Tag Archives: feedback loops

Feedback Loops

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Marion’s bottom lip protruded. If she was eleven years old, I would have sworn she was pouting.

“I think I know who said that,” she announced.

“Is it important?” I asked.

“Well, I think they have a chip on their shoulder and this evaluation was just a chance to vent, to make me look bad.”

“Marion, there are positive things in this evaluation, and there are negative things here. You like the positive stuff, but you don’t believe the negative stuff.”

“Well, I think this person has an agenda. I don’t think it’s me,” she continued to protest.

“Do you think that is part of the problem?”

“I don’t think it’s me,” Marion repeated.

“You are angry at the person who gave you the negative feedback and you would like to ignore the feedback,” I confirmed.

“Besides, even it were true about me, I can’t change, that’s just not me. I couldn’t do it. Out of the question. I don’t see how anyone could do that.”

I looked at Marion. Without a word. Silence.

“But if you could change, what would you do first?”

Are Budgets Necessary?

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From the Ask Tom mailbag –

Question:
We are looking at our planning scenarios for next year, and one question we have is the value of creating a budget. Doesn’t it make more sense just to print comparative reports year over year rather than spend the time to create something new?

Response:
I always go back to purpose. What is the purpose for a budget? What are the questions we ask ourselves as we look forward to next year?

  • What is our market? Size of market? (Facts or assumptions)
  • What macroeconomic factors impact our market?
  • How much of that market can we expect to earn with our product or service?
  • Is our product or service something that can impact the market (materially) different than in the past, with a disruptive technology or delivery method? Or is it a product or service with a maintenance track that will substantially see similar volume to last year?
  • Given our assumptions about our revenue levels, what is the appropriate cost structure to deliver our promises in the marketplace?
  • Does that cost structure deliver the gross and net profit levels, appropriate to the risk, and within the return on (investment, assets) that we believe appropriate?
  • Is there a disruptive (to our market) cost that we are willing to suffer that might dramatically impact our positive ability to sell or take marketshare? Like a warranty program or alternate delivery method, like air freight for a heavy product? I know it might be heavy, but the question of air freight might spark an idea.

I see budgeting as a bit of realism for our strategic decisions. The purpose of budgeting is to help us make those decisions. As a post-mortem, budgeting helps us check our assumptions (were they wrong or confirmed) and how well did we execute on the decisions we made.

When I am working on this process with a company, a quarterly shakedown on the questions (above) help us deal with reality and adjust (our assumptions, our efforts, our cost structure, our decisions). In a stable, incremental business model, year over year may be a satisfactory approach. Where the business model is seeing dramatic disruption, by economics, technology, largess competition, regulation or other factors, a zero-base approach may be appropriate.

Budgets ARE necessary as a measurement to check our assumptions and aspirations in the market.
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Important First Behavior

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“I understand positive reinforcement in video games, how you level up to expert, but, how does that work around here?” Travis asked. “I run a loading dock.”

“Travis, the guys loading the trucks, have you noticed the different colored t-shirts they wear, the ones with the company logo on the front?” I asked.

“Yeah, I noticed. We started that about three weeks ago. The new guys get a white t-shirt to start. We had a meeting about it.”

“And when does the new guy get his first white t-shirt?”

“The first day,” Travis smiled.

“No, the first day he punches the time-clock reporting for work on-time,” I clarified. “What is the most important first behavior?”

“Showing up for work on time,” Travis said.

“And when does he get his second white t-shirt?”

Travis was catching on. “The second day he punches in for work on time.”

“And when does he get a yellow shirt?” I continued.

“Five days on time, consecutive days on time.”

“And when does he get a green shirt?”

“When he passes forklift training.” Travis stopped. “I think I get it.”
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Orientation for our next program Hiring Talent starts Monday, March 4, 2013. For more information and registration, follow this link – Hiring Talent – 2013.

Your Customer is Not Your QC Department

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“You cut your lead time from six weeks to four weeks. Higher throughput with the same number of people, with the same equipment, in the same facility, you lowered your cost. You shifted from just getting the orders out the door, to a consistent, predictable system. And that’s when your troubles began?” I was curious.

“Yes, we were certainly focused on our systems,” Arianne continued, “but we had to match a competitors warranty. We figured, no problem, but we were wrong. We had our cost-to-produce down, but our warranty returns went through the roof. Everything we made up in cost savings went right back out the door in warranty repairs and replacement. We had a quality problem.”

“Pace and quality,” I said softly.

“Yes, our throughput was quicker, but it just meant we were making mistakes faster.”

“What did you do?”

“We were relying on our customer to be our Quality Control department. Bad move. We had to retrench, put inspections after each major step, so if we had a problem, we could identify it before we made another thousand parts. We tracked everything on white-boards. We didn’t make it to six-sigma, but enough quality improvement to make a big difference.”

“So, finally you got organized, accelerated your throughput, beat your internal quality standards. It must have been a proud moment,” I encouraged.

“Not really,” Arianne replied. “That’s when the rug got pulled out from under.”