Book Review: The Remedy

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The Remedy

There are few business concepts which are applicable across any company in any industry. From solopreneurs to multi-national conglomerates, the principles of Lean Management are a tool to improve the culture of a company.

I recently got the chance to read “The Remedy” by Pascal Dennis, which is a real life story about how lean was applied across a large car manufacturer.

Lean is predominantly known to be a process to decrease waste within manufacturing processes. Through the travels of Tom and his sensei Andy, stories are told on how Lean Management is applied within non-manufacturing settings.  The reader is taken through a journey where common obstacles of dealing with a company that is heavily placed into silos, non-communitive, and insular culture are dealt with. You get the opportunity to see how Lean Management can be applied in the non-manufacturing departments of Human Resources, Marketing, Product Development, and Accounting.

The reader is introduced to many of the basic concepts and terminology of Lean Management (for example the 8 types of waste) in the style where Tom, the plant manager of the shining star of Taylor Motors, is taken from his current role to lead the development and launch of a new car, originally known as the Defiant.

If you want to learn more about Lean Management, this would be an ‘average’ book to pick up. The Japanese terminology is used throughout the book which can make things confusing at time. There are great animations throughout the book, but at times, too many. It gave the feeling that you were reading a Pictionary book at times.

I personally don’t see this book as being a good starting point if you are a novice to Lean Management. Lean is best learnt within a manufacturing setting since the subject matter can be visibly seen. The author previously wrote “Andy & Me” which details the journey of transforming a manufacturing plant towards being Lean. This book would be a good starting point.

Do you have any books about Lean and Lean Management that you recommend?

Have an awesome week.

Kevin

Kevin MacDonald is a Business Consultant at L6S Business Consulting Inc (www.L6SBC.ca). L6S offers services in management consulting, Controller and CFO contracting, and lean management with either project work or teaching/mentoring of staff. Kevin has his CMA accounting designation along with a Black Belt in Lean Six Sigma.

Kevin is active in the community by volunteering for the South Edmonton Business Association, the Fringe Festival, Goodwill Industries of Alberta and donates blood at the Canadian Blood Services.

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Volunteering at United

The newest corporate public relations blunder now belongs to United Continental Airlines (United). I am sure that Pepsi is very happy to pass the hat onto another corporate citizen.

What Happened

It is ‘commonly known’, in some circles, that airlines will oversell their flights to ensure that they are full at time of departure. United follows the same practice. This practice came to a head for a flight from Chicago to Louisville on April 10th. United staff asked for 4 people to voluntarily give up their seats to accommodate the airline. 3 people volunteered while the 4th person was violently removed from their seat. From a memo off the desk of the CEO of United, Oscar Munoz, the person was ‘re-accommodated’.

Airlines commonly overbook their flights, for multiple reasons. According to the US Department of Transportation, in 2016, less than 1 in 10,000 were involuntarily bumped from the major US airlines. In 2016, this happened to United passengers at a rate of 0.43 per 10,000. It happened on American Airlines at a rate of 0.64 and at Southwest Airlines to 0.99 persons per 10,000.

Why Did It Happen

Overbooking happens for a number of reasons. None, however, can explain the events that occurred.

Resource Allocation: A flight leaving from Louisville had 4 members of its flight crew in Chicago. This is a reason why 4 seats were required. Did United not have any flight crews in Louisville that they could have used? Are their flight crews centrally located in certain locations or based off flight schedule and needs? Overall, did the schedule of the flight crews have then in the correct place?

Leadership: The CEO of United, Oscar Munoz, sent out a memo to staff after the event blaming the passenger for actions which is not seen in any of the footage that was captured. The CEO mention in the memo that the passenger was violent and belligerent. A properly written memo could have helped the situation but instead, gas was poured on the fire. If an employee of mine treats a customer that way, I would take ownership of the situation right away. It can be assumed that staff were not properly trained. That is a responsibility of the CEO. I understand that it was Chicago Airport Police that removed the person but United staff should have been trained on various methods to help get passengers to volunterily give up their seat. I have seen it happen effectively.

KPIs: United is a publicly traded company. Shareholders are constantly looking at the numbers to see how their investment is performing. Revenue per Available Seat and Passenger Miles Flown are key indicators on the health of an airline. Why does this create overbooking? If there is no passenger in the seat, the miles flown per passenger are negatively affected. When travelling, I have waited more than once for a fellow passenger to board the place. By overbooking, airlines are ensuring that there is a person in every seat.

Sensitivity: Consumers are rarely loyal to a certain airline. They will change airlines to save $5. If you don’t have any loyalty to an airline or are constantly purchasing the cheapest flight possible, you are increasing your chance of getting bumped out of your seat.

Legality: Airlines are allowed to overbook their flights and they are also ALLOWED to remove someone from a plane. In the purchasing contracts of Canadian airlines, however, it does not state how a person could be removed from the plane. Based on this assumption, the acts which happened on United are allowed and legal.

Internet Reaction

As you can imagine, the reaction from the Internet, specifically Twitter, was very fast. Videos of the event were online hours after the event occurred. It is possible that videos were posted even before the plane departed Chicago.

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Some reaction from Twitter in regards to the United flight.

Stock Market Reaction

Shareholders of United firstly saw the event in a positive light by bidding up the price of the stock. When reading the headlines, the focus was most probably on the fact that United was overbooking their flights. A great problem for business is to have too many customers. As I am writing this the day after the event, United’s stock price has already decreased by 4%.

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United’s Stock increase after word of event spread

Operating in the airline industry is not an easy task. There is a high capital investment along with the fact that one of your largest costs, jet fuel and airport fees, are largely controlled by third parties. Overbooking of flights is not something that will stop in the near future. Airlines have lost their sensitivity to consumer demands and views…mostly because consumers have trained them to be that way.  Even after dragging a bleeding and paying customer off one of their planes, United is still flying today and will for some time.

Did you know that airlines commonly overbook their flights? If you were a CEO of airlines, would you look at stopping the overbooking of flights? How would you do it so your financials are not compromised?

Kevin

Kevin MacDonald is a Business Consultant at L6S Business Consulting (www.l6sbc.ca). L6S offers services in management consulting, Controller and CFO contracting, and lean management with either project work or teaching/mentoring of staff. Kevin has his CMA accounting designation along with a Black Belt in Lean Six Sigma.

Kevin is active in the community by volunteering for the South Edmonton Business Assocation, the Fringe Festival, Goodwill Industries of Alberta and donates blood at the Canadian Blood Services.

Book Review: My Life by Bill Clinton

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As many of you know, I enjoy reading. Over the past several months, I have been reading my first autobiography of a living American President! I have already gone through numerous biographies of historical political leaders like Churchill, Ghandi, and Hitler and also Canadian politicians like Jean Chretien or Lucien Bouchard; but never have I read an autobiography. So, I decided to start with My Life by Bill Clinton.

When you first get the book, it is interesting to notice that the book is almost 1,000 pages long! I thought originally that the length of the book was due to the fact that it went into extreme depth in regards to issues on the campaign trail and while being Governor and President.  Sadly, I was wrong.

The book was very detailed in regards to his upbringing. Personally, it was so detailed and monotonous that I was considering not finishing the book. I have gone through some bad books, but never had me thinking this…till now.

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As you would expect, there are some sections in regards to his time as the Governor of the State of Arkansas and President of the United States. The book actually ends on inauguration day for George W. Bush who defeated Al Gore.

It was interesting to learn about the thought process used to make certain decisions. It was also interesting to learn how Clinton tackled various peace negotiations, from Ireland to the Middle East.

Many people define Bill Clinton’s Presidency based off his personal actions which were highlighted by the ‘independent’ council of Kenneth Starr. It was very interesting to learn how Clinton decided to tell his family about his failings and the number of months that he slept on the couch.

All and all, My Life by Bill Clinton was okay. I would recommend it for someone that is interested in learning how a President of the United States thinks; but that is about it. People have asked me if I would read it again, and that is an easy answer: no.

What great or horrible book have you taken up lately? Do you have any good suggestions?

Have an awesome week.

Kevin

Kevin MacDonald is a Business Consultant at L6S Business Consulting Inc (www.L6SBC.ca). L6S offers services in management consulting, Controller and CFO contracting, and lean management with either project work or teaching/mentoring of staff. Kevin has his CMA accounting designation along with a Black Belt in Lean Six Sigma.

Kevin is active in the community by volunteering for different groups and donates platelets at the Canadian Blood Services clinic on a bi-weekly basis.

Hydro One Firing

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Over the last week, national news in Canada has been highlighted by a group of young men yelling “FHRITP” into a microphone while the female reporter was doing a live report before a soccer match in Toronto. Please click here to see the footage.

 After the event was aired nationally, Hydro One, an Ontario-based electrical company, fired the soccer fan found in the picture above. This person didn’t yell the obscenities into the reporter’s microphone but ‘defended’ his friend for having the ‘right’ to say such things.

Hydro One stated that the actions of the employee harmed their reputation. At the time of the incident, there was no evidence of what company the person was employed with. The linkage between the heckler and Hydro One started to be leaked out via social media and certain local media outlets.

I understand Hydro One’s decision to dismiss their employee for their involvement in the incident due to the fact the work environment would not be safe or comfortable for people who would deal with the heckling supporter. What I personally don’t agree with is the fact that Hydro One stated that the act hurt the reputation of the company. How the person could hurt the company’s reputation if nobody knew where the person worked?

According to a few media reports like here, Hydro One may have a very hard time to prove that their reputation was hurt by the incident. It will also be hard to show to the courts that the incident has made the workplace unsafe.

After the dust has settled, the biggest question I have left is what happened to the person that actually yelled out the obscenities?

Do you think that the situation was handled properly by Hydro One? Should the employee have been sent to a training session or counselling? Please let me know what you think.

Have an awesome week.

Kevin

Kevin MacDonald is a Business Consultant at L6S Business Consulting Inc (www.L6SBC.ca). L6S Business Consulting offers services in management consulting, Controller and CFO contracting, and lean management with either project work or teaching/mentoring of staff. Kevin has his CMA accounting designation along with a Black Belt in Lean Six Sigma.

Kevin is active in the community by volunteering for different groups and donates platelets at the Canadian Blood Services clinic on a bi-weekly basis.

The Different Forms of Being Organized

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Being organized comes in different forms. During my history as an employee and business owner, I was told that a clean desk surface with no material on it is a sign of organization. I actually worked somewhere with an unwritten policy that desks needed to be clean of any materials or papers.

When employees were asked to work on a certain project, I would witness them open their drawers to packed chaos where paper was arbitrarily placed in the drawer. As many people say, a clean desk means dirty drawers.

Personally, a clean desk makes me nervous. I organize myself by keeping active piles of material that is logically ordered by priority and deadline. Even though my desk is not ‘clean’ and is covered with paper, I am able to find any piece of information within seconds.

Organization is not something that can be judged or perceived by the look of an office. There are different ways for people to organize themselves, but I have noticed that they can be placed into two general groups.

Clean Organizer: The Clean Organizer is someone that has everything in their colour coordinated file folders which can be found in a filing cabinet.

Dirty Organizer: The Dirty Organizer, like myself, has numerous things in the open. This person has either structured piles or a loose organization system that allows the person to find information.

Neither system is incorrect; it depends on the personality that is using the system. I have tried to use files and filing cabinets to organize myself. With this level of organization, I found myself spending a lot of time dealing with housekeeping of making files, ensuring the right thing was in the file, and that the file was placed in the appropriate place. Surprisingly, with this ’organized’ system, I was losing items and taking time, sometimes an hour, looking for something.

With my current dirty or clutter system, I have my piles set out where current projects are within arms reach. I have my plan sheet on the top of each appropriate pile so I know where I am in the workflow of the project. Lastly, I have found that I haven’t lost anything (knock on wood).

Organization is not something that can be determined by the look of an office. The effectiveness of the person and their level of responsiveness to request is a better estimator or gauge to their level of organization.

As someone that keeps their desk dirty, don’t force someone into using a system that is not natural to them. Respect their system and review the performance of the employee instead.

Kevin

Picture from http://varyincambodia.blogspot.ca/2012/08/mastering-organized-chaos-theory-to.html

Environmental Leg of Corporate Sustainability

After getting an idea about Key Performance Indicators, we can move onto learning more about corporate sustainability. A great place to start is where most people know sustainability, the environment.

Environmental  sustainability statement.

Environmental sustainability statement.

I recently went on vacation at a resort in Mexico where environmental sustainability very pronounced. It is their brand identity.

As the statement to the left shows, they had the common bathrooms outfitted with toilets that didn’t require water. The resort calculated that it would save them 115,000 gallons of water per year. That sort of saving would drop to the bottom line.

Where the resort was built, it was originally a jungle. Much of the vegetation and wild animals are native to the area. Since it is a natural setting, the grounds maintenance upkeep would be minimal in comparison to converting common areas into grass areas, like a North American park.

Why is this all important? Why make it apart of their brand?. Consumers are looking at the environmental sustainability of a company in making their purchasing decisions (see below chart).

Drivers: Description of this image follows.

Source: Mintel Sustainable Food and Drink 2011

Lastly, as the below chart shows, over 50% of consumers are actually willing to pay more for a product that comes from a sustainable company.

Pay Extra: Description of this image follows.

Source: Mintel 2011

Even the harshest industries are becoming environmentally sustainable. Shell Canada, one of the biggest oil companies in the Canada, has a goal of cutting CO2 emissions that its operations produce.

Here are some stats and facts from  The Economist in regards to environmental sustainability

1. “More than half the companies listed on the world’s 31 largest stock exchange publish some environmental data” (Schumpeter (2014, March 29). A green light. The Economist.)

2. “Including the LSE (London Stock Exchange) and Deutsche Boerse, over 80% of large firms publish this sort of data, ranging from their greenhouse-gas emissions to the return on investment of projects with aim to reduce pollution” (Ibid).

Environmental sustainability is not only a ‘concept’ or ‘idea’ for the environmentally conscious, but a viable portion of a sustainable business model. “A study published by Harvard Business School in 2011 looked at 180 firms over 18 years and found that those which paid the most attention to environmental matters also did best when measured by share prices and earnings” (Ibid).

All companies can be environmentally sustainable. During the journey to becoming environmentally sustainable, different goals or KPIs are tracked to rate performance. Different KPIs used include: level of carbon emissions, water usage, natural gas usage, electrical usage, and tons of garbage taken to landfill.Next week, we are going to take a look at the people aspect of corporate sustainability.

Kevin

Looking at KPIs First.

Before we go into greater depth about the different aspects of a corporate sustainability strategy, we will look at a measuring ‘tool’ that is used to help manage companies and their strategies.

Many management teams use their financial statements to look at their performance for the past period.

What if there was a tool that could be used to help ‘forecast’ your financial performance in the future? What if there was a way to track certain events which are integral to your company’s overall performance?

Key Performance Indicators, KPIs for short, are non-financial ratios used to help manage the direction of the company.

The manufacturing industry tracks direct labour cost per unit, % of waste from raw materials, and defect rates on a daily basis to manage operating processes, ensure cost control, and manage quality.

Retailers look at their sales volume per square foot and number of customer returns to help define the product placement, product selection, and how well sales people are fulfilling the needs of customers.

A few (but not all) ‘must haves’ for great KPIs include:
– Being measurable;
-. A benchmark so people know what is expected of them;
-. Timely reporting which allows management to react if issues occur;
– And multiple KPIs since you don’t want people to focus on only one activity while allowing other activities to fall to the way side.

The top 3 points can be linked back to Lean and Six Sigma management and the specific concept of DMAIC (Define-Measure-Analyze-Improve-Control).

When setting out a corporate sustainability strategy, KPIs are used as a scorecard to how your plan is being implemented. Timely KPIs allows for adjustments before the next set of financial statements are produced.

Next week, we will look at the environmental portion of a corporate sustainability strategy.

Kevin

Video

Leyla Acaroglu: Paper beats plastic? How to rethink environmental folklore – Environmental portion of Corporate Sustainability Strategy

As I talked about last week, corporate sustainability is becoming a larger portion of the business world.

You will find a TEDTalk by Leyla Acaroglu which talks about environmental portion of sustainability. I will move the subject forward farther next week with more focused business applications of the environmental leg of corporate sustainability.

Corporate Sustainability – What is it?

Corporate Sustainability is one of the latest buzzwords you may of heard of. Is it just another buzz word? What is it anyways?

Looking at Wikipedia, you will find that ‘Corporate Sustainability is a business approach that creates long-term consumer and employee value by not only creating a “green” strategy aimed towards the natural environment, but taking into consideration every dimension of how a business operates in the social, cultural, and economic environment.’ In other words, corporate sustainability is looking at how your company effects everything, not just water or trees.

Sustainability comes from the fact that the strategy taken up by the company allows for sustainable revenue generation or cost cutting (I will give examples in future blogs).

Traditionally, when companies are working on their corporate strategy, they look strictly for the economic impact. Corporate sustainability is a holistic view of operations and strategy via financial statements, your physical environment, the communities you work in, and the relationships you have created.

Corporate Sustainability is not only a buzz word but a smart way to do business. As a matter of fact, during the performance review process of purchasers for Walmart, they are rated on their ability to purchase items from suppliers which have a corporate sustainability strategy. Many large grocery store chains expect to receive an annual report from their suppliers on their sustainability strategy.

If you are wondering how a Corporate Sustainability Strategy could help your company, please stay tuned for more information or just contact me.

Kevin