Proven Systems come with
Memorable Success Stories
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Companies invest in management training/development systems that give their people new perspectives and skills. Why is that important? Because executives expect more from their management teams… more profit, a better corporate culture, faster change.
Getting more from equipment is the easier task… getting more from people and the culture is a much greater challenge.
How does Corporate Culture Impact Profit?
- When people don’t trust each other, culture-driven losses will occur.
- When management has a separate set of rules, culture-driven losses will occur.
- When people are afraid to talk about problems, culture-driven losses will occur.
- When departments interact like a separate company, culture-driven losses will occur.
- When people work as if they were on opposing sports teams, culture-driven losses will occur.
- When management accepts a “It’s Just the Way It Is Here” attitude, culture-driven losses will occur.
- When high project contingencies are set to cover cultural weaknesses, culture-driven losses will occur.
- When recurring problems are accepted as “normal” and even budgeted for, culture-driven losses will occur.
- When management lacks awareness of their link to profit, culture and change, culture-driven losses will occur.
Here are some case studies that could have happened in any company. Each case study demonstrates how MiningOpportunity perspectives, data, tools and tactics were used by management teams to stop their culture losses and shift to a Loss Reduction Culture. The amounts lost are specific to each scenario and may not reflect the amounts of loss occurring in your company. This new kind of thinking and expanded focus helped each team them discover many other hidden losses in their companies that are not mentioned here. The shift in the team’s thinking WAS THEIR KEY TO SUCCESS!
CASE STUDY #1: $17,000,000 LOST – Budgets
Meeting budget is a measure of success for all companies. When actual equals budget, the variance is zero and bonuses are often paid for meeting the plan. Management’s emphasis on meeting budget goals “shapes” the management culture (i.e., the perspectives and choices of the management team). This case study shows how the management team mindset was linked to significant hidden losses that continued for years.
Several years ago I met with the management team of a large Canadian operation. The first day on site I asked questions that would tell me things about their focus, starting with their budget goals. When I asked about operating delays, I learned that management had been meeting their budget for several years. I asked about their budget assumptions and quickly found a 10-minute loss that occurred multiple times per day. The loss had been budgeted for, so there was no variance that “flagged” its existence. The team told me that they were “satisfied with meeting budget”, so they had STOPPED LOOKING for small opportunities to exceed their targets. Instead, the team relied on large projects with large budgets for improvement. The team did not know that losses could be linked to management thinking and ways of working together. I showed them how to quantify the financial impact of this loss. Given their margins, this loss was valued at $17,000,000/year! They had been losing $17,000,000/year for several years and did not know it! Once the dollar value of this loss was known, stopping this loss became a high priority! The meeting shifted from reviewing historical performance and budget to ASKING NEW QUESTIONS about what was possible to achieve. This was when the team’s thinking shifted… and things got exciting!
A list of “capital-free” projects with quantified losses and “agreed-to” management measures was created. A “real-time” shift in thinking and management culture happened that day… this team would NEVER GO BACK to their old way of thinking! How much more money would they make in future years because of this shift?
Question for you: How many HIDDEN LOSSES have you unknowingly budgeted for?
CASE STUDY #2: $4,000,000 LOST – Cost Savings
Cost reduction programs are implemented with the best of intentions, but sometimes they create unintended results. Extreme cost savings programs can change the culture of a company, driving decisions that save pennies in one area while sacrificing thousands in another area. Savings are always measured and reported, but the related losses are seldom measured, even though they may be talked about behind closed doors. This case study shows one example of a loss caused by a heavy cost savings focus and how management stopped it.
A centralized procurement group changed to a foreign supplier of hydraulic parts to save $2,500/year. There was no communication with the end users about this change. Parts from the new supplier started failing, causing equipment damage and downtime. One plant knew that this change in suppliers was causing losses, but did not know how to calculate them. Together we quantified the financial impact, which had several components. Given their margins and number of events, a conservative estimate for this loss was $4,000,000 per year for only this site (compared to $2,500 total savings reported by corporate). Once the dollar value of this loss was known, management wanted to take action to stop the loss.
A meeting was requested between plant management and centralized procurement. During the meeting, the loss data was used constructively to educate corporate about the “risk of loss” for end users. NEW QUESTIONS were asked and a new communication about critical parts was established between sites and corporate. A collaborative culture between sites and corporate developed as “risk of loss” was balanced against cost savings and vendor selection became a shared responsibility.
Question for you: How many HIDDEN LOSSES are being caused by a heavy focus on cost reduction at your company?
CASE STUDY #3: $24,000,000 LOST – Silos
Silos are departments that work on their own… almost as if they were a separate company. Silos perform to meet their department goals without regard to the quality or quantity of products/services they provide to others. Silos do not know what other departments need or have been told to make decisions for other departments without knowing their requirements. Silos refuse to work with others to solve a problem. They decide whether to commit resources to change initiatives or comply with new ways of working together. In every case, each of these examples results in financial losses that are not measured or reported. This case study shows how a “silo” culture can cause huge losses and how management stopped it.
Another client asked me to meet with all their corporate departments to find hidden losses caused by corporate activities. Some losses were occurring between corporate and sites; others were occurring between corporate departments. All of the losses were ultimately tied to the corporate culture… how people were communicating or allowed to communicate, who was making decisions for other groups, the response to reported problems, etc. All of the problems were valued with the help and agreement of department managers. Total value of hidden losses identified with a first pass review was $24,000,000 per year, a loss that was NOT MEASURED OR REPORTED until we calculated it.
When awareness was raised about the impact of culture on profit, corporate culture became a very important thing to focus on and change. Departments that previously did not talk to each other made the choice to join hands, tear down the walls of their silos, and eliminate their losses, which “shifted” the corporate culture in a very short time period.
Question for you: How many HIDDEN LOSSES are silos causing in your company?
CASE STUDY #4: $5,000,000 and 5 MONTHS LOST – Projects/Processes
Any time more than one department must work together to solve a problem or tackle a project, corporate culture impacts the end result! Working relationships between departments play a huge role in the profitability of a company, but we seldom think of this as a factor in lower than expected earnings or lower than expected project ROI. What if the people involved in a problem or project knew that their choices were worth money… real money to the bottom line… maybe millions of dollars? Would it be easier for them to make a different choice? I have found that the answer to this question is always YES! This case study shows how interaction between departments can make or break a start-up process for a new operation.
A client asked me to lead a project team to create a repeatable start-up process for new operations. The process in use was disjointed and poorly designed. Departments that were the “players” in start-up participated in this effort. At the first meeting, team members said there was little hope shown of success by the team because the working relationships (the culture) between these departments were so weak… little communication and low commitment. We analyzed start-ups over the past two years and found that the average cost over-run was $5,000,000 and average time lost was 5 months. To prevent these kinds of losses during future start-ups, we knew the process and the culture had to change.
The team gained a single vision and very high commitment to the plan for execution as the new process came together. The culture within the team had changed, but we knew that the vertical culture (site, division, corporate) within the company plus the relationships with external agencies had to change also to be successful. A new kind of roll-out was designed to create the culture change we needed during a joint session with all groups. Even the executives had not seen this done before. With this culture change strategy, great things happened. People were finally free to communicate and they recognized the value of their process step to the end result, which significantly raised their level of commitment and responsiveness.
Question for you: How many HIDDEN LOSSES are you incurring because processes are implemented with NO CULTURE CHANGE?
CASE STUDY #5: $3,000,000 LOST – Recurring Problems
Problems happen more than once for one of four reasons: 1) people are afraid to inform management about them, 2) management does not have the proper response when problems are revealed, 3) no desire to spend money to fix them, or 4) no one knows the loss caused by the problem. The first two reasons are directly linked to corporate culture. Interestingly enough, when people know the loss caused by a problem, it is easy to use that information to change the corporate culture. It is also easier to create urgency and justify spending money to fix a problem. So… knowing the loss caused by a problem is a catalyst for solving recurring problems and changing the culture simultaneously. This case study shows how hidden losses were used to solve recurring problems and create management processes for the sole purpose of loss reduction.
A large client was losing millions of dollars because heavy equipment tires were failing early. For years these losses had been accepted as normal or expected by management. This problem was so common that managers viewed it as a source for higher costs that had to be budgeted for, so they budgeted hundreds of thousands of extra dollars to buy even more tires to compensate for short tire lives. Each tire cost $50,000, so losing 20-50% of the projected life was a big deal. The site had no effective way to track tire failures because no measures had been established that were linked to failure reason. They also did not know how to calculate the loss associated with an early failure.
With a tire budget of several million dollars, it was important to be able to value the loss and understand its root causes so action could be taken to stop the losses. I worked with a tire expert to calculate losses by reason for failure. Some of the reasons were “cultural” in nature. Choices of drivers and the relationship between production, road maintenance and tire teams contributed to losses. Total opportunity was $3,000,000 annually. A tire management system was created for the express purpose of loss reduction. Its success depended on culture change (a change in thinking and working relationships) and key measures linked to root causes for each group. This system reported reduction in losses (a new concept for this site). This kind of data helped change how top leaders thought about problems that kept happening over and over again. Instead of accepting them as normal and budgeting for their reoccurrence, new “loss metrics” were applied to create urgency and connect the losses to weaknesses in the culture. This system was shared as a “best practice” company-wide.
Question for you: How many HIDDEN LOSSES are you incurring because of recurring problems that are accepted as normal?
SHIFT YOUR COMPANY’S PERFORMANCE into OVERDRIVE!
Talk to THE EXPERT in LOSS REDUCTION CULTURES…
OPPORTUNITY: The only element with an infinite atomic number and weight. An odorless invisible element defined as a hidden or substandard set of circumstances in business that, when not acted upon, creates invisible losses that reduce profit. These losses can be eliminated by management when linked to beliefs, behaviors and numbers that drive the corporate culture, yielding a desirable green substance found in financial institutions.