Drummond: Don’t Neglect Process Improvement
Time and time again, I have witnessed too many companies spending millions on capital investments to achieve marginal improvements while others spend far less and achieve spectacular results. It may feel obvious that adding a saw or auto-puck table will significantly enhance output, but the reality often falls far short of the promised results. It is far easier for many to risk spending millions on new equipment and buildings, but an investment of a few thousand dollars for formal training in proper process enhancement has been deemed a step too far. Why is investing in meaningful process improvement not part of every company's yearly checklist?
One might be asking, what is meaningful process improvement? Process improvement covers all processes that happen within any company. For example, HR, manufacturing, design, sales, admin, and capital improvement discussions are all part of the process improvement umbrella. Process improvement is at the heart of the continuous improvement philosophy embedded in successful lean manufacturing. For a fraction of the cost of major capital improvements, the value of investments in process improvement can be measured in hundreds of thousands of dollars—if not millions of dollars—in additional profit/revenue. What would the return for your company be for a three-point gain in net profits year after year? Just FYI, a 3-point increase is a very low bar.
Employer HR practices. Time and time again, many are stating that finding enough talented and dependable employees is becoming a growing problem. That statement is far more accurate than most understand. More people will be leaving the workforce for the foreseeable future than coming into it. In the U.S., this will translate to 400,000 fewer new workers per year for the next nine years. As a percentage, Canada's demographics are even worse. (Source: Peter Zeihan, The Trade Breakdown | Upfront Summit 2020)
Lean manufacturing has two sides to the proverbial coin. One side is lean tools, such as 5S and Just-In-Time, and the other side is that lean manufacturing requires excellent employee and management practice. Without good employee and management practices, lean manufacturing will fall apart. Over the coming decade, the companies that survive and prosper will only be those with strong and healthy HR management practices. Employees will have far better bargaining strength when choosing who to offer their services as an employee. Talented and skilled individuals will have multiple offers from multiple companies to make their choice.
Case Study for HR Process Improvement. During our lean training, we spend considerable time explaining best practices of HR and management principles. One client, who must remain confidential, had chronic turnover and vacancies in a very prosperous area with an extremely low unemployment rate. While their competitors were experiencing healthy net profits, they struggled to break even. Fast forward three years, while implementing best practices for HR and management and with no investment in new equipment, the company has virtually no turnover or vacancies. Their net profits are now among the high percentage of their peers. HR and management practices are part of process improvement and must be remedied. The best practices of HR and management principles are just as important as any new equipment.
With so many areas included under the meaningful process improvement umbrella, all of them cannot be covered in this article. The one thing that needs to be mentioned – is the most significant barrier to implementing or investing in a formal process improvement program: pride or ego.
Case Study for Manufacturing Process Improvement. One client brought me into their location without his co-owner’s consent. His partner could not believe that he did not think that they were undoubtedly the experts. They certainly did not need an outsider coming into their location to point out what the consultant believed were areas of deficiencies and how they could make improvements. He thought they already knew where they needed improvement and did not need anyone explaining what they already knew. Long story short, each day spent showed just how many areas where they could make adjustments and improve, and that both owners had blind spots. It was a typical case of not knowing what you do not know. The services' cost was paid back within the first hour on location. The returns garnered by the better practices in every department kept filling their bank account every month, just like an investment in new equipment. Yet this investment was not even close to what new equipment cost.