Straight to the Top

David Drickhamer et al.

Industry Week

October 2002, pp. 33-70

Industry Week has announced the winners of its annual “Best Plants” awards. Facilities in the U.S., Canada, and Mexico are eligible. Over the past three years, the 2002 winners improved quality by an average of 34%, decreased inventory by 25%, improved productivity by 21% and reduced customer lead time by 46%. “Such figures are doubly impressive considering the difficult economic conditions in some of the markets served by these manufacturers.”

This year’s winners are:

(1) Boeing’s C-17 Production Complex (military transport aircraft; Long Beach, CA);

(2) Collins & Aikman (automotive OEM exterior trim, primarily injection molded, molded-in-color and painted fascia; Americus, GA);

(3) Collins & Aikman (automotive interior trim including instrument panels, door panels, consoles, and other plastic trim; Athens, GA);

(4) Collins & Aikman (automotive instrument panels and plastic interior and exterior trim; Rantoul, IL);

(5) Dana Corp. (full-perimeter frames for pickup trucks; Stockton, CA);

(6) DST Output (prints and mails billing statements for client firms; El Dorado Hills, CA);

(7) Honeywell Controls (electromechanical snap-action switches; Warren, IL);

(8) International Specialty Products (specialty chemicals for personal-care and pharmaceutical products; Calvert City, KY);

(9) Medtronic Xomed (medical devices for ear, nose and throat surgery; and for opthamology; Jacksonville, FL); and

(10) Webster Plastics (custom injection-molded parts; Fairport, NY).

The last few pages of this long article contain comparison data for Industry Week’s Best Plants vs. normative data from Industry Week’s Census of Manufacturers.

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Open-Market Innovation

Darrell Rigby and Chris Zook

Harvard Business Review

October 2002, pp. 80-89

The authors of this article state that “A growing number of companies are exploring the idea of open-market innovation—an approach that uses tools such as licensing, joint ventures, and strategic alliances to bring the benefits of free trade to the flow of new ideas.”

Four distinct advantages to open-market innovation are identified:

(1) Importing new ideas is a good way to multiply the building blocks of innovation;

(2) Exporting ideas is a good way to raise cash and keep talent;

(3) Exporting ideas gives companies a way to measure an innovation’s real value and to ascertain whether further investment is warranted; and

(4) Exporting and importing ideas helps companies clarify what they do best.

Five dimensions which indicate whether a company can profit from open-market innovation are:

(a) intensity of innovation in the field;

(b) the economies of innovation in the field;

(c) the need for cumulative innovations in the field;

(d) applicability of innovations across companies or industries; and

(e) market volatility.

The article identifies the following companies as practitioners of open-market innovation: Pitney-Bowes, Tetra Pak, BellSouth, Linux, Cisco Systems, Air Products & Chemicals, and Lilly.

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The Best & Worst Boards

Louis Lavelle

Business Week

October 7, 2002, pp. 104-111

Boards in the post-Enron era are undergoing radical improvements in governance. The principles of good governance used to evaluate Boards in this article include:

(a) Independence—“No more than two directors should be current or former company executives, and none should do business with the company or accept consulting or legal fees from it. The audit, compensation, and nominating committees should be made up solely of independent directors;”

(b) Stock Ownership—“Each director should own an equity stake in the company worth at least $150,000, excluding stock options. The only exception: new board members who haven’t had time to build a large stake;”

(c) Director Quality— “Boards should include at least one independent director with experience in the company’s core business and one who is the CEO of an equivalent-size company. Fully employed directors should sit on no more than four boards, retirees no more than seven. Each director should attend at least 75% of all meetings;’ and

(d) Board Activism—“Boards should meet regularly without management present and should evaluate their own performance every year. Audit committees should meet at least four times a year. Boards should be frugal on executive pay, decisive when planning a CEO succession, diligent in oversight responsibilities, and quick to act when trouble strikes.”

According to the above criteria, Business Week rated the following companies as having the best boards: 3M, Apria Healthcare, Colgate-Palmolive, General Electric, Home Depot, Intel, Johnson & Johnson, Medtronic, Pfizer, and Texas Instruments.

Rated the worst boards were: Apple, Conseco, Dillard’s, Gap, Kmart, Qwest, Tyson Foods, and Xerox.

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Seven Keys to Improving Customer Satisfaction Programs

Micahel Garver and Gary Gagnon

Business Horizons

September-October 2002, pp. 35-42

The authors of this article conducted a qualitative research study with nine best practice companies (including Federal Express, Eastman Chemical, US West, Subaru, Sun Microsystems, AT&T Worldnet Services, and Hewlett-Packard). The “seven keys” which the authors uncovered were:

(1) A customer-focused culture -- “In best practice companies, cultural values suggest that satisfying the customer is essential for business success;”

(2) Executive support, intensity, and persistence -- “although spoken words are necessary, executive actions have the greatest impact on the perceived level of management dedication;”

(3) A set of customer listening tools -- these include critical incident survey, relationship surveys, benchmark surveys, complaints, and won- lost and why surveys;

(4) Training, training, and more training -- common content includes: a case for change, credibility of the CVS (customer value and satisfaction) program, customer listening tools, access to CVS data and tools, analyzing and understanding data, and responding to customer understanding;

(5) Identifying continuous improvement opportunities -- the best practices for identifying these opportunities are performance-importance analysis, confirmation among customer listening tools, capability assessment, and cost-benefit analysis;

(6) Linking performance measures -- “For many companies, the most important relationships are those between internal quality, CVS (customer value and satisfaction), and financial performance;” and

(7) Evaluating and rewarding CVS performance -- “Best practice companies evaluate all front-line employees, middle managers, and executives who are in a position to affect CVS performance, and the majority of firms tie both financial and nonfinancial rewards to CVS performance.”

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Rebuilding Employee Trust

Shari Caudron

Workforce

October 2002, pp. 28-34

A recent Watson Wyatt survey of nearly 13,000 workers in all job levels and industries revealed that fewer than two out of five employees today have trust or confidence in their senior leaders. In addition, the three-year total return to shareholders is almost three times lower at companies with low trust levels than at companies with high trust levels.

Though senior leaders obviously play the key role in building trust, the key predictor of employee trust is the effectiveness of an organization’s HR function. In companies where the employees believe that the HR department is effective, 62 percent of workers also believe that the organization is trustworthy. In companies where HR is deemed ineffective, only 8 percent of employees believe that management can be trusted.

The five things that HR departments do to keep trust high are:

(1) Communicate openly about company performance, explain the rationale behind decisions, and encourage employee involvement and information-sharing;

(2) Communicate the value of benefits;

(3) Make constructive changes based on employee input;

(4) Communicate the company’s business goals and explain to the employees their role in achieving those goals; and

(5) Hold poor performers accountable through discipline and termination.

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BOOKS

Lean Six Sigma: Combining Six Sigma Quality with Lean Speed

Michael George

New York, NY: McGraw-Hill, 2002

This book emphasizes the complementarity of the Lean approach and the Six Sigma approach.

After describing each of the two approaches and how they can work together, the author describes:

(a) How to obtain CEO commitment and engagement;

(b) Development of deployment plans, with elements of sustaining processes, organization structure, measures of success, rewards and recognition, and supporting software tools;

(c) The elements of a transforming kick-off event (CEO presentation, design team presentation, testimonials from trusted outsiders, lean six sigma simulation, and discussions on launch preparations);

(d) Selecting the right people and the right projects;

(e) Predicting and improving team performance;

(f) The Lean Six Sigma Define-Measure-Analyze- Improve-Control (DMAIC) improvement process;

(g) The DMAIC tools;

(h) Institutionalizing Lean Six Sigma;

(i) Total supply chain acceleration;

(j) Lean Six Sigma logistics; and

(k) Design for Lean Six Sigma.

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From GP Deltapoint: Total Six Sigma Implementation and Culture Change

Mike Bresko, Managing Director; and John McNeil, Principal Consultant

Total Six Sigma™ is a GP Deltapoint's holistic system that provides a pathway to operational excellence. It integrates the methodologies of Lean, Six Sigma, and Total Productive Maintenance (TPM) and builds a management system that drives quantum leap improvement and assures effective daily management up and down an organization. This system improves customer satisfaction, streamlines workflow, reduces process variability, and engages people at all levels of the organization.

GP Deltapoint recommends initiating Total Six Sigma implementations with a Model Line or Area. The Model Line allows concentrates projects in one product line or operational area. This approach educates internal consultants (black belts) as they learn by doing; and achieves substantial improvement in cost, quality, and lead-time for the selected value stream.

We use a four-phase approach to implement Total Six Sigma. The first phase - Organize - accomplishes the tasks needed to begin the Model Value Stream Transformation Project. These tasks include engaging leadership, selecting champions and internal consultants, assessing opportunities, and planning the detailed transformation project. The second phase - Stabilize - uses various methodologies to reduce defects and stabilize processes. The third phase - Synchronize - establishes continuous flow and refines process improvements. The fourth phase - Optimize - occurs after the initial Model Value Stream Project. This phase applies more sophisticated analytical techniques, integrates the supply chain, and aligns support systems such as human resources.

As with any large-scale change initiative, organizational and cultural issues play a large part in Total Six Sigma success. Here are ways to avoid pitfalls

• Balance customer needs and cost reduction. Using the methods of Total Six Sigma only to cut costs will not reap the most powerful benefits.
• Build a system for running your business that integrates Lean, Six Sigma, TPM Quantum Leap Improvement and Daily Management. These are powerful allies that together create a more robust and sustainable results.
• Keep a keen eye on what is possible in your organization: challenge people, expect high performance, and set stretch goals. But remember to watch the stress meter.
• Copying the best practices of other companies will not yield results as good as studying other best practices and applying them wisely to your situation.
• A leadership team that is willing to drive decision making down to the lowest effective level, coupled with effective team leadership is the most important predictor of Total Six Sigma success.
• Remember that commitment takes time and everyone's engagement is critical.

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