Biyernes, Agosto 20, 2010
Opinions and Expectations About Continuous Improvement Programs by Jolito Ortizo Padilla
How does continuous improvement fit with 21st century leadership? This survey shows the importance of a clear link between improvement efforts and achievement of organizational goal.
Over the last few decades, continuous improvement (CI) initiatives such as Six Sigma, lean, total quality management (TQM), just in time (JIT) and other quality programs have recieved significant attention in Asia, U.S. and Europe businesses. The desire to remain current and competitive by adopting CI intitiatives enthusiastically and today, these programs are part of the management vernacular across the country.
Although these initiatives have generated significant buzz in business for some time now, the focus on quality is hardly new. Manufacturing has embraced varying levels of continuous improvement since the industrial revolution hit its stride in the mid-19th century. The evolution in automation resulted in great productivity gains, and 20th century innovators such as Ford, Taylor, Shewhart, and Deming demonstrated how manufacturing companies could increase productivity through a variety of quality techniques and approaches. By the early 1980s, these approaches were at the forefront of many US and European manufacturing companies.
Likewise in the early '80s , companies started to take notice of Japanese automotive manufacturing, notably Toyota. As American companies sent envoys to Japan, new terms such as JIT and kanban gained popularity. Books were written about the new Japanese manufacturing principles and companies began experimenting with some of those techniques. Then Motorola developed the Six Sigma methodology, which other organizations eagerly adopted.
In 1990, the term "lean" was coined by MIT researchers studying the global automotive industry, and their follow-up book in 1996, Lean Thinking, Womack and Jones captured the attention of many companies. Corporate leaders extolled the virtues of lean, Six Sigma, and other CI initiatives during the decade and into the 21st century.
Not all organizations, however, are as enamored with CI programs. One study found that many companies that adopted Six Sigma actually underperformed in the stock market and achieved only incremental gains. Moreover, some companies experienced losses after the early initial gains that occurred within a relatively short time after these programs were implemented.
For example, Motorola, a Six Sigma pioneer, announced in 1998 that its second quarter profits were almost non-existent ;as a result, the company cut 15,000 of its 150,000 jobs. In a particular irony, when Robert Nardelli, former CEO of Home Depot and a Six Sigma evangelist, cut the work force and increased training programs to reduce defects, Home Depot dropped from its worst among major retailers on the American Index in 2005.
Although , it is clear there is still groundspell support for CI programs, failure to realize promised results suggests that these implementations were challenging for some organizations, which generated our interest in investigating these seeming inconsistencies. Specifically, this research involved conducting a survey of supervisors, managers, directors, and officers from a variety of companies in the manufacturing sector in Japan. The survey contained two main points of inquiry, as follows:
. Do respondents still eagerly embrace current CI initiatives?
. What do respondents believe about these efforts' impact on performance expectations, such as increase in revenue, inventory reductions, and perceived quality improvements?
The actual survey and detailed discussion of its methodology are included in the supplement to this article, http://gaconsultants.com.
The most widely used CI approaches among those surveyed were lean, Six Sigma, some combination of lean and Six Sigma, JIT, or TQM.Most respondents (75 percent) reported that the CI initiative was deployed company-wide;division-wide was 14 percent, and others were restricted to a department or product line (8 percent). More than one third (36 percent) reported their particular CI initiatives had been in place between one and three years. Fifty-six percent indicated that their organization had launched many CI initiatives over the years, and 19 percent said that this was at least the second attempt.Only 8 percent reported that this was a first attempt, and 16 percent said they didn't know how many intitiatives their company had attempted.
Respondents' opinions about CI programs were generally very favorable. For example, the vast majority (91) percent agreed that the implementation appeared fully aligned with their company's long term strategies and that their particular initiative was aimed at the root problems in the organization (81 percent). Most respondents (89 percent) agreed that their companies emphasized the need for awareness of the goals of their initiatives.
Furthermore, 83 percent reported that their personal enthusiasm and support were very strong for their particular initiatives, nearly 60 percent claimed that many in their organization had lost enthusiasm for the project, exhibiting a "been there, done that " atttitude. Moreover 38 percent indicated that they did not have all the needed resources (e.g. people, education, time, budget) to make their improvement initiatives successful, and 41 percent had concerns about comprehensive training for the initiative. Furthermore, close to two thirds (63 percent) anticipated organizational resistance organizational resistance to making all the changes required for successful implementation.
When respondents were asked what percent of people in their organizations believed in and supported the initiative, 33 percent of the respondents felt that over half were supportive, and 31 percent reported between 26 percent to 50 percent; only 25 percent reported that there were less than 25 percent of people in the organization who truly supported the initiative.
Performance Expectation Question
Performance expectations were less definitive. For example, when asked about expected increases in revenue, as a result of CI, 16 percent expected no increase at all, 44 percent expected to see only small or modest increases, and 33 percent didn't know what to expect. For reduction of inventory levels, 50 percent of the respondents expected few significant reductions, and 31 percent said they don't know.
This pattern of responses repeated itself for other quantifiable performance measures. For example, 33 percent anticipated less than 10 percent dollar savings, another 30 percent expected between 10 percent and 25 percent savings, and 27 percent didn't know. Almost two-thirds (63 percent) expected less than 5 percent reduction in headcounts; 48 percent expected 10 percent or less improvement of on-time deliveries, and 53 percent expected minimal reduction of lead times. When asked about the level of quality improvements that were expected to impact the final customer, however, respondents were generally more optimistics with 39 percent indicating they expected significant improvements and 47 percent expecting small to modest improvements. Only 6 percent said they didn't know if their initiative would have an impact on quality.
Analysis by Involvement With Implementation
We expected some variability in responses on both opinions and performance expectations based on how involved the individual respondents were with the day-to-day CI programs. To analyze this, we categorized the respondents into two groups: those with a high level of program involvement (self described as project sponsor, project leader, or part of the project) and those with a low level of program involvement (self described as only moderately involved or not involved at all). Interestingly, results indicated there were no significant differences on opinions or specific outcomes of the seven key metrics between two groups with one exception. On average, those more involved expresses somewhat greater agreement that the organization emphasized the need for them to be aware and understand the program (more involved=3.4, less involved=3.0)
When we looked at the frequency distributions of the "don't know" responses between the two groups, however, those less involved were considerably less aware of the aniticipated outcomes of the CI program than those more involved. For example,57 percent of those less involved said they didn't know what to expect in terms of revenue increases compared to 21 percent of those in the highly involved group. When looking at expected dollar savings where 52 percent of those less involved don't know what to expect., only 14 percent of those closest to the implementations reported that they don't know. with the exception of quality improvements, similar results emerged for all performance metrics.
The main stated goal of most CI initiatives is enhancing quality through greater operational efficiencies, an inarguable premise for business today, and we found that CI implementations are viewed as necessary and positive actions for organizations. Even with a few dark clouds such as a sense that resources and efforts are spread too thin and a certain "been there, done that" apathy by some, enthusiastic acceptance of CI programs continues. Although there is some apprehension that the CI program could face some internal resistance , most respondents reported that the programs are largely supported and aligned with the company's goal.
We did find, however, that while most respondents expressed great enthusiasm about their CI initiative and its importance in meeting their organizations' strategic goals, there was some hesitancy about their CI program's ability to impact success on key performance drivers. Furthermore,although the majority appeared confident that their initiative was aimed at addressing core organizational problems, respondents were somewhat guarded when asked about real and achievable outcomes generating from the program. In essence, regardless of how involved respondents are with day to day CI implementations, many were tentative about the program's ability to bring about substantial bottom line results.
We also found that while CI projects are perceived as aligned with company goals and management has emphasized the need for awareness of these goals., there is a lack of clarity about what proram is supposed to accomplish specifically. Several respondents, particularly those less involved with the day to day implementation of the programs and some of whom would logically be considered key decision makers in the organization, don't know what to expect about their program's ability to achieve measurable results. This is in spite of reporting that they fully understand the goals of the CI programs.
We wondered why people who are avid supporters of a given CI are somewhat reticent to forecast outcomes. One explanation might be that although there is a belief that there CI program is inherently "good," organizations are complex, and cause -effect relationships are difficult to isolate. Another possible explanation may be that excitement and motivation are driven more by the pride of having the program itself than waht the program actually will deliver to the organization's bottom line. This explanation seems consistent with some criticism that the emphasis on CI integrations tend to focus more on the conceptual appeal of the program and less on the realities of its effectiveness.
This study was limited by its small sample size, but its implications should interest strategic decision makers who are seeking to maximize the reults of their CI programs. It provides insights for those who either lead or actively participate in a currrent or proposed CI program, suggesting a reticence about a program's ability to achieve organizational goals. On the other hand, these reults actually may reflect a lack of internal communication regarding the stated end goals of continuous improvement program. In any case, most CI programs are extraordinary expensive, and with the requisite level of investment of money, time , and effort needed, quantifiable expectations for these efforts should remain transparent throughout an organization.
Clearly, CI is management prerogative, and most companies feel compelled to have some type of initiative in place. It is no longer a point of parity; however, as Abrahamson pointed out more than a decade ago, the issue of efficacy is of critical importance to leadership. Adopting and executing a particular CI program or combination of programs will result in some type of change, with both positive and negative effects. Although there is a preponderance of support for CI program efficacy, there are also contrarian reports that are worthy of consideration and which pose a strategic dilemm: When enthusiasm is high, measurable accountability can be neither less imporatnt not immaterial. Otherwise , we are left with what Alan Greenspan called "irrational exuberance."
This research work is long overdue. This was conceptualized during my stay in KSA, where CI was not given due importance in most manufacturing companies. I have finished this research only recently when I was in Japan.
I am honored to share this research with those who believe in CI.