Tag Archives: efficiency

Why Structure?

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From the Ask Tom mailbag –

Question:
In your workshop, you say that everything starts with structure, or organizational structure. There are so many other management issues to focus on, like communication, efficiency, goal setting and teamwork. Why do you always focus on organizational structure?

Response:
You are correct. Communication is important, lean initiatives bring efficiency, goal setting keeps us focused and teamwork helps us work together. But, all of those efforts will underperform if undertaken on top of a faulty structure. You may even see short term improvement by setting goals, or being more efficient, but in the long run, a faulty foundation will rip those improvements apart.

Get your structure right, and many of your issues related to management and motivation will disappear (almost overnight).

Just a Little Bit of Truth

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One inch higher on the left and the magnetic white board would be level. It had been the subject of much speculation on the shop floor that morning. There were several theories floating around, but no one had correctly guessed what the boss had in mind.

While the shop floor was organized according to a logical work flow, production had gotten further and further behind. The right jobs were late, the wrong jobs were early.

Last Friday, the boss had taken an informal poll. “George,” he said, “tell me, how do you know if we are ahead of schedule or behind schedule?” It was a fair question, but one that George did not know how to answer. “Well, boss, I guess if we were behind schedule, someone would come out here and tell us.”

It was an interesting response, seeing as how the floor was running only 28% on-time delivery. The boss walked over to the foreman’s office, leaned in and asked, “Say, John, when we are behind schedule, which I know is most of the time, do we ever tell anyone out on the shop floor?”

“Oh, no, boss, if we did that, they might get discouraged and quit.” Another interesting response.

You see, the boss had just heard of an experiment in a plant where they simply published production numbers on a daily basis to everyone in the plant. Every time there was an improvement over the previous day, the manager would circulate and thank everyone. No bonuses, no pizza, just a complimentary remark. The slow group in the plant improved from 83% efficiency to 87% efficiency. The fast group, however, improved from 96% efficiency to 162% efficiency (62% beyond predicted capacity.)

One inch higher on the left and the magnetic white board would be level. I wonder what your numbers would be?

Shift to Efficiency

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“You were more organized, but you almost went broke?” I pressed.

“Yes, we managed to get all the orders out the door, but it cost more to produce, than the revenue could cover,” Arianne replied.

“So, you needed to raise your prices?”

“Not that simple,” she explained. “We had competition. Our competitors price-to-the-customer was 15 percent below our cost to produce the same product. We waited for two years for them to go out of business. There was no way they could sustain that loss. But after two years, we figured out they weren’t losing money after all. They had found ways to be more efficient and productive.”

“What did you do?”

“It wasn’t enough to be organized. We had to examine every step. Turns out there were more efficient ways to work. We changed the sequence of some of the steps. Some steps could be done at the same time by different teams, increasing throughput. It was amazing. We cut our lead time from six weeks to four weeks. Higher throughput with the same number of people, with the same equipment, in the same facility, we lowered our cost. We shifted from just getting the orders out the door, to a consistent, predictable system.”

“Problem solved?” I asked.

“Not really. That’s when our troubles really began.”