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Between a Rock and Hard Place

Business Decisions Rock Hard PlaceEvery day we meet businesses of all sizes that are struggling to make decisions.

Oh, we're not saying that they aren't making decisions. There's plenty of decision-making going on.

But, to say there isn't some consternation and wavering would be less than true to the facts. Most of the questions we run into in trying to help our clients improve lead them to choose among several unfortunate options:

  1. Hold to a single position in policy, but often violate that policy when driven by circumstances to do so.
  2. Hold to one position for a period of time and then, when there becomes too much negative fallout from holding that position, move toward the opposite position—sometimes slowly, sometimes hastily.
  3. Create confusing metrics that lead one department or function to hold to try to manage in one way, while (without knowing it) creating metrics that ask another department or function to manage (or demand actions) that are contrary.

Here is a short list of some of the key dilemmas that management face on a day to day basis:

  • Do routine maintenance on production equipment in order to prevent unexpected downtime
    or Maintain equipment on as required in order to maximize production time utilization
  • Buy in large volumes in order to get the lowest cost for purchased goods
    or Buy only as needed in order to minimize inventory and maximize cash-flow
  • Offer larger discounts or lower prices in order to get more sales
    or Maintain prices in order to keep margins up
  • Make production runs in large batches so that equipment achieve high utilization rates or measured efficiencies
    or Run in smaller batches in order to reduce cycle times and lead times
  • Authorize overtime expense increase in order to meet promised/due dates
    or Do not authorize overtime in order to hold the line on labor cost
  • Ship only complete orders so that shipping costs can be minimize
    or Ship partial orders so that customers can get at least part of their order on-time
  • Produce products using optimal resources so that costs of production can be held to a minimum
    or Produce items on any available resource in order to help hold cycle-times and lead-times down
  • Build to order so that inventories can be minimized
    or Build to stock so that lead-times can be held to a minimum

Painful meetings and declining morale

Most folks have been forced to sit in at least one meeting—usually, several meetings—where there is no shortage of finger-pointing and blaming going on within the organization.

Top management is complaining that total sales are down and market share is declining. This is a double threat, of course, because it means the company is not only losing customers, but also that the sales department is feeling ever greater pressure cut prices just at the time when the company needs more revenues and better margins to keep moving ahead.

Managers in the Sales Department are complaining about how poor customer service levels are keeping them from making more sales and forcing them to compromise by lowering prices (and margins). They report that, compared to the company's competitors, the firm is falling behind in performance. The VP of sales says, "We absolutely must get our customer service level up to 95 percent or better.

Accounting insists that product margins are already so low that, if things continue, "pretty soon we'll be paying our customers to take our products!" Plus, the CFO complains that the company simply has too much inventory. "Inventory turns are way down," he says, "and we don't have the cash to stay on this course."

Next, Quality Assurance and Sales jump on the bandwagon together complaining about how warranty issues have risen dramatically. Accounting confirms, saying, "Our warranty-related costs are at 230 percent of last year, and this is only August!"

In his own defense, the VP of Operations stands up and says, "Hey. Wait a minute. I have hit all my numbers. Efficiencies have never been higher. Our utilization rates are well above last year, and we are under budget with overtime." Accounting confirms that what the VP said is 100 percent correct.

The meeting ends, but the pain doesn't

Typically, these meetings end with the executive handing out some assignments using phrases like: "do a deep dive into…"; "look into… and come up with recommendations"; "make me a plan to…" and "find a way to…."

Everyone at the meeting (at least outwardly) "smokes a peace pipe" and they all agree that they will all "just have to dig a little deeper" and "put in 110 percent effort until things turn around."

But, all too often, things don't really change.

Maybe something changes in the economy, or the company catches a few breaks, and everyone feels relief for a while. However, a few weeks or a couple of months down the line, another very similar meeting is likely to occur. And, sadly, everyone in the room pretty much knows that's what is going to happen.

What's going on here?

Our experience tells us that, until there is some kind of breakthrough at a company like the hypothetical one described above, there is little chance that the folks on this management team will truly work well together. They will try. They will try valiantly.

But, the problem is, they leave meetings (like the one described above) not even agreeing on what the real problem is (or, problems are). Instead, they left with a mandate to investigate further in half-a-dozen areas.

A team that should be working together toward a common solution, instead of each doing their own thing in their individual silos, have no idea how unite.

What they need

Companies and management teams that find them caught in these cycles and that cannot seem to get clear on which levers to push and which levers to pull need to find a common language to describe the challenges their "system"—read: their entire company, and perhaps their entire supply chain—faces. They need to find a framework, a context, a method that will allow them to harness what they already know—their tribal knowledge—for creating real and ongoing improvement.

There is help available. We have found that, introducing companies to the Thinking Processes [PDF] really does help executives, managers and, even, whole companies think differently, see differently and create real, lasting improvement.

Tell us about your experiences along these lines. We would like to hear from you - just leave your comments below.

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