Fred J. Conforti, Author, Beyond Goals…Beyond LEAN
In the previous article we talked about needing a vision for the future. We also outlined the typical shortcomings keeping any company from being the best it can be.
Now let’s look at one of the most common shortcomings keeping companies from reaching their vision– no Plan. Not an idea of a direction or a list of things to do, but a well-organized and documented Plan that is set up in a way such that it has a great chance of succeeding.
Most companies do not have such a Plan. Without one, how does the team know where they should be going or how they’re to get there?
A great Plan is very difficult to assemble. Many questions need to be asked up front.
“What are our Goals?”
“Which ones are most important?
“Who will be responsible to get a Goal completed?
“When do they need to be done?”
These and many more need to be answered.
To answer those questions without missing an important factor, a comprehensive guide is needed. Such a guide is available. It is a GAAMESS Form*. It includes all of the necessary features to outline and measure a goal’s progress. Two of the most important features of GAAMESS are accountability and metrics – who will get it done and how will I know it is successful.
But prior to filling in the GAAMESS Form* one needs to determine what opportunities there are for improvement. To do this I recommend a SWOT exercise and analysis with all the members of the management team. If done well a myriad of ideas for improvements should come forth. Also, if done correctly, these ideas should be ranked in order of importance via an anonymous voting process. You as CEO should still have influence on the rankings.
The factors most often missed in a workable Plan include:
- The person who is solely responsible to achieve the Goal.
There cannot be more than one, else finger pointing and avoidance will occur.
- The quantitative method for determining that the Goal has been successfully achieved
Without this quantitative aspect, like the date when it will be done and what will be accomplished by a finite measurement, projects can go on forever, or marked “finished” without having any tangible improvement to show for the effort.
Don’t let this happen to your team. Use a guide like GAAMESS* to make sure all aspects are covered. The Goals, the Actions needed to complete the Goals, the Accountable person, the Metrics for successful completion, the Evaluation of progress in order to ensure Success.
Companies that have used this process have had great success. Here are some examples.
Saving a Floundering Ship
The first company I was hired to manage was insolvent when I arrived. It needed tens of thousands of dollars monthly to keep the doors open. Immediately a GAAMESS type program was started and within six months the cash flow was positive and the company made its first profit.
The company (let’s call them OCK) made capital equipment. Historically they sold hundreds of machines yearly but sales had fallen off. Currently they were only selling dozens of mostly customized machines.
The Board believed that they were losing business on price. So the Board challenged the President to go visit competitors to see if he could buy less expensive models with OCK’s name on them.
He came back in disbelief. The competitor visited in Taiwan had a warehouse full of machines stocked for regular orders. Hundreds a year compared to a few dozen that OCK was selling.
What was happening to OCK has happened to thousands of companies in many industries. They enjoyed a large share of a market for decades and made their products locally. Then foreign competitors come into the market at the lowest end.
At first the foreign companies came in with cheap and poor quality products. As their quality improved, their share grew. After a while, rather than fight for the low end business, the local manufacturers decided to move up and out of the lowest end of the market (figure 1). They concentrated on products with more features. By moving up, there are higher margins but somewhat lower volumes. Unfortunately, the low cost foreign competitors became smarter, improved their quality, and what was even more troublesome, they developed better products thus moving up the hierarchy. The local producer was eventually squeezed to the pinnacle of the market making only what was custom and low volume. Here he could not compete for long as his fixed costs over a few units were too high.
To reverse this, the local manufacturer needed to, either quickly develop a lower cost set of products, or go out of business. One company did this by setting up a Plan using GAAMESS and getting it done. It is still in business.
A private equity firm bought a steel tube fabricating company. Quickly they added three acquisitions. Two were within 50 miles of the original tube factory. The initial thought was to have each of the three close-by units act as independent businesses. One would be a tube business, another a machining business, and the third a screw machining business. There were several opinions within the ownership and management on the best structure.
The problem was that the two recently acquired, nearby companies were very small. So there were three GMs, three personnel departments, three QA Managers and three Operations Managers.
At the behest of the Board, a Goal was set to evaluate consolidation. Once done, it was decided to consolidate two of the three onto one campus. That became a follow-on Goal as part of the Plan later that year.
So, in a little over a year these two operations were consolidated, which reduced management overhead and eliminated redundant departments. The overall annual savings exceeded $1,000,000.
Controlling explosive growth or contraction
Using a process similar to GAAMESS, my team managed a company that grew profitably over 200% per year for seven straight years. Without a guide like GAAMESS we could have lost control.
That same company’s sales dropped by 50% in two years after the 7 year boom. Yet it never lost money. It stayed profitable. This was due, in great part, to having a disciplined Plan that addressed its changing circumstances.
* A GAAMESS Form can be downloaded at www.Conforticonsulting.com
About the Author
Fred J. Conforti was president and cofounder of First Alert, the leading home detector brand. He founded System Sensor, now owned by Honeywell, and Wyreless Access, now part of Ingersoll Rand. He received an MBA from Northwestern University and a BSEE from the Illinois Institute of Technology. He currently consults by mentoring presidents of companies and has just released a book titled, Beyond Goals…Beyond LEAN. The book is available from Amazon.