Cutting costs

 

Managers are adept at cutting costs. It’s easy; just take a look at the budget line items and decide which ones to cut by what percentage. But of course this often CAUSES costs, in as much as flow can be damaged – causing re-work, duplication of effort and other forms of waste.

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The cost in any process consists of basic two elements: flow efficiency and functional efficiency. Any true reduction of cost should show in improvement to flow, for flow is end-to-end. In the Toyota Production System costs associated with flow are given priority over costs associated with functions.

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Of course few of our organisations have measures of flow. So here are the Vanguard tips on establishing measures of flow:

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Look outside-in; let the transactions you have with your customers dictate your core processes. Ask ‘what is the purpose of this process?’ from the customers’ point of view. Measure the process end-to-end against the purpose. Now any improvement in achievement of purpose will result in a reduction in costs. Any proposals to reduce functional costs can now be assessed from an understanding of the impact on flow.

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For much more on establishing measures for improvement (that won’t damage your capability) see The Vanguard Guide to Using Measures for Performance Improvement

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The madness of regulation

 

The UK parliament is debating whether to ban hunting with dogs (country people call them hounds). The Home Secretary, Jack Straw, has proposed a compromise – regulation. Living in the country, I notice how hunting people conduct themselves. They turn out looking very smart and on well-groomed horses, there are protocols for who rides with whom and where. Talking to those who hunt you learn that care is taken to ensure the hounds are well cared for; one hears stories of how troubles in the kennels are managed. If any person fails to behave in accordance with the conventions of the hunting community, they are dealt with; the community has its own hierarchy, principles, rules and roles.

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What could regulation add to all of this? In my view nothing of value. What might a government man in a ‘white coat’ DO? Inspect and make demands for administrative records. This kind of behaviour takes away the community’s sense of responsibility. Rather than making things better it makes things worse. When you take away peoples’ sense of responsibility you take away their pride. Inspection is extrinsic, pride is intrinsic.

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We have seen this phenomenon with the growth of regulation in our organisations. I believe the people who do need regulating are the politicians. To use a hunting term they need ‘whipping in’ (keeping in check). I hold no brief for those who choose to hunt; I hold a brief for all whose lives are destroyed by unnecessary or misguided regulation.

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Business Excellence

 

Note: this and the next items are peculiar to the UK market.

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Private sector organisations are de-registering their membership of the British Quality Foundation (BQF) – the body that administers the Excellence Model in the UK. People working at the BQF tell me the reasons are that some people don’t take the Model seriously enough or they don’t appreciate the need to work with it long-term.

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My own view is that people experience a ‘honeymoon’ with the Excellence Model – in the first two years there is much positively-received activity. People are energised as they score themselves and determine projects for action. After this period, however, doubts begin to set in. People, especially top managers, begin to ask ‘does it bake bread?’ to use Ackoff’s phrase. The argument that the Model needs to be worked with long-term raises the question ‘how long does it take to change?’ to which I shall return in the next edition of this newsletter.

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Regular readers of this newsletter will know that I consider the Excellence Model to have two ‘areas for improvement’ to use it’s language – and they are content and method. The method issue is the cause of the end of the honeymoon. To compare your organisation to anything is not the right place from which to start change. It will lead to unreliable conclusions and thus inappropriate or irrelevant actions. The right place to start change (if you want to improve) is to understand the ‘what and why’ of your current performance as a system – this idea is at the heart of The Vanguard Guide to Business Excellence. I shall be talking about this approach at the Public Sector Excellence Conference (see Seddon Speaks, below).

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I have asked the BQF for numbers. I want to know how many private sector organisations are ‘leaving’. As a next step I intend to make contact with those who have ‘given up’ on the Excellence Model.

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If your organisation has ‘given up’ on the Excellence Model I would like to hear from you. Please contact me: john@vanguardconsult.co.uk The same applies to users of the Baldrige Model.

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For more on the issues with the Excellence Model go to: https://www.vanguard-method.com/content/750/

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Best Value

 

NB (for those who do not know) ‘Best Value’ is a term coined by UK Government Ministers to mean improving organisation performance amongst public sector organisations.

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In practice Best Value means bad measures and no method. The measures in use are all arbitrary and they are used in the wrong way (standards and targets). There is no guidance on how to improve performance. When people who are responsible for Best Value have attended seminars hoping to learn what to do, they have found themselves being asked to share what they are doing and learning. A pedagogical mistake.

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The Vanguard team is preparing a systems thinker’s guide to Best Value. It will have contents on better measures and the relationship of measures to methods. If you want an early look at the draft please contact me: john@vanguardconsult.co.uk