Lean Six Sigma in a Tight Economy
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Steven Bonacorsi
Aug 17, 2011, 12:14:59 AM8/17/11
to Lean Six Sigma
We are as uncertain as everybody else is about how bad the economy
might get over the next several months. What is certain is that many
companies are already taking steps to conserve funds and prepare for a
possible recession. We have talked to people whose travel and training
budgets have been slashed and others who are doing across the board
budget cuts. These are traditional ways companies cut spending as they
prepare for tough times. We have also heard of companies reviewing
major programs that were scheduled for 2009. Those of us practicing
Lean Six Sigma, like those in other disciplines, are forced to
consider how bad things could get. At the same time, we should also be
thinking about how we can help organizations survive the problems they
will face in the months ahead.
One popular Lean Six Sigma argument holds that Lean Six Sigma prospers
in both good and bad times. In good times companies want to expand.
They expand, acquire other companies, and enter new lines of business.
In bad times, companies reexamine their processes and their business
models to see how they can save money. In either case, they need Lean
Six Sigma practitioners to help them change their processes. It's a
comforting thought, and, in many cases, it is actually true.
Consider the financial meltdown that's occurred in the past few weeks.
Several financial organizations have merged, willingly or otherwise.
Others have changed their status, moving from investment banks to
traditional banks, to acquire more government protections. Meantime,
governments throughout the world seem focused on introducing new
regulations to prevent practices that are presumed to have caused some
of the current problems.
Mergers always result in two sets of processes that need to be merged
into a common process. Changes in status also require that new
processes and business rules be implemented throughout the
organization. And, of course, new regulations require new practices
and new business rules. All such changes require process analysis and
redesign. It may be done by consultants, by process practitioners, or
by line managers, but it will need to be done, and it represents a
major opportunity for process professionals. Companies other than
those in the financial sector probably won't face the major changes
that will necessarily take place in that sector, but they will
certainly face demands for cost containment and, if the recession
deepens, major cost reductions.
On occasions when we have been asked how to sell Lean Six Sigma to
management, we have consistently argued that you should not try to
sell Lean Six Sigma - as such. In the minds of senior executives, Lean
Six Sigma is just another new technology or methodology and is of
little or no interest. Instead, we've always urged process
professionals to sell productivity and support for whatever changes
their organizations need. In the months ahead, those needs are going
to be cost containment and then cost reduction. Now is the time for
Lean Six Sigma professionals to present management with strategies and
plans for containing and reducing costs.
Smart Lean Six Sigma planners are going to want to present a menu of
options. An immediate crisis requires actions that can be undertaken
quickly and that will yield immediate results. If the crisis lengthens
into a long recession, then there will also be a need for changes that
require more time to implement but will yield more significant
savings. Let's consider these two timeframes independently.
Short Term Cost Containment
Some of the changes companies routinely make are done without much
thought, such as cutting travel and training across the board. Smarter
companies have a good idea of which processes are yielding the most
profit - or are likely to do best in the emerging economy - and cut
from those that will be less profitable, while continuing to support
the lines of business or the processes that will yield the best
results. If your organization has a business process architecture and
a good process measurement system, then you can help prioritize
intelligent cuts. If you don't, however, it is too late to develop one
to help with this crisis on the short term.
Many companies will consider Lean programs to help make quick cuts.
Lean vendors and consultants differ on the most effective approach.
Some take a broad perspective that captures much of the philosophy
contained in the Toyota Production System and they, like other Lean
Six Sigma practitioners, will urge enterprise analysis and redesign
and cultural change, as well as the elimination of waste in specific
processes. Others, however, will focus on the elimination of waste.
The problem with the latter is that it often sub-optimizes overall
performance. That is, you may get immediate savings in some areas, but
subsequently discover that it is costing you more in other areas. Each
company will have to decide the urgency for delivering specific
savings immediately versus pursuing a course that will yield a broader
and more sustainable savings.
In any case, creating some Lean Six Sigma teams that can move quickly
to examine mid-sized processes and suggest quick changes to eliminate
waste, is probably an item you should put right at the top of your
menu of offerings.
Some companies will find themselves engaged in rapid mergers or in
outsourcing. The next three months will be a good time to show that
your Lean Six Sigma team can move quickly and get results with a
minimum of analysis. This isn't the time for detailed modeling - it's
a time for quickly identifying the minimum information required to
make smart decisions.
Ironically, it is also a time to think about hiring some consultants.
One of the most difficult challenges facing new Lean Six Sigma teams
is determining which process problems will yield the greatest ROI.
This determination requires considerable experience and you likely
don't have time for a lot of on the job experimentation or training.
We aren't talking about a lot of long term consulting - we are talking
about using consultants to review proposals and provide advice and
direction on how best to prioritize activities for implementation of
short term gains.
Longer Term Cost Reductions
Broadly speaking, Lean Six Sigma puts an emphasis on broader concerns.
It focuses on understanding processes throughout the enterprise and
prioritizing and coordinating intervention efforts. The most powerful
Lean Six Sigma efforts require trained process managers and monthly
measures of process performance. In the best case, Lean Six Sigma
leads to more sustainable improvements, but it requires more training
and more time to implement.
Similarly Lean Six Sigma products, like most automation efforts,
require more time and a larger initial investment to achieve
significant ROI. Lean Six Sigma is especially powerful as a way of
building agility and the capacity for rapid changes to processes, but
a commitment to Lean Six Sigma will require time and experimentation
to determine how best to use it.
Most companies, in the next few months, will focus on short term
changes to gain immediate savings. Most companies have been running in
an expansive mode for the past few years and a good Lean team can
almost always identify some quick changes that will save 10-30% of the
cost involved in any mid-size process. You probably won't be able to
sustain all the savings for more than 6-12 months, but for many that
will be an appropriate response to a call for immediate action.
Some companies, however, may not experience the need to simply focus
on short term savings. And even those that do will probably not focus
exclusively on savings for too long. Smart Lean Six Sigma teams will
want to provide an immediate response to executive calls for savings,
but will also want to lay the groundwork for more sustained efforts.
Thus, even as some specific changes are made, Lean Six Sigma
professionals should be pointing out to executives that side-effects
and continuing changes will undermine those savings in a relatively
short period. Thus, when economic times improve, or when a company is
willing to launch a project that aims more at future gains than on
immediate savings, the Lean Six Sigma team should refocus on
establishing a business process architecture and installing a Lean Six
Sigma platform that will lay the groundwork for a more systematic
process effort and more reliable long term response capability.
Process professionals are, in essence, support people, and, as such,
they must support the immediate concerns of corporate executives. If
those executives call for immediate savings, a Lean Six Sigma team
should be able to deliver it. By focusing on bloated processes that
were created without much thought and/or require lots of overhead, an
immediate, significant savings should be easy to provide. At the same
time, however, Lean Six Sigma team ought to take advantage of any
credibility it develops to push for a more sustainable and
comprehensive effort as the economy improves and funds begin to flow
more freely, once again. You don't get to be an organization like
Toyota by focusing on one-off savings. You get there by creating a
culture that focuses on process improvement month-in-and-month-out.
Hopefully the current crisis will help Lean Six Sigma organizations to
emerge stronger than ever and more focused than ever on installing
organization-wide systems for managing continuous improvement.
Steven Bonacorsi is a Certified Lean Six Sigma Master Black Belt
instructor and coach. Steven Bonacorsi has trained hundreds of Master
Black Belts, Black Belts, Green Belts, and Project Sponsors and
Executive Leaders in Lean Six Sigma DMAIC and Design for Lean Six
Sigma process improvement methodologies. Bought to you by the Process
Excellence Network the world leader in Business Process Management
(BPM)
Author for the Process Excellence Network (PEX Network / IQPC)
Process Excellence Network
Steven Bonacorsi, President of International Standard for Lean Six
Sigma(ISLSS)
Certified Lean Six Sigma Master Black Belt
47 Seasons Lane
Londonderry, NH 03053
Phone: +(1) (603) 401-7047
E-mail: sbona...@islss.com
Process Excellence Network: http://bit.ly/n4hBwu
ISLSS: http://www.islss.com
Article Source: http://EzineArticles.com/?expert=Steven_Bonacorsi
Article Source: http://EzineArticles.com/1678291
might get over the next several months. What is certain is that many
companies are already taking steps to conserve funds and prepare for a
possible recession. We have talked to people whose travel and training
budgets have been slashed and others who are doing across the board
budget cuts. These are traditional ways companies cut spending as they
prepare for tough times. We have also heard of companies reviewing
major programs that were scheduled for 2009. Those of us practicing
Lean Six Sigma, like those in other disciplines, are forced to
consider how bad things could get. At the same time, we should also be
thinking about how we can help organizations survive the problems they
will face in the months ahead.
One popular Lean Six Sigma argument holds that Lean Six Sigma prospers
in both good and bad times. In good times companies want to expand.
They expand, acquire other companies, and enter new lines of business.
In bad times, companies reexamine their processes and their business
models to see how they can save money. In either case, they need Lean
Six Sigma practitioners to help them change their processes. It's a
comforting thought, and, in many cases, it is actually true.
Consider the financial meltdown that's occurred in the past few weeks.
Several financial organizations have merged, willingly or otherwise.
Others have changed their status, moving from investment banks to
traditional banks, to acquire more government protections. Meantime,
governments throughout the world seem focused on introducing new
regulations to prevent practices that are presumed to have caused some
of the current problems.
Mergers always result in two sets of processes that need to be merged
into a common process. Changes in status also require that new
processes and business rules be implemented throughout the
organization. And, of course, new regulations require new practices
and new business rules. All such changes require process analysis and
redesign. It may be done by consultants, by process practitioners, or
by line managers, but it will need to be done, and it represents a
major opportunity for process professionals. Companies other than
those in the financial sector probably won't face the major changes
that will necessarily take place in that sector, but they will
certainly face demands for cost containment and, if the recession
deepens, major cost reductions.
On occasions when we have been asked how to sell Lean Six Sigma to
management, we have consistently argued that you should not try to
sell Lean Six Sigma - as such. In the minds of senior executives, Lean
Six Sigma is just another new technology or methodology and is of
little or no interest. Instead, we've always urged process
professionals to sell productivity and support for whatever changes
their organizations need. In the months ahead, those needs are going
to be cost containment and then cost reduction. Now is the time for
Lean Six Sigma professionals to present management with strategies and
plans for containing and reducing costs.
Smart Lean Six Sigma planners are going to want to present a menu of
options. An immediate crisis requires actions that can be undertaken
quickly and that will yield immediate results. If the crisis lengthens
into a long recession, then there will also be a need for changes that
require more time to implement but will yield more significant
savings. Let's consider these two timeframes independently.
Short Term Cost Containment
Some of the changes companies routinely make are done without much
thought, such as cutting travel and training across the board. Smarter
companies have a good idea of which processes are yielding the most
profit - or are likely to do best in the emerging economy - and cut
from those that will be less profitable, while continuing to support
the lines of business or the processes that will yield the best
results. If your organization has a business process architecture and
a good process measurement system, then you can help prioritize
intelligent cuts. If you don't, however, it is too late to develop one
to help with this crisis on the short term.
Many companies will consider Lean programs to help make quick cuts.
Lean vendors and consultants differ on the most effective approach.
Some take a broad perspective that captures much of the philosophy
contained in the Toyota Production System and they, like other Lean
Six Sigma practitioners, will urge enterprise analysis and redesign
and cultural change, as well as the elimination of waste in specific
processes. Others, however, will focus on the elimination of waste.
The problem with the latter is that it often sub-optimizes overall
performance. That is, you may get immediate savings in some areas, but
subsequently discover that it is costing you more in other areas. Each
company will have to decide the urgency for delivering specific
savings immediately versus pursuing a course that will yield a broader
and more sustainable savings.
In any case, creating some Lean Six Sigma teams that can move quickly
to examine mid-sized processes and suggest quick changes to eliminate
waste, is probably an item you should put right at the top of your
menu of offerings.
Some companies will find themselves engaged in rapid mergers or in
outsourcing. The next three months will be a good time to show that
your Lean Six Sigma team can move quickly and get results with a
minimum of analysis. This isn't the time for detailed modeling - it's
a time for quickly identifying the minimum information required to
make smart decisions.
Ironically, it is also a time to think about hiring some consultants.
One of the most difficult challenges facing new Lean Six Sigma teams
is determining which process problems will yield the greatest ROI.
This determination requires considerable experience and you likely
don't have time for a lot of on the job experimentation or training.
We aren't talking about a lot of long term consulting - we are talking
about using consultants to review proposals and provide advice and
direction on how best to prioritize activities for implementation of
short term gains.
Longer Term Cost Reductions
Broadly speaking, Lean Six Sigma puts an emphasis on broader concerns.
It focuses on understanding processes throughout the enterprise and
prioritizing and coordinating intervention efforts. The most powerful
Lean Six Sigma efforts require trained process managers and monthly
measures of process performance. In the best case, Lean Six Sigma
leads to more sustainable improvements, but it requires more training
and more time to implement.
Similarly Lean Six Sigma products, like most automation efforts,
require more time and a larger initial investment to achieve
significant ROI. Lean Six Sigma is especially powerful as a way of
building agility and the capacity for rapid changes to processes, but
a commitment to Lean Six Sigma will require time and experimentation
to determine how best to use it.
Most companies, in the next few months, will focus on short term
changes to gain immediate savings. Most companies have been running in
an expansive mode for the past few years and a good Lean team can
almost always identify some quick changes that will save 10-30% of the
cost involved in any mid-size process. You probably won't be able to
sustain all the savings for more than 6-12 months, but for many that
will be an appropriate response to a call for immediate action.
Some companies, however, may not experience the need to simply focus
on short term savings. And even those that do will probably not focus
exclusively on savings for too long. Smart Lean Six Sigma teams will
want to provide an immediate response to executive calls for savings,
but will also want to lay the groundwork for more sustained efforts.
Thus, even as some specific changes are made, Lean Six Sigma
professionals should be pointing out to executives that side-effects
and continuing changes will undermine those savings in a relatively
short period. Thus, when economic times improve, or when a company is
willing to launch a project that aims more at future gains than on
immediate savings, the Lean Six Sigma team should refocus on
establishing a business process architecture and installing a Lean Six
Sigma platform that will lay the groundwork for a more systematic
process effort and more reliable long term response capability.
Process professionals are, in essence, support people, and, as such,
they must support the immediate concerns of corporate executives. If
those executives call for immediate savings, a Lean Six Sigma team
should be able to deliver it. By focusing on bloated processes that
were created without much thought and/or require lots of overhead, an
immediate, significant savings should be easy to provide. At the same
time, however, Lean Six Sigma team ought to take advantage of any
credibility it develops to push for a more sustainable and
comprehensive effort as the economy improves and funds begin to flow
more freely, once again. You don't get to be an organization like
Toyota by focusing on one-off savings. You get there by creating a
culture that focuses on process improvement month-in-and-month-out.
Hopefully the current crisis will help Lean Six Sigma organizations to
emerge stronger than ever and more focused than ever on installing
organization-wide systems for managing continuous improvement.
Steven Bonacorsi is a Certified Lean Six Sigma Master Black Belt
instructor and coach. Steven Bonacorsi has trained hundreds of Master
Black Belts, Black Belts, Green Belts, and Project Sponsors and
Executive Leaders in Lean Six Sigma DMAIC and Design for Lean Six
Sigma process improvement methodologies. Bought to you by the Process
Excellence Network the world leader in Business Process Management
(BPM)
Author for the Process Excellence Network (PEX Network / IQPC)
Process Excellence Network
Steven Bonacorsi, President of International Standard for Lean Six
Sigma(ISLSS)
Certified Lean Six Sigma Master Black Belt
47 Seasons Lane
Londonderry, NH 03053
Phone: +(1) (603) 401-7047
E-mail: sbona...@islss.com
Process Excellence Network: http://bit.ly/n4hBwu
ISLSS: http://www.islss.com
Article Source: http://EzineArticles.com/?expert=Steven_Bonacorsi
Article Source: http://EzineArticles.com/1678291
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