Home » Blog » Archives for Nigel Reaney

Author: Nigel Reaney

Managing Director,
LMAC UK

THE IMPORTANCE OF CORE PURPOSE IN BUSINESS

Core Purpose, not to be confused with Company Vision or Company Values (which could be considered the “where” and “how”), a company’s core purpose is more about the “why”.  In fact, it could be considered the philosophical component that is often missing in business. Let’s be honest, most of us have asked ourselves at some point, usually on a Monday morning, why am I doing this? or what difference am I making in life?  Not having the answers to these questions can leave us feeling empty and un-motivated, for most of us, having no clear purpose in life can be downright depressing.  So, why would this be any different in our working lives?  After all, we all spend far too much of our lives at work.

A common mistake with core purpose that businesses make is confusing it with what they make or provide to generate revenue streams. For example, “Our core purpose is to make the best widgets in the world”. This doesn’t cover “why”. One could ask why do we even make widgets in the first place?  The problem with this scenario is that there is no ideology involved, and therefore little emotion or passion.  The workforce will continue to turn up each day and make this, or provide that, go home, return the next day and do it all over again.  Even typing these words sends a shiver down my spine.

Providing Continuity

In this world of change, it’s sometimes difficult to establish just how much change we should make.  After all, we keep hearing “change is good”.  This is true, but only to a point.  For example, I know of a business that made a total change in its direction of what it produced, based upon a perceived market opportunity with higher profit margins.  The move was almost disastrous, and a U turn with a lot of painful learnings was made just in time.  The fact is that they attempted to move too far away from what they were about, and what they’d always been the best in the world at. With frequent changes of board members and CEO’s in todays business world, it’s increasingly important to nail down just what the core purpose of the business is.

A better example is a medium size enterprise I know that makes mid to high range food products.  Their core purpose is very clear, “to provide life with a little enjoyment”.  To fully understand the impact and importance of this purpose, you would need to see and feel it from the shop floor to the board room – it is tangible.  They don’t make mass produced cheap products.  They don’t use cheap imported ingredients, and they certainly don’t make health foods.  Not that there’s anything wrong with health foods and cheap mass produced foods, it’s just not “their thing”.  They make products that can be enjoyed as a treat, something that satisfies a basic need in most people.  It has helped them to keep focused upon why they exist, and what they do best and thus achieve good profitability, sustainability and growth.

Relating this to my life was interesting for me.  My eldest son has recently completed a degree in music, and when I asked what the hardest part was, he answered “being constantly asked what job it’s going to get me as if money is everything in life”.  He went on to explain that his purpose in life wasn’t to be a well-paid accountant, or a captain of industry, rather it was to entertain people.  That’s what he’s passionate about, that is what he’s good at, and this is what will make him successful.

LMAC are internationally recognised Lean experts with consultants in Australasia, UK and China. Our strategic Lean thinking approach takes organisations beyond simple ‘Lean tools’. We have extensive experience in many sectors including FMCG, Protein Processing, Manufacturing and Service. If you would like to know more about LMAC and how we could assist your organisation’s Lean implementation Contact us

LEAN CULTURE – THEORY INTO REALITY

Changing a culture in an organisation is no easy task. It takes dedication, strategy, and a heck of a lot of learning and experience to avoid the numerous pitfalls along the way.

Some won’t succeed the first or even second time of trying, but some will come back and try again.

Let me introduce you to a poultry processor taking a different approach – they have taken in past learnings and are committed to a very real and personal journey. Even better, they’re doing it for all the right reasons.

LMAC are proudly supporting Tegel on their Simplify journey. They are doing the hard stuff, making sure tough decisions are made for the long term and by creating and maintaining their own internal momentum. Our role is smaller, but still important. Providing guidance on what works well, and what doesn’t. Together, we make a good team.

Let’s re-cap on 3 key messages from the video:

  • Keep the message simple. Committing to making things simpler for everyone in the organisation is absorbed much more easily than talking of high ideals of Operational Excellence and eliminating waste.
  • Keep the message real by living and breathing it. Hearts and minds will never be won if it looks like another “flavour of the day”.
  • Of course, cost benefits are important, but please let it be more than a cost reduction exercise.

The key to sustaining improvements – create a win-win

Let’s look at the client’s rally call “SIMPLIFY”. By simplifying the roles and tasks of every individual, they are in fact creating a win-win scenario. Waste is eliminated which benefits the business, frustration is eliminated which benefits the individual. A key difference in this case is that the organisation is leading with a positive.

Lean Entropy

ENTROPY – A SCIENTIFIC ANALOGY OF LEAN MEDIOCRITY

At Last, a scientific analogy of Lean failures and Lean Mediocrity

Managers across the world imagine a utopia of “self-managing teams” working hard to continually take their organisation to the next level of perfection.  For many, progress will be made, only for decline and recession to dash their dreams, and force a compromise with reality.  The problem is, many people take things like “Operational Excellence” too lightly – they treat it like another initiative, something to do rather than something to be.  They underestimate the energy and commitment required of themselves, and their management team not only to get their organisation to industry best, but more importantly, the energy and commitment to keep it there.  They fail to consider ENTROPY.

Until the other day, I had never come across the word “entropy”, so please don’t mistake me for one that reads a thesaurus for evening relaxation.  I was having an interesting discussion with one of my Senior Lean Consultant’s, Peter, who happens to have a degree in Chemistry.  He mentioned that in the scientific world of thermodynamics, there is a law that dictates that entropy will always increase with time.  Time to explain the meaning of ENTROPY:

lack of order or predictability; gradual decline into disorder

My learned colleague went on to explain, “there is no such thing as perpetual motion or free energy in thermodynamics, unless additional energy is constantly applied, ENTROPY will prevail”.

The light bulb went on – actually, there is no such thing as perpetual motion or free energy full stop.  So in terms of Lean, can we logically assume that there is a law concerning Entropy?   I think we can.

Entropy in business operations might look like the following

diagram1

LEAN ENTROPY LOOKS LIKE THIS

diagram2

Culture Change to sustain!

A lot has been written about culture change being the most important element in sustaining Lean and continuous improvement benefits and providing a platform for future improvement.  We often hear the mantra “we must develop a culture of continuous improvement” from management teams across the globe.  But what about LEAN ENTROPY?  Any images of Eutopia should shatter at this point, because in reality sustaining the culture that sustains improvement will be an even bigger challenge.

So what sustains a business organisation culture?

Answer: ENERGY, it needs to be in the form of Leadership Energy, and unfortunately it isn’t free.   Prior to consulting, I felt this first-hand over 13 years within Toyota Motor Manufacturing UK.  I often thought about the culture we had developed there and how much it differed to other car manufacturers just down the road.  I also wondered how long it would take for us to drift back to let’s say a more “traditional” British car manufacturing culture without constant leadership drive and energy.   Not long I suspect.

Do the basics well, and more importantly, reward them well!

Doing the leadership basics well is time consuming and often undervalued, yet it is the basics that are most important.  Senior leaders walking the floor daily, looking at visual performance boards without invite, commenting on successes, advising upon closing gaps to targets – all actions that drive behaviours and ultimately culture.  Those junior managers that can respond instantly to the leader’s comments and questions are on the ball, and probably do their basics well too.  This is the kind of energy that senior leaders must look for in their management teams – it will fuel sustainability and stop Entropy in its tracks.

LMAC are internationally recognised Lean experts with consultants in Australasia, UK and China. Our strategic Lean thinking approach takes organisations beyond simple ‘Lean tools’. We have extensive experience in many sectors including FMCG, Protein Processing, Manufacturing and Service. If you would like to know more about LMAC and how we could assist your organisation’s Lean implementation Contact us
lean performance

A QUICK AND SIMPLE 20% PERFORMANCE LIFT

The obvious
Quick and simple is not always sustainable, that’s the hard bit. However, on occasion there may be a sudden need to increase performance in a “step” manner. For example, there may be a sudden peak demand on a business that is beyond output capacity. There will always be extra potential in any process, and putting a clear business need for improvement around it may provide an opportunity to create a new benchmark.

The Method (the “what”)
“Measure it, and it will improve” is the baseline concept with truth in it. From our years of experience across many industry sectors, by putting in a performance measure as a starting point, there will be an improvement in results, 20% just happens to be a common outcome. The key is to make the measure simple to understand and relevant to the specific process.

The “how”
Getting people to work harder is definitely NOT the request or approach. Nor is cutting corners with safety and quality. There is however a common human element of focusing in more when things are deemed important. As we focus, wasteful distractions reduce, and we “get the job done”. In terms of the specific Lean approach, it’s the beautifully simple concept of removing waste, but, consider a specific emphasis on motion and waiting. The important ingredient we’re adding here is the measure. If done correctly, adding the measure gives the message that it’s important. People on the process will begin to realise that the new important target is only attainable if they didn’t have to wait for this, and walk to fetch that, and so on.

Some simple steps to follow are:
1) Tell people why
“Call to action” appears to be the latest term doing the rounds. A basic principle it appears to support is that people will generally rally behind a cause if it is clear and generates a sense of urgency.

2) Be a leader
You don’t need to be the most inspirational leader on earth, just make sure the message is clear and that it means something real. Get the team together, explain the business need to improve, do it in a positive way, and ask for their input and support. CEO’s – use this as an opportunity to connect with the teams!

3) Commit to some basics
People fear change, not a headline concept I know. However, the reality remains that most people will know at least one person that has lost their job as a result of change. So what happens if they improve output by 20%? Think this through carefully, decide what the positive outcome will be and stick to it.

4) Lead by example
Get out of the office, look at the results and talk to the workforce in and around the processes – make it clear it’s important. Recognise people’s input and breakthroughs. Small actions go a long way in improving performance.

5) Sustain
Maintaining performance is the hard bit from an organisational and human perspective. However, the sequence and tools bit is fairly straight forward (yet often not followed).

The chances are that there is a significant amount of variation in the work process – for example in the form of output or quality. Variation is the main “Killer” of quality and efficiency. In my experience, the causes of this variation will fall into two buckets:

1) Genuine problems
2) Sloppy practices/behaviours

The initial problem though is that these issues tend to be a murky mixture in one bucket. Sloppy practices/behaviours “hide” behind the genuine problems.

Here’s the thing – fix the genuine problems and the sloppy practices and behaviours have nowhere to hide. In my experience, many of them will stop of their own accord. Complex human issues and performance management can be avoided.

Here is the basic sequence to follow:

performance-eg-output

In Summary: We firmly believe that it is possible to achieve a quick and simple 20% performance lift by doing the simple things well.
Measure: Follow steps 1 to 5
Control: Prioritise the genuine problems. Fix some easy things, and then apply Root Cause analysis to complex problems
Improve: A good foundation now exists to effectively deploy CI/Kaizen tools and approaches

LMAC are internationally recognised Lean experts with consultants in Australasia, UK and China. Our strategic Lean thinking approach takes organisations beyond simple ‘Lean tools’. We have extensive experience in many sectors including FMCG, Protein Processing, Manufacturing and Service. If you would like to know more about LMAC and how we could assist your organisation’s Lean implementation Contact us
Lean Lost in Translation

LEAN – LOST IN TRANSLATION…

Although most people know that Lean is a generic term for the Toyota Production System, few people understand how much has been lost in translation. Japan study tours are common these days, and although Toyota allow visits to their sites, only the surface layer can be seen. To the untrained eye, it would be difficult to see tangible differences to a Nissan or Honda factory. In my experience, many people believe Japanese manufacturing is Lean – hence the japan study tours. I believe this to be a symptom of the loss in translation of lean, and the ongoing general focus on the “lean tools” rather than the “lean mind set”.

Are all Lean systems equal, or are some more equal than others?

I recently heard a comment from a governing body that in effect, the Nissan Production System and the Toyota Production system are “the same thing”.

Really?   Let’s not forget, in recent history, Nissan reportedly came very close to bankruptcy, and sold a significant shareholding to the Renault organisation. On the other hand, Toyota has been one of the few financially stable car manufacturers throughout its history.

I’ve conducted a couple of study tours myself recently to take a look at the different “takes” on Lean that have evolved.  One thing stood out very clearly – they generally fall into 1 of 2 generic groups:

  • Lean Tools Orientation

If I’m going to hear the saying “we’ve done lean”, then it will be an organisation in this group.  Yes, the key tools have been implemented at some point with varying degrees of uptake by the process operators.  Some tools, such as “stand-up” meeting boards are often coated with dust, displaying a distant historic date and old information that serves as a reminder of the failure of their Lean Programme.  Even a half trained eye can see masses of waste around the processes and massive opportunities for improvement. However, advice is not wanted in some of these organisations, “don’t talk to me about that Lean stuff and car manufacturing approach” has been blurted out to me on several occasions.

  • Lean Principles Orientation

These organisations seem to get it.  They’re sometimes the organisations that have been less hasty to jump in and “do that lean thing”.  They have taken the time to think about things and are confident that the Lean principles stand up well to logic and reason.  Some of them don’t have the flashiest 5S boards and andon systems yet, but they are doing the basics really well.

So in answer to my own question, it is clear that all Lean systems are not equal.  Some, in fact, are just poorly introduced tools.

So, what needs to be done?

This depends upon the organisation’s maturity level.  For those that are still in a tools frame of mind, I would advise reading up on the lean principles and challenging them at a senior leadership team level.  Do they stand up to reason?  Wouldn’t these principles enhance your organisation even though you don’t make cars?

For those that answer yes, then consider the following steps:

  • Start with “why”. Be very clear to the whole organisation why it needs to take a different approach and embrace the lean principles.
  • Empower the organisation to deliver. Not adhoc training courses or sheep dip training, but strategic people development.
  • Lead people to do the basics well every day. Relentlessly reinforce the lean principles and then hold people accountable for results delivery.

Remember, if lean fails it’s because it’s been “done” wrong.

THE LEAN SCATTER GUN - IMPROVEMENT FOR THE SAKE OF IT

THE LEAN SCATTER GUN – IMPROVEMENT FOR THE SAKE OF IT

In today’s world, it is easy to fall into the trap of thinking that it is an expectation that an organisation must improve in all areas of its business. That customers and stakeholders are looking to see improvements in all areas of the operation.

So that’s what lots of organisations do. But should they be doing this?  After all, improvement is good right?

Well, the issue is that you can only do so much at any given time no matter how good or flexible you think your business is, and if you’re improving things that are already OK, then you might not be improving the things you need to.

Wide scale CI vs Internal CI Champions – here’s where the problem lies.  Until you have an organisation that doesn’t need “internal CI Champions” (one where the operational management structure is sufficiently indoctrinated to change and improvement), then CI champions will tend to work on their own projects and suffer the following:

  • They sit outside of Operations Management
  • They have the goal of savings – often these don’t align with Operations Management Targets
  • Savings, savings, savings – cost reduction, not $ creation
  • Their requests to Operations Management are an additional burden – they don’t get supported.
  • Their language is strange, it’s vaguely familiar with that lean course the managers went on a while ago

I’ve termed it  “Push System CI”  and to but it bluntly, it doesn’t work

OK, so some cost savings are recorded from the CI projects – big deal.  Putting someone with an educated brain on a focus improvement project has always done that, even before it was called lean or CI.  I feel for the Internal CI Champions – often frustrated, not really listened to, and no real levers to make big lasting changes to the business.  Don’t get me wrong, Lean and CI Champions are a good thing, they just need to be better utilised in a strategic manner.

To do this, you need   “Pull System Improvement”

OK, there’s no C for Continuous in there, but let’s not get ahead of ourselves – walk before you run – improve before developing a deeply engrained culture of improving everything you see.  Seems logical to me.  Like I would try and get my teenage son to tidy his bedroom once per week, before hoping blindly that he’ll love to tidy everything as he goes because I’ve appointed myself as an “internal cleaning champion”

So what do I mean by a Pull System?

The objectives and goals of a business should PULL through the required improvement activity.  The improvement initiatives must:

  • Align with business goals
  • Combine with other initiatives to guarantee the attainment of the business goals

To ensure success, the improvement targets must be cascaded through Operations Management – the CI Champions will now have their attention.  The CI Champion becomes a critical support person, not another distraction from business as usual

What to do:

  • Start with a technique called Hoshin Kanri and stick to it’s principles. Set 6 and no more than 10 top level business operations objectives (SMART), that will lead to the attainment of 3 year objectives and beyond.
  • Establish what improvement initiatives are required to deliver on the objectives, and no more. Any initiatives that do not support the attainment of the set objectives must be removed.
  • Sort the agreed initiatives by categorising into work streams – Assign Leaders
  • Cascade KPI’s and targets to operations management
  • Devise a CI support plan and allocate CI resources accordingly
  • Operations Management report back on improvement results and take ownership.

Put away the ‘Lean scatter gun’ and stop improving things for the sake of it. Think strategically. Focus your efforts on the real parts of the business that need improvement and start maximising your gains.

If your organisation requires strategic improvement then contact us.  It’s what we do.

CONTACT US

National Living Wage

FMCG SURVIVING THE NATIONAL LIVING WAGE – MORE IS LESS

Well it’s here. On the 1st April, approximately 1.8 million of Britain’s low-wage workers got a pay rise as the legal wage jumped from £6.70 to £7.20 for all those aged 25 and over. More importantly the Living Wage is planned to be increased year on year until at least 2020. This will place increasing long term pressures on all parts of the FMCG sector to adapt and change.

There are a number of approaches reportedly being adopted by industry in general including some FMCGers.

  •  Pay the Living wage, but reduce staff hours
  •  Reduce other staff benefits including overtime rates
  •  Large capital investment in automation to reduce labour
  •  Absorb the cost increase but lower profit margins

There is another option – but only for the brave

What are the successful businesses doing? How are they dealing with labour cost increase? After all, the National Living Wage is only one example of staff cost increase, and it’s not confined to the low income bracket. Some organisations take the brave road:

PAY MORE, EXPECT MUCH MORE

The Chicken and Egg question

Let’s face it, the most successful organisations are often ranking as both the best place to work, and the best paid. So the question is what came first, success that affords benefits, or benefits that afford success? I believe the latter. Most organisations will chant that their biggest asset is their people, but how many organisations back this up with hard cash?

Don’t get me wrong, I don’t support rising costs that reduce profits, but rising costs that support rising profits is different. The key here is productivity lift – people output increase that is greater than their cost increase. Here is a perfect opportunity for a call to action.

It starts with the WHY

Any change that involves large numbers of people requires a strong change management framework and approach. In turn, a strong change management approach starts with “why”. Why must the organisation become more productive? Why do we need to change the way we do things? Why must we continuously improve? Without a compelling reason (the why), the outcome will be lame. Chanting “we must be more productive” will fall on deaf ears. BUT, now we have a compelling reason for change, something we can articulate and rally the organisation with. We could choose to say the following:

“We are not like most organisations. We will not give with one hand and take from another. We will not cut your hours or cut overtime rates. You will go home with more money than before. Together, we will make this happen, but it needs your input”

Follow with the HOW

The above is all well and good, but how do we actually go about this process? Here’s the steps:

  • Start with the WHY for change (as above). Don’t email it or issue a memo – be a leader and tell the workforce directly.
  • Calculate the difference between inflationary price increase and the National Living Wage, and set that as the productivity lift target.
  • Talk to the Union. Explain that you are not taking the easy route like other organisations – you will NOT be:
  1. Reducing people’s working hours
  2. Reducing overtime rates
  3. Making people redundant

Explain that you WILL be:

  1. Expecting their support
  2. Improving the worker’s day and pay
  • Communicate to the organisation what you will and will not do – make it clear and make a commitment to them. Give examples of what lesser organisations are doing.
  • Use science over emotion. The average Value Add content we find in a living wage worker’s day is <50%. Lifting this to a modest average of 60% will give you the opportunity to reduce direct staff by 10% – more than enough to off-set The National Living Wage
  • Lifting the Value Add content of the worker’s day – Use Lean tools and principles strategically to achieve no less than you need, but no more than you need.
  • Remove temporary staff if you have them – only by the required amount. If all staff are permanents, then side line the “cream of the crop” – avoid the temptation to side line your under performers. Definitely do not make redundancies.
  • Develop your side lined people and make them internal lean champions– train them and put them on improvement projects. Make their cost of employment be the minimum target for cost improvement initiatives.
  • Performance manage your under performers – those that fail to improve must be exited from the business.
  • Backfill natural attrition leavers from the side lined pool, but move people around in roles to allow these people into personal development roles, or promotions.

The benefits of off-setting the national living wage

  • Sustain and grow profit margin
  • Retain low cost labour in FMCG
  • Create a platform for further employee engagement
  • Human flexibility over expensive automation CAPEX

Remember, this process is not a theory, it is proven. The only choice is which path to follow.

LMAC can help you accelerate this process.

CONTACT US

FMCG

UK FMCG – IS LEAN A FOUR LETTER WORD?

For the industry that probably needs it the most, I fear Lean may be on a road to nowhere. It’s a shame – the industry is arguably facing its biggest challenge in history. Relentless price pressure could be forcing a total focus upon cost reduction, and this combined with the industry’s new emerging nightmare scenario that is social media images of poor processing habits could leave some of FMCG players ruined.

THE CURRENT FMCG TREND

Survival by being bigger and ripping cost out. It’s probably nearing the end of its effective cycle – most brands are now part of a huge “food group” and most of the centralised services benefits have probably already been manifested.

WHAT WE’RE LEFT WITH:

Food groups suffering the usual problems of rapid growth through acquisition:
•   Individual business units trying to operate as one
•   Conflicting cultures and values across the group
•   A workforce fed up with the term “restructuring”

That’s OK – the Retailers have the answer – It’s called Lean, and they’re going to make you do it! Here we go again, we must comply!

THE CULTURE PROBLEM

Most FMCG organisations I’ve encountered face a common problem – a culture of compliance. And, where Lean is concerned, this is a major hurdle. A true Lean organisation at it’s very heart has a culture of Continuous Improvement, an approach of challenging everything and striving for excellence in everything it does just because that’s what the whole organisation is about. Having to improve because the customer has raised the compliance bar isn’t the same. External “lean audits” may exacerbate the problem – it’s true that audits can drive actions, but by the same token, actions can drive behaviours, and in time, behaviours form a culture. The term “culture” is currently ranking highly as “sustainability”. Many organisations are chanting these words, but in my experience most are just doing cost reduction. The culture that may emerge could be a legacy of this generation.

COST REDUCTION IN THE NAME OF LEAN

“The ultimate objective of any improvement programme is to lower manufacturing costs”
Anonymous FMCG “Lean Expert”

It seems the FMCG sector is getting the same message from all sides – being lean is all about cost reduction right? Well there’s the problem – it depends upon who you listen to. If we’re talking about how the true Lean principles have typically been bastardised in the past, then yes – it’s all been about cost reduction. For the few that have embraced true Lean principles, it’s about being the best in industry in everything they do, being un-catchable. Ultimately, only those organisations will survive.

5 THINGS THE INDUSTRY NEEDS TO DO:

  1. Make Lean your own and do it for your own reasons – ticking boxes to comply is just a waste of time and will discredit you in front of your staff. It will make Lean a four letter word.
  2. Use Lean from a PULL perspective at a business level, not a PUSH of tools on the shop floor. Link your Lean activities to top level business objectives and PULL the results through.
  3. Get professional guidance from Lean experts with leadership experience – without this, the “lean expert” only knows the tools, and you might as well download them from the internet.
  4. Develop your people, particularly your management team. Leadership strength is the key ingredient to success with Lean.
  5. Once you have enabled your organisation, then set the bar high across a balanced set of business targets. A pure focus upon cost reduction will not grow your business.

What do I do if the top level of my organisation only wants cost reduction from Lean?

Find an organisation with a stronger more visionary leadership team. These are the organisations that will succeed and be the best employer with the best benefits with the best career development opportunities. Move town if you have to.

If you’ve had an average outcome with Lean, don’t throw the baby out with the bath water.  LMAC can show you a better way.

CONTACT US