Reward systems, bonuses, and other forms of compensation have been the topic of many newspaper articles and news broadcasts as of late. Although attention has turned toward the viability and sustainability of the manufacturing sector, there are many of us who question how the performance of these companies is measured and, even more so, rewarded.
While executive compensation is typically subject to scrutiny in and outside of most organizations, those rewards that are internal to an organization are seldom challenged or checked. How do we really measure the effectiveness of our leaders and management?
Our industry leaders are truly being tested as today’s economy has further challenged many organizations to make additional substantive cuts to their operating budgets. These times all but test our own survival strategies as well.
Executives and management at all levels continue to look at where and what to cut – this usually translates into “WHO should be cut”. It is time for leadership to recognize that current management methodologies and infrastructure must change – the organizational structure must become seamless in its approach.
In the late 1940’s and early 1950’s, Toyota was faced with the same dilemma our current North American auto manufacturers are facing. They didn’t just try to figure out how to build a better car they also figured out how to build them more efficiently and effectively. Toyota didn’t replicate the existing North American systems, they re-invented them.
Consumers want a quality product. The what, where, when, and how it is built are not really their concern – as long as it’s available when they want it!
Discussions should be focused on the METHOD or the HOW things get done (systems and / or processes) not necessarily WHO does it. Rationalizing the current business structure and what can be done to improve it is required. It is difficult to get your team involved in problem solving and strategy meetings when the only thing on their minds is “who is left after the storm blows through”.
The Axe Falls … on operations
Typically, operations becomes the focus of most cost cutting endeavours. In the automotive industry, plant closures are devastating communities and the ripple effect of these closures puts us on the brink of another wave of closures at the supplier level. The most recent example supporting this trend is Chrysler’s announcement to close several of it’s major plants in North America.
Unfortunately, eliminating excess capacity is only a short term solution. The true change events will occur when the infrastructure challenges are addressed and a new “fresh” culture is introduced and embraced by the “new” management.
If we learn anything during these times, we quickly discover the difference between the things that matter most and those that don’t. Now is the time to find out what is really necessary and matters most to your operations. A corporate, system level, 5S process is required to really clean up and move forward.
Bankruptcy can make the discovery process very quick and easy. Liquidators are also very quick to give you the real value of your assets. Peter F. Drucker suggested that abandonment was a necessary part of the management process. The timing, however, is much better when it is on your terms and not those of the bank.
OEE – does it work?
Overall Equipment Efficiency, or OEE, is one of those metrics that should survive the test of time. We have discussed the many positive attributes of using OEE as an effective metric for managing your manufacturing operations. If the culture in your company is one of candor and open and honest communication, then OEE can definitely be used as a metric to help drive change and improvements.
In the wrong culture (selfish versus company gain), metrics such as OEE can be used and abused quite readily. We would caution you to think about how improvements to OEE are rewarded. At a minimum:
Reward the action or the change – not the result.
Rewarding the action allows you to identify what has been changed or improved and will encourage others to duplicate this type of activity. The OEE result serves to validate the effectiveness of the change or improvement. This strategy also ensures that people are focused on solutions and tangible actions as opposed to “tweaking the system” to make the numbers look better. Getting a better stop watch may improve the accuracy of the measurement, unfortunately it won’t save you a dime unless something else changes.
Visioneering and Innovation are imperative to our continued future successes. The electronics industry continues to churn out new ideas and technologies at an amazing rate of change. Some argue that it’s easier with electronics because …
Is it really? Or is it that we have learned by the very practices of leaders in the electronics field that change is inevitable, encouraged, embraced, and most importantly expected.
The automotive industry and manufacturers in general need real and true competition. There is absolutely no room for complaceny. If the automotive industry was anything but close to embracing this type of culture, cars would be much different today.
Perhaps this is a bit of a rant, however, we seem to be too set in our ways. Protecting past methods, preserving old cultures, and confusing complexity with genius. Museums and memorials have their place, just not in today’s manufacturing facilities and management practices.
Until next time – Stay LEAN!