In my last article, I posited that the only effective means of maintaining a sustainable competitive advantage is through productivity improvement. With daily news of the economic recovery on shaky footing, we are reminded that this economy is far from healthy, and disposable income will continue to be closely guarded. Continuing to differentiate yourself from the competition is critical to your success. Productivity improvement can help you do that.
So, how can an organization go about such an initiative? There are four steps necessary for a successful productivity improvement campaign: 1) assess, 2) baseline, 3) re-engineer, and 4) implement. Granted, this is no magic formula, and this basic engineering method has been practiced for decades. But, faith in the method and a disciplined approach is necessary for success. You may have even previously attempted a program similar to this in your organization. Depending upon your particular theological perspective, either the devil, or God, is in the details. Either way, it is important to remember that the method, itself, is universal; success is achieved through good execution. (Note: The approach described in this article is rigorous and suited for chain operations where the fruits of your labor can be leveraged across many units.)
The first step in tackling any problem is to first assess the situation. Running headlong into the fray will only result in much wasted effort and inferior results. This phase is akin to homework, in that you must first understand what makes your operation tick. Where are the strengths, the weaknesses, the opportunities to improve?
I personally believe in spending many hours in an operation making observations, taking notes, asking questions, looking for things that don’t make sense. What kind of “brain damage” (aka inefficient processes) can you uncover? Measure performance in critical areas such as kitchen time, table turns, and labor utilization, in order to quantify your performance in the universal language of numbers and mathematics.
In addition to observing the operation, a careful analysis of the data that describes your operations is also a good source of learning: P&L statements, sales histories, and other metrics. Look for correlations between overall performance and specific key metrics, to see which are the critically important operational areas that, once fixed, can dramatically improve your performance.
It is important to solicit input from all corners of your organizations, so that you can gain a complete picture of all of the interdependent elements of your operation. Have them identify the challenges and opportunities that they see everyday from their unique perspective. If you go about this exercise in a truly open manner, you will elicit many responses. You will ultimately need to pare down the list of opportunities to a manageable subset, but, initially, you want quantity. You can deal with the quality later.
All of the information you have gathered to date can then be used to develop an exhaustive list of opportunities to improve your operation. By constraining this list using the Pareto Principle (or the 80-20 rule), you can develop a strategic plan for your improvement initiative. This plan should identify the initiatives to be pursued, how you will do so, the expected cost to implement, the success criteria, and the expected return, or ROI.
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Once you have done the necessary homework, it is time to establish a baseline, or a ground floor, from which you can proceed to higher levels of performance. If this important step is omitted, then it will be impossible to objectively determine the results of your efforts. Then, you run the real risk of implementing change for the sake of change, with no real compass to tell you if you are on the right path.
This is where industrial engineering techniques, which have been practiced for decades in the manufacturing industry, really shine. Using time and motion studies of various types to measure the steps required to complete each process, it is possible to develop a precise accounting of what it takes to execute each task required by your operation. You can also establish the current productivity of your labor, equipment, and other resources. All of this should be done quantitatively so that you have a universal language with which to make comparisons. It is hard to argue with numbers (assuming you don’t torture the data to match preconceived notions, that is.)
This time and motion data can be used to establish optimal labor costs required to run your operation, given the current set of processes and tasks. If you can get your operators to run to this new optimal cost, you may uncover significant savings before you even implement the process improvement initiatives. In most operations, by moving from a non-measured to a measured environment, you can expect to save 2-5% of wasted hours.
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You have now thoroughly assessed your business and established a baseline for improvement, you are now ready to buckle down and exploit those opportunities that you have thus far identified. There are many ways to improve processes and this is where right-brain creative thinking is necessary, to be sure that you are not unduly weighed down by current operational dogma.
Process improvement can come in many flavors. Use the following topics and questions as you seek innovation:
It is my belief, that you should let the process dictate the rest of the facility design. In other words, layout the space, select equipment, and design each workstation to support the best set of processes. Many facilities are, unfortunately, designed the other way around, thus forcing operators into inefficient workarounds and suboptimal methods.
Using the quantitative baseline established in the previous step, it is possible to correlate where you spend your resources to what is important to your operation and your brand. In other words, do you spend your money on the things that matter? When you find discrepancies, these are great opportunities to re-engineer. Can you eliminate or minimize the time spent on tasks that add little or no value to your brand? Where there is congruence, you will find that an improvement in an important task can be leveraged into a very significant impact to your overall operation and your brand.
As you develop re-engineered processes, it is important to use quantitative techniques to estimate the impact of each innovation. This will help you focus on those areas that can yield the greatest impact, and provide a clear picture of the outcome if all goes as planned.
Each alternative should be tested both analytically and/or physically to insure feasibility and to correct design flaws before being introduced to the field.
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Finally, it is time to put your process improvements to work, so that you can begin to reap the benefits of superior productivity. It is imperative to remember that your project is not complete once the system is introduced to the field. Actually, it is just the beginning. Now, the proverbial rubber meets the road.
You are now engaged in change management of a magnitude that, in my opinion, is one of the more difficult you’ll encounter in the business world. If you are in a chain environment, the problem is multiplied by the number of individuals, system-wide, who will have to understand, commit to, and execute your initiatives. In a chain of even moderate size, this number can easily run into the thousands! Do not underestimate the amount of work required to insure faithful execution of your initiatives. I find that some of the concepts (especially mavens and stickiness) discussed in Malcolm Gladwell’s excellent The Tipping Point, to be particularly salient for these efforts.
In order to extract the gains of your productivity improvement initiatives, you should update your labor management targets to reflect the gains in efficiency. If this is not done, then you may incur the cost to implement, but fail to see any real return in labor costs savings.
Once the initiatives have been trained and implemented in a small pilot test, a second assessment, similar to the one done in the first phase, should be conducted. Quantitative comparisons should be made to insure that impact expectations have been met. Further refinements may be necessary in order to fine tune the initiatives for greater success or correct for the realities of imperfect implementation constraints.
Ultimately, you should be looking for significant gains in performance expressed by reduced costs, increased ROI, increased profits, and improved guest experience. All are necessary ingredients for a sustained competitive advantage, enabled by productivity.
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