Category Archives: Systems


“But, there were reasons that the team didn’t hit their output target. Materials were late, a machine broke down, and Fred didn’t show up for work,” Dalton explained. “Ever since I got promoted from supervisor to manager, it seems like everything lands on me.”

“Indeed it does. How does that feel?” I asked.

“I fell overwhelmed. There are so many more moving parts. And, my manager expects me to anticipate and prevent things going wrong.”

“So, what do you think is causing your distress?” I prodded.

“It’s my manager, all the stuff that is going on around me,” Dalton commiserated.

“And, how do you feel about that?” I continued.

“Frozen. I don’t know what to do next. When I was a supervisor, I just had to react and fix. But, now, fixing doesn’t happen fast enough. There is too much going on,” Dalton breathed.

“How do you find calm?”

Dalton stopped. “Calm?”

“Sometimes you have to slow down, so you can go fast. How do you find calm?”

Make Assets Productive

Luis began an aggressive calling plan to get his money collected, put holds on new orders for customers who were past due and began requiring deposits on large orders. Nothing happened at first. Luis stayed off kilter for the better part of two weeks. Slowly, he calmed. Payments began to come in, not enough to have a party, but enough to breathe.

“Management is about making resources productive,” I repeated. The first thing to manage is capital. Next are your physical assets.

“Our building, our equipment?” Luis confirmed.

“The first decision is to decide what is necessary. You haven’t thought about that since this company was a start up. Back then, you thought about it a lot. You outsourced some production until you could afford your own machine. Then you bought a second machine. You moved into a new building so you could bring in a third machine.

“Now, you can’t keep the second machine busy. You tell me, what is necessary?”

Where is the Money?

“Where’s the money?” I asked.

Luis looked at me and squinted. “What do you mean, where’s the money?”

“Look, you asked me to come here and help you straighten out this mess. Where’s the money?” I repeated.

“That’s the problem, there isn’t any money,” Luis replied.

“Yes, there is, there always is. Luis, the first resource a manager has to manage is capital. But before you can manage it, you have to find out where it is. Sometimes you think you know where it should be, but if that’s not where it is, you can’t manage it.

Sometimes your capital is tied up in a machine. Sometimes your capital is tied up in unbilled work in process. Sometimes your capital is tied up in Accounts Receivable. Once you find out where your capital is, only then can you manage it. So, where’s the money?”

A raw nerve had been struck. Luis shuffled some papers on his desk. “It’s here,” he said, pointing to the third column in his AR aging report. “It’s over 60.”

“Well, now we know where it is, we can manage it.”

One Most Important Thing

“What’s the one most important thing you do?” I asked. “In a year’s time, looking back, what one thing have you done that has had the most impact on your company?”

Kristen was thinking. She had some stuff up on her walls, some recognition plaques, a framed letter from a customer. “I don’t know,” she started. “My highest contribution? I guess it’s just making sure my people are always busy and not wasting time. That’s what managers do.”

“No, on your team of 19, you have two supervisors, that’s what they do, keep people busy. What is the most important thing you do?”

“I guess I never really thought about it. No one ever asked me, or told me. In fact, when I got promoted last year, the only difference is that I go to management meetings once a week. I spend the rest of my time dealing with problems and issues. Who is arguing with whom? Who wants time off? Why someone is constantly running behind? Why things don’t come out right? Motivating my team? I stay pretty busy doing all that.”

“What would you have to do differently, so that you did none of those things?” I challenged.

“Well, there’s no way. The people I have on my team just wouldn’t be able to get along and stay productive without me in there.”

“So, what would you have to do differently?”

Out of Sequence

“I’m having a tough time with my team, struggling to meet the project expectations I set for them,” Sheila explained. “It seems they have different interpretations of the project deliverables, a bit of confusion, making it difficult to nail down accountability.”

“So, tell me what you told them?” I said.

“We had a team meeting about the project, making the message consistent to everyone on the team, so, I’m not sure how people got off track. I’m not even sure how what they are thinking, I just know each of them has a different take.”

“How so?” I pressed.

“It looks like everyone started at a different place in the sequence. This is a linear project with specific steps, one after the other. But, one person is starting on step three and another on step eight. They told me they were trying to think ahead, so when we got to that step, it would already be done.”

I wasn’t skeptical, but wanted to more detail. “And, the problem is?”

“Step three depends on the outcome of steps one and two, it’s a dependent step. We might even be able to skip step three depending on how steps one and two turn out.”

“And, I am sure you clearly described this?” I smiled.

“No, I just assumed the team would figure that out,” she explained.

“So, if you had to do the meeting over again, what would you, as the manager, do differently?”

A Process and a System

From the Ask Tom mailbag:

What’s the difference between a process and a system?

A process is the way we get something done. A process is a shift from the haphazard, often the backbone of a discipline or a set of instructions. A process can take the form of a checklist, often has an order or sequence to its steps, like do this first, then do that.

A system is more robust than a process. A system has a defined start and a finish. A system also has a series of steps, but there are different relationships between the steps. In a system, some steps can be done at the same time (concurrent steps). Some steps depend on other steps to be completed first, before the current step can begin (dependent steps). Some steps run at different speeds and can bottleneck other steps (constraints). Some steps may only be required under specific conditions (conditional steps). Some steps may loop back to previous steps and repeat (iterative steps). A system looks at specific conditions, finds the similarities and, by treating them the same, produces a consistent outcome. A system looks at specific conditions, finds the differences and, by treating them differently accommodates a range of variables.

Looking at levels of work, a process may more accurately be used at S-II, while a system is more likely required at S-III.

Where is Engineering?

“Where is engineering?” Sam repeated.

“They never come to this meeting,” Mary replied. “They said it wasn’t a good use of their time, that all we ever talk about is production schedules and complain about the status of our catch levers. They do send someone to this meeting about once a month, but they never say anything, except that they are working on the catch levers.”

Mark, from marketing spoke up. “I do remember them saying they had just about fixed the problem with the catch levers and wanted to talk to marketing about some new packaging, because the new catch levers are going to require a bigger box.”

Larry, from legal, piped in. Larry was always playing on his iPhone during these meetings. “I think I found the name of the company that is competing with our unit. They are located on the west coast, with a distribution hub about 50 miles from here. The Google map of their distribution hub looks like a warehouse with some trucks in the yard. Big trucks. No wonder we didn’t know about them. But, here’s the thing, they have a patent filing on…it looks like our unit, but without catch levers. Their patent is on a sealed unit that doesn’t open.”

Sam surveyed the room. “Thirty days ago, this company was hitting on all cylinders. Every department was spinning perfect. Our marketing click rates were up, sales were increasing, production throughput was stellar, inventory was moving, returns were normal. Every silo in this company was performing as designed. Except for the catch levers. How did we miss that? Where is engineering?”

The Hidden System Defect

“So, you all agree on a path forward,” Sam continued. “This is your problem to solve. We have everyone in the room. Marketing, sales, customer service, production and accounting.”

Marketing began. “We are very proud of our pay-per-click ad campaign. We are delivering more leads at a lower cost than last year and total marketing costs are under budget.”

Sales stepped up. “We have more leads, but our closing ratio is down, way down.”

Production was next. “We know that sales are sluggish. We had finished goods back up on the production floor, so we had to find room to store the excess inventory. Lucky, we found on old warehouse that the real estate group was trying, unsuccessfully, to sell. They were happy we took it off their hands, so that’s where we put the inventory.”

Accounting, always cheery, gave the next report. “Yes, putting that warehouse back in service helped our balance sheet, eliminated a non-performing asset. We saw our holding costs on the inventory were going up, but, that is to be expected if sales are sluggish.”

“There is still a problem,” Sam declared. “Individually, you all, each of you is doing a good job in your respective departments, and I am glad that I didn’t see any finger-pointing. And, we still have a problem. Sales are still sluggish.”

Customer service, Mary, who had been quiet the whole time, finally spoke up. “I was looking over our customer satisfaction surveys yesterday, in preparation for this meeting. We have been getting EXCELLENT responses, especially in our return department. The problem is, we have triple the responses, meaning we have triple the returns. So, in addition to sluggish sales, our product returns are up.”

Sam probed, “And? Why do people say they are returning?”

Mary nodded. “I know this sounds silly, but our customers are saying they found a substitute product with higher quality from another company. And, its a company I never heard of before. We have always had a problem with one of our catch levers, it’s been our biggest customer complaint. This new product doesn’t have any catch levers. It’s designed differently.”

It was Sam’s turn to nod. “So, our sluggish sales and inventory problem looks like it may be a design problem. Why isn’t anyone in here from engineering?”

Excess Inventory

The good news was that we stumbled on the problem early. Sam arrived in Corina’s office about two minutes after the phone call.

“I thought something was up when I saw the excess inventory down here a couple of weeks ago,” he reported. “I figured there must have been some snafu in shipping that was causing a bottleneck, and I had some fires somewhere else, so I hoped that shipping would figure it out on their own.”

“We figured it out,” Corina chimed in. “We put the over-production in the Fifth Street Warehouse, so we could keep working around here.”

“But, I thought we sold the Fifth Street Warehouse,” Sam interrupted.

“Almost. But I talked to the Real Estate Department and they hadn’t had any serious offers, the listing had just expired and they were actually glad that we needed the space to put the inventory.”

Sam looked especially troubled. “Corina, I need you to gather the data, the real data on what we have in the warehouse, and your current production rates. We need to do some thinking about this.”

Utilization of Resources

“Come on, I think you are splitting hairs,” Corina said. “Everyone knows that the goal of the company is to make money, and the goal of the plant floor is to make as much product as efficiently as possible.”

“Is it, really?” I asked.

Corina stopped. She was trying to be defensive without being defensive. Rarely works.

“Has there ever been a time,” I continued, “where you were doing such a good job on the plant floor that you produced more than the company was selling?”

“Oh, all the time. We always produce to the sales forecast that Joe puts together. And his forecast is always wrong. I mean, right now, is a good example. If you had been here last week, you would have seen stuff stacked up all over the place. We even had three semi-trucks in the parking lot loaded with finished goods.”

“Where is it all now?”

“Well, there was a warehouse that we were trying to sell. I got lucky and found out in time to stop it, so we moved all the excess inventory there. Now, that’s utilization of resources.”

“Who knows about this?” I probed. “Does Sam, your VP of Ops know?”

“Yeah, he was down here a couple of weeks ago and saw all the inventory. He looked concerned, but I told him we were working on it. When he came down a couple of days later, I had all the stuff taken care of. He looked relieved.”

Our conversation became quiet.