Monday, February 22, 2010

Requirement One for Continuous Improvement Culture-Significant Emotional Event

The Significant Emotional Event (SEE or Epiphany) is what is required to start down the road to developing a continuous improvement culture. CI culture change is driven by the survival instinct.

So what is the SEE? It is the realization that creeps into the leadership of a company that if something doesn't change, things are gonna get alot worse around here. Maybe the SEE comes from competition taking away market share, or customers firing you, or significant drops in sales and revenue. If the SEE comes from those kinds of things, chances are, the ship is already lost or at least the battle to turn things around will be alot tougher.

The trick is to sensitize the organization to EARLY signs that help deliver the SEE, while there's still time to right the ship. So what are the early signs? First, before going into that one thing that must be said is that the organization must saturate the company with the Voice of the Customer (VOC). I've talked about one of my favorite books on this; The Customer Driven Company by Richard Whiteley. In The Customer Driven Company, Mr. Whiteley makes the point that quality is from the customers' viewpoint. This is a common idea to lean practitioners where value is defined by the customer, same idea. The bottom line is that the organization has to start by accepting what the customer says as the truth and understand that we are all in the business of satisfying customer needs, not producing goods. Once the customer version of the truth is endorsed, metrics dashboards need to be built and monitored that give those early warning signs of trouble. That's not enough, however. You have to act.

A recent example illustrates the point. The Voice of the Customer for Company A stated, among other things, that responsiveness on quality issues and effectiveness of the response were key factors for improving customer attitudes towards the company. Metrics were established for measuring time to key milestones for response on customer complaints. Performance against these metrics was poor. In many cases Company A did not meet any milestones for any complaints in a given month, dates slipped, excuses started flying.

What didn't happen next is what was important. When the monthly metrics reviews showed continued poor performance, and a continuous improvement project was suggested, no action was taken. Why? Who knows, pick your excuse. Too much firefighting, not sure if its really important or not, can't be fixed. We heard 'em all. The bottom line is, the excuses worked. Management was lulled into indecisiveness because they decided it was easier to dismiss the metric as unimportant than to act on trying to improve it.

If the Voice of the Customer was truly present in this situation, the metric would drive a decision to improve the process based on the poor measured performance and the understanding that it is an important characteristic of quality in the customer's eyes. The hard lessons of the Significant Emotional Event would send a message throughout the organization that says "Believe what the customer tells you, it's important to our survival."

To quote a recent political expediency, "Never let a good crisis go to waste, its an opportunity to do important things you would otherwise avoid". Quality Leaders should recognize the early signs of the crisis and push the message for all its worth.

Thursday, February 18, 2010

Lean Tool of the Month-Poka Yoke

Poka Yoke (Pronounced Poka Yokay) is quite literally, mistake proofing. A mistake proof is anything that prevents an error from occuring. One of the seven lean wastes is Defects or Poor Quality. Poor quality is a lean waste because it causes additional product to be manufactured or additional repetitions of the work process to be performed to achieve an acceptable result. This is waste. In an ideal lean world, we would do it right the first time, with no wasted effort or resources. So if poor quality is a significant issue in the lean waste stream, Poka Yoke is an effective ideal to help address it. There is no standard formulaic way to apply Poka Yoke, its simply the concept of something that prevents the mistake from occuring in the first place. Without even knowing it, we all have at least a dozen Poka Yoke that we interact with on pretty much a daily basis. Here are some examples that you may not have noticed.

All of these are Poka Yoke because they prevent us from inserting the plug incorrectly. A Poka Yoke does not have to a physical means of preventing a mistake. Ever order anything from the internet? or do your banking electronically?, or refill your prescriptions over the phone? There are Poka Yoke's in those systems that prevent the order from being placed without your authorization (that 3 or 4 digit number they always ask us for from the back of the credit card), or the account number for our savings account or refill number for our prescriptions. All of these systems have a poka yoke to prevent the vendor or the client (us) from making a mistake.

So the next time you're grappling with a tough quality problem in your process, don't dismiss a poka yoke just because you're working on a transactional or back office process where there's no physical control or prevention that can be easily done. Plenty of electronic business systems give the user some ability to require certain information in order to process a transaction to the next step. That's a poka yoke.

Monday, February 15, 2010

Tug of War: Customer Satisfaction vs Cost Reduction

This is the classic struggle of Quality. High quality and high customer satisfaction demands that suspect product be thoroughly scrutinized and a high standard set for its release to a customer. Customers expect this and quality staff strive to achieve it. The other side of the tug of war is cost. Business leaders are looking for every advantage they can get in reducing their costs and scrap product is one fo the biggest targets out there. Does it have to be this way? Can Quality and Business be on the same side? In short, the answer is, yes they can. What's required is a change in attitude and approach about quality. The two models below help to illustrate the different attitudes about quality. In the Economic Conformance Model illustrated below the classic Quality vs Cost struggle is portrayed. The underlying philosophy is that high quality costs money and that there exists a point of diminishing returns. That point is called the Economic Conformance Level (ECL). The ECL is the point above which higher quality is more costly to achieve that its "worth". This viewpoint pits those with "Quality" in their job title against those without in a dance to determine where the ECL exists for the business and promotes a "good enough" rationalization mindset that permeates every product quality decision eventually.

For a different perspective, we turn to the work of Phillip Crosby. Mr. Crosby developed a four part quality philosophy through years of proven experience. The four components of Mr. Crosby's philosophy are:
1. The definition of quality is conformance to requirements

2. The system of quality is prevention

3. The performance standard is zero defects

4. The measurement of quality is the price of nonconformance

Mr. Crosby's approach is illustrated below in the "Quality if Free" perspective on quality costs.

A key component of Mr. Crosby's philosophy is the definition of quality. "Quality is defined as a conformity to certain specifications set forth by management and not some vague concept of "goodness." These specifications are not arbitrary either; they must be set according to customer needs and wants." This statement is very important for what it really means in practice. It means that everyone from top management on down is engaged in the work of quality, not just those folks with "Quality" in their job title. It means that management must grapple with interpreting what the customer wants and needs and set policy to achieve those wants and needs, accepting the consequences of not achieving those results and relieving the pressure on the organization to rationalize quality and cost. I participated in a discussion recently which is frightening but illustrates the point. In this discussion, trend data were being reviewed and a poor trend was displayed for a product that is limping along. A meeting particpant then announced that the product would continue to be made for the next couple of years in response to customer demand. Since this was beyond what we had all come to understand was the End Of Life of this product, the questions started to fly. Will we now engage suppliers in process improvement? Will we perform process improvement in-house? Will we upgrade the raw materials? In short, will we invest in helping make and keep the product "good". The answer to all of these questions was No. Now here's the frightening part; tacked onto that No was a statement that the problems with the product were because we had accepted the notion that variation should decrease over time and the continuous improvement was driven by customer demands. "We should just say no" to tighter control limits requested by the customer is the viewpoint expressed. Clearly, this is not a customer-centric approach to quality and shows that there is still work to be done to change hearts and minds.

So how do people with Quality in their job title fit into this system? The unpleasant answer is that, in my opinion, Quality folks should do everything in their power to work themselves out of a job by working with top mangement to change the view of quality from a job responsibility to an organizational value. When everyone values quality from the customer perspective, and acts accordinly, "Quality" folks in the traditional sense will no longer be needed because there will be no need to police for quality. Quality becomes a  consultive role to management in interpreting customer needs and wants and giving guidance on what that means in practice.

Thursday, February 11, 2010

Six Sigma Tool of the Month-Capability Analysis

Capability analysis comes up twice in the six sigma process. Capability can be measured a number of different ways. I'll cover that in a minute.

First, what is capability analysis and why do we measure it? Capability analysis is measuring the variation and bias of our process against the requirements of the customer (otherwise known as specifications). The number reported, in whatever form, is a statistic that indicates to us how well the process meets the needs of the customer. The diagram below shows a process that has wide variation and is not centered between the specifications. Both of these issues result in defects, costing the organization money and reducing customer satisfaction.

So, how can capability be measured? At least four ways come to mind immediately: Cpk, Z Score, DPMO, and Yield. The key thing to remember about all of these measurements is that they are just different ways of expressing the same idea; how good is my process at meeting the customer needs. So, whats the difference? The short answer is not much. Cpk and Z scores are directly convertable from one to the other just by multiplying or dividing by 3, depending on which statistic you prefer. DPMO is Defects Per Million Opportunities and expresses the idea that if you were to perform the work process 1 million times, how many results would be defects. Yield is another way of expressing this as a percentage. Yield is just the percentage of the output of the work process that is "good". I could share with you the formulas for how to calculate these different capability measurements but I dont want you to leave, and those formulas are readily available from any number of sources, including myself.

What I'd rather discuss is why we do this in the context of six sigma or really any continuous improvement project. There are two reasons; 1. baseline process performance and, 2. measure the improvement. In step 6 of DMAIC we measure baseline capability. Capability is a measure of how well the process performs its intended function for the customer. Before we go and start tinkering with things in an effort ot improve performance, we need to understand how the process performs today: thats a baseline. We come back later in DMAIC at step 14, after we have implemented the improvement plan and allowed the process to run for some time and we measure performance again. This time, we compare the new process performance to the baseline to determine how much improvement we have made through our efforts.

Monday, February 8, 2010

Six Sigma-The Project Review

I'm reading a new book that everyone should go out and buy. Its called "The Brain Advantage, Become a More Effective Business Leader using the Latest Brain Research". A friend of mine is a co-author so I got a copy from him to read through. I've made several connections to my experiences in leadership.

I'm going to share one of them with you here, then you go right out and buy the book.

All of us involved in Six Sigma, or Quality Management have participated or led a management review meeting, and all of us have experienced some that were good active discussions and others that were flat, routine, automatic. In Chapter 2 of "The Brain Advantage" the authors talk about scripting and how brain research has shown that when mastery of a subject is achieved, the brain goes on autopilot, working less to accomplish the same task than before mastery was attained, this makes sense in a very real way. The old adage "practice makes perfect" applies here. Once well practiced, an automatic script slowly takes over, and things become "second nature". However, practice makes perfect also makes people overlook when changes to the script are needed. A review meeting is one example where we should be "off-script" but typically, review meetings follow a routine agenda, which reinforces the script in the mind, inhibiting questioning behavior or "thinking outside the box" if your keeping buzzword score. Six Sigma reviews are particularly susceptable to this scripting because of the step by step nature of the six sigma process, which reinforces the script. I have observed some Master Black Belts and Black Belts who are so scripted that when they see an innovative approach used to address a step in the six sigma process, they struggle to accept it because it does not follow the script of what they expect to see in their mind. A review meeting is the best place for people to be "on" and actively thinking, rather than playing a script. When reviewers are "on" rather than "on autopilot", new and interesting approaches to problems can be discovered and project leaders can be challenged to deliver better results rather than just marching through a bunch of pages to place a check mark on a script. How I think I can practice this new learning to improve the quality of my reviews is to ask for key points from the project leader about what was learned that was surprising, insightful, or counterintuitive or to deliver those points if I am the one being reviewed. Sort of like asking "Why should I care about this information?" or "What can I do with this information?" instead of looking for something to fill a space where I expect to see a space filled.

Get a copy of The Brain Advantage here

Thursday, February 4, 2010

ISO Stuff-Internal Audit

In this series I will talk about sections of the ISO 9001 standard that I have seen organizations struggle with. This week is Internal Audit.

Internal Audit is part of those requirements that deal with the need for us to monitor the performance of our Quality Management System. As such, you'll find the requirements for Internal Audit under section 8 of the ISO 9001 standard, where monitoring & measurement requirements are laid out.

The purpose of Internal Audit is to ensure that the QMS conforms to planned requirements and is effectively implemented.

Internal audit has two key interactions with other parts of the ISO 9001 standard, one is Corrective and Preventive Action. Internal audits result in identification of issues that require corrective action. Management for the audited area is responsible for taking action in a timely manner on results of audits. The other key interaction is with Management Review. Internal audit results are a key input to management review activities. Think of Internal Audit as the "Eyes and Ears" of management with regards to the integrity of the Quality Management System; its intended to tell management how things are going and where things need to be improved.

Lets cover the requirements for internal audit in detail. The requirements for internal audit are few but there are some critically important points. Here's the requirements:

Internal Audits should be;

1. Process Based
2. Scheduled and conducted according to the status and importance of the process to the overall Quality Management System (QMS).
3. Conducted by personnel not responsible for the work of the process
4. Acted on my management for the area.

Process based. This is a key requirement because it encompassed a sweeping change in audit philosophy with the 2000 revision to ISO 9001 from a clause based audit approach to a process based approach. The intent is that internal (and external) audit activites should focus on the process(es) being audited and let the auditor determine what clauses of the ISO 9001 standard are in play. This approach makes much more sense from the viewpoint of the way the business operates.

Scheduled & conducted according to the status and importance of the process. This requirement has broad, meaningful implications to audit programs everywhere. No longer are Quality Managers required to audit everything in a yearly cycle, now the Quality Manager can assess the status and importance of a process relative to other processes and decide how often to look at that process. There are many different logical strategies that can be employed to make this assessment using everything from a Failure Modes & Effects Analysis (FMEA) type of approach to a simple assessment of business results through dashboard metrics to enable decision making about what to audit and how often.

Conducted by personnel not responsible for the work of the process being audited. This is simple. Auditors can not audit their own work. It ensures an unbiased assessment of the process.

Acted on by management for the area. We've covered this already above. Internal audits find things that need to be corrected, management that is responsible for the process being audited must act on the finding to correct the issues discovered.
As you can see, the requirements for internal audit are not prescriptive. There is no detailed "how to" in the requirements. This generic approach leave the Quality Manager alot of room to interpret how they chose to address the requirements in a way that is effective to their QMS.

One final point about internal audit. Internal audit is NOT intended to be a "gotcha" process, where we "trick" people into revealing the skeletons in the closet. It is intended to be a unbiased assessment of compliance with the planned activities of the QMS. Auditors should be looking equally for best practices and improved processes as they are for non-compliance with planned requirements.

Monday, February 1, 2010

Lean-Its Not Just for Manufacturing Anymore

Lean is not just for manufacturing anymore! Really, lean has always been about removing waste from processes, any processes, it doesn't matter if they are manufacturing processes or office processes. So why the disconnect? Why do so many look at Lean as something that applied to the manufacturing floor but not to their office space? I think the difference is in how you think about Lean. For instance, if you consider 5S. It is very easy to see how and where 5S is applied on the shop floor. It involves the physical arrangement of the space and the tools within it. Easy to see and wrap your brain around. Move into the office and things get a little harder but you can still see removing clutter and establishing organization and homes for everything, but move into the digital office and you've got problems. To see an opportunity for 5S you have to change your thinking because the mess and lack of organization is not right out in front of you, it might be in your computer. The same 5S concepts apply to your e-document & data storage and retrieval as would if you printed it and put it on your desk.

What is the focus of the Lean office then? Productivity, Efficiency, and Customer Satisfaction. Lets consider Productivity and Efficiency. A 2008 report on global productivity by Proudfoot Consulting showed that unproductive time (defined as time spent doing things that were unproductive for the company) rose to a new high of 34.3% or roughly 1.7 days per week per employee of time wasted. The story by industry sector is not much better. See the chart below for the sector breakout.

The number one cause cited for low productivity was staffing shortages and labor issues. This is great news if your thinking about how to implement a Lean Office because this means that by streamlining your processes, removing wasteful delays, reviews and approvals, you can bridge the staffing gap and do more with the same staffing levels.

Be sure of one thing though. If you're thinking about how to become more efficient, your competition is too. The chart below shows the gap that exists by geography between potential and realized gains in productivity. This data shows Europe and North America losing ground to Asia-Pacific and BRIC regions in terms of realizing producivity gains. The really bad news in this is that the staffing shortage issues don't exist in those regions, meaning that even as they work to gain efficiency and productivity, they have no shortage of labor to bridge the gap.

Here's an example of a ripe opportunity for waste reduction. How many of us receive reports that we dont get much from? Or maybe we dont even read them at all. According to the 2008 Global Productivity Report, Managers said they needed on average 6.6 reports to do their job, but received 10 per month. Meaning that 34% of the reports created every month are not needed. How much staff time is spent preparing those reports? The chart below shows the data broken out by best and worst. In the west, we are swimming in reports! This is a waste of your time but also the people that have to put these together each month.

That covers Productivity and Efficiency but what about Customer Satisfaction? I mentioned earlier that to think about Lean in the digital age, we have to change our paradigm. In the lean digital office environment, we first must understand that everyone has a customer, internal or external, and that all customers have legitimate needs that we can fulfill. To improve customer satisfaction in the Lean Office, just as in the Lean Manufacturing setting, you must understand your value proposition. What is the thing that your customers' value from your organization. What do they need, really need, in their terms, not yours. If they were paying you, what would they want to pay for? I'll give an example to consider: Consider an Internal Training Development Team. They might say that the customer needs good quality training content, jazzy graphics, and slick animations to keep people interested. If we were to ask the customer, they would probably say that what they need are to have their people's skills enhanced so they can be more effective at their jobs. If you consider what the customer really values, you can imagine that the outcome might be very different.

Lean is not just for the shop floor anymore. Lean is universal, it applies to any process. Not every lean tool will apply in every situation but the overall lean principles of reducing non-value added activity, enhancing value added process steps, doing only those things that enhance value for the customer, making only what is needed by the customer, and continually striving to improve apply universally to all business situations.