begin. Because once they begin, and the political machines of protecting one’s own butt come into play, it will be very hard to reverse course even when it is obvious to everyone that it will not work.

The best protection against such a thing happening to you and your organization is - do the thing yourself.

YOU CAN: DO IT WELL, DO IT COST EFFECTIVELY, DO IT YOURSELF

There are many programs and many more consulting firms that provide process improvement techniques and process excellence services - from Six Sigma programs to Process Mapping Consultants.

Each approach has its specific strengths and weaknesses, levels of effectiveness, buzz words, acronyms and secret handshakes. The installation costs and infrastructure required for some of them are staggering, as are their claims of massive savings and ever increasing improvements. Often times, these programs are championed by any number of ambitious executives seeking recognition and immediate visibility through rapid and dramatic accomplishments. That’s fine, if they work.

But in my forty-year career, most (and I mean most) of the programs that I have been part of in some of the largest fortune 200 companies have been mediocre if not outright failures. Oftentimes claims are made about outstanding results in order to justify the high expenditures and higher expectations for success. The executive or executives who have pushed for an expensive process excellence program, has basically risked professional credibility and job security on the success of said program. These executives are also responsible for reporting the performance results to the board.

In many instances I have witnessed lackluster change or failing results from ill-conceived projects, overly exaggerated program features or programs lacking in the systemic change needed for effective improvement and yet - for some reason, I have rarely if ever witnessed any unfavorable, career ending reports presented or passed onto the board. In many cases where cost overruns are unfavorably impacting the cost to benefit ratio – the benefits are correspondingly and mysteriously increased.

I WAS A WITNESS TO MANY SUCCESSFUL FAILURES

I say this as a witness to countless programs that exaggerated results for purposes of denying failure, saving the career behinds of the internal sponsors, as well as the reputations of the consulting companies providing the work. I also say this as a front line departmental director or program participant / worker bee who worked with the front line consultants of said companies. If the changes or improvements did not happen at my level – it did not, and would not, happen at all. I would gladly debate this fact with anyone – from Jack Welch, the former CEO of GE to any head of the large consulting companies servicing the Fortune 200.

The place where savings are initially calculated and communicated (before they are ‘massaged’ for the political acceptability of the board) was at my level. Many of the internal sponsors themselves did not know how savings were calculated but relied on their hired guns (the consultants) to provide it to them. This relationship is rather bizarre. Would you tell your employer that he made a mistake in hiring you? Would you admit miscalculations and failures to those who are in the position to deny you continuing work? There is the rarity, but I’ve rarely seen it – and I’ve seen many – many more than a Jack Welch.

Anybody can shut a plant, lay off workers, cut expenses, discontinue services or freeze salaries. There’s no magic to cost cutting. Companies do it all the time, but often to their own peril. It does not preserve the future of the company. I’m reminded of an aggressive cost cutting program that was initiated by the head of a large foods manufacturing giant I had once worked at for several years. A rather large and prestigious consulting firm, with whom the company head had had a long prior relationship, was hired to aide in the endeavor and the initiative was to begin with the north America manufacturing and distribution network.

THE CONFIDENCE (AND ARROGANCE) OF IGNORANCE

This initiative was embarked upon without consulting the various front line managers and directors who would be the most affected and who would be responsible for executing the changes because, and I quote, What could they possibly know about anything that my consultants don’t already know?

The strategic idea was to streamline operations by reducing headcounts, consolidating far-flung support operations and reducing the amount of sites. I sat through a number of long and tedious presentations by smart, talented, young MBA’s who knew everything about how to articulate to the board what would be required to reduce companywide costs at a high level of change but in reality, knew nothing about the lower level changes required to make those changes happen in a cost effective and sustainable manner. There was an overall strategy yes (flawed as it was), but no respect was given to what tactical missteps could do to the success or failure of the overall strategy.

With a creative combination of plant closings and early retirement incentives, along with a consolidation and centralization of support services from numerous locations into the New Jersey headquarters – the plan was set and began with earnest. It lasted about twelve to fourteen months. It resulted in disaster, but not a big disaster. The failure grew slowly but due to the valiant commitments of the worker bee front line people, the system functioned as best it could – which was now poor at best.

With the early retirements, a slew of talented people walked out the door. The remaining plants (which were now supposed to be more efficient thereby capable of more output) began to produce less because the talent and knowledge to run them well was not transferred to the remaining managers. Plus the consolidation of services drastically disrupted the networks ability to respond to the unique changes in regional suppliers, customers or products because of the uniqueness of each regional area’s capabilities, network configuration and infrastructures. There was no way that this situation could be prettied up with false or misleading reports to the board. The income statements and profit projections showed a problem, but not THE problem.

IN BIG COMPANIES: WHEN ANY INTERNAL (EXECUTIVE-SPONSORED) PROGRAM BECOMES A FAILURE – DECLARE IT A SUCCESS

In order to avoid disaster, the CEO took quick action (lest the board fire his butt). He declared the project a success, congratulated the consultants for a job well done and then rehired them to help reverse what was done in the first place. The retirees were hired back as consultants for a long period of time to transfer their years of accumulated skill and knowledge to the newbies running the plants. The centralization project was reversed and all support activities were decentralized with a restoration of a flexible, quick response support infrastructure sensitive to regional differences.

This was a costly and stupid adventure, done with professionalism and tactical intelligence. Taking tactical action is not the name of the game here, nor is hiring expensive consultants to validate your stupidity and then reverse it to save your butt. That was not the lesson to be learned - hopefully.

The true takeaways were not lost on either me or the other operating managers. The failures arose from basic omissions endemic when ambitious internal sponsors and fee-conscious external consultants cabal together to make changes for career advancement and big consulting fees.

In this case,

(1). The implementers did not solicit the input of the process owners before beginning, thereby any critical information needed to either avoid failure or insure success was not applied

(2). Those ultimately made responsible (and made accountable) for improvement change were not involved with, nor were shared knowledge with, those who designed and developed the changes

(3). The external consultants had no investment, other than compensation, in the long-term outcome of their proposals. They were paid to come up with ideas, not sustain them.

IN CLOSING: A SUCCESS STORY

One of the most successful reengineering experiences I was privileged to be a part occurred while I was employed at Bristol-Myers Squibb as financial controller for their consumer medicines division.

The division was in need of a change. It was bleeding money, the sales and marketing groups continually missed forecasts and projections, operational areas were continually missing product deliveries while incurring high percentages of back orders. Product quality problems were staggering causing waste, high levels of sales returns and unrecoverable rework costs.

At this same time, a new head of the supply chain operations (purchasing, manufacturing, engineering and distribution) was appointed to take care of these issues. I learned later that he eschewed the use of external consultants because of previous experiences that were all about posturing and corporate politics. But, he was a strong advocate of the book The Fourteen Points by Dr. Deming (check it out on Wikipedia, as it summarizes the book very well). This was (and still is) a mind-changing book about how to improve a company’s performance – not through gimmicks, colored belts or one-time fixes – but through a series of applied principles that involved everyone in the organization. In the book, Deming defined the purpose of any change was to enact lasting improvements that were sustainable, and could be continually improved upon.

In particular, one of the points encouraged management to empower (yes, I’ll use this word even though it’s been over used to the point of meaninglessness – here it has meaning, great meaning) those being managed by sharing responsibility, accountability and planning for a change in thinking and practice – a new paradigm as it were – to continually improve operational performances, to improve quality and to drastically lower costs and cycle times.

This specific point was the one the new operations chief hit upon. He was convinced that by educating everyone (by reading the book), the organization could apply this simple principle without detailed instructions or method minutiae for a dramatic change in performance. The result was an explosion of positive energy. It unleashed the creative and innovative potential of the organization to analyze root causes, create solutions, develop actions plans and implement change.

WHAT WAS ACTUALLY DONE

It was not a quick fix or a one-time process. It was a concerted approach by all levels of management and labor to enact intelligent change with a strategic intent for overall improvement. But in the interests of time, I’ll oversimplify what occurred.

It began as a project that took shape and definition over time. Classical project management and process coordination took over at this point, but it was a home-grown project managed and planned by the owners of the processes affected. Various teams were given responsibility to perform a series of assessments on the state of current operating conditions within their respective areas. They identified the performance problems within their areas as well as the processes that were affected, particularly those that ran through each of the purchasing, production and distribution functions.

In addition, we researched the current best practices in competitors operations and visited the sites of many of them, analyzing their strengths and weaknesses as well as comparing and contrasting their processes with our own.

Armed with these analytics, and applying the principles behind the rest of the fourteen points, each problem area was assigned a problem resolution team that was empowered to call onto the other operating teams for help in resolving cross functional process issues. A great deal of the improvement came about through an enhanced employee training program. It involved the training and education of ALL employees, i.e., managers, supervisors, line workers, administrative staff and office clerks, etc. The aim was a better articulation, definition and communication of each employee’s job, their job’s purpose and their responsibilities.

But what was truly revolutionary (taken from Dr. Deming’s 14 Points) was a new program on quality standards – which essentially made all employees accountable for out of spec production, missed delivery dates, scheduling delays, cost over runs, etc. The classic ‘quality assurance line technician’ roles were eliminated, or better said, transferred onto all other employees. In-Spec production was a concept that was to be understood by everyone, and made the responsibility of everyone.

THE RESULTS

In practical terms the resulting actions and solutions showed themselves in improvements within all the critical (and essential) areas of the supply chain. The following is a list of some of the more significant, but not all of them.

Raw Material Purchase Price Improvements

How was this accomplished? Implementing a "Certified Vendor: program. Certification of preferred vendors allowed for stable price purchase contracts, protected sources of supply, greater reliability on deliveries and reduced variations in