The Titanic Syndrome


Performing a top-to-bottom operations audit can help identify production leaks that might prove to be the tip of the iceberg of bigger, more costly problems. First of two parts.




Most furniture and millwork manufacturers have the right to be pleased with the pace of orders they wrote during 1998. The housing boom created tremendous demand for building materials and home furnishings. The economy is still nudging ahead despite a stagnant world economy. The Federal Reserve Board reduced interest rates, which bodes well for the housing market. Most business owners seem comfortable with the way economic indicators point, while not knowing how long this boon will last.

Eighty-seven years ago everyone marveled over the greatest new ocean-going vessel ever built. It was a symbol of mastering the new industrial age. It was even described as unsinkable with its 16 water-tight compartments. Little did they know that an iceberg would slice through five of them. We look back now and wonder how these designers and managers thought the HMS Titanic could be so invincible.

Getting Started

Everyone from the chairman of the board to the supervisor on the shop floor must be convinced that this is not a witch hunt but a sincere effort to find ways to make your company more responsive to your customers, more profitable, and a better place to work. Period! Watch out, this could well be the most threatening exercise your company has ever undertaken.

Sit down and discuss this with your CEO or general manager and work down from there. Don't jump out into the rough mill or interior door shop and try to convince the supervisor this is a good idea. You first have got to get top management behind this concept. You will only add to your company demise and make things worse if you get associates pumped up only to get shot down during the process.

Start at the top and work down one level at a time, explaining the value of this SOS as you go.

1. Discuss objectives with your partner, CEO, or general manager.

2. Make the decision to go for it only with top management's commitment.

3. Identify areas you agree to survey and what, if anything, is off limits.

4. Develop and define the scope of your Structured Operational Survey.

5. Pick your SOS team and train them.

6. Have the team structure areas of inquiry for the survey.

7. Explain SOS to associates throughout your organization
from the top down.

8. Conduct the SOS involving teams in all departments per an agreed schedule.

9. Analyze results of the SOS with the team.

10. Form a Rapid Continuous Improvement (RCI) Steering Team to define change initiatives

11. Define the objectives of the change initiatives.

12. Implement the RCI Program with small teams.

(Editor's note: The RCI Program, items 9-12, is subject of next month's article.)

I have continually run across something akin to this in the wood products industry during the past year that disturbs me profoundly. I call it The Titanic Syndrome. This is when key managers in our industry say, "We're doing fine; don't rock the boat. We've been doing it this way for years." Many are just drifting, satisfied to be eking out a meager return on assets year after year with little or no growth. Perhaps they don't realize if you're drifting you are going nowhere!

What is sad is that there are executives and plant managers who allow their company or plant to flounder or at best coast with marginal results without really looking for ways to correct the course. It's like saying, "It's OK if only one water tight compartment is flooded, we still won't sink. We've got more pressing problems to look at today." What about another compartment taking on water, and then another? How many problems can a company afford to put off solving? How much can your customers take? How much will your stockholders take?

When you are feeling great but suddenly develop a strange symptom such as shortness of breath after a short walk, what do you do? Ignore it because you feel good otherwise? What if it's still there month after month? Would you really ignore it? What if it got worse? Wouldn't you get a check up? Of course you would! Your very life may depend on finding out what's wrong (and you know it) so you do something about it.

Every furniture or woodworking executive in business today must realize that his company is vulnerable no matter how large or high-tech the organization is. You must take a critical look at your operations and ask, "What are we doing right and what are we doing wrong?" If you don't ask now, you may find out too late that you suffer from the Titanic Syndrome. Your company may be on a final, fateful voyage and you don't even know it!

Structured Operational Survey

Every three years your company, whether it's a small shop with 15 employees or a 1,500-man, multiple plant operation, should conduct what I call a Structured Operational Survey (SOS). This is a formal, structured, quantitative, item-by-item operations audit. It is a honest and objective look at your entire operation, department by department, to find out if everything is designed and operating as it should to insure your company's future.

Why every three years? It's simple. If you are doing everything the same way you were doing it three years ago, in this changing world, odds are it can and should be done a different way. If your marketing or manufacturing strategies have not changed, you had better look behind you because your competitor is probably hot on your heels breathing down your neck. If not, that may well be a sign that he is ahead of you and you are now in the catch-up role. Don't think you're unsinkable for one minute.

Before any positive change can happen, you must decide that it is essential that your company move forward toward true World Class status. You must be dedicated to follow through wherever the survey takes you. You, as the top production manager, more than anyone else in your organization, must be willing to expose your company to critical analysis without being defensive and thereby set the tone for everyone else.

Next, you must convince your CEO or COO that this is essential to the point that he or she is solidly behind this seemingly preposterous idea of finding out where your company really is at this time. Curing the Titanic Syndrome is a top-down exercise in employee involvement. If you can make the decision as a general manager or plant manager you should still discuss your plans with your CEO so he or she will know what you are planning and can give you support. After all, you must make sure you will have the resources to follow up with any change initiatives that are generated from this survey.

Operations Audit Benefits

The two most important benefits of an operations audit are:


  • The identification of the strengths of your organization to allow you to further capitalize on them; and
  • The identification of the weaknesses within your operations which are constraints to growth and profitability.

You may find that your plant has geared its methods of production to generating production dollars instead of on-time and completed deliveries. The former looks good on paper but does not generate cash flow, or more importantly, happy customers. The audit will provide the basis for a Strategic Plan to move your company or plant forward with strength, direction and resolve. In addition, it will involve your people in a rewarding, team-building exercise as you follow up with a Rapid Continuous Improvement (RCI) program, which I will discuss next month.

In addition, your associates, even if not directly involved in the SOS, will develop a sense of pride through your efforts to make their jobs more secure. Furthermore, they will appreciate your efforts to make the company a better place to work.

Frequently Asked Questions

There are several questions that routinely surface at companies that contemplate conducting an audit. They include:

Why should I do this SOS? If you don't know where you are now (and you can't without an in depth self analysis), how on earth do you think you are going to get where you want to be? If you don't know where you are going, you answered your own question. You can't stick your head in the ground and survive. It's not just a philosophical point. It's a truism you cannot ignore.

The CEO of a very successful millwork operation once said to me that he didn't want anything to change. "We've been doing this the same way for 12 years and I don't want to mess up the operation by changing." Well, he soon found out that if he just kept on making the same wood double-hung and casement windows, and ignored the calls for maintenance-free products he could loose his window business altogether. So, he agreed to start making his own line of vinyl windows to fill that niche and immediately saw his overall market share grow.

Another example involved a furniture manufacturer on the verge of bankruptcy that I visited last year. In the sanding and assembly room of the factory, not one single machine had been moved or replaced in the almost 20 years since I was last in that plant! It was like entering a time warp. Was this symptomatic of the Titanic Syndrome? Yes! Does this apply to you somewhere in your organization? Do a Structured Operational Survey and find out!

Where am I going to conduct this SOS? This survey should be conducted in each major department from Accounting and Human Resources through Manufacturing and Maintenance. If yours is a multiple plant operation, all plants should be surveyed.

What questions are going to be asked? Each department has its own responsibilities in the interdependent functions. A list of items important to your woodworking plant's success must be developed to see how each of these functions or departments "measure up." This SOS is slanted more macro instead of micro.

For example, Manufacturing would be looked at with an overall functional assessment rather than whether or not eight screws are being used to install a top instead of six. You would look at this question under the broader stroke of, "Are route sheets and specifications complete and accurate and are they being followed?" If you find the answer to that question is "No," then you will get into micro analyses when you attempt to find out why and to what extent this problem exists in your follow-up RCI program.

Making this list of survey questions is critical. Begin by discussing your goals as a company -- where you are and where you want to be. Questions in the survey should be made up by those in your SOS team with your input. Focus will come only if you have something to guide you through each area of the survey.

In addition to survey questions you and your team must interview each department head and their assistants. After all, they should know their departments better than anyone. If they say everything is OK and you find it's not, then this is definitely a leaky compartment in your ship that needs attention.

Likewise, your associates in the finishing room or machining room know what's going on better than you or your supervisors. Talk with some of them and ask, "If you could change two or three things in your department, what would they be?" Be ready; listen patiently and carefully. Take notes (that will impress them that you feel their ideas are important enough to write down). Tell them you appreciate their input and that it will be included into your report. Tell them someone will get back to them about their concerns and don't forget to do it! This will likely come when the RCI team begins working.

Who is going to do the audit? You must assemble a team of knowledgeable and talented individuals within your organization or bring someone in from the outside to help you. You should not

Sample SOS Questions for Quality Assurance

1. Is there a formal quality assurance program in place?

2. Is one person responsible and accountable for quality assurance?

3. Does this person report to someone other than the plant manager?

4. Which of the following are included in the QA program?:

*Raw Materials

*Purchased Parts

*Manufactured Parts

*Machinery and Equipment

*Completed Products

5. Are the following procedures documented and in place?:

*Receiving Inspection

*Production Parts Inspection

*Machinery and Equipment Inspection

*Tooling Inspection

*Rework Procedures

*Scrap and Salvage procedures

*Packing and Loading inspection

6. Are rework materials re-inspected before use?

7. Is the quality of suppliers monitored and feedback given in a timely manner?

8. Does QA and associates have the authority to halt production of defective product?

have anyone conduct a survey of his own department. You would never get a good look at your operation by everyone looking only at their own departments. The idea is to have a completely objective look from an outsider.

If yours is a multiple plant operation, pick three of your top people from other plants to conduct the audit. Pick a different group for each plant if you have enough talented people. Include one member with prior experience from an earlier survey for experience after your first. Don't be afraid to have someone from a case goods plant on the team to survey the upholstery plant.

When are we going to do this? We don't have time. You don't have time not to do it! Pick a time when your team is not getting ready for market or some other equally time consuming task. This is a Stephen Covey Quadrant II Task: Important but not Urgent. If your company is in trouble, it becomes "Urgent and Important!" You have to remember to make time for these tasks. They assure your very future. Always set a deadline for completing each phase or you will find the whole process falling through the cracks. If you are not going to do the entire SOS this year, at least get started.

Phase II: Assembling a Rapid Continuous Improvement Team

After your survey team has gone through the Structured Operational Survey and documented the results, you must assemble a dynamic RCI team including managers in charge of every area surveyed. This team will be led and challenged by you (the executive or manager) to develop a plan for rapid change initiatives in the areas showing need for improvement. This can include the team that will help you structure the survey as mentioned above.

A "strategic plan" or Managed Change Initiatives (MCI) will need to be drawn up for each department with time-lined, measurable goals for improvement in the deficient areas the survey highlighted. Each department head will work with the associates in his department to form a team and action plans to correct departmental deficiencies or to reach new goals. Regular periodic reporting of results will occur within the RCI team.

The details and benefits of effective managed change initiatives and an RCI program, complete with details of how to set up, will be the subject of next month's article: "The Titanic Syndrome, Part 2." Right Full Rudder!



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