It’s Not A Matter Of If … It’s A Matter Of When
Don’t get too comfortable in your current business operations. The term “recession” has been making waves recently in the financial industry, and the chatter about this unwelcome visitor has certainly increased over the past several weeks.
If the last economic recession wasn’t enough of an eye-opening experience, then I don’t know what would be. Many businesses that failed to read the writing on the wall prior to the recession struggled to survive – and some didn’t make it out at all.
It’s easy to fall into complacency when times are good, and you don’t notice that ticking time bomb — known as economic recession and competition — lurking in the shadows. You probably weren’t thinking about changing your processes or considering all the various expenses going out the door. Why? Because you still had a comfortable amount of money in your pocket, and everything appeared to be OK.
Listen to episode 8, “Don’t Settle For A Plate Of Spaghetti,” on Rea’s award-winning podcast, unsuitable on Rea Radio, featuring Kyle Stemple.
Revisiting Lean Six Sigma
If your business adopted Lean Six Sigma when the last recession hit, or if you quickly learned and implemented a Lean mindset, you probably weathered the storm better than those that weren’t Lean. But becoming Lean isn’t a process that happens overnight. It’s a change in culture that requires a major commitment by all, especially leadership, to change existing behavioral patterns. Most importantly, Lean Six Sigma is about developing a culture of continuous improvement.
Albert Einstein defined insanity as “doing the same thing over and over and expecting different results.” When you adopt a continuous improvement mindset, you know that you need to regularly improve your processes to get better results.
Before the next recession hits, consider reevaluating your operations and whether they are Lean enough to help your business weather another recession. But where exactly should you start?
Don’t Just Begin Cutting
Lean isn’t about making cuts everywhere. You need to analyze all of your various processes, not only in production, but also in administration. You need to have measurability and accountability in your processes. You can’t manage what you can’t measure, and you can’t manage well without accountability incorporated into the process.
Utilize Your Team
A Lean business knows and understands all of its processes. However, it also obtains input from all individuals involved in the process. No one knows the process better than the individuals performing it day in and day out. Use those people to identify steps in your processes that don’t add value to your customers or other co-workers (aka internal customers) like:
- Defects. Any type of undesired result.
- Overproduction. Making more than what your customers need or want.
- Waiting. Time where you’re waiting for materials, equipment, product, etc.
- Excess Processing. Useless steps in a process.
- Bottlenecks. A step in the process where work gets piled up.
Lean is not a top-down approach to management. In order for Lean to be effective, everyone within the organization has to participate and be heard.
Reduce Waste and Increase Profit
To be a Lean organization, you must look at all processes within the organization, including scheduling of resources, training, division of responsibility, etc. You must have the right resources at the right place and at the right time in order to be both efficient and effective.
The end goal in any business is to effectively deliver a quality product or service to your customer in a timely manner. Most importantly though, you have to make a profit. Your product or service cost must be in-line with the market, and increased efficiency may help you be more competitive.
The recession hasn’t hit yet, and we don’t know exactly when it will hit – but we’re pretty confident that, sooner or later, it will. Don’t wait until it’s too late to evaluate – or in some cases, reevaluate – your business’s operations. If you haven’t considered what Lean can do for your business, stop the insanity. Try something new to get different post-recession results.
By Kyle Stemple, CPA, CGMA, CEPA (East Central Ohio Regional President)