Simple Business Approach to Continuous Improvement

As we rolled out our Six Ideas to Improve Your Business Today, we got some feedback that businesses are looking to go to the next level, and are looking for an easy approach, without using Lean Sensei's and Six Sigma Black Belts.

We continued with the theme of using layman's terms, and got rid of the consultant "lingo", to bring you an approach that anyone can use to better plan and prioritize their improvements.

We defined a 10-step approach. Here is a quick summary of those steps.

1) Gather customer complaints
2) Gather employee complaints
3) Review business finances
4) Determine top 3 issues
5) Determine importance of each issue
6) Get to root cause of each issue (using worksheet)
7) List potential solutions
8) Assign actions
9) Verify improvements
10) Communicate and celebrate (and go back to #1)

The process is simple, as you can see. Basically, a simple workbook that you can print out, fill out, and guide your business towards long term improvement. If you focus on the right things, this will either save you money, bring in more revenue/business, or both!

The best way to show you is to have you download an example form of how this form should be filled out. We used a small family restaurant as our case study.

Ready to begin filling out your own form? We have blank forms available for free download, including the Problem Solving Worksheet.

If you'd like to customize it with your own business logo, contact us and we'll modify it for free.

Six business improvement ideas you can implement today!

Sometimes us consultants get a bad reputation for making things more complicated than they need to be. We turn people away when we don't put process improvement tools in layman's terms that anyone can understand.

I was reminded of this when working with a small family restaurant recently. If I mentioned standard work, theory of constraints, 5-S, kanban, or PDCA, I would have been escorted out the door. They aren't used to hearing these terms, like some of our larger manufacturing clients are.

I needed to explain it to them, without the consultant "lingo". In fact, we applied every single one of the tools mentioned above, but we didn't call them by their name.

As I mentioned in my last blog, there are simple tools that any business can start with, that almost always gain some improvements.

We decided to package them into a one-page sheet. We identified six different suggestions for businesses who aren't sure where to get started. You can download a copy of them at the bottom of the page.

1) Workplace organization, cleaning and labeling – With your staff, get rid of everything you don’t need very often (put it in storage or recycle it). Everything that remains should be stuff used quite often. Label it and make sure there is room for it somewhere. Clean up the area, to make it shine, so that it looks like a brand new area (this gets the workers excited). Setup a process to put things away after use, and maintain the cleanliness and organization, so it doesn’t go back to the mess it was before.

2) Customer Surveys - send out a survey to your customers, and ask them how you can improve your products and services. Be open to input they receive, and gather the top 3 ideas for implementation.

3) Employee Brainstorming - Gather your employees and “brainstorm” ways to improve the business. Your employees hear the complaints and deal with the inefficient processes, so listen to what they say. Make sure you ask them about risks of problems, not just those that have actually happened (employee turnover, close-call accidents, anticipated issues, mistakes that almost made it to the customer, etc).

4) Reduce backups - Look for areas in your business processes where the work piles up or gets backed up(called “bottlenecks”). If you can improve the efficiency in that area, the results are often seen immediately with your customers.

5) Document tasks - develop a standard and consistent approach for doing key activities and tasks in your business. Write them down, so everyone knows how it should be done. If someone comes up with a better idea, update the steps. Provide as many photos and pictures as possible.

6) Cross-train employees - train other employees to be able to do multiple tasks and skills (not the same as multi-tasking, which tends to be inefficient overall). This gives you a more flexible workforce, so in case you get overloaded in one area, or someone is out sick or on vacation, you aren’t keeping the customer waiting, or providing poor service, or not responding to them at all.

Even really mature and highly efficient companies go back to these basic improvement approaches over and over again. They are critical for success.

Download a copy for free! Six Ideas to Improve Your Business Today!

Cost savings from process improvements can be misleading

I've been to many conferences, and have seen lots of companies claim cost savings and metric improvements that are very impressive. However, the more experienced I get, the more skeptical I get of these claims.

First off, let's define what process improvement savings should be. It should be the elimination of waste in a process (removing non-value added work), improving quality to the internal and external customers, reducing the time to complete value added tasks, or redesigning a process to provide more value to a customer.

Savings should not be the outsourcing of processes to another country to save money, or cutting heads and expecting them to "be lean" in order to make up the gap in resources. These are usually short-sighted decisions that end up costing the company more money in the long run, and risk negatively impacting the customer. But for this discussion, we will focus on one more incorrect savings: when the bottom line benefits do not actually exist.

Let's talk about one scenario that I've seen. Short term savings.

Let's say the process is tracking the Work in process (WIP) for approving charge numbers, so employees can start work on a new program or project.

Refer to the table below

Starting at Day 15, the number of charge numbers waiting for approval is 108 (red line). Each day, that total grows larger, as the amount of time available to complete these approvals is not sufficient to keep up with the new requests. This means the process will never be able to cut into the existing WIP. At some point, shown at Day 40, the management gets too many complaints about charge numbers not being available, and they work overtime, and add more resources to complete a bunch of them over the next couple days. They complete 350, 400 and 75 over the three days (blue line), compared to a typical day of around 20-30.

If we were to capture the savings from bringing the total number of charge number requests from 772 to 71 by Day 42, you could conclude a huge reduction of 90%, or 601 requests. If we determine that each request is $1000 per day in lost productivity, then on Day 39, we have around $772,000 tied up in the process, and it is reducted to $71,000. A savings of $601,000!

However, we didn't do anything "lean" since we spent additional money on labor to get the number down. We haven't actually addressed the time available or cycle time per request. Of course, the extra labor should be subtracted out of the savings, so we'll take out $10,000 for the extra labor/resources.

Next, we assume that this is actual bottom-line savings. In order to claim this as savings or growth, we would have to assume that all employees are not using any other charge numbers, and are charging to an overhead number, and therefore the company is losing money by employing them without work to do. This is highly unlikely. Let's be conservative and assume that 10% of the employees would be in that situation, so we'll claim around $60,000 in additional sales/work, not $600,000.

The next assumption is that the 772 open requests would have stayed at that level for an extended period of time. It does appear that this number was continuing to climb, so the number of new requests would have to be reviewed, to see if that was true assumption for the future. If the requests drop off, then they might have been able to catch up on their own.

Finally, we must assume that they can maintain the savings at the low level of around 70 requests for an extended period of time. If we look at the data in the future, you can see that the requests climb back up again. Again, this shouldn't be a surprise, since we didn't do anything to address the original problem, that we cannot keep up with the request demand for charge numbers.

Let's assume that they actually "lean" out the process and are able to keep up with the demand now. One final problem with cost savings is the impact of the improvements to the bottom-line financials of the company. For example, if the process was able to keep up with demand, and a resource was able to be freed up to do some other work, then if that resource isn't actually given value-added work, the savings won't actually show up in the bottom-line. You should be able to see an increase in output or work as a result of the freeing up of the resource, which is where the true savings hit the financials. This step is critical, and should be verified after any claimed improvement.

So next time you see some cost savings presented, think about these key points:

1) Did the baseline data represent the true situation if no action was taken, or was it an unusual time period and not representative of the typical situation for that process?

2) Was waste taken out of the process to improve it, or were more resources and cost thrown at it?

3) Were the improvements maintained over a long period of time (6-12 months)?

4) Did the savings actually flow down to the bottom line?

So be careful what you read about lean or six sigma cost savings, and be diligent if you are involved in a project or event to report the correct and most accurate numbers you can.

Start simple before you map your processes

We see a lot of different processes at various levels of process performance. Some are running near six sigma levels, while others don't even think they have a process that they follow.

The maturity of the process should determine the type of tool to apply.

If your process is just getting started with process improvement, has no metrics, have never defined a common process, and doesn't know where to begin, start simple. The two tools we recommend are 5-S and standard work (actually let's call it consistent processing, since standard work is more complex than it seems).

5-S is a way to clean and organize the workspace, so that unneeded items are removed, needed things are well-labeled, easy to find, everything has it's place, so it's easy to see when there are problems in the workspace. To maintain these methods are difficult, but the first couple phases are easy and can gain some quick efficiency gains, along with a pleasing appearance.

Consistent processing is about defining a process that can be followed by everyone involved in the process, so that the problems created by differences in approaches can be reduced, and the new process can be adjusted according to problems that occur going forward. It's too confusing to try and improve a process that doesn't have any repeat performance. When you look for root cause, there are often so many process issues that can "muddy up the waters".

I recently helped with some yield problems at a facility. We had the failed unit hooked up to the test equipment, asking all kinds of questions, testing different scenarios, trying to identify what could be the problem. When we finally decided to open up the unit, it was missing a major part! You end up wasting a lot of your time investigating the simple stuff, and it slows down the improvement process (instead of working on the major issues). Establishing some standards for assembling, repairing, reworking, and verifying processes is a must!

You might also be concerned that workers will feel "confined" by a standard.

Here is what you can do to alleviate their concerns:

1) Involve them in developing the process, so they own the process, and feel a part of its development.

2) Reiterate that the standard is the safest and most efficient way to do a process TODAY, but can be improved or changed at any time.

3) Recognize those individuals who helped establish the best process, and those who improve it, to encourage others to come up with better ways of doing something. If they get some motivation from being recognized by their co-workers and leaders, then they may spend time trying to think of better ways to improve the standard.

If you can instill that kind of thinking in your people, you are really maturing as a company.

Annoying tourist photos have wrong business model with lots of waste!

While on vacation recently, we were overwhelmed by the number of attractions with a photographer service, who make you take a photo and then try and sell it to you afterwards for a ridiculous price. It has gotten so prevalant that you get worried when you don't see anyone waiting to take your picture.

They must be getting enough people to buy these expensive photos, otherwise they wouldn't be so popular at these attractions.

I give them credit for identifying a need and taking advantage of it. Often times, I'm not in a position to have a photo of me and my wife snorkeling, or getting off a boat, or in the middle of a ride. However, when you look at the prices, it is unbelievable how much they charge. The majority of the time we decline on price alone.

My problem is customer value. I think the current model is terrible, and needs to be fixed.

Let's say that I'm in the majority, and only 10% of the customers actually purchase the photos. If they charge $20 per photo, and take 1000 photos, then they make $20x100 = $2000 per day. The other 90% walk away muttering about what a rip-off it was, and disappointed that they couldn't get the photo, and the 10% who bought it try to justify in their heads why it was worth the money to spend for one photo.

Many of these places pre-print the photos in hopes that people will feel guilty and buy them. If they don't buy it, then the photos get thrown away. What a waste! All that effort taking the photo, processing them, printing them, and even time spent trying to sell the customer on them is wasted!

Here is a better option, that could improve the experience for everyone.

What if the price was only $5 per photo, which I think is more reasonable. If this increases the chance of buying a photo to a conservative 50%, then let's look at the business model now. If we use the same numbers as before, $5X500 = $2500 per day. Now 500 people leave the attraction with a good experience, and a photo to go with it. I would also argue that it would cost no additional amount of work to process the 500, then it does currently to handle the 100 people in the prior model. The people who buy can also post or share the photo with family and friends, and provide free advertising for the attraction. Everyone leaves feeling good, since they paid a fair price for something they wanted, and more people were able to take advantage, providing customer value to many more people. I would even argue that the % would be much higher than 50%.

Even if the companies who run this service see no immediate improvement in sales with this model (doubtful), the free advertising and increased satisfaction (part of the whole experience for the customers) would provide long term growth for these companies, which would eventually give them the sales growth they are looking for.