Creating Successful Change Using Continuous Improvement Methods

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Presented by Susan Schall of SOS Consulting for SWaMFest VII. For more information see http://www.soschall.com/.

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Creating Successful Change Using Continuous Improvement Methods

  1. 1. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Creating SuccessfulChange Using Continuous Improvement Methods SWaMFest VII September 15, 2011 Copyright © 2011 SOS Consulting, LLC. All rights reserved. Susan O. Schall, Ph.D.  President/Owner of SOS Consulting, LLC since 2004 with clients in the chemical, food & beverage, automotive, industrial supply, education, and printing industries.  Over 20 years experience delivering improved performance using engineering, statistical and process improvement methodologies.  Prior to consulting, Susan held a variety of process improvement and leadership roles at RR Donnelley, GE Lighting, DuPont and Eastman Kodak.  B.S. in Mathematics from SUNY, Fredonia; B.S., M.S., and Ph.D. in Industrial Engineering from Penn State University. 2Copyright © 2011 SOS Consulting, LLC. All rights reserved. 1
  2. 2. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Workshop OutcomesAt the end of this workshop, you will: Understand the basic principles of Continuous Improvement and similarity with common change management models. Be familiar with key Continuous Improvement tools and how they can be used to successfully manage change. – What – How – Examples of application 3 Agenda Overview of Continuous Improvement Overview of Organizational Change Models Key Continuous Improvement Tools for Change – Strategic focus – Helping employees “see” – Communication – Action planning – Hold the gains Workshop Summary 4 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 2
  3. 3. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Overview of Continuous ImprovementWhat is Continuous Improvement? Continuous Improvement (CI) is a never-ending approach to improving organizational performance. It is based on two premises: – The world will continue to become increasingly complex and competitive. – The performance of a process will degrade over time if energy is not applied to maintain and/or improve it. It is how you meet the increasing needs of customers and stakeholders. 6 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 3
  4. 4. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 World Increasing Complex Environment Technology – Regulation – Economy – Culture Any Organization Funding Materials Providers Equipment Outputs Human Resources Receivers Requests / Requirements Outputs AlternativesBased on: Improving Performance: How to Manage the White Space on the Organization Chart, Geary A. Rummler & Alan P. Brache 7 “Now here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” Red Queen from Lewis Carroll’s Through the Looking Glass Copyright © 2011 SOS Consulting, LLC. All rights reserved. 4
  5. 5. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 “In business, the competition willbite you if you keep running; if youstand still, they will swallow you.” William Knudsen, industrialist Process Degradation Process Degradation 10Copyright © 2011 SOS Consulting, LLC. All rights reserved. 5
  6. 6. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011Types of Continuous Improvement Daily improvement – Incremental improvement made by those individuals that are part of the process. – Seeks to standardize and stabilize process performance and to implement daily controls to sustain the improvement over time. – Involves use of basic process improvement tools. Breakthrough improvement – Step change improvement. – Usually created by fundamental changes to the process. – Typically involves the use of advanced process improvement tools such as Six Sigma, simulation/ modeling, new technology, etc. 11 Continuous Improvement Daily Improvement Breakthrough Improvement 12 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 6
  7. 7. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Principles of Continuous Improvement Value is in the eyes of the customer (receiver). All work is a process. Processes can be measured. Variation exists everywhere. Variation creates waste which leads to process degradation. Understanding and reducing variation and waste are key to successful improvement. Involve and empower employees. 13 What is Value? Value Added Activity Non-Value Added Activity An activity that changes the size, shape, An activity that consumes time or fit, form, or function of material or resources, but does not satisfy customer information (for the first time) to meet demands and requirements. customer demands and requirements. Value add is typically ≤ 5% Non-value add is typically ≥ 95% 14 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 7
  8. 8. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 What is a Process? A process is a series of activities (value added and non-value added) that converts inputs into outputs to satisfy customer needs. Inputs Process Outputs Suppliers Customers 15 Process Examples Business  Other – Order entry – Planning a family – Invoicing vacation – Product / service – Getting ready for work development – Buying a car – Material / service acquisition – Preparing dinner – Product / service – Ordering shoes on-line delivery – Obtaining a new – Personnel hiring prescription – Budgeting 16 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 8
  9. 9. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Measuring Process PerformanceTwo types of measures:1. Result - Describe the outputs of the process2. Driver - Describe the inputs and/or steps of the process Inputs Process Outputs Suppliers Customers Drivers Results 17 Variation and Waste Generates The 8 Wastes Variation is Everywhere  Defectsσ Materials  Over Productionσ Equipment  Waitingσ Work Practices  Not Engagingσ People Employeesσ Measurement  Transportationσ Demand  Inventoryσ Environment  Motion  Excess Processing Generates 18 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 9
  10. 10. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Hidden Costs of Variation and Waste Traditional Costs Rework (Easily identified) Budget Overruns Overtime Missed Schedules Inspection/Checks Hidden Costs(Difficult to measure) Low Customer Satisfaction Lost Sales/Orders Late Delivery Long Cycle Times Lost Excess Inventory Expediting Costs Opportunity Productivity Loss Outsourcing Change Requests Lost Customer Loyalty Employee Morale, Turnover 19 Improving Process Performance Inputs Process Outputs Must change inputs & process To impact results 20 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 10
  11. 11. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011Involve & Empower Employees Employees understand the needs of the customer. Employees think and solve problems. Employees on the front lines can identify and fix the myriad of small problems that invariably add up to big problems. 21Key Continuous Improvement Tools Strategic Focus  Process Analysis – Shared Vision, Mission & – Value Analysis Core Values – Pareto Chart – Voice of Customer – Histogram – Key Measures – Run Chart – Prioritization Matrix – Basic Statistics – Charter – Scatter Plot – Fishbone Diagram Process Understanding / Documentation  Team/Stakeholder – Process Map/Flow Chart – Action Register – Work Instructions – Stakeholder Analysis – Visual Communication – Communication Plan – Control Plan – RACI 22 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 11
  12. 12. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Overview of Organizational Change Models What is Change? According to the dictionary, change is: – The act, process, or result of altering or modifying. – The replacing of one thing for another. – A transformation or transition from one state, condition or phase to another. – Something different; variety. Synonyms for change include: – Alteration – Modification – Transformation – Adjustment – Variation 24 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 12
  13. 13. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Types of Change Incremental change – Constant process to eliminate problems and improve efficiencies. – Seeks to maintain “fit” among all components of the organization. – Aligned with daily improvement. Radical change – Usually brought on by fundamental shifts in the external environment. – Typically requires dramatic changes in strategy and abrupt departures from traditional work structures, job requirements, rituals, and habits. – Aligned with breakthrough improvement. 25Incremental vs Radical Change Incremental Change Radical Change 26 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 13
  14. 14. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Kotter: Why Organizational Change Fails Allow Too Much Complacency Fail to Create a Sufficiently Powerful Guiding Coalition Underestimate the Power of Vision Under Communicate the Vision Permit Obstacles to Block the Vision Fail to Create Short-Term Wins Declare Victory Too Soon Neglect to Anchor Changes Firmly in Organization Culture From: John P. Kotter. Leading Change. Boston, MA: Harvard Business School Press, 1996. 27 Kotter’s Eight-Stage Change Process1. Establish a Sense of Urgency2. Create the Guiding Coalition3. Develop a Vision and Strategy4. Communicate the Change Vision5. Empower Broad-Based Action6. Generate Short-Term Wins7. Consolidate Gains and Produce More Change8. Anchor New Approaches in the Culture From: John P. Kotter. Leading Change. Boston, MA: Harvard Business School Press, 1996. 28 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 14
  15. 15. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Five Elements Needed for Creating Change Vision Skills Incentive Resources Action Plan Change Skills Incentive Resources Action Plan Confusion Vision Incentive Resources Action Plan Anxiety Gradual Vision Skills Resources Action Plan Change Vision Skills Incentive Action Plan Frustration False Vision Skills Incentive Resources Starts 29 Bridges: Managing Change Uncertainty Commitment CreativityExcitement Accomplishment Innovation High Energy Anticipation Learning Ending Transition Zone New Beginning Anxiety ReliefConfusion Resistance UnsureFrustration AmbivalenceReservation Confusion Denial Skepticism Exploration Adapted from William Bridges. Managing Transitions. Cambridge, MA: Perseus Books,1991 30 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 15
  16. 16. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Managing Change: Tactics by Phase Ending Transition Zone New Beginning Communicate the  Allow resistance to  Reward and What, Why and How surface Recognize Acknowledge  Provide information  Celebrate emotions, don’t get about the future/use defensive personnel support  Ensure structures organizational Mark Endings support for new  Encourage creativity beginning and innovation Get leadership to  Communicate the play a role  Talk to employees about What, Why and How individual transitions Expose key leaders  Consider how it and stakeholders to  Integrate details into integrates into other these concepts/ meetings and events areas of the plan conduct trainings Adapted from William Bridges. Managing Transitions. Cambridge, MA: Perseus Books,1991 31 Brain Barriers to Strategic Change Right Thing Wrong Thing Brain Barrier 1: When opportunities or Done Well threats stare people in the face, they fail to see theBrain Barrier 3: need to changeEven when peoplemove, they fail to Brain Barrier 2: Evenfinish when people see the need to change, they Done Poorly often fail to move From: J. Stewart Black & Hal B. Gregersen. Leading Strategic Change: Breaking Through the Brain Barrier. New York: Prentice-Hall, 2002. 32 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 16
  17. 17. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Leading Strategic Change Right Thing Wrong Thing 1. Repeat message 2. Create high- Done Well impact, inescapable confrontations1. Provide of the facts champions2. Make the results 1. Make sure visible destination is clear 2. Provide skills, Done Poorly resources, tools 3. Deliver valuable rewards along the way From: J. Stewart Black & Hal B. Gregersen. Leading Strategic Change: Breaking Through the Brain Barrier. New York: Prentice-Hall, 2002. 33 Common Themes  Strategic focus  Helping employees “see” the need for change  Communication  Action planning  Hold the gains 35 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 17
  18. 18. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Continuous Improvement Tools for ChangeKey CI Tools for Managing Change Strategic Focus  Communication – Shared Vision, Mission & – Visual Communication Core Values – Stakeholder Analysis – Voice of Customer – Communication Plan – Key Measures – Prioritization Matrix  Action Planning – Charter – Action Register – RACI Helping Employees “See” – Simple Flow Chart  Hold the Gains – Cross Functional Flow Chart – Work Instructions – Histogram – Control Plan – Run Chart – Pareto Chart 37 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 18
  19. 19. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Role of Leaders in Managing Change Create a climate where truth is heard* – Lead with questions, not answers. – Engage in dialog and debate, not coercion. – Conduct autopsies, without blame. – Build red flag mechanisms that turn information into information that cannot be ignored.* Jim Collins. Good to Great. New York: Harper Collins, 2001. 38 Strategic Focus Tools Shared Vision, Mission & Core Values Voice of the Customer Key Measures Prioritization Matrix Improvement Project Charter 39 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 19
  20. 20. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Strategic Change & Improvement Identify Opportunities Scope Shared Vision, Shared Vision, Mission, Values, Mission, Values, Prioritize Key Measures & Key Measures & & Select Voice of Customer Voice of Customer Charter Strategic Change & Improvement 41 Identify Opportunities for Change/Improvement Shared Vision & Performance TargetsMission & Core Values Voice of the Customer Opportunities to reach the goals Unmet or new Products & Unaligned Services Potential Opportunities needs Issues needing attention Problems, Defects, Dissatisfaction 43 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 20
  21. 21. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Mission, Vision & Core Values Mission: Statement of purpose – Essence of organization; does not change over time. Core Values: Principles of the organization – Guide behavior and decisions in pursuit of the Mission and Vision. Vision: Description of the desired future state of the organization – Clarifies direction for change. – Gap with Current State provides motivation to take action. 44 Relationship Current State, Mission, Vision and Core Values Vision Current State Time 45 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 21
  22. 22. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011Discovering Mission, Vision & Core Values You do not create or set your organization’s Mission and Core Values. You discover them by looking inside the organization. Before a vision can emerge, an organization must be clear about its identity. – Organizational Identity = Mission + Core Values They have to be authentic. – It needs to match in a way that persons familiar with the organization will recognize it. 46 Voice of the Customer Voice of the Customer (VOC) is used to describe customers’ needs and their perceptions of your product and/or service. VOC helps identify what is value added in the process. – Non-value added activities are sources of variation and waste. Can be used to provide focus to change & improvement efforts. Can also be used to create a sense of urgency in the organization. 47 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 22
  23. 23. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 VOC Data Collection Reactive Proactive Customer What & Why Summary Sources Sources Who is your What do you What reactive What proactive What customer – want to ask actions will you actions will you information didinternal and/or them and what take to gain the take to gain the you gain from external? information do information – information – the probing? you need to customer surveys, What does the probe for? complaint data, interviews, customer need monthly customer focus from your Why are you scorecard groups, process? asking these information, meetings, etc. questions – customer what feedback, etc. information are you expecting to gain? 48Proactive: Customer Interview Important information gathering technique to understand voice of customer. Fosters cooperative working relationship with customer. Ask open-ended questions such as: – “Tell us about your job …” – “What barriers do you face in doing your job …?” – “What issues do you encounter when …?” – “Tell me more about …” – “Give me an example of ….” – Use what, how, when or why words LISTEN! 49 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 23
  24. 24. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Proactive: Customer Survey Measure of what a person knows, likes and dislikes, and/or thinks about your product and/or service. Must be well designed. – Identify needs and goals of survey. – Define participants. – Determine format and administration of survey. – Generate survey questions. • Keep short, simple and relevant • Keep clean • Provide instructions – Test/pilot with several participants. – Determine how survey results will be analyzed before administration. 50 Proactive: Focus Group A small group of people are asked about their perceptions, opinions, beliefs and attitudes towards a product and/or service. Questions are asked in an interactive group setting where participants are free to talk with other group members. Useful when desired information about behaviors and motivations is more complex than a survey is likely to reveal and when the dynamic interchange between the group members may result in more in- depth and unbiased information than one-on-one interviews. 51 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 24
  25. 25. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Translate VOC to Customer RequirementsVoice of Customer Key Customer Issue / Customer(Actual Statements) Need Requirement“This remote does not Does not understand the All remote functions arework!” operation of the remote. useable with little to no instructions.“I don’t want to listen to Wants to talk to a person Less than 3 options ona bunch of options and quickly when calls for the phone tree andthen wait on hold.” customer service. sufficient CSRs to handle peak calls.“Why do I have to fill out Does not want to spend Verify information andanother form? You time repeatedly update only when therealready have my providing the same are changes.information on file.” information before obtaining service. 52 CTQ Tree Translates customer expectations into requirements.Need Drivers CTQCs Measures Requirement Between 150 & Temperature Hot Degrees F 155 Degrees F Customer Taste At least 4 on Taste Good Satisfaction Scale of 1-5Cup ofCoffee Number of No Less Than Volume Full Cup Ounces 10 Oz No More Than Cost Cheap $ $1 53 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 25
  26. 26. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Procedure for Creating CTQ Tree Identify customer needs. For each need, determine what fulfilling that need would mean to the customer. This is a “driver.” Keep asking the same question – “what would that mean” – until you reach a level where a clear and measurable specification can be written. – Example: “timely and accurate” means “quick delivery”; “quick delivery” means receipt the next day. 54 On-line Ordering CTQ Tree 55 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 26
  27. 27. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 The Kano Model Delight Delighters – Must be characteristics are generally taken for Resigned Pleased granted—unless they are absent!Customer Satisfaction to Reality – Delighters are generally Neutral not mentioned, since Must Be the customers are not dissatisfied with their Not Taken for Pleased Granted absence. – Customers generally discuss or bring up issues Dissatisfaction Absent Degree of Fulfilled related to More Is Better Achievement characteristics. 57 On-line Ordering Kano Model Delight Delighters Received Next Business Day Sizes & Colors Customer Satisfaction Neutral Must Be Catalog up-to-date Not Taken for Website menus Pleased easy to navigate Granted Links to items Dissatisfaction correct Absent Fulfilled Degree of Achievement 59 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 27
  28. 28. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Key Measures High-level indicators of the success of the organization. Often reflect: – Customer requirements – Financial expectations – Targets for each product/service family and market – Expectations for each competitive advantage to be established or enhanced Should be: – Derived from strategic objectives. – Defined and measurable. – Clear to all who have to understand and be guided by them. – Balanced between financial, customer, internal process, and learning & growth. 61 SMART Measures Specific – identified with a relevant strategic objective, strategy or process. Measurable – mechanisms exist or can be developed to quantify the metric. Action-oriented – provide insight into action required. Relevant – to the critical processes of the organization. Timely – available at the right moment for decision making. 62 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 28
  29. 29. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Operational Definition A clear, precise description of what is being measured. Used to remove ambiguity in measurement and improve data integrity – no matter who does the measuring, the results are the same. – Example: One person may say an invoice is paid when the request to pay is submitted to the accounting system, while another person may say it is paid when the check is cut, while yet another person may say it is paid when the check is cashed. 63Operational Definition ExampleTitle Average monthly invoice cycle timePurpose Is the average time to pay invoices meeting target?Description Invoice Cycle Time is the amount of time between when the billing information is received from a CSR as measured using the time stamp on the file to the time the invoice is sent to the customer as measured by the time stamp on the electronic customer notification.Source of Data Invoice tracking reportCalculation (Time invoice sent to customer) – (Time billing information received from CSR)Timeframe Calculated for all invoices processed in a given month (28 days)Units Measured in minutes 65 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 29
  30. 30. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Identifying Key Measures Identify critical dimension(s) associated with each strategic objective, strategy or process: Quality, Timeliness, Cost, Quantity Brainstorm potential key measures for each critical dimension. Evaluate each brainstormed potential key measure: – Does the measure assess performance of the strategic objective, strategy or process? – Can your organization influence the outcome of the measure? – Can you establish a challenging goal for the measure? – Will the measure result in a number that can be analyzed? – Can you obtain an accurate and precise measurement? – Is it cost effective to track and report? 66 Prioritization Matrix Narrows options (change/improvement opportunities) by comparing and weighing choices against a set of criteria. Identifies the option that best meets multiple criteria. Rating of 10 8 9 4 6 Importance Probability of Resources Implement Implement Impact on Customer Criteria Required Success Time to Cost to Total Option 1 Option A 3 9 3 1 3 151 2 Option B 9 3 9 3 1 213 3 Option C 3 1 1 1 3 69 4 Option D 3 3 1 1 9 121 67 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 30
  31. 31. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011Prioritization Matrix Procedure Create a list of opportunities for change/improvement. Create a list of strategic criteria for evaluating the change/improvement opportunities. Rate importance of each criteria on a scale of 1 to 10, 10 being highest. Rate each opportunity versus the criteria using 0, 1, 3, 9 weighting: – 0 no impact – 1 minimal impact – 3 moderate impact – 9 strong impact Cross multiply the criteria rating by the opportunity rating to arrive at a total score for each opportunity. 68 Prioritization Matrix Example Dollar impact of  Time to Complete (5) Opportunity (10) – 9: ≤ 4 months – 9: > $1 MM – 3: 5 to 6 months – 3 : $250 K to $1 MM – 1: > 6 months – 1: < $250 K  Customer Impact (8) Probability of Success (7) – 9: strong positive and – 9: > than 80% visible impact – 3: 50 to 80% – 3: low positive or no visible – 1: < 50% impact – 1: negative or no impact 69 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 31
  32. 32. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Prioritization Matrix ExampleOpportunities Criteria Rating of Importance ---> 10 7 5 8 Probability of Dollar Impact Customer Complete Success Time to Impact Opportunities Total Time Reconcile Balance Sheet 3 3 3 3 90 Invoice Posting First Match Rate 9 3 3 9 198 Interco Manual Invoicing Errors 3 3 3 3 90 Time to Archive Financial Docs 1 9 3 3 112 Cost Center Splits 1 1 1 3 46 Manual Payment Processing 3 3 9 9 168 T&E Reconciliation Time 1 3 3 1 54 Vendor Data Error Rate 9 3 3 3 150 Impact Ratings 70Prioritization Matrix Example Rating of Importance ---> 10 7 5 8 Probability of Customer Complete Success Time to Dolloar Impact Impact Opportunities Total Invoice Posting First Match 9 3 3 9 198 Manual Payment Processing 3 3 9 9 168 Vendor Data Error Rate 9 3 3 3 150 Time to Archive Financial Docs 1 9 3 3 112 Time Reconcile Balance Sheet 3 3 3 3 90 Interco Manual Invoicing Errors 3 3 3 3 90 T&E Reconciliation Time 1 3 3 1 54 Cost Center Splits 1 1 1 3 46 71Copyright © 2011 SOS Consulting, LLC. All rights reserved. 32
  33. 33. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Charter Opportunities A charter is a one-page document that defines in clear, specific terms the task an individual or team is to accomplish. Includes: – Process and process owner (senior leader who has responsibility for the process and its results) – Opportunity statement – What’s in/out of scope – Objectives (metrics, baseline, goal, entitlement) – Milestone dates – Team members 72 Opportunity Statement Factual statement of situation including a description of what key measure is involved and current level of performance. – Does not assign blame. – Does not assume cause(s) or include solution(s). Example: – Accounts Payable processes over 150,000 invoices per year; of those, 35% are being paid out after the contracted 60 day terms. Overdue payments to our enterprise partners are the number one reason for ship and credit holds, resulting in a loss of $2 Million of revenue and on-time performance. 73 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 33
  34. 34. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Improvement Project Objectives Baseline –performance over recent past. – Preferably last 12 months. Entitlement – best conceivable performance. Goal – desired performance at end of the change/improvement effort; chosen to close the gap between baseline and entitlement. Note: Effort should include “balance” metrics. – Primary key measure: Reduce cycle time – Balance measure: Product quality 75 Closing the Performance Gap Performance Goal Gap Baseline Closing the Entitlement Gap 76 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 34
  35. 35. IMPROVEMENT TEAM CHARTERDept/Location: Process Owner/Champion:Process: Date Created/Revised:Opportunity Statement:In Scope (What is in focus): Out of Scope (What will not be considered):Objectives: Metric Baseline Goal EntitlementFinancial Impact:Milestone Dates:Team: Name Role
  36. 36. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011Tools for Helping Employees “See” Process Variation and Waste – Simple Flow Chart – Cross Functional Flow Chart Process Performance – Histogram – Run Chart – Pareto Chart 77 Process Flow Charting Makes the process visible to all members of the process. Encourages a deeper and broader understanding of the process. Helps identify process disconnects. Used to identify opportunities to reduce variation and waste and to create a sense of urgency for change/improvement. Two common types: – Simple flow chart – Cross functional flow chart 78 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 35
  37. 37. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Simple Flow Chart Detailed representation of the process including: – Action steps – Decision points – Delays – Movement Helps employees “see” the sequence of steps in the actual process. Helps employees “see” the opportunities for variation and waste needing change/ improvement. Basis for identifying result and driver measures of the process. 79Invoice Process Simple Flow Chart 80 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 36
  38. 38. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011Paint Manufacturing Simple Flow Chart 81Loan Approval Simple Flow Chart 82Copyright © 2011 SOS Consulting, LLC. All rights reserved. 37
  39. 39. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Kidney Transplant Flow Chart Based on: Matthew Franchetti & Kyle Bedal. “Perfect Match,” Six Sigma Forum Magazine, August 2009. 83 Cross Functional Flow Chart Rearranges flow chart process steps into rows or “swim lanes”. – Rows represent individuals, roles or functions. – Steps fall in appropriate row. – Also known as swim lane flow chart. Clearly shows hand-offs between individuals and/or functions. Helps employees “see” opportunities for variation and waste needing change/ improvement. 86 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 38
  40. 40. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011Invoice Process Cross Functional Flow Chart Consultant Secretary Team Manager Planning & Control Shared Service Center 87Invoice Process Cross Functional Flow Chart Account MgrShared Service Center Client 88 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 39
  41. 41. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Paint Manufacturing Cross Function Flow ChartPaint Manufacturing Phase Scheduler Recipe Charge Blender Charge Fill Tank Drop to Fill Mix Sample Additional Wait Materials Empty? Tank Material Lab Tech Test Ok? Fill Operator Empty Fill Tank 89 Loan Approval Cross Functional Flow Chart 90 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 40
  42. 42. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Identify Actual Process You may think the  When it is actually: process is: Go see the process! 93 Actual Process Example 94 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 41
  43. 43. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011Increasing Process Understanding Changing and improving the process requires increasing understanding of process details. 95 Process Performance ChartsHow are the six sales regions • Basic charts help employeesperforming? “see” the overall process performance, including theRegion 4Qtr96 3Qtr96 4Qtr95 location and variability andNorth East 1148 976 952 patterns/trends inSouth East 1337 1197 1196 performance.North West 806 688 878 • Facilitate comparisons toNorth  requirements or targets or 702 743 670Central benchmarks.Mid‐ • Help focus 781 807 802Atlantic change/improvement efforts.South  • Help create a sense of 359 447 462Central urgency. • Include: Histogram, Run Chart, Pareto Chart 98 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 42
  44. 44. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Process Performance Charts A Picture is Worth a ThousandWhat Is This? Words 99 Histogram A frequency bar chart where the bars show the number of times a value or range of values occurs in the data. A Histogram can be used to: – “See” the overall process performance. – “See” the variation or spread in the performance data. – Compare the process performance against specifications or targets. 100 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 43
  45. 45. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011Potential Histogram Patterns Bimodal Bell-Shaped Skewed 101 Sales by Region Time Northeast Southwest Northwest N. Central Mid-Atlantic S. Central1992_Q1 924 1056 1412 431 539 3971992_Q2 928 1048 1280 470 558 3911992_Q3 956 1129 1129 439 591 4141992_Q4 1222 1073 1181 431 556 4071993_Q1 748 1157 1149 471 540 4151993_Q2 962 1146 1248 496 590 4421993_Q3 983 1064 1103 506 606 3841993_Q4 1024 1213 1021 573 643 4481994_Q1 991 1088 1085 403 657 4411994_Q2 978 1322 1125 440 602 3661994_Q3 1040 1256 910 371 596 4701994_Q4 1295 1132 999 405 640 4261995_Q1 765 1352 883 466 691 4451995_Q2 1008 1353 851 536 723 4551995_Q3 1038 1466 997 551 701 3631995_Q4 952 1196 878 670 802 4621996_Q1 1041 1330 939 588 749 4201996_Q2 1020 1003 834 699 762 4541996_Q3 976 1197 688 743 807 4471996_Q4 1148 1337 806 702 781 359 103Copyright © 2011 SOS Consulting, LLC. All rights reserved. 44
  46. 46. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Sales by Region Histogram of Northeast Histogram of Southwest 14 7 12 6 10 5 Frequency Frequency 8 4 6 3 4 2 2 1 0 0 400 600 800 1000 1200 1400 400 600 800 1000 1200 1400 Northeast Southwest Histogram of Northwest 5 4 Frequency 3 2 1 0 400 600 800 1000 1200 1400 Northwest 104 Sales by Region Histogram of N. Central Histogram of Mid-Atlantic 7 9 8 6 7 5 6Frequency Frequency 4 5 3 4 3 2 2 1 1 0 0 400 600 800 1000 1200 1400 400 600 800 1000 1200 1400 N. Central Mid-A tlantic Histogram of S. Central 18 16 14 12 Frequency 10 8 6 4 2 0 400 600 800 1000 1200 1400 S. Central 105 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 45
  47. 47. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011Kidney Transplant Histogram Original Process Total Processing Time 90 80 70 Number observations 60 50 40 30 20 10 0 Days for completion Based on: Matthew Franchetti & Kyle Bedal. “Perfect Match,” Six Sigma Forum Magazine, August 2009. 106Kidney Transplant Histogram Improved Process Total Processing Time 40 35 30Number observations 25 20 15 10 5 0 Days for completion Based on: Matthew Franchetti & Kyle Bedal. “Perfect Match,” Six Sigma Forum Magazine, August 2009. 107Copyright © 2011 SOS Consulting, LLC. All rights reserved. 46
  48. 48. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Histogram Procedure Collect at least 30 data points. Calculate the range (R). Choose the number of bars (k) for the histogram • # of data points number of bars – 30 - 50 7 - 10 – 51 - 100 10 - 15 – 101 - 200 15 - 20 – Over 200 20 - 25 Calculate the width (w) of the bar intervals: w = R/k. Round to a convenient number. Set up the intervals for each bar starting at (or just below) the smallest data value. Set the boundaries for each bar using w. Count the number of points falling into each interval. Draw bar graph of counts for each interval. 108 Paint Batch Cycle Time Histogram The addition of requirements to the Histogram allows one to see how the process performance compares to the requirements. Histogram of Time 14 12 10 Frequency 8 6 4 2 0 40 80 120 160 200 Time 109 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 47
  49. 49. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Variation and Customer Satisfaction LSL USL $ $ $ $ $ $ $ $ $ $ $ $ $ $ 110 Histogram and Requirements The addition of specifications or requirements to the histogram allows one to see how the process performance compares to the requirements but tell nothing about when out of specification observations occurred. Target When did these occur? 111 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 48
  50. 50. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Run Chart An XY plot of data where the X-axis is always time. A Run Chart can be used to: – “See” the overall process performance. – “See” the variation or spread in the performance data. – Compare the process performance against specifications or targets. – “See” shifts, trends, intermittent and cyclic patterns that occur over time. 112 Patterns in Run Charts Intermittent Variation Shift 70.000 70.000 65.000 65.000 60.000 60.000 55.000 55.000 50.000 50.000 45.000 45.000 40.000 40.000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 Trend Cycle 60.000 60.000 55.000 55.000 50.000 50.000 45.000 45.000 40.000 40.000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 35.000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 Rapid Swings in Variation 60.000 55.000 50.000 45.000 40.000 35.000 113 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 49
  51. 51. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Sales by Region Northeast Sales Southwest Sales 1300 1500 1200 1400 1100 1300 SouthwestNortheast 1000 1200 900 1100 800 1000 700 2 4 2 4 2 4 2 4 2 4 2 4 2 4 2 4 2 4 2 4 _Q _Q _Q _Q _Q _Q _Q _Q _Q _Q _Q _Q _Q _Q _Q _Q _Q _Q _Q _Q 92 92 93 93 94 94 95 95 96 96 92 92 93 93 94 94 95 95 96 96 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 Time Time Northwest Sales 1500 1400 1300 1200 Northwest 1100 1000 900 800 700 600 2 4 2 4 2 4 2 4 2 4 _Q _Q _Q _Q _Q _Q _Q _Q _Q _Q 92 92 93 93 94 94 95 95 96 96 19 19 19 19 19 19 19 19 19 19 Time 115 Sales by Region N. Central Sales Mid-Atlantic Sales 750 800 700 750 650 600 700 Mid-AtlanticN. Central 550 650 500 600 450 550 400 350 500 1992_Q 2 1992_Q 4 1993_Q 2 1993_Q4 1994_Q2 1994_Q4 1995_Q2 1995_Q4 1996_Q2 1996_Q4 1992_Q 2 1992_Q 4 1993_Q 2 1993_Q4 1994_Q2 1994_Q4 1995_Q2 1995_Q4 1996_Q2 1996_Q4 Time Time S. Central Sales 475 450 425 S. Central 400 375 350 1992_Q2 1992_Q4 1993_Q2 1993_Q 4 1994_Q2 1994_Q4 1995_Q2 1995_Q 4 1996_Q2 1996_Q4 Time 116 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 50
  52. 52. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Run Chart of Paint Batch Cycle TimeThe addition of requirements to the Run Chart allows one to see how theprocess performance compares to the requirements. Batch Cycle Time 225 200 175 150 Time 125 100 75 50 1 5 10 15 20 25 30 35 40 45 50 Index 117Run Chart: Lack of Standard Work 140 130 120 110 100 90 80 1 9 18 27 36 45 54 63 72 81 90 118 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 51
  53. 53. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011Run Chart: Visualize Improvement Overage by Production Run 40000 30000 Overage (linear feet) 20000 Work Instructions implemented Weekly audits 10000 implemented 0 1 20 40 60 80 100 120 140 160 180 Production Run 119 Run Chart Procedure Measure process performance over time in sequence. Draw a graph with a vertical line and a horizontal line. – The vertical line should cover the full range of measurements. – The horizontal line should cover the time period over which the data was collected. Plot the data on the graph. Connect the points to form a line. 120 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 52
  54. 54. Creating Successful Change Using CI Methods SWaMFest VII, September 15, 2011 Are the 4 Processes the Same?Statistic Process A Process B Process C Process DAverage 70.0 70.0 70.0 70.0Statistic Process A Process B Process C Process DAverage 70.0 70.0 70.0 70.0Standard Deviation 10.0 10.0 10.0 32.4 121 Are the 4 Processes the Same?Statistic Process A Process B Process C Process DAverage 70.0 70.0 70.0 70.0Standard Deviation 10.0 10.0 10.0 32.4Median 70.0 65.7 73.8 74.2Statistic Process A Process B Process C Process DAverage 70.0 70.0 70.0 70.0Standard Deviation 10.0 10.1 10.0 32.4Median 70.0 65.7 73.8 74.2Minimum 29.8 62.9 1.87 11.78Maximum 103.3 130.4 77.1 132.8 122 Copyright © 2011 SOS Consulting, LLC. All rights reserved. 53

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