Pondering Common Mistakes

9 Common Mistakes companies make when embarking on business improvement programs

One of the benefits of recovering from COVID is that you have time to think. After evading COVID for two years but then succumbing and being confined for a week, I started to ponder improvement programs that had not been successful and the common mistakes made.

I have been consulting since?I left the military after 13 years of service and responded to an advertisement for the unknown role of a management consultant in 1996. During this time, I have worked for, and with an array of companies, including more than four years with McKinsey & Company.? Being in consulting for this length of time has several advantages.?The main ones are the experience in recognising issues and their related root causes, also known as pattern recognition.?Another advantage is the ability to identify environments and situations that are causes of the failure of improvement programs.?

From this introspection, I identified nine common mistakes that result in program failure.?Can you recognise any of these in your own company?:

1. Improvement is conducted in isolation from the rest of the company/system/value chain
2. Stakeholders are not involved in the improvement process
3. Improvement is treated as an event rather than as a process
4. Senior Management is isolated from the improvement process
5. Improvement is based on the flavour of the month (what the boss is reading)
6. Improvement doesn’t start with the end in mind
7. Improvement teams are filled with people that leaders think they can release without losing production
8. Management believes that digital will solve everything
9. Solving the wrong problem

1.? Improvement is conducted in isolation from the rest of the company/system/value chain

Case: A mining company was having issues with achieving production targets. ?Production and maintenance were separate departments run by different managers. ??The production manager established an improvement team.???The problem to be solved for production was related to increasing utilisation and productivity. ?The project was successful, with productivity increasing by around twenty percent. ?An issue arose with the increased tempo of operations in that it highlighted maintenance deficiencies with equipment frequently breaking down due to the quality of maintenance services.?As a result of poor availability, the company failed to reach production targets. ?The production improvement initiative was successful; however, the company wasn’t successful.

?Considerations: Considering the bigger picture of the value chain when embarking on an improvement project is essential.?In the case above, an analysis of Overall Equipment Effectiveness (OEE) and a Value Stream Map for the equipment’s function and not just the department’s role would have identified issues with availability that resulted in limited improvement.

2.? Stakeholders are not involved in the improvement process

Case: ?A manufacturer of electronic components embarked on an improvement project due to customer feedback on quality issues.?The improvement team determined that the quality at the despatch loading dock was fine; however, the problem occurred during transit from the factory to the customer.?The improvement team decided that if the components were individually wrapped, they would arrive at the customer in the same condition as they were despatched.?Upon implementing the improvement, the client contacted them to advise that they were considering cancelling their orders as the factory wasn’t providing service compatible with the customer’s requirements.?The factory conducted a site visit and observation (Gemba) at the customer’s factory.?They found that the customer had to engage extra staff to remove the components from the packaging so that they could be put into stock for feed into the production line.?By not including the customer in the improvement process, they almost lost a critical and profitable customer.

Considerations: Ensuring that the composition of the improvement team and the related governance routines include the ‘right’ participants is essential to solving the right problem and that the solution is correct and sustainable.?In this case, the correct answer is to minimise unintended consequences by ensuring that the improvement team contains diverse members.?Members should include, at a minimum, ?the Process Sponsor, Process Owner, Process Operators (front line workers), and the suppliers and customers of the process.?The improvement routines should ensure that each stakeholder has the opportunity, and expectation, to provide input.

3.??Improvement is treated as an event rather than as a process

Case: ?This cause of failure is the most common that I have encountered.?Often, a client has an issue with performance, and management has decided what needs to be fixed.?Previously this has included requests such as “we need to fix communication” and “production is unable to keep up with processing” (or vice versa).?As a result, they bring in external consultants to fix the problem.?The problem that has been identified to be solved often falls into areas of Mistakes 1, 2, 6, 8, and 9 and fails as there are no internal systems or processes to identify opportunities for improvement as part of the way of doing business.?An absence of internal improvement processes is good for consulting companies but not for the client.

Considerations: The main concern is ensuring that the workforce is empowered with skills and expectations to identify issues, offer suggestions for improvement, and have an internal process to prioritise and implement improvements.?The internal processes require an integrated Management System and bottom-up improvement routines and procedures.?An effective improvement process also shifts the expectation for solving problems from the leaders to the Process Operators.

4.??Senior Management is isolated from the improvement process

Case 1: A major mining company implemented a company-wide lean-based improvement strategy that integrated Management Systems and Lean Practices.?During the implementation, the CEO asked, “what is all this about?”.?When told, he commented, “so we are still trying to implement that”.?The result was that there was top-down degradation of the implementation.?

Case 2: A large mine site had undergone an improvement process resulting in the design and implementation of an integrated Management System that reflected the culture in place and solved some functional and responsibility silos.?A new General Manager was appointed who directed one of the integration meetings between planning and production to be cancelled.?The consequence was that production fell by around thirty percent due to the General Manager not understanding the purpose of the meeting.

Considerations: The establishment of Improvement Processes requires the active and visible sponsorship of the very highest appropriate level of leadership.?For a company, this would be the CEO.?For a Department/Function, the head of that Department/Function.?Visible sponsorship requires developing and implementing Change Management plans and elements, including cascaded Change Stories.?Senior Management needs to be included in Role Confirmations at the frontline to demonstrate support for improving processes and offering guidance.?Integrating visible sponsorship into daily and weekly routines is imperative to make it a process, not an event, as per Mistake 3.

5.??Improvement is based on the flavour of the month (what the boss is reading)

Case: ?A finance company was doing well; however, the CEO had the habit of directing his senior leadership team to adopt particular approaches to managing their departments.?During one meeting, he provided direction that all areas were to implement performance boards (Lean).?This direction was accompanied by a template and a visit by the CEO to assist with the implementation.?A few months later, he directed each department to adopt the DMAIC (Six Sigma) process to manage their internal projects.?A few months later, he started talking about Herbie (Theory of Constraints.?Around this time, the marketing manager realised that the CEO kept a library of business books in his office, and it was usual for the CEO to have a book on his desk that reflected his direction for that month.

Considerations: Consultants, advisors, and suppliers often come with pre-packaged solutions.?Be sure that you engage with people that don’t have a vested interest in any one approach. ?As Maslow said in 1966, “If the only tool you have is a hammer, it is tempting to treat everything as if it were a nail”. ?A Lean consultant with little or no experience outside of Lean will have a limited ability to offer solutions other than Lean along with the Japanese terms.?The truth is that Lean, Six Sigma, Theory of Constraints, Agile, and Management Systems (or Management Operating Systems) all have a role to play in the practical design and implementation of business processes.?The primary consideration is that all of these are used to develop an integrated system that supports the organisation’s culture, structure and strategy and not just used to patch holes.?

6.??Improvement doesn’t start with the end in mind

Case: A manufacturing company conducted an internal review of operations and identified several initiatives to be implemented to increase production.?An external consulting company was engaged to integrate with the internal Business Improvement team to assist with the implementation.?The team successfully ticked off the initiatives until it reached the stage where the consulting company effectively identified their own work with no specified end to the program. ?In the end, the Program Manager advised the client’s General Manager that they had reached the end of the program.?This also occurred with several other companies where the CEO started using the external consultants as their own Business Improvement function with the related low probability of sustainability and high costs.

?Considerations: This Mistake can include scope creep, where the original project or program keeps absorbing other problems to be solved with limited governance.?It can also include implementing improvements with no corresponding business case.?Typically an improvement initiative will either be a sustaining or an aspirational initiative.?The sustain initiative ensures that performance meets the budget while an aspirational initiative aims to increase capacity and performance above the budget.?

?7. Improvement teams are filled with people that leaders think they can release without losing production

Case: A manufacturing company started a program of improvement.?The program was to be led by an external consulting company with internal resources seconded to the team.?When the team was formed and met on day one of the program, it was clear that the internal resources that had been released from their regular jobs were not motivated, nor were they particularly interested in the program or “making more money for the bosses”. ?When the department heads were asked what the development objective was for each of their secondees, the common theme was that this was not a concern and they were the only people they could release without impacting production.?

Considerations: Effective improvement teams are populated by the best people within the company.?Those that have been identified for advancement.?Having them introduced to improvement programs run by experienced improvement professionals enables them to be trained in a broad range of improvement tools and methodologies that they can then pass on to others as they form the seed of an effective improvement team. ?The improvement program typically enables each team member to lift their view of the business out of their own section to see and understand the complete value chain. ?The improvement program should be part of their development with set and agreed objectives.?

8.??Management believes that digital will solve everything

Case: A large gold mining company was implementing an ERP.?At the start of the blueprinting process, some outside Subject Matter Experts (SMEs) were brought in to observe and provide their views.?The SMEs had ERP expertise and also expertise in Management Systems and Business Process Reengineering. ?After two weeks of observation, it was clear that digitising current disparate and inefficient processes would only result in embedding the same inefficient processes.?Management stopped the project and initiated a business process improvement project to ensure efficient processes were in place.?The ERP would be designed to support improved business processes rather than having to develop processes based on the requirements and limitations of ERP.

Considerations: Digital solutions are essential to modern companies and should support effective processes rather than being bolted onto a process.?The sequence should be to: identify the value chain, design processes, determine which elements of the process can be automated/digitally supported, and implement the processes.?

9.??Solving the wrong problem

Case: A plastics company conducted a takeover of its main competitor.?An integration team was established to bring the two companies and leadership teams together.?One of the areas of focus was integrating the customer database and scheduling systems into a master operational planning and scheduling system to be integrated with an integrated marketing function.?During this process, the team discovered that the customers of the two entities were discrete and that the two companies were, and never had been, direct competitors.?

Considerations: Determining the root cause of the problem is essential to implement improvements effectively.?It is part of what I call being creatively lazy or doing things correctly the first time.?Using company standard approaches, the ability to conduct Problem Solving sessions, whether large and formal or intimate and informal, should be an essential skill of all company leaders, from frontline managers to CEO.?

This has been an introduction to common mistakes made when setting up improvement programs.?The checklist below provides a summary of requirements to minimise these mistakes.