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Similar examples exist in almost every company, whether service or manufacturing, software or hardware, or private or government. The point here is that profitability is a small number compared to total sales, and just one process can eat away the profitability of the entire operation. Just as one punctured wheel disables a car, a poorly managed process can kill a company. In several companies I have visited, a key individual at a senior engineering level or a manager level (well recognized and respected in the company) had been unknowingly hurting everyone else. In the absence of proper performance measurements, it is difficult to eradicate the situation, and the entire business suffers until its close. Therefore, management must start the optimal process right away. They need to define and optimize each process, establish performance measurements, document the process, train the people, and capture and analyze performance data. If the results are not satisfactory, remedial action must be taken with a sense of urgency. When processes are managed in such a way, managers will not have a million things on their plates, and they will not be working late and forcing their people to work late to do tasks that do not add value. Management must keep the processes simple, measurable, and managed. Many times, management personnel cannot relate the performance of their processes to profitability. In such cases, processes must be managed well; otherwise, they are guaranteed to hurt profitability. Every waste in the value stream is deducted directly from profitability. One percent waste in one process can account for as much as 25 percent of the profitability. On the other hand, it is possible for a business s sales to grow while its profitability is shrinking. This is often considered acceptable. No matter how big a business is, however, not one can last long by losing money or having waste. Management s job is to enable its people to do well at work, accomplish a lot, and have fun doing it. However, due to increasing competition and pressures to reduce price and improve quality, management must also focus on how fast the process is improving. Even though no one has asked about process improvement speed, that concern must be the new mantra.
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CHAPTER FOUR
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The performance level is less critical than the rate of improvement. Moreover, improvement of 5 or 10 percent is not enough, as no one actually sees that amount of improvement. If, however, the performance improvement is planned at 30 to 60 percent annually, everyone will have to be involved, innovation is required, and the improvement exceeds the measurement system errors. Improvement will be noticeably significant because everyone has participated in bringing it about. In the case of 5 to 10 percent improvement, management may know what to do, but no one else is aware of it or involved. The Six Sigma methodology requires an aggressive rate of improvement in the customer-critical areas.
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3. EMPLOYEES AND INNOVATION
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Not many businesses exist without employees. When no mistakes are made, employees are thought to be an essential and good component of all business processes. However, when mistakes are made, employees are almost always fingered for blame. In the past, employees were hired for their physical effort to push the product through operations either to the stockroom or for shipping. In today s workplace, with increased automation, computer networks, and other productivity tools, businesses need more informed and alert employees. Normally, in a business, managers believe they know a lot and make most of the decisions. In a growing organization, however, employees intellect must be utilized as well. Employees must be challenged to think and perform better. Employees must also feel that they are contributing in a real sense, not just by doing what someone else tells them to do with no room for creativity. A statistical distribution of employees performance occurs naturally. In other words, most people do the necessary amount of work, while some are superior and a few are substandard. The main objective of a company s management is to maximize the contribution of employees in terms of physical and intellectual productivity to bring out the best on the job every day at every job. This requires effective job planning, incentives for extra effort, recognition for prevention of problems, and reward for innovation.
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