By Max Krug
It seems for the past several years, whenever I visited a business and I ask the management what is biggest challenge they face in managing and growing their business, the overwhelming response I get is: “We cannot find good people”. I find this statement interesting because over the relative same time period, whenever I have performed an evaluation on a business, the biggest issue that I find is they are not utilizing their people effectively. So why is there such a big disconnect between what I hear and what I see?
The conclusion that I have come to is that my definition of effective utilization of people and most company’s definition of effective utilization of people is not synonymous. What I find in most companies is the belief that to make the organization effective, every process must be efficient, and by making every process efficient, we are utilizing our people effectively. But the most common undesirable effects that I observe in most businesses is poor delivery performance, constant expediting, excessive work in flow, too much overtime, long lead-times, quality issues, and the end of the month push to make the financial numbers. So I began to ask myself, “With all these undesirable effects that I see in businesses, how can the organization be managing their resources effectively?” Therefore, my conclusion was, there must be something about their how they are managing their resources that is causing many of these undesirable effects.
With all the undesirable effects that I saw in organizations that I visited, it was apparent that their operating system (how work gets done) was not stable and it was also not capable, which explained a lot about the failed initiatives that the companies had embarked on in the past. When I did a further analysis of these different organizations, I came to the same root cause: the way resources were managed was the cause to most of the undesirable effects. Let me explain what I mean.
When I looked deeper into how the resources were managed, what I found was that most of the resources were over-utilized, and some of resources were under-utilized as related to customer demand. It was not too difficult to identify resources that are over-utilized, I just looked where there was excessive build-up of work in flow, and it was a good indicator that the resources before the excessive work in flow were being over-utilized. However, to identify the resources that were under-utilized was not so easy to find. The best way to find the resources that were under-utilized was to ask the people that were responsible for expediting, and ask them what resources that they are constantly going to and expediting work. The resources where most of the expediting was happening were the candidates of potential resources where under-utilization was happening. After spending some time observing these resources, what I typically saw was that these resources where the expediting was happening were the resources that were most often asked to multi-task (e.g. stop working on that and start working on this).
To be able to properly address the issues that these organizations were dealing with, I had to refer to two very important lessons that I learned throughout my career. The first lesson I learned from Dr. W. Edwards Deming. What I learned from Dr. Deming was: If a system is not stable, any improvement or changes that you try to make to improve the system will most likely not improve the system, and in some cases make the system more unstable. The second lesson I learned from Dr. Eli Goldratt. What I learned from Dr. Goldratt was: Striving to make every resource in the system efficient will result in making the system less efficient.
Therefore, my approach to improving any organization is to first establish stability, and after stability is established, then work on making the system capable. In order to create stability in an organization, the first actions are actually quite simple in theory, but very difficult in practice, because it involves a major paradigm shift in thinking and behavior. To create stability, the first action is to stop all the resources that are currently over-utilized to stop overproducing (overproduction is one of the 8 wastes in Lean), and in addition ask the resources that are under-utilized to stop multi-tasking (under-utilized resources is another of the 8 wastes in Lean). If you are not aware, bad multi-tasking is one of the biggest killers of productivity, but I find in most organizations, very few people understand how devastating bad multi-tasking is on productivity.
By simply taking these two actions, something amazing begins to happen, delivery performance begins to increase, expediting is reduced, work in flow reduces, overtime reduces, lead-times become shorter and more reliable, quality improves, and there is no longer a need to push to make the financial numbers at the end of the month. All of these desirable effects happen as a result of the synchronization of the flow of work to be in line with customer demand. From my experience, organizations that are successful in taking these actions and synchronizing the flow will realize 20 to 25% increase in productivity. This increase in productivity is an example of how dealing with a root cause of a problem can yield significant results in short period of time, verses trying to deal with each undesirable effect, or the symptoms in isolation.
In conclusion, when I hear from management that the biggest challenge they face in managing and growing their business is “we cannot find good people”, my response is, “you have good people, you just need to understand how to utilize them more effectively”.
Max Krug has been helping organizations improve their businesses for more than 20 years.