Making Improvements Stick

The single most common cause of failure in business is failing to change when change is needed!

The economic downturn in recent years has exacerbated the challenges leaders already faced. As recession took hold, leaders focused more on cost cutting to sustain margins. Surveys show that it remains the number one strategic objective for this year.

Many manufacturing firms have implemented or expanded operational-improvement programs involving lean tools, Six Sigma or both. Marketing groups have adopted analytic software, as the sales organization has implemented CRM technology. Organizations ranging from steelmakers to insurance firms have benefited from application of lean tools.

But experience has shown that organizations overlook what may be half of the potential benefit of improvement to be derived by setting their sights too low or overlooking how the existing performance management system or the mental models of employees could undermine them. Still others underestimate the level of senior-management involvement required and delegate their change programs to technical experts. The unfortunate longer-term impact is that according to the AME Institute, only 5 percent of organizations build sustainable continuous improvement processes.

The fundamental challenge is integration of operational tools with the intangible elements such as development of leaders with the ability to understand the broader improvement objectives, and move up and down the ladder of abstraction from high level thought to day-to-day activity. It also involves building of technical and interpersonal skills that make efficiency a reality.

Those who understand how Toyota has succeeded so effectively at eliminating waste, variability and inflexibility know that the engine that powered that success was deployment of objectives from the C-suite to the shop floor -- and the creation of a thinking foundation that enabled people to think and work differently. Without the ability to direct the intangible elements and focused attention on the people aspects, difficulties in implementation can arise that will negate the investment in improvement initiatives.

In one manufacturing firm, some sales people long frustrated with what they saw as the shortcomings of the operations group, began circumventing the production-scheduling system in order to speed their own products through the queue. That undercut many of the efficiency gains the experts managed to achieve.

The result was chaos: line workers later showed executives a schedule indicating that one machine, chosen at random, was to perform 250 hours of work during an 8-hour shift. This revelation spurred leaders to refocus the improvement effort and ultimately embrace a far more holistic approach to deploying objectives which started with an effort to get sales and operations to collaborate in setting production priorities and to work together on a daily basis.*

Overlooking the intangible elements can drastically lower any improvement initiative's odds of success. Some companies rush to implement the tool kit without ensuring that employees -- including managers -- are prepared to work and lead in different ways. The tools are a means to an end, not an end in themselves. Technical expertise is necessary but not sufficient. It rarely can instill the desire for change in behavior permanently, nor can it build the organizational capabilities that permanent change requires.

 * McKinsey & Company

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