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Will You Add? - 5 Steps to Continuous Process Improvement
Accountability in business and in government is the cornerstone of good governance and ultimately, good performance. Without single point accountability for processes, organisations have no means of ensuring that what have been determined as the goals for the organisation are likely to be met.Before discussing why accountability is such an important issue, let me proffer an opinion on the difference between responsibility and accountability. A person, who is responsible for a process, executes the process. A person who is accountable for a process has the authority to change the nature of a process, its business purpose and is held accountable for the aggregate performance of the process over time.When
Process Training
It’s all about collecting feedback to set the right priorities for your change process. You need feedback to drive the change process. The more feedback you get the better you will be able to evolve your process. So let’s take a look at what your change process needs to include.
1. Feedback Records with Deficiency Notations
2. Trend Analysis
3. Corrective Action Process and Criteria for action
4. Audit Process
5. Management Review Process
And then ask yourself the following questions about your change process:
• Are process feedback records created?
• Have the feedback records been analyzed for process deficiencies?
• Are the deficiencies analyzed for statistical significance?
• Are the deficiencies of statistical significance written up for corrective action?
• Is corrective/prev
The days of 40-hour work weeks with benefit packages and retirement shares are quickly going the way of dinosaurs, phonograph records and VCR’s… and remember 8-track tapes? You see it at Home Depot, libraries, and grocery stores – self checkout lanes, and no help to be found in the aisles when you’re looking for a particular size dress, or for the guy to cut your PVC plumbing pipe.Corporate America is changing, and the savvy are getting ready now to find their own way, whether on the books with their own business, or with one of the more off-the-book individual entrepreneurial responses to an over-taxed, under-personalized culture.The resume mindset always asks what you can do, how much, how many, how
What if your sales increased from $100,000 to $110,000 per day and your profit increased from $10,000 to $11,000 – did you improve by 10%? The answer might shock you...
Because the answer is no. No improvement occurred. In fact, your process deteriorated. Sure, revenue increased, but is this really an improvement? Let’s take a look at the problem by looking at revenue and expenses.
Extra Expenses Prevent Process Improvement
Let’s examine the before and the after scenario. Say, in the before picture, you have sales of $100,000, fixed costs of $20,000 and variable costs of $70,000. Total expenses amount to $90,000, giving you a gross profit of $10,000. In the after picture, sales increase to $110,000, while variable costs rise to $77,000 in addition to $2,000 in Extra Expenses – which give you total expenses of $99,000 and a gross profit of $11,000. In the after picture, remember though, fixed costs are fixed, and do not change with additional revenue. So you should get more than 10% (11.8% to be exact) profit from 10% growth.
But in order to maintain a 10% profit we have to spend $2,000 in Extra Expenses. These Extra Expenses represent your process inefficiencies. These expenses could be sales discounts, travel, overtime, or something else. The names don't really matter. What does matter is that we are not improving.
Process Evolution Enables Improvement
Improvement results from process evolution, not from an increase in scale. What’s the difference? Scale increases when we hire another person, increase expenses, or purchase more assets in order to acquire or service more business. Process evolution occurs when we change the process and as a result can release hidden capacity and service more business without adding any costs - and this is a form of efficiency. You can measure efficiency with the formula:
Efficiency = Output / Costs
But process evolution is about more than just changing costs. It is about changing time, increasing process velocity, and getting more output from the costs you already have. Cutting costs, by itself, does not evolve a process. In fact, reducing costs, without properly understanding how those costs relate to the process, can actually decrease process evolution (devolution). Let's review an example…
A Cost Reduction and Procedures Training Case Study
A company decreases costs by switching suppliers and using cheaper materials for their manufacturing process. Now the purchasing department is happy they are saving money. The bottom line is starting to look better as profits initially increase. And so this improved the process, right? Well...
But then complaints start rolling in from the field. Products are breaking down faster. Technical support costs rise, and customers start reducing their orders. Not only do profits evaporate, but customer goodwill does too. To offset this, your first reaction might be to switch back to the old supplier. This is much easier and it fixes the immediate problem, but it won't recapture the lost sales, customers and damage to the company’s reputation.
But, again, you need to focus on the most important issue. There is a limit to the amount of costs one can reduce in any process – zero. You can’t reduce costs below zero. On the other hand, there is no limit to the process potential we can achieve. Process evolution concerns the numerator (the output), not the denominator (the costs) in the efficiency equation above.
Change in Process Evolution = New Output / Old Output (Assuming costs are held constant)
By focusing on process evolution instead of costs we can continue to increase our output forever. We just have to make sure that the output increases faster than the costs. Then what we have is incremental improvement. But what procedures can you use to achieve this?
Process Training
It’s all about collecting feedback to set the right priorities for your change process. You need feedback to drive the change process. The more feedback you get the better you will be able to evolve your process. So let’s take a look at what your change process needs to include.
1. Feedback Records with Deficiency Notations
2. Trend Analysis
3. Corrective Action Process and Criteria for action
4. Audit Process
5. Management Review Process
And then ask yourself the following questions about your change process:
• Are process feedback records created?
• Have the feedback records been analyzed for process deficiencies?
• Are the deficiencies analyzed for statistical significance?
• Are the deficiencies of statistical significance written up for corrective action?
• Is corrective/preve
OK. The stats for 2005 are in.1. Women make up about half the American work force.2. Women hold about half the managerial positions.3. Women earn just 73 percent of what men earn in the same jobs.4. Women hold only 5 percent of the country’s top-paying jobs.5. Just eight of the Fortune 500 companies have women CEO’s.The secret to changing this situation is learning to communicate more effectively.Molly Dickinson Shepard just wrote a book called “Stop Whining and Start Winning.” She contends that women, who are said to come from Venus, need to learn the language of their Mars-based male counterparts.“They must get in the game,” she advises. “Otherwise they won
But in order to maintain a 10% profit we have to spend $2,000 in Extra Expenses. These Extra Expenses represent your process inefficiencies. These expenses could be sales discounts, travel, overtime, or something else. The names don't really matter. What does matter is that we are not improving.
Process Evolution Enables Improvement
Improvement results from process evolution, not from an increase in scale. What’s the difference? Scale increases when we hire another person, increase expenses, or purchase more assets in order to acquire or service more business. Process evolution occurs when we change the process and as a result can release hidden capacity and service more business without adding any costs - and this is a form of efficiency. You can measure efficiency with the formula:
Efficiency = Output / Costs
But process evolution is about more than just changing costs. It is about changing time, increasing process velocity, and getting more output from the costs you already have. Cutting costs, by itself, does not evolve a process. In fact, reducing costs, without properly understanding how those costs relate to the process, can actually decrease process evolution (devolution). Let's review an example…
A Cost Reduction and Procedures Training Case Study
A company decreases costs by switching suppliers and using cheaper materials for their manufacturing process. Now the purchasing department is happy they are saving money. The bottom line is starting to look better as profits initially increase. And so this improved the process, right? Well...
But then complaints start rolling in from the field. Products are breaking down faster. Technical support costs rise, and customers start reducing their orders. Not only do profits evaporate, but customer goodwill does too. To offset this, your first reaction might be to switch back to the old supplier. This is much easier and it fixes the immediate problem, but it won't recapture the lost sales, customers and damage to the company’s reputation.
But, again, you need to focus on the most important issue. There is a limit to the amount of costs one can reduce in any process – zero. You can’t reduce costs below zero. On the other hand, there is no limit to the process potential we can achieve. Process evolution concerns the numerator (the output), not the denominator (the costs) in the efficiency equation above.
Change in Process Evolution = New Output / Old Output (Assuming costs are held constant)
By focusing on process evolution instead of costs we can continue to increase our output forever. We just have to make sure that the output increases faster than the costs. Then what we have is incremental improvement. But what procedures can you use to achieve this?
Process Training
It’s all about collecting feedback to set the right priorities for your change process. You need feedback to drive the change process. The more feedback you get the better you will be able to evolve your process. So let’s take a look at what your change process needs to include.
1. Feedback Records with Deficiency Notations
2. Trend Analysis
3. Corrective Action Process and Criteria for action
4. Audit Process
5. Management Review Process
And then ask yourself the following questions about your change process:
• Are process feedback records created?
• Have the feedback records been analyzed for process deficiencies?
• Are the deficiencies analyzed for statistical significance?
• Are the deficiencies of statistical significance written up for corrective action?
• Is corrective/prev
All industries have change and we know change is a constant and something the executive management teams should be able to deal with and if they expect to make their companies successful. Have you noticed change in your industry? Or has it happened gradually without much notice? If change is slow sometimes it is because of fear and because you did not adequately see opportunity and create change to take advantage of it. Change need not be evil, change is good, especially if you act.Personally, I ran a company, a Franchise Company, I founded and we were in the Service Industry serving large companies in 22 market sectors or industries. And well, I can tell you this change is a Constant no matter what industry
Efficiency = Output / Costs
But process evolution is about more than just changing costs. It is about changing time, increasing process velocity, and getting more output from the costs you already have. Cutting costs, by itself, does not evolve a process. In fact, reducing costs, without properly understanding how those costs relate to the process, can actually decrease process evolution (devolution). Let's review an example…
A Cost Reduction and Procedures Training Case Study
A company decreases costs by switching suppliers and using cheaper materials for their manufacturing process. Now the purchasing department is happy they are saving money. The bottom line is starting to look better as profits initially increase. And so this improved the process, right? Well...
But then complaints start rolling in from the field. Products are breaking down faster. Technical support costs rise, and customers start reducing their orders. Not only do profits evaporate, but customer goodwill does too. To offset this, your first reaction might be to switch back to the old supplier. This is much easier and it fixes the immediate problem, but it won't recapture the lost sales, customers and damage to the company’s reputation.
But, again, you need to focus on the most important issue. There is a limit to the amount of costs one can reduce in any process – zero. You can’t reduce costs below zero. On the other hand, there is no limit to the process potential we can achieve. Process evolution concerns the numerator (the output), not the denominator (the costs) in the efficiency equation above.
Change in Process Evolution = New Output / Old Output (Assuming costs are held constant)
By focusing on process evolution instead of costs we can continue to increase our output forever. We just have to make sure that the output increases faster than the costs. Then what we have is incremental improvement. But what procedures can you use to achieve this?
Process Training
It’s all about collecting feedback to set the right priorities for your change process. You need feedback to drive the change process. The more feedback you get the better you will be able to evolve your process. So let’s take a look at what your change process needs to include.
1. Feedback Records with Deficiency Notations
2. Trend Analysis
3. Corrective Action Process and Criteria for action
4. Audit Process
5. Management Review Process
And then ask yourself the following questions about your change process:
• Are process feedback records created?
• Have the feedback records been analyzed for process deficiencies?
• Are the deficiencies analyzed for statistical significance?
• Are the deficiencies of statistical significance written up for corrective action?
• Is corrective/prev
Marketing is a vital and important aspect of bringing customers to your business. While marketing isn't the selling point, you cannot sell without first having attracted a clientele. Knowing how vital marketing is to your business you should always attempt to add branding to all marketing efforts.Why is branding important? Quite simply branding is when people remember your business name and can associate it with your industry without the aid of your advertisement being present. When advertising online paying CPM for banner ads or even CPC contextual ads there is no better way to ad value to your advertising dollar than by adding branding to all your marketing efforts.Visually a good branding campaign
But, again, you need to focus on the most important issue. There is a limit to the amount of costs one can reduce in any process – zero. You can’t reduce costs below zero. On the other hand, there is no limit to the process potential we can achieve. Process evolution concerns the numerator (the output), not the denominator (the costs) in the efficiency equation above.
Change in Process Evolution = New Output / Old Output (Assuming costs are held constant)
By focusing on process evolution instead of costs we can continue to increase our output forever. We just have to make sure that the output increases faster than the costs. Then what we have is incremental improvement. But what procedures can you use to achieve this?
Process Training
It’s all about collecting feedback to set the right priorities for your change process. You need feedback to drive the change process. The more feedback you get the better you will be able to evolve your process. So let’s take a look at what your change process needs to include.
1. Feedback Records with Deficiency Notations
2. Trend Analysis
3. Corrective Action Process and Criteria for action
4. Audit Process
5. Management Review Process
And then ask yourself the following questions about your change process:
• Are process feedback records created?
• Have the feedback records been analyzed for process deficiencies?
• Are the deficiencies analyzed for statistical significance?
• Are the deficiencies of statistical significance written up for corrective action?
• Is corrective/prev
You’ve probably seen or heard the Geico and Wachovia commercials touting their high customer satisfaction rates. Geico says it has a 97% customer satisfaction rate. Wachovia says it has the highest customer satisfaction ranking in its industry. At first glance, you might think that’s pretty impressive. But, let’s take a closer look at what a satisfied customer really is and then decide if you should celebrate such an accomplishment. (Please note I do not have any personal vendettas against either Geico or Wachovia. I am not “picking on them.” They are just the first examples that came to my mind.)Remember when you were in school and report cards came out? How did you feel when you saw a bunch of
Process Training
It’s all about collecting feedback to set the right priorities for your change process. You need feedback to drive the change process. The more feedback you get the better you will be able to evolve your process. So let’s take a look at what your change process needs to include.
1. Feedback Records with Deficiency Notations
2. Trend Analysis
3. Corrective Action Process and Criteria for action
4. Audit Process
5. Management Review Process
And then ask yourself the following questions about your change process:
• Are process feedback records created?
• Have the feedback records been analyzed for process deficiencies?
• Are the deficiencies analyzed for statistical significance?
• Are the deficiencies of statistical significance written up for corrective action?
• Is corrective/preventive action implemented?
• Is there an objective review of all processes to ensure the change process is working?
• Does management review all findings to ensure the change process is working -- and that processes are evolving to meet or exceed organizational requirements?
Next week: Business Modeling
With these thoughts in mind, you can see how important it is to first define continuous improvement and note how it can actually affect your business.
But you can't gather feedback from all processes at once. If you did, that would generate a process overload. So where do you start?
Next time we will show you show how when we discuss business modeling. Business modeling prioritizes which core processes you should improve. It tells you which processes are most important to not only achieve your company goals - but also to survive as a profitable business.
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