Green Based Profit Matters

October 1, 2009

I gave a presentation at the Midwest Manufacturing Conference in Chicago on September 22, 2009.  Following is a very brief synopsis.  If you’d like to see more, please send me an email or call.

 Profitability and Environmental Responsibility – Lean Manufacturing Solutions in Two Shades of Green

 The time for Green has come.  Societal, regulatory, and market factors have converged to Green.  Can we learn a way to bring our companies into compliance and maintain or improve profits?

Green Initiatives will work when we realize
we can use them to increase profits.

Topics covered were

  • Environmentally Responsible ways to improve profits
  • Use what you learned from Lean to organize Green
  • The value in being ahead of the Green curve

 This presentation provided guidance for executive leadership, project management, and financial justification necessary to make a focus on environmental sustainability a source of profit in your business.

 I was asked by one of the attendees at my presentation the following questions about Cap and Trade.  Thought I would share it with you, too.

 First, thank you for attending my session.  I am very interested in the logical, profitable reductions in waste and pollution that is in U.S industry’s potential.

 What are the important points of the Cap and Trade Bill in the Congress?

One of the best sources of analysis of the bill passed by the House of Representatives is in the BusinessWeek blog posting by Dan Buecke of June 26, 2009 http://www.businessweek.com/blogs/money_politics/archives/2009/06/house_passes_ca.html .  The key objections are the cost, the punitive – not preventive – focus of the bill, and the fact that utilities were given for free 35% of the expected tradable cap and trade credits.  I have also read that many of the congress members’ favorite constituent corporations were given many more free credits – maybe half of all credits were given out free.  A punitive system preferentially applied does not have much to recommend it.

 How will it affect the U.S. economy?

As the aforementioned link opines, there is an expected chilling effect on the economy.  Most business organizations including the Chamber of Commerce are saying that if prices rise due to required emission reductions of 17% and a new legion of government workers is employed to enforce all the interpretations and measures of a 1000+ page bill, it will be a significant drag on economic and personal well-being.

 Personally, I am not opposed to a fairly applied, incentive-based plan.  I just a.) haven’t seen one come out of Washington and b.) believe the world is cleaner in 2009 than it was in 1960, whether it is water, air, or soil.  http://liberty.pacificresearch.org/press/can-co2-emissions-be-cut-without-hurting-growth is a link that was published in the Wall Street Journal.  The author, Hayward, is a little more pessimistic than I am, but he is probably smarter, too.  My feeling is that politics has so strongly impacted the science that it is hard to know exactly how to feel.  I am very skeptical that the CO2 I breathe out is a pollutant, though.

Advertisements

It is sometimes a tough sell to spend money on a consultant, especially in tough economic times.  If there is:

  1. An experienced consultant who is profit-focused, aggressive, and capable.
  2. Management is ready for change – i.e., somewhere in the range between a.) disappointed and b.) panicky about the profit situation and, therefore, ready for rapid improvement.

Then:

  1. Have the consultant do the Assessment and
  2. Refuse to accept any plan that can’t get in the black within 5 months.  Make it cash-positive in this calendar year.

If you’re ready, go to this link to see how the typical successful Rapid Improvement Initiative is financed.  http://www.profitmatters.biz/index.php?option=com_content&view=article&id=18&Itemid=9

A Plant Manager recently asked why the operators seem uncaring when their processes are out of control, sometimes making hours of bad product?  My answer: it is now easier to do it the wrong way than to do it right.  I advised investigating these areas to find the root cause of this management problem:

  1. Are the operators capable? 
    If they’re not capable, they are either untrained or in a job above their abilities.   Evaluate and make sure the metrics are understood, then train them or replace them.  (If they are at jobs above their abilities, can we find another job that they can do?  After all, we put them there.)
  2. Do they know what a good job is?
    The primary job of production is to make good product.  Measure them and make consequences.  We measure folks on attendance, experience, hours worked, etc.  Let’s measure them on good parts produced per hour.  (Our job is not to work hard or to work smart.  Our job is to make profit by making good product.)
  3. Are they motivated?  
    Is there a positive consequence to good performance, and a negative consequence to poor performance?  Both are needed. 
  4. Are their supervisors motivated?  The floor will take on the personality of its leader.  Expecting a poor, unmotivated leader to make good, motivated employees is fantasy.
  5. Are they willing?
    I don’t know any cure to employees doing a poor job who are capable, trained, well led, and while saying they want to do a good job.  Give them a last chance and if they fail, replace them.

Profit Matters

December 15, 2008

Visit this blog for answers on business improvement, profit improvement, dealing with people in organizations, or just to vent (politely) about work.  I have 35 years in the Profit Matters area, and would throw in my two cents for free!  Here are some examples:

In the Profit Matters© blog we address questions from owners, general managers, department managers, and others with questions about their company’s profitability.  Please send your questions here or to JimGrubb@ProfitMatters.biz to have them considered for the blog.  I’ve also been an avid collector of quotations that inspire entertained me.  I will occasionally intersperse the answers with a borrowed thought I hope you like.  Thanks for submitting your question!

 

“Nearly all men can stand adversity, but if you want to test a man’s character, give him power.” Abraham Lincoln

 

An owner writes: As an owner of the business how much data on the financial results should I share with my employees?  I believe it could make employees a more committed a part of the company, but fear they don’t have the financial savvy to understand what a reasonable profit is, or to understand our need for paying down debt on the facility and equipment.  Do you have experience in this area?  What are the advantages, and do they outweigh the dangers of misunderstanding? 

 

These are great questions!  I’ve had several clients ask the same thing, and as an executive I faced the questions myself.  First let me say that I have erred on the side of disclosure.  You need to be careful to put the data in context for them – the danger of misunderstanding is a real one; you are wise to recognize it. 

 

Before you decide on whether to follow our suggestions or not, I have a question for you.  What is the level of trust back and forth between the management (you) and the workforce?  If the level of trust is high, they will believe your message and you can have a greater level of openness.  If not, revealing the numbers will be your first step in increasing the level of trust, but I recommend that you move more slowly into the data.

 

Since you don’t have a history of sharing this information with the employees, the suggestion is that the first meeting be to announce that you will be sharing the information.  At that time, it is appropriate to explain the three points at the beginning of this web page:

1.    Profitable Companies stay in business, unprofitable ones do not.

2.    Ultimately, profit is the only job security.

3.    Lowest profit competitors fail in a crisis. 

Perhaps the first number to share will be the amount of debt load that you service per month and/or what the projected date of paying off the facilities and equipment will be.  Certainly I would mention that during the time we are paying debt off we also will be looking for other new equipment to be able to grow the business and hire more people.  That means as the debt is paid off we will be hoping to acquire even more debt – because the marketplace demands it.

 

In the first meeting to reveal the financial performance you may want to recap your explanation.  I also recommend starting with percentages and generalities and moving into more specific numbers as trust is built and as you assess the response you get from the workforce.

 

By the way, you are not likely to get a unanimously positive response.  Please don’t let a small minority of negative employees affect your decision on how involved to get the workplace as a whole.  The more you feel comfortable sharing, the more the employees will feel like members of the team. Profit Matters©

 

 

“We must make the best of mankind as they are,
as we cannot have them as we wish.” 
George Washington

 

 

A plant manager, Jim, asks: I was just transferred to a new job to be the plant manager where three of our top 10 customers have threatened in writing to leave us because of quality reasons.  Also, the plant profitability suffers because we have labor costs about 20% higher than our competitors.  In fact, if the plant tissues aren’t solved I am not sure how long we can stay in business.  How in the world will I motivate the workforce to improve quality, let alone while cutting employees?

 

You are about to spend a lot of time in employee meetings!  And, as your mother always said, honesty is the best policy.

 

What would your workforce say if you posed exactly the same question to them?  Let me predict what a large majority would say:

Thank heavens somebody finally recognizes we have a problem!  Maybe we’ll get some leadership to fix this place!  I hope to retire here, and the factory won’t make it if we don’t do something.  Why, I’ve been telling people for years…

Believe me, your workers are more profoundly aware of the problem than you are, and they have more to lose if the plant is unsuccessful.

 

But you have to do more.  Your workforce expects you to lead!  When you ask them the survival questions, give them the survival answers.  Tell them the list of what you are committed to do, in general terms. 

 

To fix the quality issues, will you shut down machines for repair?  Will you make sure the people have top-quality raw material sufficient to make a good, high quality product?  Will the management team respond to every customer complaint by creating and implementing a corrective action plan?

 

Be honest enough to tell them that your labor costs are 20% high.  To the extent possible, we will save jobs by increasing quality and decreasing scrap.  You must explain to them how to increase quality and decrease scrap, not because they don’t know, but because they don’t know you know.  You have got to convince them that they can have confidence in your understanding of the problem.

 

Give them the challenge to increase the amount of the product produced by 20% and the current level of employment can be maintained. 

 

Be honest with yourself, too.  Tell them: I have a responsibility lead to plant out of this situation, and my bosses have an obligation to replace me if I don’t. Profit Matters©

 

“I desire so to conduct the affairs of this administration that if at the end,
when I come to lay down the reigns of power, I have lost every other friend on earth,
I shall at least have one friend left, and that friend shall be down inside me.” 
Abraham Lincoln, reply to the Missouri Committee of Seventy

 

 

A department manager, Pat, asks: I’m a part of the team turning a plant around.  While I enjoy my job – I even enjoy long hours I am working – the time spent in meetings is outrageous!  Although I’ve tried I haven’t been able to convince the boss that these meetings are keeping us off the floor and away from where the money is made.  Have you been through this?  What advice you have?

 

Do the financial numbers bear you out?

 

If your plant is making steady and sufficient progress, it’s possible the meetings are contributing.  I led a team once where the communication had been historically awful.  Each of the team members seemed to be pulling in a different direction and each department had been striving for its own success by taking actions without regard to the detrimental effect these actions would have on other departments.  The organization made steady, measurable profit improvements, and we had daily meetings, weekly meetings, planning meetings, lunchtime meetings, dinner meetings – well, you get the point.  These meetings were always focused on solving problems, the scope of the meeting was not allowed to creep, and meetings were adjourned as soon as possible.  The last task of the meeting was to go around the table and let every participant have a last word.

 

At another location, meetings were long, boring, and unorganized.  The financial numbers were not improving.  In this situation, we canceled as many meetings as possible and we shortened others to be able to spend more time on the factory floor.  We rescheduled the unavoidable meetings to be at lunchtime or just before, and we announced that each meeting would be no longer than 25 minutes.  If a meeting participant was unprepared, he was brusquely told to be prepared next time and we moved on to the next participant’s comments.

 

I wish I knew which of these situations is more like yours.  Judge your team’s behavior in the light of the demonstrated profit improvement.  Keep trying to influence your company for the better!  It shines through your question that you care about your workplace! Profit Matters©

 

The best executive is one who has sense enough to pick good people
to do what he wants done, and self-restraint enough to keep from
meddling with them while they do it.
Theodore Roosevelt