1. MANAGERS, STRUCTURES, LEADERSHIP AND TEAMWORK
1.1. Do my managers have tight daily control of their processes?
If your managers have clear and exclusive responsibility for an area/process, and if they collect performance indicators and review them frequently and regularly with their people, the basics are in place. Then it is a matter of how well they do these things. Managers should be trained to run good review meetings.
1.2. I am worried about managers not doing a good job. How can I make sure they will?
The CEO/MD’s prime day to day responsibility is to ensure his or her managers are doing a good job. There are lots of ways that this can be categorised but in the context of this website a good manager is:
• Working towards the strategy
• Controlling & improving the process (tasks)
• Whilst developing people & teamwork (mentoring individuals & teams)
• And assisting in communicating & enhancing the vision/mission/strategy (culture of passion).
Different levels of management will put greater or less emphasis on each of those factors. Each of them should be greatly supported by the business processes and systems. In a good organisation it is easy for managers to flourish AS PART OF THE WAY BUSINESS IS RUN i.e. success is consciously and carefully built into the culture.
1.3. Do we have departmental barriers and if so what harm do they do and how do we remove them?
You can tell if you have departmental barriers by mapping your most important three to six processes at high level, ignoring departments and authority boundaries and asking yourself ‘does this process operate smoothly as a process?’ If processes do not operate smoothly and without waste, it may be that there is too much emphasis on politics and the power of functional (departmental) management, ie managed in silos, not joined up. More importantly the processes will be sub-optimised, operating below par. The good news is that in this circumstance there would be a big opportunity to improve performance by HiGh Level Process Mapping.
A simple answer is that a clear desk, organisational delegation, teamwork and control, with time to spare should be the desired ‘modus operandum’. This is the best chance for the team to work best. Perfection is an end aim but those who put perfection first can tend in reality to do too much themselves, not trust people fully and become too overwhelmed with the workload. Perfection is not a method and nor is it a credible aim.
1.4. Perfection or a clear desk. Which is the most important aim for a good manager?
You can delegate authority but not responsibility and you are accountable. Another way of putting this is you can delegate the power to do things (authority) but not the duty to make sure they are done (responsibility) nor the need to report ‘progress and success level’ figures (accountability). It pays to get help from people who work in your team by delgating. As long as they have the brief, the support, the training, good management control and personal organisation it should work. One thing is very certain; delegation done well is very healthy for the organisation. If anybody is afforded spare time, by such delegation it should be those who can use it to develop value added and competitive advantage, usually those at the top.
1.5. How do we make delegation work?
1.6. How do we get managers to solve problems pro-actively?
Your managers can solve problems, and should, but if lots of them don’t solve problems it may be because the organisation or its culture stops them or deters them. Of course it could also be that they just aren’t good at it personally. The best way to solve problems is: • Look at the horizontal process • Involve the people in the process • Be scientific and study the numbers • Encourage and recognise successes • Manage your time to allow ‘time to get on the attack’ Remember a problem is often a ‘pain’ or a frustration to the people who work ‘in the process’ and they will often be instinctively willing to help for their own reasons as well as yours. “People act quicker to remove pain than to gain pleasure”
2. SIGNIFICANT SHORT TERM IMPROVEMENT OPPORTUNITIES
2.1. What are the most fruitful areas in which to find short term profit improvement (i.e. the biggest pay-off in the shortest period of time)?
This is a cracking question! This “gain pleasure” answer is not ‘how’ but ‘where’. The most fruitful areas are: • Under-performing in growing the business, failing to win market share (see product/market matrix)
• Unprofitable market sectors or customers
• Unprofitable product/service groups or products and services
• Waste within operations (everywhere)
• Waste between processes – where things are not linked up between internal customers and suppliers
• Non-value adding activities (see ‘lean’)
• Poor supervision of the day-to-day work
• Bad structures costing more money and ‘damping’ improvement (see flaw in organisational structures) It is said that the cost of poor work in its broadest sense can easily be 25% to 40% of sales turnover, however this is not to say that all of this waste can be ‘won’ and remember there will be a cost to doing it. I have never scoped an organisation and come up with less than 10% (estimated) waste. The main answer to ‘how to win it’ is covered in various places in this website.
2.2. How do we improve Process Management in two months, and make a difference to the bottom line?
This is driven by the need to ‘fix’ something or to find quick profit improvement.
• First explain to the workforce what you are doing and why, and remember to involve as many as you can in this throughout the stages below
• Brainstorm to find anecdotal which areas have most ‘leakage’ or opportunity
• Map the processes in ‘high level’ detail to pinpoint problem areas
• Do a borehole, or pull out figures to see the extent of the waste (see boreholes)
• Institute simple KPIs or Performance Indicators
• Analyse root causes
• Implement changes
• Monitor progress very frequently and regularly
2.3. How do we assess the amount of wasted time and wasted resource in our business?
Wasted operations time and resource should be a regular ongoing management control drive using simple time and output reports with hourly or daily Performance Indicators. The quantification of wasted (ie non-productive) time is made more difficult because, in the typical business it is usually an intellectual process with no widgets to count. But there are lots of things you can do:
• Identify ‘failures’ – forms not completed right
• Identify ‘rework’ – things which have been redone
• Identify time dealing with ‘ problems or complaints’
• Break all activity into ‘activity headings’ using ABC (activity based costing) and just guess the max/min cost of each regular activity and what causes that cost to rise (see ABC)
• Ask people what frustrates them and stops them doing their job, because those things hit the operation in two ways: wasted cost and demotivation.
2.4. How can we tighten the monitoring control of cash?
We have always used two methods to monitor and tighten control of cash. One method is medium term forecasting (P&L and BS) to show forecast inflows and outflows under each control factor (e.g. debtors, creditors, stocks, capital expenditure, loan repayment and cash profit/loss) compare the actual to the forecast each month by extracting information direct from the Balance Sheet. The other is the short term cash plan, showing individual receipts and payments (bundled if there are too many) ‘planned’ forward about ten weeks. The medium term forecast shows you if you have a big obstacle or ‘hump’ coming up and gives you time to circumvent it or flag it as a ’big problem’. The short term plan allows you to flatten out the normal ups and downs but it won’t fix a big problem.
2.5. What is the profitability of our customers or market sectors and how do we find it out easily and monitor it?
Most businesses will sell to different groups of customers otherwise known as market sectors. One of the most important spreadsheets that you can have as a permanent business unit feature is a two-dimensional matrix which shows market sectors in the horizontal and product/service groups (see FAQ #12) in the vertical. If you show sales and gross margin over any period sub analysed this way, it will always reveal trends and opportunities not otherwise exposed.
2.6. What profits do we make on Product Groups or Service Groups?
A product or service group is a consolidation of similar products/services which are likely you have similar profit levels and operational and delivery mechanisms. If you monitor sales, and margin trends in a number of different ways – in the context of the matrix mentioned in FAQ #11 you will see where money is being made or lost.
2.7. Can we have a daily profit figure?
It would be reasonably easy to get a daily profit figure for most organisations by using standard estimated daily fixed overhead figures and applying them to daily sales and direct cost figures. Some organisations like manufacturers of large items and contracting companies would additionally need good work-in-progress accounting to make things a bit more accurate. A daily P&L is an extremely good discipline which speeds up reactions and decision making. If you are always looking at information more than a week old, you’re out of touch!
2.8. How can Short Interval Control enhance our management control?
Short Interval Controls are nothing short of a fantastic tool. Monitoring any given indicator at short (weekly, daily or even hourly) intervals accelerates learning and performance improvement. It shows up highs and lows which would otherwise have been ‘greyed out’ by averaging and it causes lots of good questions to be asked. It also shows purple periods of performance which may be usable as benchmarks (see short interval controls).
2.9. How does ‘Lean’ manufacturing, warehousing, operations or anything else work?
Lean means without ‘fat’ ie without non-value adding activities. It is a process which identifies waste, rework, overproduction and other ‘stealers’ of cost and efficiencies in the front line. Actually it is very easy to understand and is a proven tool for finding and attacking wasted cost. It can be used to improve performance in the very short term, but can also give rise to continuing benefits of all shapes and sizes over the years. ‘Lean’ is about how to save whereas ‘Continuous Improvement’ is ‘how long you keep improving’. The Business Improvement Techniques NVQ is based on lean principles.
3. MEETINGS AND MOBILISATION
3.1. What is the best and most effective way to involve front line people in finding and knocking out waste and reducing non-value adding activities?
Communicate to them thoroughly and then get them to assist you in the typical change programme which would usually involve (1) scoping for improvements – (2) mapping processes at high level, (3) identifying opportunities and (4) fixing problems in small teams. It is absolutely vital that visible Performance Indicators and other displays are used and that there is recognition and reward. Remember the people in the process are the experts in what is happening day to day. We should empower them by giving them figures and organising time for problem solving.
3.2. How do we make our meetings slick, effective proactive and motivating?
The vast majority of meetings fall into two types – Action Reviews (quick slick and regular) or – Problem Solving (in depth), and you should never mix them up and try to do both things in one meeting because you will end up optimising neither. Bad meetings are the most important failing of many businesses in practical terms – because of the perverse effects. Meetings can accelerate or block improvement drastically.
4. MEDIUM AND LONG TERM IMPROVEMENT
4.1. We would like a single and complete methodology for managing the business
A simple process for managing the business would have six sub-processes • Strategic development and review • Business planning • Continual improvement – major projects • Continuous improvement – every day, everywhere • Hawthorne meetings. These would be supported by a regime of four pillars permanent philosophies. • Quantification measurement and display • Training • Action review meetings and problem solving meetings • Recognition and reward.
4.2. How do we ensure we perform well as a business in our sector?
Medium to long term performance in the context of the business is all about knowledge or research of the particular business environment, including the market, the climate, traneds and the competition, leading to strategy, which in turn is linked to implementation. As yourself ‘what gives us the right to continue to thrive where others fail?’
4.3. How do we ensure that management is happening at all levels at all times?
If all areas of the business are covered by: strategic imperatives, coming from strategy; plans for one year and the ‘four pillars’ (see FAQ #19) and if the managers understand what good looks like as a manager, the business is likely to be under control. Note: it is the MD/CEOs job to ensure that the managers are doing a good job.
4.4. How do our managers maximise the value of the business and plan ‘exit’ from it?
Exit is a term related to private companies, Ltds, small PLCs, partnerships and sole proprietorships. The watchwords for making the exit (sale) go well for optimising the value of the business are: • Showing further growth potential for the future owners • Demonstrating that the business is under control and is clean• Without reliance on the constant presence of the (present) owners. • And preferably – establish a good brand .These things will increase value and make the sale easier to carry through.
4.5. What is brand all about, and how do we increase brand equity?
Brand is the sum of all things such as culture, identity, looks, image and differentiation which make the business recognisable in its market context and which make it worth a premium above the net asset value. Quality is not brand. Good quality is a given in a brand and is not seen to add anything except in the sense that brand does not exist if quality is not there.
5. SYSTEMS FOR PERFORMANCE MANAGEMENT, SCORECARDS, DASHBOARDS, KPIS AND IT
5.1. How do we establish the right Key Performance Indicators?
The best way to establish the right PIs and KPIs is to complete a High-Level Process Map across the three to six major processes in the business. When this is done, ask what information is required to prove that the process is operating well over ANY time period
5.2. How can we become good at Business Performance Management and Performance Improvement?
This is done by Process Management. Processes are horizontal. The ingredients for good processes management are: • High Level Process Maps • PIs and KPIs • Review meetings • Proactive problem solving Involvement of people who work in the process.
5.3. How do we go about getting the right integrated software for our business system?
Nowadays lots of smaller businesses have patchwork systems with accounting systems separate from CRM systems, separate from operating systems and project management systems and perhaps with lots of little unlinked spreadsheet/database processes. Nevertheless it is usually not difficult for an expert to rationalise these systems and then create a data repository linked to an umbrella system which produces the right KPIs, dashboards and scorecards. IT is not usually as fundamental a problem as you may think, once you know what information you need to have the business constantly under control and identifying improvement opportunities. Without good KPIs you CANNOT have a good management culture.
6. SUSTAINABILITY, PRO-ACTIVITY AND CULTURE
6.1. How can we make our culture more pro-active and productive?
You need to have a process for proactivity, a plan-do-check-act (the Deming cycle) which causes you to constantly review and improve processes, process maps, KPIs, reviews and problem solving.
6.2. How can we implement Continuous Improvement throughout our business?
Continuous improvement means what it says. To sustain it long term you need a ‘plan-do-check-act’ mechanism supported by communicated vision, good management practice, recognition and reward, to make it a way of life, a cultural thing, where people do things because “that’s the way life is here and it works”. Continuous Improvement is not about reacting to problems it is being on the attack every day, everywhere.
6.3. What is the best and most effective way to involve front line people in reducing waste and reducing non-value adding activities?
If people in the front line see the numbers and are given the form to identify root causes and solutions, they are (technically) empowered. To make this process effective, involve them perhaps by rotation, in Review Meetings and in improvement teams. Also train them in process improvement. Most people will be very willing to help to improve processes and create better work practices. People will be very willing to remove frustration and hassles in the process ie in their work.
6.4. Innovation, how do we get it?
Innovation comes with a combination of training, encouragement, necessity (problems) and creative environment. It needs to be formally organised in the same way as you would organise any other essential business function – but not many businesses do this.
6.5. What is sustainability and how do we get it?
Sustainability is a big subject, but we have examples of sustained success in organisations lasting 40 years. Some of the secret is about the business strategy ‘the hedgehog’ principle which means a business is capable of rolling into a ball to protect itself in hard times. Most of it is a culture of dealing in facts and confronting issues, knowing how the business is running everywhere and putting the philosophy and culture before the style and personality of the high-profile management personalities in the business thus transcending leadership changes. Finally selecting the right people with a good attitude is preferred to the reverse method of creating the structure and then looking for people to fit it. Of course you do need a full team capable of meeting the various different skills demands.