MEASUREMENT, ANALYSIS, AND KNOWLEDGE MANAGEMENT

Basic Business Cents

A Community Performance Improvement Plan for Small Business

MONTHS 4-8: MEASUREMENT, ANALYSIS, AND KNOWLEDGE MANAGEMENT

In months 4-8 of the community plan training for small business, the focus is on the selection of what data to collect, measurement methods, analysis, and corrective action to take. The first part of the training session for Month 4 is to again do a self-assessment of the Baldrige Criteria Award for this category. It includes:

· Measurement, Analysis, and Improvement of Organizational Performance: How do you measure, analyze and then improve organizational performance?

o Performance Measurement

§ Performance Measures

§ Comparative Data

§ Customer Data

§ Measurement Agility

o Performance Analyses and Review

o Performance Improvement

§ Best Practice Sharing

§ Future Performance

§ Continuous Improvement and Innovation

· Management of Information, Knowledge, and Information Technology: How do you manage your information, organizational knowledge, and information technology?

o Data, Information, and Knowledge Management

§ Properties

§ Data and Information Availability

§ Knowledge Management

o Management of Information Resources and Technology

§ Hardware and Software Properties

§ Emergency Availability

MONTH 4:

This is the first of five months dedicated to process improvement and innovation. After the assessment, training will be provided on the Plan-Do-Study-Act cycle and the Seven Basic Quality Tools. Included in this session will be instruction on:

• How to obtain data
• Pareto analyses
• Cause and effect diagrams
• Histograms
• Scatter diagrams
• Run charts
• Basic control charts
• A system called The Improvement Journal to use the basic tools in the proper sequence for process improvement.

MONTH 5:

Attendees are asked to bring a completed Improvement Journal to review and obtain feedback on how to improve the application of the basic tools.

The seven basic quality tools are based on data. In the real world of management, there are some problems where data cannot be obtained. A committee of top Japanese scientists was asked to develop tools to solve these problems where data is not available. They have proven very useful to save time and frustration by management around the world and result in better decisions. Although they total seven in number (seven is considered to be a lucky number in Japan), this session will focus on five:

• Brainstorming
• Affinity diagram
• Interrelationship diagraph
• Tree diagram
• Matrix diagram

MONTH 6:

Attendees will share an application of the Management Tools with the class and recommendations for improvement will be provided.

An introduction to the Toyota Production System, commonly called Lean Thinking will be provided. This is an excellent methodology to remove waste in the form of material, effort, movement, and redundancy in the work processes.

MONTH 7:

Attendees will share an application of Lean Thinking for feedback from the class and the instructor. This month will present phase one of an introduction to Six Sigma-Improvement through DMAIC

• Define

• Measure
• Analyze
• Improve
• Control

MONTH 8:

Attendees will share an application of improvement through a Six Sigma application for feedback. Instruction this month will be provided on innovation through Six Sigma through DMADV

• Define

• Measure
• Analyze
• Design
• Verify

This education and practical application of the process improvement tools arms the attendees and their organizations to continually improve their performance and thereby contribute to success and survival long term. Again that saying of Dr. Deming’s comes to mind, “Nowhere is it written that thou shall survive.” You have to arm yourselves with the best tools and technology and then work at it, now and forever.

Customers & Markets

Basic Business Cents

A Community Performance Improvement Plan for Small Business

MONTH THREE: CUSTOMERS AND MARKETS

“To survive, a company must win against competition in the world market. Needless to say, it must strengthen its cost competitiveness by perfecting its quality improvement efforts or downsizing and differentiating its existing products and services… It is obvious, however, that the path of continuous downsizing eventually would lead to a company with no employees… Therefore, to continue to survive and prosper, a company needs to develop new products and services, create new markets, secure employment, and upsize the organization.”

Dr. Noriaki Kano

“Attractive Quality Creation”

October 17, 1994

In this session we will focus on the numerator of the revenue/expense ratio and explore Market Creation. Dr. Noriaki Kano has been pioneering work in this area for two decades with his work on “Attractive Quality Creation.” He says we need to move beyond customer satisfaction to delighting customers. His methods of determining those features that create loyal customers will be studied. A simple survey technique to determine customer loyalty will also be presented.

By now it is apparent the sessions will start on a self-assessment of the category of the Baldrige criteria being covered. Category 3 is titled, Customer Focus. Attendees are asked to score their organization first on the section, “Voice of the Customer; How do you obtain information from your customers?” It includes detailed questions in the areas of:

· Customer Listening

o Current Customers

o Potential Customers

· Determination of Customer Satisfaction and Engagement

o Satisfaction and Engagement

o Satisfaction Relative to Competitors

o Disatisfaction

Part 2 will address “Customer Engagement; How do you engage customers to serve their needs and build relationships?” It includes questions in the areas of:

· Product Offerings and Customer Support

o Product Offerings

o Customer Support

o Customer Segmentation

o Customer Data Use

· Building Customer Relationships

o Relationship Management

o Complaint Management

When the scoring is completed on their organizations by the attendees and they have identified opportunities for improvement, training will be provided to help in those improvement activities.

The dynamic change in the world around us is exciting, bewildering, and frightening. In the past decades we have seen a productivity emphasis in the '70s, a quality emphasis in the '80s, a reengineering emphasis in the '90s, and Six Sigma and Lean Thinking in the past decade. What are the major thrusts for this decade? If we look at the focus of the last four decades, we are looking at emphasis primarily on improving cost effectiveness. Elements of these three major thrusts have resulted in restructuring, de-layering, and downsizing. We need to continue our efforts on cost effectiveness forever in order to become more productive, but we also need to work on areas to create a bigger demand for our services so that we can provide more jobs and have a resultant upsizing. To survive and prosper in the next decade it will be necessary to work continually on cost effectiveness but we need parallel efforts to achieve a unique advantage by creating pull for our services and upsizing the organization. Market Creation methods as developed by Noriaki Kano can lead to breakthroughs in new and better services and result in survival and prosperity for the future. The elements of Dr. Kano’s Attractive Quality Creation—“Must Be Quality, More is Better Quality, and Attractive Quality will be presented along with a means to identify the Attractive Quality features.

After these attractive quality features are identified and incorporated into the products and services, continual monitoring of customer satisfaction is required. However many customers are weary of lengthy satisfaction surveys and choose to ignore them.

Business Week had an article in their January 30, 2006 edition that was very interesting and timely. It was titled, “Would You Recommend Us? That simple query to customers is shaking up planning and executive pay.” It referred to an uncluttered approach that first appeared in a Harvard Business Review article. Basically, it is a very simple customer survey that asks, “On a scale of 0-10, how likely is it that you would recommend (insert your product, service, or organization) to your friends or colleagues?” This is followed by a question asking for reasons that prompted the rating and what could be done to provide a better experience. A scoring guide is provided; a 0 rating would mean not at all likely, 5 is neutral, and 10 would be extremely likely. The 9 or 10 responders are classified as Promoters, 7-8 responders are called Passively Satisfied, and 0-6 responders are labeled Detractors. The percent of Detractors are subtracted from the percent of Promoters to get a score that can be used to compare and track progress.

Deming used to say satisfying customers is not sufficient; satisfied customers will switch when something better comes along. He said we need loyal customers. Kano says roughly the same thing in his Attractive Quality Creation work when he talks about the need to have “delighted” customers. This survey appears to be a simple, effective way to measure loyal customers. q

MONTH TWO: WORK ON THE RIGHT THINGS

Basic Business Cents

A Community Performance Improvement Plan for Small Business

The second month of the Community Performance Improvement Plan provides the training for the participants to conduct a unique strategic planning event in their organizations. This copyrighted process has been used by some of the largest and best organizations in the world but is equally applicable to the smaller organizations involved in this community activity.

The participants will again start the session with a self-assessment of the Strategic Planning category of the Baldrige Award. Attendees will score their organizations by addressing a number of questions in the following areas:

· How do you develop your strategy?

o Strategy Development Process

o Strategic Objectives

· How do you implement your strategy?

o Action Plan Development and Deployment

o Performance Projections

The soul searching that goes on in answering the questions in the Baldrige criteria reveals issues to be addressed within each organization, whether they are opportunities or threats. These issues are shared between attendees from each organization but not with attendees from other organizations.

They will be introduced to the Strategy Management process where they will receive the necessary understanding to conduct the process within their own organizations. The Strategy Management process contains four equal parts:

1. Research
1. Customization—A generic manual will be presented to each attendee and a slide presentation to be used in presenting the process when initiating the activity in their respective organizations. They may wish to add their organizations name to the process and material and add questions known to be important in their industry.
2. Introduction and assignments—A kick-off meeting starts the planning activity with an explanation of the process and distribution of the research assignments in 21 areas.
3. Data collection-- Research assignments are to answer questions supplied in the manual (typically requires research to find data) and prepare a 10-minute presentation for the planning event. There is usually a month allowed for the research between the introduction and the event.

2. Plan
1. Presentation of research results—It is important that the presentations not be allowed to go no longer than 10 minutes with 5 minutes for clarifying questions so that all 21 categories can be covered in one day. All key people from the organization, including important stakeholders, should be invited to the planning event so they have ownership in the outcome.
2. Development of strategy to move from present state to the desired state—A unique process is used so all attendees have an equal input.
3. Development of the Strategy Management Profile—A one-page summary of the strategy with a Vision of the future state of the organization, its Mission, and Values, is developed for distribution to all employees and key stakeholders.

3. Action
1. Communication and distribution of the Strategy Management Profile—The Profile suitable for framing is typically accompanied by and oral presentation of the contents. Acceptance and understanding are improved noticeably by using more than one of the senses to communicate.
2. Deployment of the strategic actions to the organization—Action plans are deployed throughout the organization so that everyone has action to accomplish to achieve the plan.

4. Management
1. Regular review of the progress on the actions—Management’s interest and attention to the progress made on the Action Plans on a regular basis (at least once a month) is required to establish priority and get results.
2. Visits of the Top Executive to the strategic action workplace—Random visits to talk with employees in their workplace on their progress on their Action Plans is very helpful and enlightening. They may be encountering obstacles that would otherwise go unreported and management can take action to remove the obstacles.

With the training received in Month II of the Community Performance Improvement Plan, the attendees can return to their organizations and conduct the Strategy Management process at their own timetable without outside help. As they go forward they will know they are putting their improvement efforts on the right issues to help them attain their dream of the future of the organization.

A Community Performance Improvement Plan for Small Business

Basic Business Cents

A Community Performance Improvement Plan for Small Business

MONTH ONE: IT ALL STARTS WITH LEADERSHIP

In the last column we talked about the need to improve organizations’ performance, which has never been greater. Customers are increasingly demanding, employees are overextended, the economy is challenging, and competition has never been as fierce. Because business is complex, there is a need for systematic improvement, but where do you start? How do you know on which processes to focus? And how do you sustain improvement over time?

Organizations around the world have been improving their performance by improving and innovating their strategy, work processes, and culture. The purpose of this plan is to help small business managers apply some of those same basic principles and techniques for customer- focused quality. It applies to all manufacturing and service industries, healthcare, education, and government operations. Small businesses have unprecedented opportunities today to lead economic growth in their communities. The focus of this program is to take action to improve business results.

A leadership commitment to quality improvement is the path to success in our changing environment. This plan details a process whereby small and medium sized organizations can join together to bring in professional consultants for training and coaching key personnel in their organizations. Proven techniques will be taught and action initiated to get measurable results in the performance of the participating organizations. The plan is contingent upon enlisting 10 organizations joining together to learn and share costs for one year. Two days of training in joint sessions each month plus one-half day of individual coaching per each participating organization each month will be supplied over a twelve month time period. Training material and unique implementation processes will be provided for each of the participants. Licensing to use these processes will be granted for internal use only by the participating organizations.

The initial session will start with introductions and objective setting for participants and consultants. The first activity will be a self-assessment by the participants on the Leadership category of the Baldrige Award, the prestigious national quality award. Leadership is the first of seven criteria to be self-scored, the others being Strategic Planning, Customer Focus, Measurement, Analysis, and Knowledge Management, Workforce Focus, Operations Focus, and Results. A scoring guideline method will be supplied to provide an honest assessment of the starting point. The objective of this activity is to reveal opportunities for improvement in leadership. All processes can be improved, even leadership, and by starting with this category a strong message is sent to the organization that all will be involved in the process improvement activity and leadership is leading the way by looking at their own processes.

The remainder of the two days will be spent in review of the American and Japanese Quality Masters and selection of realistic philosophies, methods, and tools that can be used in each attendee’s organization. A copy of Profiles in Quality, Learning from the Masters will be provided. The objective of this exercise is to study people considered to be world masters in improvement, collect ideas useful to each individual organization, and develop operating principles to guide behavior by all employees.

One or both of the top two executives plus another leader in each participating organization should attend the training so that they may be effective in leading the performance improvement movement.

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

Observations of Poor Work Habits

Observations of Poor Work Habits

I once observed a group of workers that have the worst work behavior that I have ever seen. My initial thought was I would fire that bunch in a minute if they worked for me.

They appear slow, work short hours, take long breaks, and seem very unproductive. They do not seem to plan their work and results are agonizingly slow. Other workers noted their work ethics. One would only surmise they do not take much pride in their work.

But why? I believe people want to take pride in their work, even have a need to take pride in their work so why do they act in this way. If we were their supervisor, we would need to investigate why they are working in this manner.

Is it because they do not care? I don’t think that is the case because I believe that people inherently want to do a good job at whatever they are doing. It is human nature to want to excel. It could be that they really are bad workers that don’t care, but that would be very, very unusual. So what is causing them to behave this way?

Have they been trained properly in the best methods of doing their work? Training pays dividends to any employer but most often gets overlooked or short-changed because of cost or expediency. Learning on the job or worker training worker is dangerous. Remember the game you played when young by whispering something to a friend sitting in a circle and then have them in turn whisper it to the person next to them? By the time it gets around the circle the message is quite different from what was started. Worker training worker gets the same distortion.

Do the workers have clear understanding of what is expected of them? As the old saying goes, if you don’t know where you are going, any road will get you there. Objectives, timetables, quality, appearance, and other parameters must be explained in clear, simple terms so the employees have a clear understanding.

Are the employees provided with good processes as to how their work is to be performed? Processes are the responsibility of management; processes that produce the best results in the shortest time. The employees responsibility is to do the best they can with the processes provided.

Is the material they are provided with of good quality, delivered to them timely, and correctly? Do they have the proper tools and of good quality?

Do they have good supervision? I do not like the term management because it means the act or art of handling, controlling, and directing. A better term is leadership because it means setting the example by behaving in ways consistent with stated values, being the role model, out in front, in fact leading. Leaders lead!

So after reflection on the scene I observed, I must conclude it is not the workers fault. Leadership seems to be missing. Once again, we must ask why. Much of the above could also apply to the leader, do they understand their job, have they been properly trained, do they have too much on their plate to lead properly, etc.?

There are many processes in any organization, not the least of which is leadership. We need to constantly remind ourselves to not fix the blame but to fix the process.

Learning from History, Part II

Basic Business Cents

In Part I of our series, we discussed the behavior cycles that repeat every four generations[1] and how knowledge of that can be used to guide our management techniques. Judging by the year our personnel were born, we can determine whether they are from the Prophet, Nomad, Hero, or Silent generations and from that certain personality traits and behaviors that they can be expected to exhibit.

Kurt Lewin identified three major leadership styles; authoritarian, participative, and delegative.

Authoritarian leaders provide clear expectations to group members on what should be done, when it should be completed, and how it should be accomplished. Frederick Winslow Taylor was the foremost expert on this leadership style. His time and motion studies were a small part of his teachings but became attached to his name. These authoritarian leaders make decisions without input from group members. It worked well with the Silent generation following WWII as exemplified by the book and movie, The Man in the Gray Flannel Suit. Overuse of an authoritarian style can be construed as bossy and controlling. Worst-case examples of this style can be seen when leaders utilize bullying techniques such as yelling, abusive power, or demeaning group members.

Participative leaders accept input from one or more group members when making decisions and solving problems, but the leader retains the final say when choices are made. Group members tend to be encouraged and motivated by this style of leadership. It often leads to more effective and accurate decisions, since not leader can be an expert in all areas. Input from group members with specialized knowledge and expertise creates a more complete basis for decision-making. This leadership style resonates with the Artist and Prophet generations.

Delegative leaders allow group members to make decisions. This style is best used in situations where the leader needs to rely on qualified employees. The leader cannot be an expert in all situations, which is why it is important to delegate certain tasks out to knowledgeable and trustworthy employees. These employees match the characteristics of the Hero generation. The complexity of technology today almost demands use of this style but occasions can require utilization of all three styles depending on the situations, for example:

· Use an authoritative style if a group member lacks knowledge about a certain procedure.

· Use a participative style with group members who understand the objectives and their role in the task.

· Use a delegative style if the group member knows more than the leader about the task.

Group leaders need to adapt and change based upon the objectives, needs of group members, and situational factors. Needs can be real or perceived and both need to be understood by the effective leader. Perceived needs are largely shaped by the current generation-Hero, Silent, Prophet, or Nomad-of the majority of the workers. It is up to us to know which type of group we are facing and what will work best with their personalities.

We can indeed learn from history to help us manage our organization and its personnel.

[1] The Fourth Turning, An American Prophecy, William Strauss and Neil Howe, 1977, Broadway Books, New York

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