ASQ - Team and Workplace Excellence Forum

March 1998

Articles

Teaching An Organization To Learn

Scenario Planning

The Sinking Of The Titanic

Through Rain, Sleet And New Quality Initiatives

Striving To Deliver Excellence

Not Your Typical Oil Change



Columns

Reality: What A Concept
by Peter Block

Reflections On The Baldrige Winners
by Cathy Kramer


Features

Brief Cases
Business News Briefs

Views for a Change

Pageturners
Book Review

 
Views For A Change

H. James Harrington Responds

When you stop improving, you don't stand still; you start slipping backwards because your competition, both within and outside the organization, is continuously improving. You and your organization can never stop changing. The question is not: When should you stop changing? It is: When has an individual act or product progressed to an acceptable level so that you or your organization should redirect your efforts to another activity or product? Although everyone in the world theoretically would like perfect quality in everything they come in contact with, I believe there is no one who would recognize when this theoretical state occurs, if it could occur. If all of us required perfection, we would still be in the womb because individuals are imperfect when they are born and they become less and less perfect until they pass away.

The question is not: How do you produce perfect products? It is: How imperfect should a product or service be in order to provide best value to one's self and the other stakeholders (management, external and internal customers, suppliers, investors, the community and your family)? The objective is to change your processes to ensure that they provide best value to all of the processes' stakeholders, not to provide the perfect product. There is a big difference between what we need, what we want, and what represents best value to us (what we buy).

For example, as far as my transportation is concerned:
o What I need is a bicycle built for two.
o What I want is a Ferrari convertible.
o What represents best value is a Ford Mustang
convertible because that is what I bought.

My perfect car would look like a Ferrari, drive like a Mercedes Benz, ride like a Lincoln Continental, be as fast as a Maserati, run on solar batteries, and cost less than Mattel's hot wheels. In addition, it would be replaced free of charge every night while I slept so that it would always be clean and never need to be repaired. Impossible, you say, and I agree. Perfection is impossible. What we need to do is reach a balance between cost, schedule, quality, pollution and performance to optimize the value of what we deliver as viewed by all stakeholders. To make this situation worse, different stakeholders have very different views of what represents value to them. The young man wants speed, the environmentalist wants zero pollution, the salesperson who spends most of his/her time riding in a car is concerned with the ride, the investor wants profit, the suppliers want long lead times, manufacturing wants a constant order flow, employees want job security, and the community wants more jobs. "Perceived value" is the term at which all changes should be directed. The concept of best practice or perfection is an outmoded concept. What we need are processes that represent best value to the key stakeholders.
The major problem with benchmarking and the chief cause of reengineering project failures are their focus on best-practice solutions rather than best-value solutions.

o Best-Practice Solution is defined as: The approach that will produce the best results for a set of conditions (e.g., minimum cycle time to produce and process an order).
o Best-Value Solution is defined as: The approach that provides the optimum value to the key stakeholders.

We benchmarked an order entry process and found that the minimum order cycle time from the salesperson to the scheduling computer was five seconds [Case #1]. At another organization we benchmarked the same process and found a cycle time of two days [Case #2].
The cycle time for the process we were trying to improve was 15 days.
What is the best-practice solution? The five-second process, of course. The problem is that best practice does not consider all of the parameters that must be considered in making a business decision. In Case #1 it would have taken 18 months to install a new computer system at a cost of $1.5 million and the technology that would have been used was changing rapidly. The Case #2 solution on the other hand, was implemented in two weeks at an additional cost of $10,000 per year with little or no additional training required. We could find no real business advantage of Case #1 over Case #2 because reducing the order entry cycle by an additional two days did not impact the customer in any positive way or increase customer satisfaction. With the additional information available, it becomes very evident that the best-value solution is Case #2, although the cycle time is far greater than the best-practice solution.

If the question is when should you stop improving, that answer is never. If the question is when should you stop improving an item you are working on, the answer is continue to improve until you meet your customer's requirements, then continue to improve to the point where the customer is unwilling to pay for any additional effort required to exceed his/her requirements and/or the maximum value point is reached. The maximum value point is reached when the gap between what it costs to provide the item and what the customer is willing to pay for the item is maximized. This gap is commonly called "profits," which fund our government, pay our salaries, maintain our retirement funds, and finance our charities. Profit is not a four-letter word as many employees treat it. It is what makes our economy tick. When profits go down, everyone loses. For example, in the early 1990s when IBM stopped being profitable, top management was replaced, over 150,000 employees were removed from the payroll, and their retired employees had one of their major income sources (stock dividends) cut by 75 percent.

As employees it is our responsibility to maximize our value to the organization that we work for. There is no doubt about it. After you have met your customer requirements it becomes purely a value proposition. There is a point when you should stop improving the quality of the item you are working on and move on to something else that adds more value to your organization and your customers. Remember that an item has no value to your customers if it has not been delivered to them.

Rule #1 for all organizations:
Get maximum value from all effort expended.

Organizations that live by Rule #1
do not need Rule #2.

My advice to you is very simple: Don't try to get all the lumps out of the gravy or your potatoes will be cold before the gravy is put on the table.

John Runyan Responds

March '98 News for a Change | Email Editor
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