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Don't Think small - Think Lean
Small businesses can benefit from the essentials of lean management.
By Craig Cochran
Working for a small company has many benefits. The environment
is usually informal, you can see the results of your work, and co-workers
know and care about you. On the other hand, in a small company, everyone
must do many different jobs. Time is usually in short supply, too. Often
there isn’t enough of a surplus to spend it on establishing consistent
procedures and systems. Instead, the whole place runs on “tribal
knowledge.” It’s critical that small organizations develop
lean and effective systems for managing their business. They need systems
more than any other type of organization because they don’t have
the luxury of doing things twice. Mistakes can be fatal.
For small businesses, the essentials of a lean management system can mean
the difference between success and failure. Fortunately, these are easy
to implement once they’re understood. Let’s examine the key
elements of a lean management system for a small organization.
Strategic planning
The term “strategic planning” conjures images of
grim-faced executives, conference tables cluttered with financial reports
and walls filled with scribbled flip-chart pages--in other words, an intimidating
and time-consuming process. However, strategic planning is critical to
small organizations. It defines their course during an extended time frame,
focusing all organizational members on the most critical actions necessary
for their growth and survival.
Lean strategic planning can be performed in two to four hours. The underlying
concerns are the same as the full-blown version but with less philosophizing.
Lean strategic planning provides concrete answers to the following questions:
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What are we doing especially well? What must happen
to ensure that we continue doing well and even improve? |
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What are some of our most promising opportunities? Why are they
promising? What should we do to pursue them and turn them into things
we do especially well? |
• |
What are we currently doing poorly? What do our customers tell us
we should improve? What do our employees tell us we should improve?
Exactly what should we do to improve these aspects of our business? |
• |
What competitors are howling at our doors? What makes them a real
threat? What should we do to minimize the risks posed by these competitors?
What other forces (e.g., social, demographic, political, economic
or technological) threaten us? What should we do about these threats? |
The answers to these questions form the basis of strategic planning.
Having formulated them, a small business must then apply project management
to make certain that the actions get done. Specifically, the following
must be determined:
• |
Responsibilities. Who is the project manager for each
task? |
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Time frames. When will the action begin? When should it end? |
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Resources. What resources are available for implementing the actions? |
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Review. When will key decision makers meet to revisit the progress
against the plan? |
The results of strategic planning along with project management details
must then be documented simply and concisely. The entire document should
be no more than a dozen pages long. Copies should be distributed to all
personnel who play a role in implementing the strategy. Depending on the
plan, this could range from the entire organization to a handful of people.
The best way to communicate the strategy to most people is through objectives.
Measurable objectives
Even the best strategic plan can be difficult to understand for
those not involved in the planning process. Objectives take the strategy
and translate it into language that everyone can understand and implement.
They also break the strategy into component pieces that are appropriate
for each process.
Let’s say, for example, that the organization must pay off debt
in order to stay viable. The best way to do this, it’s decided,
is to increase net income. The additional profit will enable the organization
to retire the debt and better manage for the future. Most people within
the organization will sniff and say, “Well, I don’t have any
way to pay off our debt or increase our net income.” Some might
not even know what net income is. Let’s translate the organizational
strategy into terms that are understandable at each process level:
• |
Organizational strategy: Increase net income to pay
off debt. |
• |
Sales objective: Increase sales of high-margin products by 20 percent
during the next 12 months. |
• |
Production objective: Increase production efficiency by 3 percent
during the next quarter. |
• |
Warehouse objective: Reduce damaged goods to 0.5 percent of total
inventory during the next inventory cycle. |
• |
Purchasing objective: Initiate long-term contracts with trucking,
packaging and raw materials suppliers. Reduce overall purchasing expense
by 15 percent during the next six months. |
The broad strategy has been transformed into specific, actionable objectives
toward which each process can work.
If each process is able to achieve its objective, then the overall strategy
of increasing net income to pay off debt will certainly be achieved.
Just like the strategic plan, the objectives for each organizational process
must be documented and made very visible. The small organization must
be a transparent one. Progress toward objectives must be tracked, posted,
analyzed and discussed. There’s no time to get fancy--display the
charts and update them regularly. The purpose is to provide a focus to
everyone’s work and demonstrate how all activities fit together
to achieve the organization’s overall objectives. Once objectives
have been established, it’s necessary to develop forums for reviewing
progress.
Business review
Small organizations don’t have time for long, formal meetings.
When people are in meetings, production grinds to a halt. That’s
why business reviews must be performed in a brief, concentrated manner.
They might not even be meetings; the review might take place over the
telephone, via e-mail, through a folder of information passed from person
to person or by logging onto a Web site. The trick is to review progress
and make decisions quickly and frequently because small organizations
exist in dynamic worlds that change rapidly.
A business review agenda for a small organization can include a wide range
of topics, but the most typical are:
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Special or unusual orders and/or projects |
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General communication between functions about current work |
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Progress toward objectives |
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Problems that have arisen since the last review |
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Improvement opportunities |
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Generating action items to address problems or opportunities |
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Status of pending action items |
Additional agenda items can be added as needed, but keep in mind that
reaction time slows with each additional topic. Many organizations have
found that their business reviews are most effective when they comprise
several different reviews, each addressing a different set of concerns.
This “mixed” review enables flexibility, timeliness and fast
response.
An example of a mixed review format--composed of a daily, monthly and
quarterly review--follows:
• |
Requires no more than 30 minutes |
• |
Tactical in nature |
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Addresses the most pressing issues (e.g., urgent orders, necessary
resources and customer complaints) |
• |
Conducted at the beginning or end of the day |
• |
Includes the status of pending actions |
• |
Can be conducted in person or remotely |
• |
Requires one to 1.5 hours |
• |
Tactical and/or strategic in nature |
• |
Reviews progress toward objectives |
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Reviews financial results (excerpted) |
• |
Addresses the status of pending actions |
• |
Includes broader trends (e.g. corrective and preventive actions,
customer feedback, and audit results) |
• |
Can be conducted in person or remotely |
• |
Requires one to three hours |
• |
Strategic in nature |
• |
Reviews progress toward objectives and strategic plan |
• |
Proposes necessary changes to strategy |
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Analyzes financial results over broader time frame |
• |
Addresses the status of pending actions |
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Includes aggregated trends and their implications |
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Can be conducted in person or remotely |
There are many different ways to slice and dice business reviews so that
they accommodate a small organization’s unique requirements. The
only imperative is that they take place. Small organizations must keep
a finger on the pulse of their performance at all times. That doesn’t
mean micromanagement; it just means that everyone knows the direction
in which the organization is moving and what changes must be made. When
these are known, personnel are able to contribute effectively.
Documentation
Documentation refers to the information used by the organization
to run its business and satisfy its customers. The documentation’s
nature and scope will vary widely from organization to organization, but
here are a few of the most typical examples:
• |
Product specification |
• |
Service standards |
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Process setups |
• |
Procedures |
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Job instructions |
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Policies |
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Engineering drawings |
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Strategic plans |
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Objectives |
Documentation should be concise and presented in the most practical format
possible. More is not better when it comes to documentation; it should
get directly to the point and avoid peripheral information that’s
not really needed.
Practical formatting means that the documentation might not resemble a
traditional procedure. Small organizations must get creative when developing
documentation. Managers should ask themselves, “What format will
deliver the information in the clearest and easiest way possible?”
The answer might point to text, drawings, photos, cartoons, flow diagrams,
physical samples, audio/video media or nearly anything else you can imagine.
In general, people digest graphic information more quickly than text,
so including images is almost always a good idea.
Whatever formats are chosen, the organization should try to steer clear
of the following documentation paradigms that plague so many larger companies:
• |
All documents must look exactly alike. Why does this
matter? Each document should look like whatever it needs to in order
to best convey its information. Consistency is only important if it
adds to the documentation’s usability and effectiveness. |
• |
Documents should always include certain sections. The sections that
organizations require within their documents run the gamut of possible
topics. These include cover page, table of contents, introduction,
purpose, scope, definitions, responsibilities and reference documents.
Although some of these sections might sometimes be relevant, others
simply take up space and make the document longer and more confusing
than it needs to be. |
Small organizations can’t afford to make their documentation long
and confusing.
• |
Documents must be reviewed and approved by every manager.
With good intentions, some organizations stipulate that all key managers
must review and approve all documents. This only slows down the documentation
system and adds useless bureaucracy. |
• |
Documents must include every single detail about a process. The
thinking is: If we’re going to bother with documents, they’re
going to include every detail anyone could possibly ever need. This
makes the documents large and unwieldy and discourages people from
actually using them. Include the essential information, but strive
to keep documents as lean as possible. |
Avoid tasks that unnecessarily slow down the delivery of information
or complicate its understanding. Get creative, and don’t be afraid
to try something a little unusual. Some of the most unusual documentation
styles are often the best for small organizations. Here are a few user-friendly
documentation formats I’ve seen applied effectively:
• |
Flowchart and/or troubleshooting guide combination.
This is a single-page document printed on both sides, posted directly
at the workstation. It’s often laminated or otherwise protected.
One side of the document shows a flowchart of the process, describing
the basic steps required to carry out the activities and make correct
decisions. The opposite side describes various troubleshooting situations
that might arise and what should be done about them. The troubleshooting
situations reflect the collective knowledge and experience of everyone
familiar with the process. In effect, they’re one-page encyclopedias
of the process and its pitfalls. The document’s content is limited
by the fact it’s delivered on a single page, ensuring that only
the most important details are included. The brevity also ensures
that users are not intimidated. |
• |
One-minute reminder. This is a single-page document, posted directly
at the workstation. It features a photograph of a particular aspect
of the process, followed by a short description of what should be
done. The text is often presented as a bulleted list. The intent is
that the entire document can be digested in a matter of seconds; hence,
its name. One-minute reminders are developed during any stage of the
process that’s particularly error-prone. Because errors usually
are made at only a few critical steps during any process, this means
that the documentation will only be applied where it’s most
needed. |
• |
Hyperlinked process diagram. This is an electronic document available
on a shared drive or network. The document depicts a high-level view
of the entire process, showing the major steps. Each step includes
a hyperlink that drills down to a lower-level activity in the process.
In effect, document users can continue drilling down as low as they
need to: process overview, activity-specific view or task-specific
view. The document’s content is completely dynamic, driven by
the users’ needs. Specifications for goods and services can
also be hyperlinked from the main process diagram. This type of document
is incredibly versatile but is only appropriate for organizations
that have the computer infrastructure and technical competency to
support it. |
Document control
Documentation is worthless if it isn’t controlled. Thankfully,
the necessary controls are very basic. The fundamentals of document control
include:
• |
Approving documentation before it’s made available |
• |
Making the documentation available where it’s needed |
• |
Keeping the documentation up to date |
Approving documents is a simple process. It’s nothing more than
ensuring the information is accurate and appropriate for distribution,
then making it clear that the document has been approved. The act of approving
a document can be done by a single person, and the approver doesn’t
even have to be a manager. There are no rules about who can approve documents,
except for any rules the organization itself stipulates. Small organizations
should keep document approval as timely and streamlined as possible. There’s
rarely a need for a herd of managers to review and approve a document
before it’s put into use. I don’t know how many times I’ve
heard people within larger organizations say: “I’m not sure
what happened to that document. I guess it’s making the approval
rounds.” In the meantime, everyone is working with outdated information.
Don’t fall into that trap.
Making the documentation available where it’s needed means exactly
that: Get the information in front of everyone. If the information users
have computers, then electronic documents are often the best way to make
documents available. If the users have workbenches, then hard-copy documents
posted directly at the workbench are probably more appropriate. Use good
sense. Practices that don’t make sense include:
• |
Enormous binders. They’re intimidating and confusing.
Provide only the information that’s needed. |
• |
Procedures stored in supervisors’ offices, training rooms
or other remote locations. When documents aren’t available at
arm’s length, they have little value. Put the information where
it’s needed. |
• |
Procedures provided electronically but without directions on how
to access them. I’ve seen this more times than I can count:
impressive documentation systems that employees can’t get to.
Ensure everyone knows how to use the new technology. |
Documentation is subject to change, of course. Small, dynamic organizations
must provide especially seamless methods for revising documentation because
the need for timely information is great. One out-of-date specification
can make the difference between a good month and a disastrous one.
A decentralized document control system, with multiple employees who are
in charge of their own documents, provides the most efficient process
for revising them. When a document must be revised, whoever recognizes
the need simply approaches the document control person in their process
and initiates the change. The less bureaucracy, the better. Simply make
the change, get it approved and make it available. This is where electronic
documentation really shines, by the way. Revising and approving an electronic
document can be performed in a snap. Once the document has been approved,
distribution is accomplished instantaneously by uploading the document
to the server or Web site. Everyone simultaneously has the most current
version.
We’ve examined some of the components for a lean management system
within a small organization. In coming months, I’ll provide additional
lean systems so that you can build an overall system for success.
Craig Cochran |
About the Author:
Craig Cochran is a project manager with the Center for International
Standards & Quality, part of Georgia Tech's Economic Development
Institute. He's an RAB-certified QMS lead auditor and the author of
Customer Satisfaction: Tools, Techniques and Formulas for Success
and The Continual Improvement Process: From Strategy to the Bottom
Line, both available from Paton
Press. CISQ can be reached at (800) 859-0968 or on the Web at
www.cisq.gatech.edu. |
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