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    Opinions and Expectations about Continuous Improvement Programs: Survey Research


    presented by:

    Richard Bernett, CFPIM, CPM Nancy J. Nentl

    Employees from 64 Midwest companies answered an online survey that explored opinions about their Continuous Improvement implementations and their performance expectations resulting from the implementations. The data indicates that while enthusiasm for continuous improvement implementations is high, there is nonetheless a reluctance about the program’s ability to achieve organizational goals. Whether a respondent is close to or distant from the day-to-day activities of the implementation does not significantly alter these findings. Results could indicate a real skepticism about a program’s ability to achieve those goals, or simply a lack of internal communication regarding the stated end goals of continuous improvement programs.

    Rick Bernett has spent the last 25 years in operations management in a wide variety of production environments such as, food processing, consumer electronics, defense electronics, plastic injection molding, carbon composite materials, metal fabrication, and machining. Rick is certified by the Association for Resource Management (APICS) at a fellow level, (CFPIM) as well as Certified Purchasing Manager (CPM) by the Institute of Supply Management (ISM). His particular areas of expertise are in Theory of Constraints, Lean Production, Reliability & Maintenance Management, and Project Management. Currently, Rick is a partner in 3sixtysolution, an engineering consulting firm, whose partial list of clients include Kraft Foods, Cummins, Starkey Labs, Minco, Remmele Engineering, Hearth & Home Technologies and Delkor Systems.

    Nancy Nentl is an Associate Professor of Marketing at the College of Management, Metropolitan State University, Minneapolis, MN. Her core teaching areas are in practical research methods for business managers, marketing management, and marketing research using quantitative analysis. Nancy has a particular interest in survey methods. She has published articles in an array of areas such as industrial marketing, strategic management, and consumer behavior.

    Richard Bernett, Partner 3sixty solution LLC www.3sixtysolution.com

    Nancy J. Nentl, Associate Professor Metropolitan State University, Minneapolis Nancy.Nentl@metrostate.edu

    Key Words: Continuous Improvement Programs, Continuous Improvement Research, Six Sigma, Lean

    Introduction

    Over the last few decades, Continuous Improvement (CI) initiatives such as Six Sigma, Lean, Total Quality Management (TQM), Just in Time (JIT) and other quality programs have received spectacular attention in U.S. business, particularly in the manufacturing sector. The desire to remain current and competitive by adopting CI programs, along with the promised benefits to be realized from these programs, have compelled countless organizations to enthusiastically embrace Six Sigma, Lean or other types of CI initiatives,and today, these initiatives have become part of the management vernacular across the country.

    While these newer initiatives have created significant buzz in business for some time now, the focus on quality is hardly new. Manufacturing has, in fact, been engaged in varying levels of continuous improvement since the industrial revolution hit its stride in the mid-nineteenth century with the advent of new technology such as the steam engine, blast furnace, moving assembly line, etc. This evolution in automation resulted in great productivity gains, as 20th century innovators such as Ford, Taylor, Shewhart, and Deming demonstrated how manufacturing companies could increase productivity through a variety of quality techniques and approaches. By the early 1980’s, approaches such as TQM, Zero Defects, and Deming’s Quality Circles were at the forefront of many U.S. manufacturing companies.

    Likewise in the early 80’s, companies started to take notice of Japanese automotive manufacturing, notably Toyota. As American companies sent envoys to Japan, new terms such as Just in Time (JIT) and Kanban gained popularity. Books were written about the new Japanese manufacturing principles and companies such as Hewlett Packard, and Texas Instruments began to experiment with some of these techniques. Then in 1986, Motorola developed and implemented Six Sigma, a method inspired by these early approaches, with General Electric following close behind.

    In 1990, the term “Lean” was coined by MIT researchers studying the global automotive industry and in their follow-up book in 1996, Lean Thinking, Womack, and Jones captured the attention of many companies such as Emerson Electric, Chrysler, and Boeing, to adopt Lean initiatives. Many corporate leaders tied to Fortune 500 companies such as GE’s Jack Welch and James McNerney of 3M extolled the virtues of Lean, Six Sigma and other CI initiatives over that decade, and into the 21st century.

    Not all organizations, however, are as enamored with CI programs. One study found that many companies that adopted Six Sigma have actually underperformed in the stock market and achieved only incremental gains (Demars, 2007). Moreover, some companies have experienced a loss after early initial gains within a relatively short time span after the program was implemented. For example, Motorola, a Six Sigma pioneer, announced that following implementation of Six Sigma in 1998, its second quarter profits were almost non-existent. As a result, Motorola cut 15,000 of its 150,000 jobs (Basu, 2001). In a peculiar irony, when Robert Nardelli, former CEO of Home Depot and Six Sigma evangelist, cut Home Depot’s workforce and increased training programs to reduce defects, Home Depot dropped from first to worst among major retailers on the American Customer Satisfaction Index in 2005 (Hindu and Grow, 2007). Lean, like Six Sigma, has also been subject to such reports including the Chapter 11 filing for Lean aficionado, Delphi, Inc., a major parts supplier for General Motors, leading Lean guru, Jim Womack to state that Lean is necessary, but not sufficient.

    While it is clear that there is still groundswell support for continuous improvement programs, failure to realize promised results suggests that CI implementations have been challenging at least for some organizations. This being the case, the basis of our interest is the investigation of these seeming inconsistencies – CI is the best of times, CI is the worst of times. Specifically, this research had two main points of inquiry: First, we asked if current CI initiatives are still eagerly embraced by respondents. Secondly, we asked respondents about performance expectations resulting from their particular implementations such as increase in revenue, inventory reductions, and perceived quality improvements.

    Research Method

    To investigate these questions, we conducted an anonymous online survey comprising 34 questions. (See Appendix.) One set of questions asked respondents to express their opinions about their organization’s CI initiatives such as: Is the CI properly positioned for and aligned with achievement of company goals; does the company emphasize the need for those involved to be aware of the goals of the initiative; are respondents enthusiastic about the program; are adequate resources available for successful implementation, and other similar questions.. Another set of questions asked respondents to approximate expected success and effectiveness of the program on seven key performance drivers, including expected revenue increases, expected reduction in inventory levels, dollar savings, head reductions, increased on-time deliveries, and quality improvements that affect the final customer.

    Our respondents consisted of 64 supervisors, managers, directors, and officers from a variety of companies in the manufacturing sector in the Midwest. Some of the respondents were selected from a member list of a manufacturing association and others were professional contacts known to the authors who agreed to participate. The respondents represented an array of manufacturing environments such as low volume job shops, high volume repetitive manufacturing, and heavy equipment manufacturers. Over half of the respondents (51.6%) came from companies with over $300 million in sales. Of the rest, 18.8% were from companies with sales between $100 to $300 million, 9.4% were between $50 to $100 million, and 14% were under $50 million. Most respondents’ functional responsibilities were in operational areas such as materials or supply chain, quality, and production (67%). Others were in sales and marketing, finance, or engineering, and other areas such as consulting. Fifty-two percent were managers and 25% were at director or officer levels. The remaining described themselves as supervisors, leads, or consultants.

    The most widely used CI approaches among those surveyed were Lean or variation such as JIT, Six Sigma or variation such as TQM, or some combination of Lean and Six Sigma. Most respondents (75%) reported that the CI initiative was company-wide, with division-wide at 14%, and the others restricted to a department or product line (8%). Over a third (36%) reported that their particular CI initiatives had been in place more than 3 years. Fifty-six percent indicated that their organization had launched many CI initiatives over the years, and 19% said that this was at least the second attempt. Only 8% reported that this was a first attempt, and 16% said they didn’t know how many initiatives their company had attempted.

    Results

    Opinion Questions

    As Table 1 indicates, most opinions about CI programs tended to be very favorable. For example, the vast majority (93%) agreed that the implementation appeared to be fully aligned with their company’s long-term strategies, and that their particular initiative was aimed at the root problems in the organization (88%). Most respondents (90%) agreed that their companies emphasized the need to be aware of the goals of their initiatives of the organization.

    While 85% reported that their personal enthusiasm and support were very strong for their particular initiative, over 60% claimed that many in the organization had lost their enthusiasm for the project exhibiting a “been there, done that” attitude. Moreover, 38% indicated that they did not have all the needed resources (e.g., people, education, time, budget) to make their improvement initiative successful and, closely related, 42% had concerns about comprehensive training for the initiative. Furthermore, close to two thirds (63%) anticipated organizational resistance to making all the changes required for successful implementation.

    When respondents were asked what percent of the people in the organization believed in and supported the initiative, 37% of the respondents felt over half of those in the organization supported the initiative, and 35% believed between 26% to 50% supported it. Only 28% reported that there were less than 25% in the organization who truly supported the initiative.

    Performance Expectation Questions

    Performance expectations were less definitive, as noted in Table 2. For example, when asked about expected increases in revenue as a result of the CI, 16% expected no increase at all, 44% expected to see only small or modest increases, and 33% didn’t know what to expect. For reduction of inventory levels, 50% of the respondents expected few significant reductions, and again, 31% said they don’t know. This pattern of responses repeated itself for other quantifiable performance measures. For example, 33% anticipated less than 10% dollar savings and another 30% expected between 10% and 25% savings, and 27% didn’t know. Almost two-thirds (63%) expected less than 5% reduction in headcounts; 48% expected 10% or less improvement of on-time deliveries, 30 % didn’t know; and 53% expected minimal reduction of lead times, and 28% didn’t know. When asked about the level of quality improvements that are expected to impact the final customer, however, respondents tended to be more optimistic, with 30% indicating they expected significant improvements and 47% expecting small to modest improvements. Only 4% said they didn’t know if their initiative would have an impact on quality.

    Analysis by Involvement with Implementation

    We expected that there may be some variability in responses on both opinions and performance expectations based on how involved the individual respondents were with the day-to-day CI programs. To analyze this, we categorized the respondents into two groups: Those with a high level of program involvement (those self-described as project sponsor, project leader, or part of the project) and those with a low level of program involvement (those self-described as only moderately involved or not involved at all). Results from t-test comparison of means indicated that there were no significant differences on opinions between the two groups, nor were there significant differences regarding the specific outcomes of the seven key metrics.

    When we looked at the frequency distributions of the “don’t know” responses between the two groups, however, those less involved were considerably less aware of the anticipated outcomes of the CI program than those more involved. (See Table 3.) For example, 57% of those less involved said they didn’t know what to expect in terms of revenue increases compared to 21% of those in the highly involved group. When looking at expected dollar savings where 52% of those less involved don’t know what to expect, while only 14% of those closest to the implementations reported that they don’t know. With the exception of quality improvements, similar results emerged for all of the performance metrics.

    Discussion

    The main stated goal of most of the CI initiatives is to enhance quality through greater operational efficiencies, an inarguable premise for business today, and we found that CI implementations are seen as necessary and positive actions for the organizations. Even with a few dark clouds such as a sense that resources and efforts are spread too thin and a certain “been there, done that” apathy by some, there continues to be enthusiastic acceptance of CI programs. While there is some apprehension that the CI program could face some internal resistance, for most, the programs are largely supported and aligned with the goals of the company.

    We did find, however, that while most respondents expressed great enthusiasm about their CI initiative and its importance to meet their organization’s strategic goals, there was some hesitancy about their CI program’s ability to impact success on key performance drivers. Furthermore, while the majority appeared to be confident that their initiative was aimed at addressing core organizational problems, respondents were somewhat guarded when asked about real and achievable outcomes generating from the program. In essence, regardless of how involved respondents are with the day-to-day CI implementations, many were tentative about the program’s ability to bring about substantial bottom-line results.

    We also found that while CI projects are perceived as being aligned with company goals and management has emphasized the need to be aware of these goals, there is a lack of clarity about what the program is supposed to specifically accomplish. Several respondents, particularly those less involved with the day-to-day implementation of the programs and some of whom would logically be considered key decision makers in the organization, don’t know what to expect about their program’s ability to achieve measurable results. This is in spite of the fact that they report that they fully understand the goals of the CI program.

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    We wondered why people who are avid supporters of a given CI program are somewhat reticent to forecast outcomes. One explanation might be that while there is a belief that their CI program is inherently ”good,” organizations are complex, and cause–effect relationships are difficult to isolate. Another possible explanation may be that excitement and motivation are driven more by the pride of having the program itself than what the program will actually deliver to the organization’s bottom line. This explanation seems consistent with some criticism that the emphasis on CI integrations tends to focus more on the conceptual appeal of the program and less on the realities of its effectiveness.

    Limitations and Implications of the Study

    This study is limited by a small convenience sample. A larger, representative sample would demonstrate whether the findings are reflective of opinions and expectations, in general. That is, despite some disillusionment reported in industry today, there are still many who are very positive that the continuous improvement paradigm is and should be embraced by their companies, even though enthusiasm is tempered when asked about the program’s specific ability to produce significant gains and improvements.

    Limitations notwithstanding, the implications of this study should interest strategic decision makers who are seeking to maximize the results of their CI programs. This study does provide insights for those who either lead or actively participate in a current or proposed CI program. Results may suggest a real reticence about a program’s ability to achieve organizational or they could suggest merely a lack of internal communication regarding the stated end goals of continuous improvement programs. In any case, most CI programs are extraordinarily expensive, and with the requisite level of investment of money, time, and effort, quantifiable expectations for these efforts should be transparent throughout an organization.

    Conclusion

    Our results support the idea that continuous improvement has become a U.S. management imperative, and most companies feel compelled to have some type of initiative in place. CI is no longer a point of differentiation between organizations; it is a point of parity. However, as Abrahamson (1996) pointed out over a decade ago, the issue of efficacy is of critical importance to leadership. Adopting and executing a particular CI program or combination of programs will result in some type of change, with both positive and negative effects. While there is a preponderance of support for CI program efficacy, there are also contrarian reports which are worthy of consideration, and which pose a strategic dilemma: When enthusiasm is high, measurable accountability can be neither less important nor immaterial. Otherwise, we are left with what Alan Greenspan called “irrational exuberance.”

    References

    Abrahamson, E. (1996) Management fashion, Academy of Management Review, Vol. 21, No. 1, pp. 254-285.

    Basu, R. (2001) Six sigma to fit sigma,, IIE Solutions, Jul, Vol. 33, Issue 7, pp. 28-34.

    Demars, Laura (2007) Six stigma, CFO, Vol. 23, Issue 3, p. 18.

    Hindo, B. and Grow, B. (2007) Six sigma, so yesterday, Business Week, June 11, Issue 4038, Special Section, p. 11.

    Stern, Stefan (2007) The next next: big thing, Management Today, April, pp. 50-56.

    Womack, James (2005) Necessary but not sufficient, available at: www.lean.org/Common/Login.cfm?NextPage=/Community/Registered/ShowEmail.cfm ?JimsEmailId=55 (Retrieved 12 February 2008).