24 Jul 2018 Turning Around Manufacturing: Paint, Potties, and Pizza
Management views the business from its various functional perspectives. Teammates view the business from their environment and interactions with management. They rarely are even remotely in alignment. The question is how to bridge this gap in viewpoints, cause greater alignment, and build enthusiasm throughout the manufacturing or distribution team for achieving short term goals.
Communicating to the Production Teammates that Management Cares About Them
Have you ever noticed that the management and administrative teams have much nicer and cleaner restrooms than the production teammates or distribution teammates? Additionally, we almost always track production performance as to labor content whether it be units produced per manhour or direct labor variance to standard. Both are common and they both communicate very clearly to the workforce that they are merely factors of production and therefore necessary, but not particularly valued. This then is reinforced when we quickly reduce their hours when the workload is soft because of weak demand. While we would be financially irresponsible to pay the workforce to be idle, we can address the issue about showing that we value these teammates by providing them with a better environment.
Another clear way we communicate how we value the members of the work force is by bringing out the stopwatch and performing time studies. Establishing production standards is generally a positive exercise to set appropriate performance standards. However, in the absence of other communications, it can be viewed as entirely adverse by the production teammate.
A very successful Private Equity firm principal who has achieved great results in improving the profitability of underperforming manufacturing companies, stated that with the 100-day plan, he was always looking for ways to emphasize safety as a way of communicating his concern for the welfare of the workforce. This is highly commendable and has the right intention. However, it may not be a visible and lasting symbol of a new ownership team that values the production worker. It may only be seen by a few teammates even though it may be broadly communicated to the entire workforce.
A better way would be to communicate to each and every production teammate that they are valued. I would highly suggest that improving the condition of restrooms by ensuring good plumbing and fixtures, a high level of cleanliness, and allowing nothing to be in a state of disrepair would send a strong signal to each teammate several times per day that they are valued as much as the office or executive staff.
After the toilets have been repaired, the cracked or aged mirrors replaced, the other bathroom fixtures upgraded, the cracked tiles repaired or replaced, turn next to the general work environment, go a further step by insisting that the production floor be clean, and remove all cobwebs and clutter from throughout the manufacturing space and the distribution center. Follow that up with a fresh coat of bright paint in the company colors with logos or brands prominently displayed, upgrade the bulletin boards to include only professional communications that communicate that the messages being sent are to valued teammates, and replace burned out lighting throughout the building.
Some skeptical leaders might describe the above as unnecessary expense with no financial gain. While that may be sometimes true, based upon my experience a poor looking manufacturing plant always runs poorly, but a good-looking manufacturing plant has the potential to run efficiently. By doing the above things, it clearly shifts the focus from labor as a factor of production to being valued as a contributor to achieving the desired results of the enterprise which are profits.
Clear Communications of How Leadership Values Teammate Efforts
On several occasions, I have been privileged to lead major turnarounds starting in manufacturing. In each and every case, some of the shift in leadership thinking has taken place before strongly addressing performance improvement. Taking a strong interest in team performance is foundational to those turnarounds. A good place to start is by tracking daily results in good units produced per shift. Since we asked teammates to clock in and clock out, we force their time horizon to fit the daily shift that they are on the production floor. This should be furthered measured by individual production line to which the teammates are nearly always assigned for an entire shift. Once these goals are determined then tracking the results and rewarding short term performance (base of a single production shift and team) that goes beyond meeting pre-determined goals. Ideally, this performance is rewarded quickly as in the next immediate shift when these teammates are back together. These results should be posted on an hourly basis in a highly visible place on each production line. Teammates will track their progress and expend additional effort to exceed previous records.
Never use financial or budgeted standards as the basis for this effort in engaging the work teams. They are poorly understood by the average teammate and many times by the management team. Standards are determined in one of two general ways.
The most prevalent method is that they may reflect a long period of past performance. This is typically by looking at production costs over a year or more. As such, they are based upon average performance and not potential performance. In that we use the term “standard”, we also imply that achieving standard is acceptable performance and since we rarely compensate teammates on superior performance. Standards many times become both the minimum level of acceptable performance, as well as, the somewhat of an informal limit on superior performance. In other words, teammates see no reason to go above and beyond as doing so may shorten their overall work week.
The second method of determining standards is engineering based with industrial engineers or similar technicians studying the production line by performing time studies. These are typically based upon determining the slowest mechanical operation on a production line (sometimes defined as cycle time or takt time). The latter starts with market demand and backs into required start and stop times of a production process which from an output management standpoint minimizes excess inventory. However, even if the rate is machine based, it largely has factors to account for such things as machine downtime, teammate breaks, production scrap (or waste), fatigue factors, etc. Time based standards are still based upon an average of expected underperformance irrespective of the production line’s true potential output. The interesting thing about Takt time is that if it is insufficient to meet customer demand, then process re-engineering or demand leveling are used. In my experience, the former is desirable anytime capacity is constraining growth and the latter is an unfriendly customer action. Also, it too backs out time for breaks and other events.
In the effort to keep things simple and highly understandable, it is suggested that a zero-based approach be used in communicating performance relative to potential output. I believe strongly in the creativity and ingenuity the American workers. Given a challenge, they will find ways to resolve issues particularly if it is a competitive, fun, and appreciated environment. This approach should be based upon the possibility of maximizing output limited only by line speed or mechanical/electronic/process cycle time. The time it takes to produce a unit of production without any interruption, waste, or other loss should be used. The actual paid, crewed time of the production line should also be used. That results in a theoretical output of 100% which can never be achieved. It sets out a potential goal to which every effort is made in achieving 100% by minimizing each and every disruption to perfect performance. One of the major reasons to look at performance this way is because the development and maintenance of standards is generally poorly done at most firms. Standards are clearly out of date when a team can achieve a number more than 100% which is sometimes the case. In my experience, I have observed production teams work reasonably productively one day and achieve 85% of standard and the next day with relatively the same productivity achieve 130%. Rather than launch a review of standards for all products via time studies and employ a team of industrial engineers, just find the limiting process on the production line, determine the cycle time, and project 100% of the maximum output. It is much simpler to understand and generally is perceived as fair by the work teams. One can always update the financial accounting system at a later date when better performance has been achieved on a sustained basis.
Once the theoretical output for the entire shift has been calculated, display by hour the actual good quantity produced relative to the 100% theoretical quantity that might have been produced if the day was perfect. To increase visibility, I suggest that actual numbers are recorded in green if they match the theoretical and a different color if they do not. At the end of the shift, the supervisor or lead should both record the results and immediately recognize great performance. Note that performance will always be less than 100%. That may seem de-motivating, but it will not be when coupled with short term rewards such as pizza parties for the team for record performance for the immediate prior shift. It may take a few pizza parties, but soon the entire production work force will embrace the system and performance increases as teams learn to resolver problems quickly. One of the things they will do is impose a bit of cafeteria or parking lot discipline by encouraging lagging teammates to pick up the pace and resolve issues quicker if their team is not being rewarded because performance as measured by good units produced is not improving. The other concept to keep in mind is that rewards are by production line and production shift. That way all work teams have the possibility of rewards.
For those expense control-oriented managers and leaders, the cost of pizza is very small compared to the gross profit dollars generated by additional units of production. Unfortunately for most companies is that this type of expense is highly visible while the incremental gross profit dollars is not easily seen on a shiftly or weekly basis. For managers and leaders that are more opportunity oriented, one can start to dimension all of the opportunities that exist between current performance and 100% theoretical output. These can be categorized, and process improvement projects initiated to reduce these categories that then result in both more gross profits and yes, more pizza. These will then be the areas where the industrial and other engineers will add the most value, not in time studies overall, but in focused improvement projects where the work teams will enthusiastically support their efforts.
By changing the focus on direct labor or the cost of labor to valuing the teammates, one sets the conditions for positive engagement. How many times have you entered a restaurant and been appalled at the uncleanliness or poor condition of the restrooms? Most times, we choose not to dine there in the future. If that is how we personally feel, why do we allow that to be the routine environment for many of our production or distribution teammates? Also, it is my view that the average quality of the product when you are not looking is reflected by the conditions that the teammates endure. So, if those conditions are of poor quality, then why should we expect them to care about the product itself?
Once some progress has made in the leadership’s communication of the high value of the production or distribution teammates, then initiating recognition for improving performance via pizza (or ice cream, or tacos, or …) will result in very dramatic, short term improvement. By dramatic, increases of 10 to 25% are not unusual depending on how poor were the previous measures of productivity (i.e. performance to standard).
Two final points, “Things that Are Measured, Get Better” and “If You Cannot Measure It, You Cannot Manage It”. Even having poorly defined or less than industrial engineering perfected goals is a far better business state than not having goals that seem irrational or are misunderstood.
Unfortunately, expect resistance from two areas. The first, as previously mentioned, are the expense control folks who can easily dimension the cost of a pizza party or the cost of painting an area, or the cost of bringing a restroom up to a level that they would be comfortable utilizing. These individuals usually do not have a full understanding of how to leverage resources to positively affect the overall income statement. If they did, then the benefit of the large increase in throughput and profits would dwarf the small expenses in these areas. Second, as one group of employees is recognized then other groups will resent why they are not included. This will be particularly true in office areas. The remedy for the latter should be that managers and leaders value these teammates also and positively recognize their performance when it has improved.
Contact Jeffrey Cartwright to talk with us about your objectives and how we can help you achieve them.
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