Padding factory performance has become a best practice at one company I visited recently. As I walked the floor with the site manager, I was impressed by the level of improvement activity I saw.
“We’ve been at this for about eight years,” the manager explained, “but it’s only in last couple years that we’ve been able to devote the time that’s needed to make a real difference. “
“What changed?” I asked. The site manager explained. “Two years ago we began rotating shop floor employees through our Lean Program Office to assist our overworked LPO staff. This has had multiple benefits: First we have more resources, second those resources have direct shop floor experience and credibility, and third, we’ve discovered this is an excellent way to develop employees. Our participation rate on the floor has skyrocketed from about 5% to 65% and continues to climb.”
Pointing to a productivity measure – 103% of goal – on a production board at the entrance to the factory, I noted, “It appears you’re hitting all your plant targets as well.”
The manager smiled, and replied in a low tone, “We’re doing a little better than that! Those numbers don’t reflect the fact that we’ve taken direct employees out for rotation in our Lean Program Office. In fact,” he confided, “we manage the rotation process to maintain key measures just above goal. We could do much better, but we’re keeping our targets conservative to spread them out over several years. Corporate is happy with 103% and that is also tied into our manager pay structure. I don’t want to kill the goose that lays the golden egg.”
“So you’re sandbagging?” I asked.
“No,” he insisted, “we’re just dealing creatively with our accounting and compensation systems.” He explained further. “For example, if I were to ask for an additional budget for indirect labor, I would never get it. That would take an act of God. Second, if corporate knew were operating with less direct labor, they’d expect me to cut it. That would kill participation.”
“And nobody realizes you’re doing this?” I asked.
“Yeah,” he replied, “on some level I think corporate knows we’re unofficially reallocating resources, but as long I make my numbers they leave us alone. It’s kind of an underground best practice.”
How does your organization budget for problem solving and improvement? Are you forced to use creative accounting or set lower goals to accommodate your cost accounting and compensation systems? Share a story.
June 27, 2013
P.S. Here’s the link I promised last time for more information about and to register for the first installment of my new webinar series “Tuesday Tea Time with The Toast Dude” on Tuesday July 9th at 3:00PM Eastern Time – Engaging Your Employees in the Lean Transformation. I hope to “see” you there. (Don’t forget, participants will be entered to win a free registration to the Northeast Region Shingo Conference, on September 24th & 25th in Hyannis, Massachusetts. The winner will be announced live at the conclusion of the webinar.)
If anyone thinks that this story is somehow a rarity, you are kidding yourselves. In many ways, manufacturing has come full circle and is back where we started. The old wrong metrics have been replaced by new wrong metrics and skilled managers have learned to manipulate the new measures, just like we figured out how to manipulate the old ones. Meet the new boss, same as the old boss.
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