This does not mean that companies have not been focusing on improving their processes. They have been doing so in the past and even in the present through structured and many not so structured and will continue to do so in future as well. While most or all companies have been pursuing process improvement initiatives, history suggests that hardly 10% of organizations have succeeded in achieving their objectives of the process improvement programs. Majority of these fail to sustain it till they complete one revolution of the sun!
Everything looks rosy in the initial phase of the PIP when there is natural enthusiasm within the organization for this initiative. However the dampener comes when the quarterly or the half yearly financial figures are looked at. Where is the dichotomy? Why are the financial figures of individual projects not getting reflected in the financial statements?
But in our experience, none of these issues touch the root cause of failure in implementing process improvement programs. So, where does the problem lie?
The need for PIP in any organization is normally felt when the organization is passing through tough times, mostly triggered by adverse market conditions, increased competition, faltering economy or a combination of these. There is invariably an urgent need to improve the top line or the bottom-line or both for the organization to stay afloat.
The single most important reason for the failure is the commitment from the top management in driving this initiative to make sure that the program is successful. Though it might surprise many of you, since it is the top management that launches these PIPs with much fanfare, the reality check will bring the reasons for failure. These PIPs are launched without going into the specifics of ‘indicators of success’. When the steering committee sits together for the launch, discussions normally revolve around ensuring that there is sufficient quantity of projects (invariably measured in terms of dollars saved). This is based on a very simplistic view of PIP viz. higher the number of projects under PIP -> higher the financial benefits -> higher the return on investment.
The critical factor for success comes in the top management’s ability to identify the right projects, right business processes for this program. It should not be a very complex problem to solve and at the same time should be able to showcase significant gains, results too. We have noticed that many projects do showcase a 30-50% improvement after completion, but the crux of the matter is that these projects have a far lower impact in terms of absolute dollar terms. The net effect of this project in the overall organization is insignificant so even a huge increase in efficiency does not reflect in the P&L.
Sign-off on the scope of work, the deliverables and methodology. It is advisable to adopt ‘agile development methods’ very much popular in the software development field. The major tasks are broken down into sub-tasks (called iterations), which are to be completed in shorter time frames. Here progress is constantly measured and corrective steps taken up to ensure that these learning are applied for subsequent iterations.
Finally involvement of line managers and staff is essential in ensuring that ‘right’ projects are picked up that provides significant impact and benefit for the organization as a whole. Identify the bottleneck in your processes, and pick those projects to fix it. Those will not only increase capacity, but also provide a much needed boost to your efficiency in operations. These certainly will help improve the financials.
The reward and recognition system should be fair and transparent as otherwise this activity might end up losing its credentials and being treated as a mere formality, as it exists in many organizations today.
Article by: Shyam Sekar S, and Ganesh TN.
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