Performance Improvement for Small Business

Basic Business Cents

Would you make an investment that promised a 20:1 return in three years? That is a commitment by Enterprise Minnesota with their Pathways to Business Growth program. Each of 10 small Minnesota businesses pledged a modest amount to participate and the National Institute of Standards and Technology (NIST) Manufacturing Extension Partnership is contributing a grant of $515,000 to fund this activity.

You might think this is too good to be true but they are using concepts and tools proven with large companies who can afford consultants to teach and coach application of performance improvement techniques to remove waste, rework, and redundancy in work processes in manufacturing and service organizations.

Let me explain a little. First, all work is a series of processes by which we accomplish a certain result. All processes have variation; waste, rework, and redundancy are everywhere. From my experience you can usually pinpoint around 35% in manufacturing organizations and 60-90% in service organizations. All processes can be simplified and improved. Although these techniques have been proven in large organizations, the costs for the training and coaching have been prohibitive for small companies. By combining a small group, say ten companies, training costs can be shared. Application coaching must be done on an individual organization basis.

The next series of articles will define how we could do such a plan in our community, which would benefit us all. We could call it the Park Rapids Community Performance Improvement Plan, or we could substitute Hubbard Area or Northwest Minnesota for Park Rapids, or anything else we might like. For now, I will just call it the Community Performance Improvement Plan.

The plan involves 1-2 days/month of group training for 1-3 employees from each participating organization. It is best if the number one or two person in the organization attend so they can lead the effort within their organization. Then the trainer or another consultant will spend ½ day per month coaching the application of what was learned in previous training to make sure it is being applied correctly and results are being obtained.

This plan involves new tools or techniques to be introduced each month for twelve months. At the end of the year, each participating organization will have knowledge and experience to continue their process improvement journey indefinitely. There will always be room for improvement; the perfect process has not yet been invented.

Now lets get back to the return on investment. If we do initiate our own plan in this community, the investment by participating organizations is a fraction of what large companies pay or even the statewide program mentioned above. The training may be covered by a grant, but if not the cost per day of training would be about $3000 including materials divided by ten participating companies or $300/day each. The individual consulting is the responsibility of each organization and can be expected to be $1,000/month plus any travel and living expenses. With a maximum of $1,500/month outlay, based on 10 organizations participating, each organization commits to $18,000. If they complete 10 projects at an average saving of $5,000/project, they should save $50,000 or a 2.7 times return in the first year. Each succeeding year multiplies that return. This cannot be promised as each organization is different and will embrace this activity differently, but in my opinion these numbers are conservative.

What I hope to show in the succeeding articles the Community Performance Improvement Plan provides:

· Affordable training and application knowledge

· Reduced waste and rework resulting in better quality, lower costs, and more market share

· Improved processes result in happier employees who take more pride in their work

· Higher satisfaction for all