"Amy, when times are tough, companies will always focus on limiting overhead like Six Sigma, Project Management, or other Process Improvement Methodologies. The focus is on Operations and just maintaining the resources needed to run the business."
This was the feedback from a VP with whom I worked at one point in time. I tried explaining how short-sighted that was, since those "overhead" services could help Operations to run more efficiently and enable the business to do more with less. The reality of the situation is that he was right. Regardless of the amount of strategic thought behind it, most companies will limit or eliminate altogether overhead Process Improvement programs when times get tough. Why?
1. The actual financial benefit may be problematic.
The financials are sometimes difficult to calculate in the first place. While companies are constantly focused on the bottom line, too many process improvement projects may focus on soft costs rather than actual net benefit. They may still be value added to the organization, but not perceived as a financial net income benefit.
For example, let's take an increase in productivity. This is valuable to employees who may find it easier to do their jobs. Perhaps a portion of salaried employees were even able to go from 70-hour work weeks to 50-hours. If the net of the productivity increase did not reduce labor costs, it may not be perceived as financially beneficial to a company's bottom line.
Cost avoidance is another great example. Perhaps the project decreased the opportunity for further defects related to a specific cause. Congratulations. There are still 20 other causes waiting to pop up (and they do very quickly). It ends up being similar to playing a game of "Wack a Mole," and again shows as more of a "soft" savings rather than a hard line benefit.
2. The annual financial benefit does not add up.
"We added $30 million in benefit," but a look at the financials reveals that the company only has $5 million in net income. Some of this is a result of the "soft" savings discussed above. However, some of it is also from the potentially redundant nature of who claims the benefit. From a process improvement perspective, we preach about the necessity of strong alignment of projects with business goals. That inherently means that many of the projects we work on are already budgeted and accounted for within the operations budgets. In order to justify the value of the process improvement program, we claim these benefits but ironically if we executed our role well, the team members are more likely to feel it was their success. By being the "wind beneath their wings" (pardon the cliche), the ability of the bird to fly higher and faster is more likely to be attributed to the bird rather than the wind supporting it.
3. The financials are incomplete.
This is one of the most prevalent reasons that continues to be overlooked from a metric side but is highly perceived by the operations teams in every company. How many labor hours did it take to achieve the net benefit? I have yet to see a process improvement program include the man hours needed from all project team members to complete the project. The result is a relevant and serious complaint from project team members who spend an increasing amount of time on projects and less time on their assigned operations. Over time, process improvement programs become perceived as overhead not because they don't add value, but because they are not measuring net value to the business. In the end, if you ask someone in operations what is most important to them, it is the monetary value of time that they need to run the business. Given a choice between two projects that yield similar net benefit but require differing amounts of time, they are much more likely to choose the one that requires less time. They will also respect the fact that their time is respected.
HOW TO GET BETTER RESULTS
Building a sustainable Process Improvement program must address these issues from the very beginning.
1. It's time to quit thinking of incremental improvements. When the economy goes south, those "soft" incremental improvements will get resolved in the minds of Senior Leaders who will capture greater hard-line results by workforce reduction efforts. Think of ways to add value to the business that lead to substantial irrefutable results and process improvement will no longer be a dirty word.
2. Figure out a way to recognize how the bird and wind work together in harmony to produce the results. Birds quickly know that they will fly south for the winter a lot faster with a nice tail wind.
3. Focus on delivering the desired results in the least amount of time with the least amount of effort. This doesn't mean less resources involved. It means a better use of their time!
Williamvads