Streamlined Process Improvement - Hardcover

HARRINGTON

Hardcover

ISBN 10: 0071768637 ISBN 13: 9780071768634

Publisher: McGraw Hill, 2011

Synopsis

“The Business Process Improvement methodology established by Dr. H. James Harrington and his group brings revolutionary improvement not only in quality of products and services, but also in the business processes.”
―Professor Yoshio Kondo

The Book That Goes Beyond Six Sigma and Lean . . . The Next Evolutionary Step in Business Process Management

“Don’t design for Six Sigma―design for maximum performance.”
H. James Harrington

How would you like to streamline your operations, lower your costs, improve your quality, and increase your profits―all at the same time?

It’s not an impossible dream. It’s the next evolutionary breakthrough in process improvement that goes beyond Process Reengineering, TRIZ, Six Sigma, and Lean to deliver actual, quantifiable results. And now it’s yours.

Streamlined Process Improvement (SPI) is the powerful new program developed by H. James Harrington. After 40 years of improving processes for IBM, Ernst & Young, the Chinese government, and many other private and governmental organizations, Harrington has become the go-to leader in the field. His revolutionary guide shows you how to:

• Discover the latest process tools―to make faster, more dramatic improvements using the revolutionary PASIC improvement methodology
• Use walk-through questionnaires and checklists―to streamline your job, resulting in optimum value to your stakeholders
• Use the newest methodologies―including simulation modeling, risk analysis, Five Ss, Process Innovation, Information Technology, Lean, and Six Sigma―to take your business to the next level
• Increase innovation―to drive growth and profits for many years to come

Harrington’s groundbreaking system is organized and explained step by step to help you achieve maximum results with a minimum of stress. His simple PASIC approach shows you how to Plan, Analyze, Streamline, Implement, and Continuously Improve throughout the entire process.

He walks you through the basics of how to analyze each process, how to decide which to focus on first, and how to prepare for organizational change. You’ll be surprised by just how quickly you can make things run more efficiently and effectively.

With Harrington’s proven techniques, you can sell your products and services at a lower price, satisfy your customers, make work more enjoyable for your employees, and still earn greater profits than your competitors.

This powerful process guide is the definitive handbook for operations managers, quality consultants, Six Sigma practitioners, knowledge workers, and Lean thinkers for a new generation.

About this title

About the Author

H. James Harrington, Ph.D., is CEO of the Harrington Institute, an international consulting firm providing a full range of services, including management, technology, education, e-learning, and knowledge solutions. He serves on the board of directors of a number of national and international companies and is a former president of the American Society for Quality (ASQ) and the International Academy for Quality (IAQ). He has authored more than 35 books, including Business Process Improvement, and developed 11 software packages. He writes columns for Quality Review, Cost Management, TQM Magazine, and News for a Change. He was named an ambassador of goodwill by former President Clinton.

From the Back Cover

Six Sigma can reduce process variation, but it doesn’t account for process improvements. Lean is effective, but it fails to address the need for major improvements in key processes. Both of these failed to use modern IT as part of their improvement methodologies. Now, renowned consultant and former ASQ president, international quality advisor to E&Y, and quality advisor to the Chinese Quality Association, H. James Harrington provides the solution—a revolutionary step-by-step method for streamlining and improving business processes that can:

• Cut cost and cycle time by 60 percent
• Improve customer and employee satisfaction
• Boost quality by 100 percent
• Analyze, streamline, and refine key processes more quickly and efficiently than ever before

Filled with checklists, questionnaires, and key process tools, this book is designed to help you streamline your systems—and to continue to improve—using a refined combination of the most effective methods available. It’s all you need to be leaner, meaner, and significantly more profitable for years to come.

Excerpt. © Reprinted by permission. All rights reserved.

STREAMLINED PROCESS IMPROVEMENT

The Breakthrough Strategy to Reduce Costs, Improve Quality, Increase Customer Satisfaction, and Boost Profits

By H. JAMES HARRINGTON

The McGraw-Hill Companies, Inc.

Copyright © 2012 The McGraw-Hill Companies, Inc.
All rights reserved.

ISBN: 978-0-07-176863-4

Contents

Acknowledgments
1 Introduction to Streamlined Process Improvement (SPI)
2 What Is Streamlined Process Improvement?
3 Phase I: Planning for Improvement
4 Phase II: Analyzing the Process
5 Phase III: Streamlining the Process
6 Phase IV: Implementing the New Process and Phase V: Continuous 
Improvement
Appendix A: Typical Business Processes Where SPI Can Be Applied
Appendix B: Process Walk-Through Questionnaire
Appendix C: Some Process Simulation Tool Suppliers
Appendix D: Definitions
Appendix E: Other Simulation Symbols
Appendix F: Typical Government Processes
Appendix G: Nonmanufacturing Typical Processes Measurements
Appendix H: HU Diagrams
References
Bibliography
Index

Excerpt

CHAPTER 1

Introduction to Streamlined Process Improvement (SPI)

Business Process Improvement (methodology) investigated and established byDr. H. James Harrington and his group [represents] some of the new strategieswhich bring revolutionary improvement not only in [the] quality of products andservices, but also [in] the business processes which yield the excellent qualityof the output.

—Professor Yoshio Kondo,the leading Japanese quality authority

Introduction

We have more opportunities to improve our processes than we have problems tosolve.

—H. James Harrington

This book is designed to help you streamline your processes, making themmore efficient and effective. This will allow you to sell your products andservices at a lower price and still make more profit than your competitors. Incar design, streamlining reduces an auto's air resistance, making it operatemore effectively and making it more attractive to customers. On the other hand,a lean car has only the essentials.

When you streamline your processes, they operate at lower cost and cycle timeand at increased efficiency and effectiveness. (See Figure 1.1.) Inaddition, the resulting changes are implemented with much less resistance andgreater acceptance by the management team and the employees than processesredesigned using reengineering, DMADV, or Design for Six Sigma methodologies.

Today we hear a lot about Lean Six Sigma—it is the removal of all wastefrom the organization. Currently, most organizations could be represented by theoverweight person in Figure 1.2.

Our processes are full of bureaucracy and waste. As we run into a problem, wejust add more and more bureaucracy so that the problem will not reoccur. Thisjust wastes time and money. A Lean Six Sigma organization could be representedby the person in Figure 1.3.

As you can see, the person in the figure is very lean; all fat has been removed.People who are that thin have often gone to extremes to lose the fat and keep itoff, but in doing so, they have thrown their body's meaningful checks andbalances out of kilter. They have often lost their natural protection fromdisease (problems) and are susceptible to any and all of the diseases that comealong. Toyota got into its quality and recall problems because it got too lean.The streamlined organization can be represented by the figure in Figure1.4.

With streamlining you may start out as the person depicted in Figure1.2, but after beginning an exercise program, you lose (remove) the wasteand transform fat into muscle. You feel better, are healthier, and are morecreative. You streamlined not only the processes, but also the way you think andgo about doing business.

Streamlining Fundamentals

The following are the key fundamentals that must be considered when youundertake to streamline a process:

1. The process to be streamlined should be chosen based on how valuable it is tothe organization, how badly the process is broken, and what the impact upon theorganization would be if the process were improved.

2. It is a mistake to try to improve too many processes at the same time. Doonly three or four at a time.

3. A good database that measures performance of the current process should be inplace before you make changes to the process. This is necessary so that you willbe able to accurately measure the impact that the future-state solution has onthe organization.

4. The way to begin is to ask the question, Is the process essential to theorganization?

5. Simplification is better than computerization.

6. The real value of a process is how well it interacts with the otherprocesses.

7. The best-designed process is worthless if it is not accepted by the peoplewho will be using it.

8. Excellent communication and trust are key elements in making the streamlinedprocess methodology a success.

9. The executive team needs to understand and fully support the SPI methodologyand the output from the Process Improvement Team (PIT).

10. The external customer is the one who defines what the output from theprocess needs to be.

11. The combination of the process and the internal customer requirements mustprovide the organization with the best overall value. Internal customers'desires may not be honored unless they add value to the organization.

12. The white-collar processes have potential for quantum improvement.

13. The processes that service the external customers should be optimized, andthe others should be designed to support them.

14. The total process key measurements need to be improved, not the measurementsthat are related to subprocesses within the major process.

15. The key process improvement indicators are increased external customersatisfaction, reduced output costs, reduced cycle time, and increased employeemorale.

16. The people who will be key players in using the process should be includedin the SPI projects.

17. The risks have to be understood before any changes are made to the process.

18. Streamlining requires resources; it can't be accomplished without a budgetand people assigned to it. The employees assigned to the PIT should have theirworkload in other areas reduced by 20 to 40 percent.

19. The variation in the cycle time and output quality should be minimized.

Technology Warning

All too often, organizations jump to automate their processes without evaluatinghow effective the processes can function without being automated. This isusually a major error, as technology should serve the processes, not the otherway around. Frequently, technology will speed up your processes so that you areable to make more errors faster than ever before. In other words, if the processis bad, automating it just causes an automated mess. Since technology is anenabler, rather than a process driver, it should only be applied after theprocess is streamlined. Far too often we automate a process or use technology toexpedite the process when we should be simplifying the process. Carla Paonessa,a partner at Arthur Andersen Consulting, stated: "Just automating something thatshould not have been done manually won't get you to be more productive. Whatwill work is eliminating bottlenecks, reducing mistakes, focusing on customerservice, and then and only then, introducing new technologies" (Henkoff, 1991).

Employment Security

Employment security is one of the most critical and complex political andeconomic issues facing top management as a result of implementing SPI. An SPIproject very often will reduce the workforce requirements by 30 to 60 percent.We have seen it reduce the number of people required to operate the process byas much as 80 percent. Not addressing this condition up front often results inthe failure of an SPI project. Employees often look at a process improvementproject as a way to reduce the number of employees. How can you expect youremployees to give freely of their ideas to increase your productivity andminimize waste if it means that their job or a friend's job will be eliminated?If you start a continuous improvement process and then have layoffs, what youare going to end up with is employees who are continuously trying to sabotageyour improvement process.

Corporate America has been on a downsizing kick since the late 1980s; its answerto business pressure is to slim down and lay off with the hope of raising stockprices, but that does not work. Three years after the downsizing, theseorganizations' stock values are negative on an average of 25 percent. Figure1.5 shows stock prices going up right after the downsizing because short-termprofits were driven by the efforts expended before the downsizing. But soonthe reduced resources and the loss of employee trust begin to be reflected inthe organization's performance, and stock prices drop below the level before thedownsizing. This stimulates another downsizing cycle.

SPI, on the other hand, attacks the same problem, the reduction of overheadcosts, but does it without decreasing the ability of the organization to meetits external customer expectations. SPI allows the organization to "right-size"its processes, removing activities that are no-value-added from the externalcustomer's standpoint. For example, Xerox was able to reduce its operating costsby $40 million per year by redesigning a few business processes. That's theequivalent of laying off over 1,000 employees.

We had done downsizing and old fashioned budget cutting, but we have neverchanged our business environment from the bottom up.

—Harry Beeth, Assistant Controller, IBMCorporate Headquarters (CFO, 1996)

Large layoffs produce sudden, substantial stock gains. These gains occur becausethe impact of the removed employees has not reached the customer and theircompensation has been removed from the bottom line, making the organizationappear to be more profitable than it really is. But in the long run, thedownsizing has a negative impact. CEO Frank Poppoff of Dow Chemical put it thisway, "Layoffs are horribly expensive and destructive of shareholder value."

The cost to lay off and replace is growing all the time. Dow Chemical estimatesthat it costs between $30,000 to $100,000 for technical and managerial-typepersonnel. Not only do layoffs cost the organization money and some of its bestpeople, but when it comes time to hire, the best people do not trust theorganization and will not come to work for it.

An alternative approach of a golden parachute or early retirement is equallybad. The people who leave are all the best performers who will not have aproblem finding new jobs. The deadwood, who barely meet minimum performance,stay because they know it will be hard to find an equally good job in today'sjob market.

Employees can understand that the organization needs to cut back when demand forthe product falls off, and they can accept that. The problem we face is whathappens to the employees whose jobs have been eliminated due to performanceimprovement initiatives. We know that programs like SPI are designed to improveproductivity, but if our share of the market does not keep pace with ourproductivity improvement, what will management do with the surplus employees? Tocover this scenario and to alleviate employees' fears, top management shouldrelease a "no-layoff policy." A typical no-layoff policy would state: "Noemployee will be laid off because of improvements made as a result of theperformance improvement initiative. People whose jobs are eliminated will beretrained for an equivalent or more responsible job." You will note that thepolicy does not guarantee that employees will not be laid off as a result of adownturn in your business. It only protects employees from being laid off as aresult of the improvement process. These are people who would still be workingif SPI had not been implemented.

Federal Express Corporation has a no-layoff philosophy. Its "guaranteed fairtreatment procedure" for handling employee grievances is a model for firmsaround the world.

I know of one organization that was able to eliminate 200 jobs as a result of aperformance improvement process. As the company started the improvement process,it put a freeze on new hires and used temporary employees to cover the workloadpeaks. This step was reviewed with the labor union leaders, and they concurredwith the use of the temporary employees to protect regular employees' jobs. As aresult, attrition took care of about 150 surplus jobs. The organization held acontest to select 50 employees who were sent to a local university to worktoward an engineering degree. While at school, they received full pay, and theiradditional expenses were paid for by the organization. Results were phenomenal.All the employees within the organization started to look for ways to eliminatetheir jobs so they could go to school.

Organizations that believe that if it isn't broke don't fix it are slaves tothe status quo.

—H. James Harrington

CHAPTER 2

What Is Streamlined Process Improvement?

We have taken away the employee's God-given right to do error-free work bynot providing them with processes that are capable of error-freeperformance.

—H. James Harrington

Introduction

Upper management provides the vision and direction, teams correct the problems,and individuals provide the creativity, but it is the processes within anyorganization that get things done. No matter how good your management and youremployees are, your organization cannot be successful if it is using the samebusiness processes it used in the 1990s.

The question in everyone's mind today is, To be more competitive, should theorganization concentrate on continuous improvement or on breakthroughmethodologies? In research and development, people argue whether to spend moreof their R&D dollars on basic research or on applied research. The answer toboth questions is that you must do both to survive.

Department improvement teams, natural work teams, task teams, self-managed workteams, Statistical Process Control, Quality Function Deployment, suggestionsystems, etc., all have focused upon continuous improvement, and we do needcontinuous improvement. But some parts of our business need that "jump-start."Many of the processes that we are using to manage the organization need to havetheir associated costs and cycle time cut by 50 percent within the next 12months. When you need a major reduction in cycle time or cost and an improvementin output quality in a specific business process, a methodology calledBusiness Process Improvement (BPI) is used. It is also sometimes calledBusiness Process Management (BPM), and it combines methodologies likebenchmarking, Streamlined Process Improvement (SPI), process reengineering,focused improvement, new process design, process innovation, activity-basedcosting, and new process specification into one logical way of initiatingdrastic, rapid change in a single business process. This book focuses on justone of these methodologies—SPI, which is sometimes called processredesign because about 80 percent of the BPI improvements are the result ofthis approach.

A two-year study of product organizations in Canada, Germany, and the UnitedStates asked the question, "What tools will be of primary importance inachieving future quality improvements?" A list of 10 choices was provided fromwhich to select the most important. In Japan, Failure Mode and Effect Analysiswas number 1, and BPI was number 2. In Germany, Pareto Analysis was number 1,and BPI was number 2. In the United States, Statistical Process Control wasnumber 1, and BPI was number 2. Based upon these data, it is easy to see that inthe coming years, BPI will be the most important approach used to improveorganizations worldwide. Continuous improvement results in a 10 to 20 percentimprovement in the total organization per year. BPI will give you a 30 to 90percent reduction in cost, cycle time, and error rates in as short a time as sixmonths for the single process to which it is applied. (See Figure 2.1.)

The primary difference between the BPI methodology and continuous improvement isthat continuous improvement focuses on eliminating and preventing errors.Breakthrough improvement focuses on doing the right things right all the time.Let's look at a good example: An older-model electronic organ used 163 parts tosimulate the sound that a violinist makes when rocking his or her finger on theviolin string. The unit did an excellent job. But when the unit was streamlined(redesigned), the same function was produced with only 51 parts at 40 percent ofthe cost, with increased reliability and equally good sound quality.

The following are typical examples of the improvements that have been realizedwhen SPI methodology was used to improve processes:

At the General Dynamics–Convair Division in San Diego, California, SPI wasused to identify cost reduction opportunities totaling $250 million (from atotal budget of $1 billion) and a cycle time reduction equaling 30 percent ofthe entire product cycle time.

IBM, by focusing on entertainment expense reporting, treasury, and informationmanagement, was able to realize $178 million in annual cost savings (CFO, 1996).

What Are Business Processes?

If people are the heart of the organization, then processes are the brain. Theorganization's processes define how activities are conducted and include boththe production and support activities.

Based upon this definition, everything we do is a process. The alarm goes off inthe morning, and that starts our getting-dressed process. The phone shatters thetranquility of our office, and our communication process gets started. Ourspouse calls out, "Dinner's on!" and that starts our nourishment process.

These examples are all very personal, but they make the point. In anorganization, large processes involve many different functions and departmentswithin functions existing and coexisting in order to manage the organization.The new product development process, for example, involves research anddevelopment, marketing, manufacturing, quality assurance, manufacturingengineering, sales, field services, production control, and other functions. Theorder entry process involves sales, scheduling, purchasing, production control,and information services. These are large cross-functional processes thatdetermine how the organization functions. The success of the total organizationdepends largely upon how streamlined and responsive these processes are.

No matter how good your managers are, no matter how hard your employees try, ifyour critical business processes are outmoded and ineffective, all thestakeholders are going to lose. Unfortunately, too many managers feel thateither they or their employees are the problem, when, in truth, it is theprocesses that are the problem. If anyone is at fault, it is management, becausethe managers have not recognized the crying need to improve the organization'sbusiness processes and have not assigned the required resources to improve them.

(Continues...)

(Continues...)

Excerpted from STREAMLINED PROCESS IMPROVEMENT by H. JAMES HARRINGTON. Copyright © 2012 by The McGraw-Hill Companies, Inc.. Excerpted by permission of The McGraw-Hill Companies, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Edition details

• Publisher: McGraw Hill
• Publication date: 2011
• Language: English
• ISBN 10: 0071768637
• ISBN 13: 9780071768634
• Binding: Hardcover
• Edition number: 1
• Number of pages: 429