Archive for 2012

Setpoint’s Project Management Method Part 5

December 11, 2012 by Kara

Setpoint lives, breathes, and survives by its project management system.  Each employee gets involved in the numbers because they see how what they do affects each project.   In the last of our 5 part series Joe talks about why Setpoint benefits from our project management system.

Interested in more?  Pick up the Project Management for Profit book on Amazon.

Want to see how it works?  Try out the PM4Profit system

Watch our other project management videos to hear the whole story

Project Management Part 4 – Gross Profit per Hour (GP/H)

Project Management Part 3 – The fundamental processes

Project Management Part 2 – Why traditional project management doesn’t work

Project Management Part 1 – How Setpoint manages projects

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The Discipline of Sustaining Lean Principles

July 13, 2012 by Roger

You and your company have just taken the big leap into the alluring land of lean manufacturing. You’ve spent some big money on developing your plan, training your people, redesigning your workstations, and implementing Kaizan, kanban and quality improvement programs. Now you can just sit back and watch it all happen in a ‘lean manner’ while the money rolls in, right? Ummmmm, no……that’s not quite how it works. Once you’ve got your lean system in place, the real work has just begun. Sustaining all of the newly implemented rules, guidelines and procedures over the long run is where you’ll really earn your keep. Or not earn your keep, such as the case may be.

I can’t tell you how many times I’ve seen companies spend hundreds of thousands or millions of dollars converting their world over to a lean environment only to have it stumble and sometimes even fail during the first year or two of implementation. Why does this happen? Well, sometimes it’s the oldest reason in the book: human nature. Just because the physical tools, policies and procedures are in place for a lean manufacturing paradise doesn’t mean that it’s just going to chug on to victory on its own. Before that’ll happen you’ll need to make sure that you’ve got this tricky human nature part fully covered (if that’s even possible).

The most preventable failures that I’ve encountered on lean implementation efforts over the years have all been directly attributable to a lack of discipline in sustaining the program and its procedures. Oftentimes people and companies can quickly become less than diligent in following the core principles and guidelines of their lean manufacturing plan, and their products and profits almost always pay the price when this happens. If you think about it this way, it’s actually quite simple: How can you expect to consistently control the quality of your product if your processes are inconsistent? How can you expect consistent performance from your team if you don’t consistently maintain their working environment? If you set the rules and then nobody follows them, are they really even rules? This sort of nasty bug can debilitate an infant lean company in the blink off an eye.

During the first year of a lean implementation program there is invariably a large amount of pain and discomfort for the people working within the system. Some of it is real and tangible pain, as new skill requirements and streamlined processes usually require all personnel to “step up their game a notch”. And some of it is classic imaginary pain of the “who moved my cheese?” variety that humans often experience when faced with change. Whether it be real or imagined, when this pain becomes more and more palpable for the rank and file team members, newly implemented processes can often become compromised.

When a dramatic process change happens, some experienced personnel tend to think along the lines of “well, this new step is a pain in the butt. I think I’ll leave that part out of our process. This is much more efficient if we do it the old way.” And sometimes, on some specific processes, they may even be technically correct. The old way may be faster and/or more efficient. But what are often lost during these “process adaptations on the fly” are steps that were implemented by a manufacturing engineer in order to support or integrate with another part of the lean process. A step that may seem meaningless, redundant or irrelevant to one phase of a process may actually be critical to another phase. If given too much latitude, well-meaning employees have been known to “tweak” the new process so much that it actually damages the lean implementation effort. And within a year, they’re back to doing everything the old way. After all, who wants to spend every day looking for their cheese, right?

I ran across a good example of this phenomenon a few years ago while working on a new production line at a company that was new to the concepts of lean thinking. The customer had brought us in to consult on lean process development, as well as to build some new lean workstations for the assembly of their product. One of the workstations had a complex set of chemical dispensers that would digitally measure very precise amounts of certain compounds to get an exact mixture of a volatile component. The whole idea of this workstation was to take the inconsistent human element out of the mixing process, thereby making the compounds more consistent.

Once the compounds were metered and dispensed, a high-resolution scale would cross-check the weight to the amount that was metered. The new process required exact weights every time, or the logic would shut down the machine and reject the batch. The process was very reliable, and the logic appeared foolproof. The workstation was quickly put into service with the highest of hopes for instant process quality improvement. After the first week of production, it appeared that the new process was a raging success. The precision dispensing and weighing of the materials was delivering a more consistent performing compound than the customer had ever produced previously. Everyone was ecstatic.

Within a few weeks, things began to change. The product slipped back to similar levels of inconsistency that had been measured from the old process. The ‘great solution’ had belly-flopped, and nobody understood why. After a lengthy investigation it was discovered that the lead operator (who, not coincidentally was always considered the old process “expert”) had decided that he could tell with his eye what mixtures were required better than any fancy dispensers and scales could ever know. From the very beginning this well-meaning expert had felt that the machine-mixed compound was incorrectly configured. “It just wasn’t the right color”, is what he later told us. So after a week or so of painfully watching the ‘incorrect’ new compound ship out, he took matters into his own hands. After a machine-mixed batch of the compound was completed, our expert would carry it to a workbench and mix in additional amounts of components to get the color of the compound back to what he considered correct. Once again, consistency met an agonizing death at the brutal hands of the human well-meaner. Unfortunately, it’s an all too common tale.

How can you and your company avoid this sort of disastrous outcome? Setup your lean practices in great detail from day one. Document the procedures that you expect your team to follow and then stick to the established procedures faithfully. Enforce equal faithfulness to the procedures from everyone on the team. If you have a commitment to complete a 5S walkthrough of your shop every day at quitting time, then make sure you do it EVERY SINGLE DAY. If your lean plan calls for a Quality Improvement meeting every week, then make sure you hold that meeting EVERY SINGLE WEEK. This level of discipline in the system is extremely important for management people to embrace. As soon as team members see someone from the leadership team slack off on the procedures, they automatically give themselves permission to do the same. Be careful what examples you set. Don’t let apathy or “expertise” destroy all your hard work. It’s a very slippery slope when we start picking and choosing which procedures we feel like following and which we don’t.

So am I saying that every lean process ever invented should be locked in stone and never changed or evolved? No, of course not. Constant process improvement and enhancement are a big part of a developing lean organization. But changes and improvements must be made systematically. All potentially impacted areas of the process must be represented and considered before any changes are actually implemented. The changes must be well-documented, properly published in all applicable manuals or work orders, and presented to the team in a formal training environment. If you deploy your process enhancements in this manner every time, everyone on the team will always implement the changes in the same way. This will give the much sought-after consistency a fighting chance at a sustained life. If you count on ‘word of mouth’ training to officially deploy your changes, your precious consistency will surely be compromised.

Once you and your company make it down that long road of lean implementation, don’t let your guard down! There is no such thing as ‘arrived’ in the lean world. It’s a constant journey that needs to be navigated carefully at all times. Remain diligent and disciplined and your product and company will consistently reap the benefits that come from a great plan that’s been well-executed. Stick to the plan.

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Setpoint’s Project Management Method Part 4

June 20, 2012 by Kara

Following the information gathered from the first three project management clips Joe walks through collecting the percentage complete based on labor hours and using that to measure how much gross profit you have earned. Once you know the gross profit you can measure your gross profit per hour to show you if you are making money or not.

Use the Setpoint project management system at www.pm4profit.com.

Watch our other project management videos to hear the whole story.

Project Management Part 3 – The Fundamental Processes

Project Management Part 2 – Why traditional project management doesn’t work

Project Management Part 1 – How Setpoint manages projects

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The Project Management For Profit System

April 25, 2012 by Roger

Can somebody please just tell me what the score is?

Several decades ago, while coaching my son and his friends in a first-year t-ball league, I had a very eye-opening experience. During the first game of the season, one of my precocious young charges came up to me and asked what the score was. I gently explained that in this league, we didn’t need to keep track of the score. Our goal was to teach the skills of the game, not to track wins and losses. The lad looked me straight in the eye and said disdainfully, “Well that’s just stupid. How are we supposed to know how to play the game if we don’t even know what the score is?!” His disgust was palpable as he turned away and trudged back to his spot on the bench. I was instantly just a little irritated, but not for the reasons that you may think. In fact, I was irritated because I agreed whole-heartily with my young (and somewhat obnoxious) tormentor. He was right…We should be keeping score! At this point I’m thinking “Well that’s another glorious lowlight for volunteer coaches everywhere…”

Shortly thereafter, I glanced over at my team and noticed that they were keeping track of the score themselves, using sticks on the dugout floor. Wow. These kids were bound and determined to know the score of the game, even if all of us well-meaning adults wouldn’t keep track of it for them. If I remember correctly, we won that game 6 sticks to 3…Not that I was keeping score or anything.

The takeaway lesson for me that day was this: No matter what age you are, no matter what task it is that you’re undertaking, in order to perform at your most effective levels you must know what the score is. Whether we admit it or not, the truth is that whatever game we’re participating in, the score dictates our basic human behaviors. Instinctually we all act differently whether we’re ahead or behind “late in the fourth quarter” of any venture, be it sporting, business, or just life in general. Our operational strategies automatically adjust and adapt to meet the needs dictated by our position on the scoreboard.

In this aspect, Project Management is no different than any other game. In order to know exactly how to manage the project; what to watch closely; what not to worry over; what to panic over; etc…..we must know what the score is at any given time. And the score in the project management game always has dollar signs in front of the numbers. Any time that we don’t know where we stand (or worse yet, have a falsely-inflated view of where we stand), our chances of winning the game decrease dramatically. As that 5 year-old ball player once chastised me, “How are we supposed to know how to play the game if we don’t even know what the score is?” If a project manger can use that score to help him consistently play at the most effective levels, his chances of winning the game with successful projects that net windfall profits increase exponentially.

But the problem is, very few project-based companies can actually tell you where they stand on the financial scoreboard at any given time. Very few project managers really know what the financial score is on their projects until they are long-completed. Unfortunately, this is an all too common tale that I’ve lived through personally time and time again.

After nearly two decades of project management experience in a variety of industries, I came to work at Setpoint as a contract project manager in early 2004. From day one I could see that the “Setpoint way” of tracking project financial progress was like nothing I’d ever seen or experienced. I was amazed (and at first, just a little skeptical) when Setpoint project managers were able to consistently calculate their project earnings in nearly real time. In my previous business experiences, this level of financial tracking was not only unheard of, but in fact, I’m quite sure it would have been laughed off as impossible if anyone had been silly enough to even bring up the possibility.

I quickly realized that by keeping close track of just a few critical project financial metrics, I too could pull off this near-magical feat of financial score-keeping that the Setpoint system facilitated. Being a numbers geek at heart, I not only accepted this new system, I embraced it to the utmost degree. Suddenly I was able to make decisions regarding my projects with a complete and thorough understanding of the financial impact that each choice would have on my project’s budget. And not some vague theoretical understanding of the financial impact. No, I could now put a solid dollar figure to every action, nearly every time.

My teams were now able to adapt operational strategies throughout the life of the project, with every financial impact measured and reported weekly. Now a strategy was not necessarily successful just because it solved an operational issue, it had to be financially effective, in order to be considered a success. My project strategies evolved based on this wonderful new financial enlightenment. Suddenly our weekly goals were measured with more than just a task list and a calendar.

I’ve always been a big believer in the age-old adage that says “Knowledge is power”. And the financial knowledge that we were able to generate and track with the Setpoint system was so powerful, it certainly played a huge part in establishing the solid financial foundation of Setpoint that lives on to this day. Without the precise and regular tracking that we’ve completed on every project every week, there’s a good chance that Setpoint may have fallen by the wayside years ago, a tragic victim of good-projects-gone-bad, like so many of our competitors over the years have done. The nasty truth of project-based businesses is this: You usually don’t get many ‘bad projects’ in a row before you get crushed. If things get out of control on several projects at once, you may find yourself in the express line to the business graveyard.

In the past two decades we’ve shared the fundamentals of the Setpoint system with many companies, including a number of our strategic business partners. Over time the management team at Setpoint realized that this system could be helpful to many companies that deal with similar challenges in monitoring and influencing a project’s financial success. And thus was born the ‘Profit Management for Profit’ (PMFP) system.

With the PMFP system, we’ve dissected the metrics and methods of the Setpoint system and reassembled them in a manner that nearly any small business can utilize to accurately track the financial success of their efforts. In our book Profit Management For Profit (Harvard Business Press June 26, 2012), we provide not only the metrics and equations needed to use the PMFP system, but also the philosophical and cultural aspects of the system that are so critical to it’s successful implementation in any business culture. What’s your current philosophy on project financial tracking? Are you able to announce the real-time financial score on your projects at the drop of a hat? Maybe you already think you know the score, or maybe you don’t even care what the score is. But if you and your company really do realize how critical the score is to the success of your efforts, then maybe some of the PMFP methods can help you.

The bottom line? You’d better have a very good method to consistently and accurately track the financial score of your efforts. If you don’t, you may be in trouble and not even know it. Because after all, how are we supposed to know how to play the game if we don’t even know what the score is?

Find out more about the PMFP system at: www.pm4profit.com

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Setpoint’s Project Management Method Part 3

March 28, 2012 by Kara

In part 3 of our project management series, Joe Knight our CFO talks about the fundamental processes that Setpoint uses to successfully manage projects.  Joe talks about how to keep your company out of trouble and becoming a “walking dead” company.  Joe explains how to track a project financially using a more rational method than the traditional approach.

Watch our other project management videos to hear the whole story.

Project Management Part 2 – Why traditional project management doesn’t work

Project Management Part 1 – How Setpoint manages projects

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