Keep Your Eye on Process Improvement

Hawk EyeIn my consulting and research I’ve seen many companies launch process improvement programs such as Total Quality Management, Business Reengineering, Lean, and Six Sigma. Many got significant benefits, including lower costs, faster time-to-market, and better customer experiences. But after one round of improvement, they gave up and let their organization get flabby again. Organizations, like people, need to stay fit and make improvement a habit to be competitive. So why don’t they? Why is sustained process improvement so rare?

Consider the story of Allied Signal. Under Larry Bossidy, Allied Signal was a “poster child” of process improvement success following the “Six Sigma” approach — enjoying consistent growth in earnings and cash flow from 1991 to 1999, highlighted by 31 consecutive quarters of earnings-per-share growth of 13% or more, and tripled operating margins to almost 15 percent. Bossidy wrote a best-selling book, called Execution, about his approach. Yet when Allied Signal merged with Honeywell in 1999 and Bossidy departed in 2000 and was replaced by Mike Bonsignore, they dropped their Six Sigma attention while focusing on a GE-Honeywell deal. According to market analyst Cliff Ransom, “It took about 18 months for a Six Sigma culture to essentially disappear when the wrong successor to Larry Bossidy took the reins.”

Or consider the story of Wiremold, a famous example of a “lean transformation,” profiled in the book Lean Thinking. From 1990 when new management and Japanese consultants arrived to 1999, Wiremold’s stock rose 32% per year, the first shipment fill rate rose from 60% to 92%, sales per full time employee rose from $92,000 to $241,000, inventory turnover rose from 3.4 to 15.8, and new product development cycle time declined from 2-3 years to 3-12 months. Then in 2000, Wiremold was acquired by Legrand, a French manufacturer of electrical equipment. Legrand was firmly committed to batch production and standard cost accounting, and the lean transformation unwound in a few years.

As the Allied Signal and Wiremold stories demonstrate, there are significant potential business benefits from adopting a process improvement program, yet despite these apparent benefits, they weren’t enough to build process improvement into Allied Signal’s or Wiremold’s DNA. What are the factors that get in the way of continuous improvement?

In my research, including analysis of more than twenty companies which have launched major process programs, I’ve identified five factors that have gotten in the way of sustained attention to process improvement:

  1. Competing demands for attention (as with Honeywell’s potential deal with GE)
  2. Competing mindsets and behaviors (such as work harder vs. work smarter)
  3. Strategic irrelevance (other more important levers for competitive success)
  4. Traditional management processes (Legrand’s cost accounting)
  5. The pain of disruption

Request: Have you experienced a process improvement program that was launched and then dropped? What are the factors you have seen that get in the way of sustained attention to process improvement?

This article first appeared on the Harvard Business Review and has been lightly edited.

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Categories: Continuous Improvement, Process Management

Author:Brad Power

Brad is a consultant and researcher in process innovation. His current research is on sustaining attention to process management. He is currently conducting research with the Lean Enterprise Institute.

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One Comment on “Keep Your Eye on Process Improvement”

  1. Carlos Leitao
    January 25, 2013 at 10:00 am #

    The 30 odd years experience acquired in various industries and in diverse disciplines, I have personally experienced this dilemma. I have experienced the following two examples.
    a) the Lean management process starts off with a bang with all parties getting the necessary training and experiencing significant financial gains etc, 18 months or so down the line people including top management start to fall by the way side and the lean system starts to erode.My personal opinion in this case, A person should have been selected from the onset to drive the Lean management systems and continue to show consistent improvement to all those involved thus stimulating their interest,
    b) The company top management have heard the benefits deriving from a Lean management system and embark in getting consultants in and looking at the financial gains if they introduce Lean management systems into the company. All goes well for say 24 months and a take over or merger occurs. When the latter occurs the new owners are unaware of the Lean management system presently in place. So once again the system starts to erode. Should a person, as mentioned in (a) been appointed from onset, he could have enlightened all the new powers to be how past history had shown significant financial gains since the introduction of the Lean management system. This, i feel, would stimulate the new powers to be and thus the continuity.

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