Process and Performance Improvement for Small Business

09-January-2013
09-January-2013 15:03
in Process & Performance Improvement
by Colin Smith

Commentators like to speak at the moment about the importance of the entrepreneur in solving some of the economic difficulties we are currently experiencing as a nation.  They present small business owners as the vanguard of ongoing economic growth and business innovation.  Whilst this idea certainly rings true to an extent, I would definitely argue that all entrepreneurs are not alike and to speak of them as a homogeneous group committed to driving forward positive changes in their organisations and society in general would an exaggeration of the truth.   I regularly speak with entrepreneurs at both ends of the experience of small business life and what is remarkable is the difference in their attitudes toward change.  Entrepreneurs at the beginning of their small business adventure seem to be a lot more cavalier in their attitude towards change than the entrepreneurs who have now established their small businesses.  

This notable difference is perfectly understandable.  Once we have built our business to the point of consistent profitability, including a market-based wage for ourselves in consideration of the duties we carry out, there is a very real temptation to leave things exactly as they are.  As small business owners, we are naturally reluctant to tinker with a winning formula.  Not only is this attitude contrary to the popular perception of the entrepreneur but such an attitude may also contain within it the seeds of the downfall of the business that the small business owner is so carefully trying to protect.  No business is impervious to the winds of change and in order to stay on top, a small business owner must continuously seek to improve his business.  My experience is that those entrepreneurs who fail to adopt a mindset of continuous improvement in terms of the processes and performance of their small businesses eventually fall victim to a new competitor, a technological breakthrough that weakens their competitive position, new laws or simply changes in in consumer preference or fashion.  Focusing on maintaining existing performance rather than pushing for peak performance is extremely dangerous, as the best case scenario is that you will achieve it and stand still as a business.  

Once the necessity of change has been accepted, the question then becomes how to best effect positive change within my small business?  As a Lean Six Sigma practitioner and serial entrepreneur, I have extensive experience of trying to effect change within small businesses.  I understand the psychology of the business owner reluctant to alter something that seems to be working well.  I also understand some of the skepticism surrounding business improvement initiatives.  Any one of you that has been involved in a "business transformation" effort will probably understand this skepticism as well.  These efforts usually start with a solution that on the face of it seems right for the business until you realise that you are one of the people that will have to "transform" to achieve the stated objectives.  The truth is that organisations do not change unless people change and in small businesses, everybody within the organisation will be touched by even the smallest changes.  The higher the proportion of people that can influence the success of a change initiative in a business, the less likely you are to achieve the desired results, even if you have the "right" solutions.  In my experience, the following hypothetical equation is true for every change initiative I have ever been involved with.

R = Q x A 

In this hypothetical equation, results (R) are equal to the technical quality (Q) of the solution times the acceptance (A) of the people doing the work.  In order for even the best ideas to succeed, team buy-in to the solution is critical.  It's not enough for a strong project manager to demand compliance based upon a folder full of complicated statistical analysis.  Simply put, it's not enough to have the "right" solution.  Lean Six Sigma practices are great and can invariably deliver process and hence productivity improvements within businesses.  However, improving the processes of a business will only get you so far.  At some point, you have to drive the right performance within the processes.  

In the remainder of this article, I will share with you the steps that we use here at Continuous Business Planning in helping small businesses achieve both process and performance improvement.  Hopefully, this will inspire you to approach your business improvement initiatives with fresh optimism and with some new ideas as to how you can actually help effect positive change within your small business and make it stick.

Step 1: Commit To Change

As a young project manager in my first corporate position after graduation from University, I used to attend weekly programme meetings with some of the other project managers within the group.  There was endless discussion of the importance of "building a burning platform" for change and lack of commitment of the project team or poor stakeholder buy-in was often trotted out as the reason for any disparity between the objectives of the projects and the actual results.  Although I think that many of them were simply excusing poor work in the early stages of the project, it is clear that poor commitment across the team will hamstring any change initiative.

Research shows that 70% of change initiatives fail to deliver the anticipated results.  This is usually not because the person trying to implement change didn't have the "right" or at least a good solution.  The problems invariably arise with the implementation of the change and those problems start because too little attention has been paid to arousing a real commitment to change across the team responsible for it and at least an acceptance and understanding of the reasons for change by those affected by it.  This is certainly something that the project manager or change agent can influence but this must be approached with care.

If people do not clearly see the reasons for change, they don't want it, won't stand for it and will go out of their way to avoid it, if not sabotage it.  People are naturally wary of change and unless they clearly understand the business case behind it, they will focus on more on what they have to lose rather than what they have to gain.  The problem with the idea of "building a burning platform" is that crises are very hard to manufacture over and over again.  To those attuned to the outside world and the inner workings of their business, however, there is no need to "build" a burning platform for change.  They present themselves all the time.  It is the job of the change agent or project manager to identify and broadcast them.  The most compelling reasons for change are real and, very often, personal.  In the absence of a burning platform, another way to achieve a comitment to change is to have a strong leader articulate a powerful vision for change.  This may be to exploit an opportunity rather than respond to a threat.  Either way, if there is no commitment to the change, the results will be disappointing at best.

Step 2: Measure and Analyse the Process

In Lean Six Sigma, the process improvement framework is called DMAIC and we believe in this structured common sense approach.  A detailed discussion of the techniques associated with Lean Six Sigma is well beyond the scope of this article but for those with more than a passing interest, I thoroughly recommend The Six Sigma Way Team Fieldbook as a guide to identifying measures and gathering appropriate data.  Of course, you might seek professional help at this stage also.  The important principle to bear in mind is that a disciplined, data driven approach to change will bear more fruit than one based upon unfounded assumptions and gut-level hunches.  The Lean Six Sigma approach seeks to answer the questions "how am I really doing?" and "how does that compare to where I really want to be?".

Step 3: Streamline the Work

There are 3 basic principles for streamlining processes which i'll summarise here.  These are:

Value - A process should only invest effort in work that produces something of value for the customer.  This work is what we call "value-added" and will change the product or service toward completion through activity which a customer would pay for if they knew about it.  Activities that just prepare, move, hand-off, sort, wait, check or fix the product or service are wasteful.  Lean philosophy talks about the seven wastes, which those that are interested can research further.  The first order of business in streamlining a process is to gett rid of the non-value-added work as much as possible, so that you can then identify the right proces steps and put them in the right order.

Flow - This basically means that a process should have just enough capacity to meet demand.  This needs to be carefully handled as most processes encounter significant variation in both demand and process capacity.  However, the right size for a team normally becomes obvious after analysis of the right measurements.  Another important aspect of controlling flow is establishing ways to react to and influence sources of process capacity variation.  The other relevant concept related to this principle is often called "single-piece flow", which is an attempt to remove handoffs by having one person complete a single piece of work before handing it off to anyone else.  It is importnt not to take this concept of single handling too far though.  You need to ask yourself, does the benefit of the handoff (usually the cost differential of the resources doing the steps) outweigh the additional work time and double handling that it causes?  Just be sure that the reasons for handoffs are dispassionately based upon actual costs rather than the emotional reasons why businesses cling to existing process handoffs such as organisational history or job protection.

Pull - This concept is usually applied to manufacturing businesses and describes the idea that the process should only create the product or service to meet a specific customer request.  It is from this idea that we jet Just In Time processes and the concept of making to order.  

Using these three guiding principles, our job is to "right-size" the process.  It is not the intention of Lean Six Sigma to make arbitrary cuts that would significantly affect production capacity.  However, I have yet to be acquainted with any business in which it's important processes were all completely optimal or operating perfectly.

Step 4: Make The Work & Data Visible

In order to really drive performance improvements within the newly streamlined processes, the current status of the teams work and the appropriate performance measures need to be immediately observable and visible to the whole team in real time, meaning that as an item arrives to be worked it is visible to all and as each item is completed it is visible to all.  For some teams this is easy, but for others it requires substantial creativity to design the right environment to drive effective collaborative efforts.  Another important challenge at this point is to change the mindset of team members to look at the data from a "whole team" perspective and to care about the "whole team" result.

Step 5: Organise the Team

The next step is to identify skill sets necessary to perform the tasks, ignoring the process steps which are often artificial boundaries, and see if they can be clumped together readily into jobs.  Additional training may be needed as the roles of the team broaden and become more holistic than they were in the pre-change environment. In larger organisations, it's useful to pilot the new processes and job roles with a single team.  Further refinement usually takes place in the light of what is learnt here before the new processes and job roles are rolled out across the organisation.  

Step 6: Set Team Goals

Together, goals and work distribution methods that directly relate to meeting a customer-required outcome as a team form the drivers of collaboration that leads to successful business improvement initiatives.  This does not mean that individuals are no longer accountable.  Instead, it means that each team member needs to be evaluated on his or her contribution to the team.  Those individuals that contribute should be developed, promoted and rewarded appropriately whilst those individuals that cannot meet a minimum standard of performance should find other roles either within or outside of the business.  Although people deserve equal treatment, all people are not equal and a well managed team recognises variation in performance.  Understanding and reinforcing what an acceptable minimum acceptable result is, as well as a typical result and a goal, which will by definition be better than the current typical level of performance, is key to effectively managing individual and team performance.

Step 7: Lead The Transition

The challenge for the change agent or project manager at this point is to ensure the team understands that implementation is a case of discovering how to make the new processes work, not if we are going to do it.  Pilot teams or the team in a small business often use a pilot or the initial implementation phase to de-rail the change, especially if step one of this process has not been successfully completed and there is only weak or partial commitment to change.  If the belief exists that failure or significant problems lead to everything going back to how it was, not surprisingly performance within the new process is less than it otherwise would be.  Another important consideration at this stage is to deliberately under resource any pilot to help understand what the new process capacity really is.  It's important now, as it is throughout the whole process to be completely transparent as to what the eventual outcome of the transition will likely be.  For example, I never say that there will be no redundancies made as part of a process and performance improvement initiative.  Rather, I simply say that the company leaders will make the best business decision possible and execute it in the most compassionate way they can.  In practice, this has meant that head count reductions have happened through natural wastage or in growing businesses that output per person has simply increased rather than headcount.  It would be unprofessional, however, to promise that this will be the case.  Every project must be approached on it's own merits.

Step 8: Sustain Team Performance: 

By sustain, we mean in practice that the company commit to continuously trying to improve performance, as our experience is, as we said at the beginning of this article, that if you are not getting better, you are usually getting worse.  In order to do this, a simple, fast, public and reliable system for measuring and displaying the fundamentals is critical.  Although it's easy to argue about what changed, it's hard to question real data.  I would recommend that the data be available in such a format as to allow leaders and teams to differentiaite between a real process issue, a significant one-time event and the typical noise of random variation.  Many teams use raw data, but I would recommend the use of trend charts over time.  Once the data is visible, leaders and team members need to watch the data, listen to the customer, analyse the process, develop the people and continue to sustain performance and develop future improvements.

This eight step process takes from the very best process and performance improvement methodologies in existence and has been field tested over the course of a decades experience in UK SME's, both working for myself within my own businesses and for others in theirs.  I commend it to you and promise that it can yield impressive, sustainable results in your business.  So confident are we that this process works that we make a 500% Return on investment promise to our clients with whom we work to improve their businesses and we have never had to issue a refund cheque to this date.  If you are interested in process and performance improvement in your small business and need some help with implementing the above, don't hesitate to get in touch.   

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