Wednesday, November 3, 2010

Innovative Sustainable Solutions

Increase Quality, Decrease Waste, Decrease Errors, Decrease Cost, “Sounds Wonderful, but Not Possible !” any CEO or Board of Directors would say, but, we are telling you not only is it possible………..we can do it.



The health care system must work toward optimizing its services to the public, this will be the difference between sustainable profitability and failure.

Joseph Juran linked manufacturing and healthcare directly. In his forward to Curing Health Care, Juran wrote, “As the health industry undertakes …..change, it is well advised to take into account the experience of other industries in order to understand what has worked and what has not. Of course, in the minds of many, the health industry is different. This is certainly true as to its history, technology and culture. However, the decisive factors in what works and what does not are the managerial processes, which are alike for all industries.”


Manufacturing and Healthcare are both multi-functioning bodies which require team work. Although similar, Healthcare systems can be more varied and have many different multi-functioning bodies providing more types of services under one umbrella than the typical manufacture who focuses on one type or group of products. At times the healthcare system is a short and long term “hotel” admitting and discharging people, providing all the amenities required by the vast array of different people of different cultures, ages and socioeconomic levels. In addition to basic “room and board”, healthcare systems must offer routine “maintenance”, manage emergencies, provide testing and in depth treatments all in a smooth seamless manner with the sometimes almost impossible goal of restoring or maintaining the individual and families’ health. Perhaps one if not the most difficult task for the healthcare system is when it must manage, support and work with individuals and families who will not survive or will not survive in a lifestyle as they once previously were able to function and survive.


There is the added complication of the hierarchy of a health system. Doctors in a healthcare system are not employees, but contractors, hospitals are typically “not-for-profit”, the main goal is prevention, cure or ongoing care, which is unique to every individual and situation.


Healthcare has no identified methodology or strategy to identify and improve processes, eliminate ineffective actions or results and waste. Manufacturing, with its’ “for profit” orientation, will not tolerate inefficiency, waste and error. Manufacturing has developed two major processes with the goal of identifying a problem and eliminating waste. They are “Lean” and “Six Sigma”.

Lean is a structured process which looks for and eliminates waste, its’ goal is “Performance Enhancement”. Lean identifies eight (8) types of waste: 1) Inventory, stagnant money; 2) Defects, errors; 3) Motion, poor facility layout; 4) Transportation, moving; 5) Overprocessing, more than is needed; 6) Waiting, idle people or facilities; 7) Underutilization, of staff, professionals; 8) Overproduction, yields inventory or waiting.


Six Sigma is a business management strategy, for “Error Identification and Error Correction”. Six Sigma was originally developed as a set of practices designed to improve processes and eliminate defects, but, as a result of its’ significant success in those areas, the application of this process has grown to include many other types of business processes. In Health care, where the stakes can be: Life versus Death; Healthcare Treatment versus No Treatment or the “Wrong” Treatment, Six Sigma’s business management strategy is gaining new levels of recognition.

Six Sigma directs you to: “Define the Problem”; Collect data pertaining to the output and variables or essentially “Measure” the defined problem. You then “Analyze” this problem area looking for correlations in other areas. Alterations or “changes” are put in place to alter or “improve” the problem you defined. Controls are used to monitor and collect additional information which will provide data demonstrating the success or failure of the alterations/changes upon the identified problem.


Six Sigma uses a set of quality management methods which are then molded to specifically meet the needs of the health care provider. Individuals already working within that health care system, are trained to implement the specific quality management tools for that health care system. This is a “key” to the success of these processes, they are directed at teaching and using the people within the system. When these individuals are trained and able to work within the health care system, this provides for continuous evaluation and improvement within the system.

The goals of each of these management tools are:
1) Increase the quality of the product, in this case the treatment which the individual receives;
2) Decrease the defects or errors which occur in the process of providing this care or treatment to the individual;
3) Decrease the cost of the care and treatment once the defects of errors have been identified and eliminated.


The utilization of these two processes together “Lean Six Sigma” identifies, solves problems through a disciplined methodology which results in sustainable improvements.





Wednesday, October 13, 2010

Accountability

Introduction



Today there is a lot of talk about accountability in business, as well there should be. The term has become a business buzz word. Consider the stock market crash, who was ever judged as the accountable party for the crash? From my perspective, no-one was held accountable. The theory of accountability is very pertinent today; corporations should be responsible for their actions and the results which follow those actions.


Explanation


Corporations should not only be accountable for their financial performance, but also should be ethically responsible. Ethics cannot be legislated, they must be voluntarily pursued. Financial performance is governed through the stock market or through pay and bonuses. However Ethics can only be monitored by the corporation stakeholders (Board of Directors, Stock holders, Institutional Investors, Vendors).


Management’s job is to clear the path to success of obstacles, so that their subordinates can succeed in their role in the company. This is a major change over how businesses were managed historically, but think of it, if the employees are hindered in their tasks, how will the company succeed. Employees are not lazy, they desire good incomes and they realize that the better the company performs the higher their reward. Responsibility increases as one progresses up the corporate ladder, the reason is that more and more personnel are supervised.


Employees should be accountable, but only if they have the authority to be responsible. This means that in order to hold employees accountable they must be empowered.


Misunderstanding of the Concept


There is a great deal of misunderstanding surrounding the term “accountability”. What is a desirable trait for corporate behavior has been modified and interpreted as a culture for employees. Managers tend to use the term to fulfill their needs and unfortunately this leads to a perversion with negative impacts.


A type X manager feels that he is in control, and that people are vehicles for him to accomplish the task. The term Top Down decision-making is an accurate description. He uses coercion to enforce his decisions in many instances. In this environment people are not willing to accept accountability, nor can accountability be forced on them. All decisions are his, hence all results are his, thus he is the accountable party, and any consideration that his people are accountable is foolish.


Conversely, a type Y manager understands that employees will accept accountability if they are empowered to effect results of their process. In a theory Y environment employees are encouraged to participate in the decision making process, thus they have a stake in the results.


Micro-managers


How can a Micromanager be concerned about accountability, this is a real stretch. A Micro-Manager is the purest form of a Theory X manager. Think about what accountability means. First employees must be empowered to be accountable. Does a Micro-manager empower anyone? No, by definition a Micro-manager controls all aspects of his employee’s processes. The old conundrum about being responsible without having authority absolutely pertains. For those of you unfamiliar with the situation, if you make a person responsible without giving them authority you are setting them up for failure. You are also creating an intolerable workplace. Hence how can a Micromanager who does not empower people hold them accountable?


Benefits of “Accountability”


An empowered accountable employee will stick to an issue until it is resolved. This is a good thing; employees who stay engaged will persevere.


A culture of accountability is created, it cannot be imposed. People willingly become accountable when they have pride in their work, people take pride in their work when complements are paid and good work is rewarded. A negatively based manager does not have a prayer of creating this culture. Instead he will create the polar opposite; he will create a culture of blame and secretiveness.


A good application of accountability is in corporate governance. Corporate governance is the title of methods of controlling a corporation by means of a Board of Directors and stockholders.


“Insider loading” is the result when the President or other operational authority loads the Board of Directors with persons sympathetic to his causes. The Board of Directors then becomes a rubber stamp for any programs the President wants to initiate. There is no one to hold the operating officers responsible for the company’s performance or ethical behavior. This defeats attempts at instilling a culture of accountability.


Institutional investors are perhaps the only means that a corporation can be governed, hence held accountable. Institution investors have large blocks of voting stock and have the power to pull their stock if the corporation is not behaving in accordance with the mission, ethics and goals which have been stated. Institutional investors are a good means of enforcing accountability.


Creating an environment of “Accountability”


Deadline v. target v. stretch target


A deadline is a milestone that must be achieved for other actions to remain on schedule. In reality there are few deadlines, those who thing in terms of all tasks being deadlines subject to punishment are rigid project managers who are unable to conceive that plans should be fluid to yield the best results. A target is a milestone goal which is the expectation for completion. A stretch target is an optimal milestone for achievement. Milestone forecasting should be achievable using normal effort and considering there could be problems along the way which might delay the accomplishment of the task. Stretch goals are the result of extra exceptional effort and not encountering alterations to the plan which would delay it. It is important that Deadlines, targets and stretch goal be understood and utilized appropriately. If deadlines are consistently difficult to achieve then the initial planning of programs will not have any risk, but will include extra time to account for any delays that might occur.


Expectations


Expectations are what drive accountability. Reasonable expectations and a culture which does not blame, but seeks to resolve the occurrence of future issues will encourage accountability


Expectations should be defined for each of the three levels of management (Operational, Tactical, and Strategic). Consideration should be given that the appropriate goal is given to the appropriate level of management, for example you would not give a front line manager a goal of expanding the company through acquisition, you would want him aware that the executive had that as a goal, but it is not a goal he achieve.


The SMART goal concept should be used to define expectations. SMART is an acronym which means, Specific, Measurable, Appropriate, Realistic and Time based. Specific means the goal is well defined. Measurable means that goal is not subjective, but is something which can be measured. Appropriate to the situation or role of the individual. Realistic goals are achievable, not “walk on water”. Time based insures the goal is achieved in such that a benefit will be realized.


Watch what you measure, because you get what you measure. It an old adage, if you measure a given performance, people will focus on that process. It is probable that by focusing in that manner other important features of the business model will suffer. For example if you measure sales volume and desire higher volume, that is what you’ll get, profitable or not, you will get sales volume, it is possible you will bankrupt because prices are cut in an effort to generate more sales, perhaps to an unprofitable level.


Summary


Accountability is good concept when properly applied. Creating a culture of accountability requires changing believes and systems which lead to a culture of blame. A culture of blame does not advance an organization rather it hinders progress with fruitless and upsetting wasted effort. Theory X managers should be given the opportunity to adapt or be moved into support roles where they cannot impact the organizations culture.


An accountable culture will encourage perseverance and innovation both of which are assets an organization desires to survive in today’s business climate.

Wednesday, August 4, 2010

Strategic Planning

A company without a Strategic plan is worse than a ship without a rudder. A ship without a rudder knows where it is to be going, it is incapable of steering itself to it’s destination. A company without a Strategic plan does not know where it is heading, so it may be guided, but to where is unknown.


The purpose of Strategic Planning is to align the company with corporate goals. Without Strategic planning the flavor of the week prevails among Managers and progress is not made in the direction that the Board of Directors or President desires. The result of the strategic plan is to generate above normal returns by positioning the company to use its competitive advantages in targeted markets. Strategic Plans are based on two principles:


  • A company is stronger if Managers are aligned to the same goals
  •  Management’s responsibility is to provide the resources necessary for employees to perform their jobs
Prior to preparing the plan, research must be done to begin plan formulation


External Environment analysis


  • Competitors- define who the competition is.
  •  Determine if there are any competitors to benchmark
  •  Gather economic data as available
State of the Industry


  • Explore entry and exit barriers
  •  Explore the competitive level of the industry
  •  Determine the market maturity level
  •  The worst combination is low entry barriers, high exit barriers, high levels of competition in a declining market. This combination frequently leads to a wasted marketing effort and promotion dollars.
  •  The Best combination is High Entry barriers, Low exit Barriers, low competition levels in a growth market.
Internal Analysis
  • Resources- define what resources are available and which contribute to core competencies
  •  Capabilities- define the capabilities of the company and notate which are potential core competencies once combined with resources.
  •  Core competencies- Combining special resources and capabilities to develop a definition of the core competencies of the company. A core competency is not defined a primary processes unless the process has certain characteristics. Core competencies are combinations of capabilities and resources that distinguish the company. Core competencies possess these characteristics: Rare, Difficult to substitute, Valuable to the customer and Costly to imitate.
  •  Determine and plan how to convert core competencies into competitive advantages.
Strategic Goals- Are a picture of the future state which are used in formulating the plan. The Strategic plan is the roadmap to the goals.


Strategic mission- is the definition of firm’s unique purpose and long term goals considering all the above information and making use of the developed competitive advantages. A Strategic mission should be prepared that can be communicated and understood by all levels of management. For example:


“We will grow the company by 10% per year by pursuing acquisitions in different industries by maintaining high quality and above average financial returns.”
Or
“We will become the best company of our size by focusing on developing our current customers and partnering strategically with other organizations to fulfill our customer’s needs.”


The Strategic mission should be a statement that the company can rally behind. It should answer any questions as to priorities. Many contain ethical expectations.


There are three levels of plans generated, the Strategic level, the Tactical level and the Operational level. Strategic level plans are generated by executive level management, Tactical level plans are developed by mid-level managers and Operational level plans are created by front line managers. Based on the definitions and the Strategic mission developed in the Research and Development phase the plans should be created beginning with the Strategic Marketing plan. Plans should be prepared in the order listed below:


1) Strategic Marketing plan (5 year minimum focus, can be as many as 10 years)
a. Focused on how to achieve the strategic mission and goals
b. 4 P planning
c. Details
d. Budget
e. SWOT analysis
f. Must be communicated to Tactical marketing managers to formulate their plan


2) Strategic Operations Plan is created from the Strategic Marketing plan (5 year minimum focus based on Strategic Marketing plan time table)
a. Supports the Strategic Marketing plan
b. Requirements and resources to support the Marketing plan
c. Budget
d. SWOT analysis (see Addendum A)
e. Must be communicated to Tactical Operations managers to formulate their plan


3) Tactical Marketing plan is created from Strategic Marketing plan (1-3 year focus)
a. Prepared by middle management
b. Includes, but is not limited to the Sales Forecast
c. Further detail to support the Strategic Marketing plan
d. Budget


4) Tactical Operations plan is prepared from Strategic Operations plan (1-3 year focus)
a. Prepared by middle management
b. Further detail to support the Strategic Operations plan
c. Budget


5) Operational plans are prepared by lower level managers (upcoming year focus)
a. personnel and training requirements
b. day to day budget items
c. maintenance plan and budget


All of the above plans must be communicated to Managers for company alignment to occur. Nothing secret exists in the above plans, there is nothing that shouldn’t or couldn’t be shared. The communication of plans allow managers at all levels to adjust their plans if there is deviation from the original plan. It also holds managers accountable to each other to achieve their stated plans.


After completion of the above plans, Finance prepares the Strategic Financial plan (5 years) from the budgets submitted. The goal of the Financial plan is to support the capital and cash needs of the Marketing and Operations plans. The Financial plan only needs to be shared with Executive and Upper level management. If budget items must be cut or eliminated for the financial plan to work this should be communicated to the involved managers so their plan can be altered appropriately.


Progress and Control are monitored by measurement, the balanced scorecard approach should be used. The use of a radar graph will easily indicate areas that are not at the desired level. With this information, corrective action can be taken to place the plan back on track.


Care must be given as to what is measured so the metrics encourage progress towards the strategic goal. Caution must be taken in emphasizing financial goals as they can lead to a risk-adverse culture which will defeat the potential for above average returns.


Typical Balanced scorecard items:


Financial
Cash Flow
ROE
ROA


Customer
Ability to anticipate customer needs
Effectiveness of Customer service
Percentage of repeat business
Quality of communication with customer


Internal Processes
Asset utilization
Employee morale
Employee turnover rates
Learning


Improvements in innovation
Number of new products
Increases in skill levels


Strategic Planning is more pertinent today than ever. Some argue with the fast changing environment today a long range strategic plan is worthless. A strategic plan is more important in a fast paced environment to keep a company focused on it’s goals. If anything the planning horizon should be shortened and the plan considered a living document that is subject to revision should the competitive environment change.

Contact us for training or help in preparing your company's Strategic plan or Business plan.