Management consulting

companies pay serious attention to changes in the workplace, such as work organization, which includes changes in the production process, job content, work allocation and organizational structure; human resource management practices; and industrial relations practices.

Enterprises that invest effectively in intangible assets through training are also likely to report positive performance trends in terms of revenue. Investments in human capital today are generally concentrated on well-educated and skilled employees at the core rather than on less skilled workers at the periphery. Best-practice companies tend to use lean production systems, though not in an extreme form, which would reduce flexibility to adapt to sharp market changes and would also have adverse social implications.

The best companies are distinguished by their high productivity. A wide range of approaches, tools, methods and techniques have been developed for improving productivity. These include continuous improvement, learning organizations, enterprise restructuring, business process re-engineering, strategic cost management, TQM, organizational rejuvenation, Six Sigma, 5S, kaizen, strategic business units, green productivity, innovative organizations, value creation, knowledge management, customer orientation and many others. Implementing different combinations of these approaches enables companies to enhance management dynamism, harness employee potential, apply new technology more effectively, improve process management, reduce waste and provide higher value for less money.

20.4Designing and implementing productivity and performance improvement programmes

A productivity consultant should be prepared to answer the typical client’s question: “Why do we need a separate productivity (or performance) improvement programme? Can’t we just improve our existing management and raise the discipline of employees?” It should be pointed out that productivity embraces all components, processes and activities of an organization. Depending on economic conditions and the stage in the life cycle of the organization, not only incremental, but also systemic and radical changes, may be needed. Radical changes can be introduced only through a horizontal productivity (performance) improvement programme (PIP) across the board. There is no standard PIP relevant for all situations; a PIP always has to be tailor-made to suit specific organizational objectives, conditions and business environments. We will therefore discuss here some principles to be applied in designing and implementing such a programme.

General conditions of success

A sound productivity improvement programme should start with a clear and easily communicated definition of the concept of productivity improvement. It should explain why organizational improvement is important, evaluate current operating

454

Consulting on productivity and performance improvement

situations and the reasons for the current status, and develop models of excellence and policies and plans for improvement. The objective of productivity improvement should always be expressed in terms of organizational improvement. The overall PIP objectives should be followed by detailed action plans.

The PIP can be successful if a number of conditions are fulfilled within an organization. The first one is that top management is commited to the programme and there is an effective organizational arrangement headed by one of the top managers. All managers and employees should be aware of and understand the programme objectives and there should be open communication between different organizational elements. The programme should be linked with strategic goals and measurement processes that are practical and easily understood. The productivity improvement techniques chosen should be appropriate to the situation and needs. Monitoring, evaluation and feedback processes to identify results and barriers should provide the basis for design improvements. Recognition of the key role played by workers is crucial and should be demonstrated through a sound productivity gain-sharing system supported by sound labour–management relations. Finally, there must be pressure for change within the organization and its external environment. Top management and consultants should provide leadership in programme design and implementation, as well as permission to experiment with new solutions.

There are many reasons to enter into a PIP, such as a negative balance sheet, new products, equipment, technologies or materials, stronger competition, demand for more flexibility in production, or need for shorter delivery time and better services. Managers and consultants should be sure that there are enough positive factors to give a reasonable chance of success, that the time is right and that conditions are generally favourable.

Structuring the process

A systematic eight-step approach to designing a planning process for performance improvement, suggested by Scott Sink,8 is shown in figure 20.6.

To run a productivity programme in an organization, a programme manager must be able to suggest processes that can be used to identify problems, and to work out and implement solutions. The intra-enterprise productivity processes include, among others, suggestion schemes, quality circles, task forces, action teams, productivity committees and steering committees, which should be fully understood and used by the programme manager.

Deciding on a productivity improvement programme

The decision to enter into a PIP should be taken in the same way as for any other investment: the cost of the investment should be compared with the likely benefits and risks. The payback period for a PIP should normally be between 8 and 18 months. To prepare to make the decision to invest in a PIP, the first step must be the identification and assessment of potential savings. The best way is

455

Management consulting

Figure 20.6 The performance improvement planning process

Source: S. Sink: “TQM: the next frontier or just another bandwagon to jump on?”, in QPM – Quality and Productivity Management (Blacksburg, VA), Vol. 7, No. 2, 1989, p. 18.

to look at the big outputs and the large blocks of cost. Usually large potential areas are directly related to product costs: the consultant should take the products with highest output and look into their cost elements such as materials, value added per production area, tooling, design cost, overhead cost and distribution cost.

Once a good reason for a project and the areas for big potential savings have been identified, the framework for the PIP has to be set. This includes: specifying the reason to start a PIP, so that people commit to the programme; identifying where potential savings could come from, what is the value or the percentage of cost of the potential savings and what risks must be taken to obtain them; and ensuring that most of the areas where potential savings can be made are covered.

The “royal road”

The “royal road”, used in many productivity improvement programmes, is outlined in figure 20.7. It consists of three phases:

Phase I – The Pre-Survey, or Preliminary Survey Phase, to identify aims and “sell” the programme to management.

Phase II – The Survey Phase, to set goals and obtain commitment of all responsible area managers.

456

Consulting on productivity and performance improvement

Figure 20.7 The “royal road” of productivity improvement

Maintain high productivity

Source: J. Prokopenko and K. North: Productivity and quality management: A modular programme (Geneva and Tokyo, ILO/APO, 1996).

457