Category Archives: Manufacturing & Operations

Do You Promote an Employee with Limited English? Five Points

Situation: The CEO of a small but profitable company has a promising employee who she wants to promote to a supervisor role. The challenge is that this employee has limited English. Promoting this individual may upset the current supervisor. Do you promote an employee with limited English?

Advice from the CEOs:

  • Before making any decisions consider taking the “lead” position in manufacturing short-term instead of promoting or hiring a supervisor.
    • This will allow you to fully understand the manufacturing operations, as well as any points of art in the operation that can serve as the company’s foundation IP.
  • To think about the role of supervisor or Plant Manager, visit a Starbuck’s for an hour and watch the Starbucks Manager. This individual will, over the course of the hour, perform all functions within the establishment. This is a good model for a hands-on supervisor for a small operation.
  • Given the small size of the current operation, look for a more modest role for the position. Instead of Operations Manager perhaps Plant Manager. This will allow the individual time to grow into a larger role as the company grows.
  • How should the message be delivered to the promising employee with limited English as well as to the current supervisor?
    • Tell the employee “We like you and think that you have real potential. Would you be interested in an English as a second language course to build your English skills? We’ll pay for the course.” It is important to be enthusiastic and positive with the individual as you have this conversation.
    • A supplemental alternative is to reimburse the individual’s use of one of the online programs like Babbel or Duolingo that enables learning or improvement of language skills using a mobile phone. These programs are inexpensive and highly effective with diligent practice.
    • Promoting this individual above the current supervisor may generate a problem. This doesn’t prevent the promotion. Just assure that it is done carefully and be prepared for the current supervisor’s reaction.
  • When it is timely, instead of promoting this individual immediately, consider offering a temporary lead role for key tasks of increasing levels of responsibility. This will allow time for the individual to prove their merit and capabilities to others over 2-3 months.

How Do You Create an Incentive-based Compensation Plan? Seven Ideas

Situation: A CEO wants to build additional incentives into the company’s compensation plan. The objective is to add group incentives to the pay mix – to focus more attention on group performance rather than just company goals. How do you create an incentive-based compensation plan?

Advice from the CEOs:

  • The best policy is to be upfront, open, and transparent as the plan is presented.
  • Communication is the key to success, including the following bullet points:
    • Pay starts at a base which is 75th percentile – a generous base in our industry.
    • Group bonuses, which reflect the results of the group’s efforts, allow you allow to reach the 90th percentile or higher.
    • On top of this, profit sharing enables the addition of 10-20% of your base.
    • Altogether, management thinks that this is a generous package. The difference from the old system is that employees will be rewarded for making decisions which will benefit the group as well as the company – and you will be generously rewarded for this.
  • Once plans are communicated to employees 1-on-1, reinforce the message with a group presentation and open discussion at monthly company meetings.
  • Consider: significant changes in compensation may be best taken in small rather than large increments. Start with small incremental adjustments. If these are effective proceed to larger increments on a planned and open schedule. This is particularly true if the historic culture has been that we all win or lose together.
  • A downside of rewarding by team is that some will get rewarded for producing minimal results. Consider some percentage of discretionary payments to recognize and reward effort instead of pure parity within the team.
  • Consider longer-term results within the payment scheme – not just quarterly results.
  • People need to know that they are accountable. Let them know that a 75% base is reasonable but that the significant rewards will be for producing results above this level.

How Do You Bring Children into the Company? Seven Observations

Situation: The CEO of a company is looking at her succession plan. The preferred option, from a family standpoint, is to groom one of her children to eventually become the CEO. A concern is how current key employees will react to this plan. How do you bring children into the company?

Advice from the CEOs:

  • As preparation for a key role at the company, have your child gain experience at a company that has been where the business is today but has grown to a higher level. Learn from them what they went through and what they would change were they to do it again.
  • How did Peter the Great become the greatest leader of Russia? As young man, and son of a czar, he apprenticed in England and Holland – in ship building and other important arts that were scarce in Russia. He was able to leverage what he learned to help build the country when he became czar.
  • Have them develop the leadership qualities and maturity that they need to run this company in another company – where there is the freedom to make mistakes and learn from them. Bring this wisdom and experience back to the company. It will help gain the respect and loyalty of company employees.
  • Have them take on tasks which are not comfortable – for example, sales. Don’t underestimate the value of being able to visit a new customer. This is the key role of the principal of any company.
  • A parent/child relationship can be difficult in business. It can get tense when business, money, survival of the company and making payroll are on the line.
  • The son or daughter must be aware that in a new role one doesn’t start out in control. This may be achieved in the end, but it is not the starting point.
  • An option, once experience has been gained in another company, is to have the individual start a new branch of the company in a different location. This will provide a valuable learning experience and will demonstrate both capacity and success to company staff.

Who Owns Quality Control? Eight Recommendations

Situation: The CEO of a company has a problem. Quality control is an essential part of the company’s success, but ownership of quality control issues is proving difficult. When more than one department is involved, each blames the other for issues or deficiencies. Who owns quality control?

Advice from the CEOs:

  • At the end of the day the project owner must own this responsibility. This individual can delegate work but not accountability.
  • QC must be embedded within the company’s systems. In addition, someone has to walk in daily to ask what is wrong with this project? What can be done better? A skeptic.
  • Put a skeptic in the QC role – the job is to find what’s wrong, not what’s right – a tactical skeptic.
    • Skeptics are ideal for design reviews.
    • It isn’t necessary to hire someone for this role if there’s already a productive skeptic on staff.
    • This person needs to be vocal and will irritate some of the other staff. Coach staff to tolerate this, because the individual is performing an essential role.
  • It’s impossible to check everything. However, as issues are identified, everything can be documented.
    • As systems are reviewed, look for patterns of problems.
    • Develop solutions as problems are identified.
    • Log issues and solutions on a shared server to facilitate access by project managers.
  • Institute cross-functional design reviews – representatives from different functions offer different perspectives. Formalize design reviews in the early and start-up stages of projects.
  • Work on company culture – build anticipation of challenges into the culture.
  • Build a heuristic of the output of each program. Use this to make sure that inputs, filters and system checks will produce the desired output and the desired level of quality.
  • Ask: where is QC currently working within the company? Why is it working?
    • Operations and testers catch the errors.
    • The issue is distributing the knowledge gained. In complex systems nobody understands the full picture or the impact on the customer.
    • This becomes the responsibility of the project owner.

How Do You Implement a Process Change? Six Suggestions

Situation: The CEO of a service company is concerned about lost income from uncaptured billing. He has identified the cause – failure to capture extra hours that haven’t been billed – but is struggling to get employees to monitor this more effectively. How do you implement a process change?

Advice from the CEOs:

  • The group presented two options for growth: bring in experienced outside people to develop additional systems to run the company, or a hybrid model using internal resources, augmented with outside expertise.
  • Bring in Experienced Outside Resources: Hire an experienced outsider with a track record in your industry to design and implement the needed systems.
    • Pros for this solution: the outsider will bring a fresh vision and new energy, plus the experience and know-how to make the desired changes.
    • Cons: impact on current business culture. This may generate resentment among employees who can no longer make decisions on the spot and may remove a path to management for existing staff. Possible negative impact on customers who receive larger bills due to change orders.
  • Hybrid Model: Outside person creates model and trains employees to implement it, then monitors the system and progress long-term. The key is to change expectations and behavior within the team.
    • Pros for this solution: more opportunity for current employee participation; involves employees in the design of the system, providing better buy-in to the solution.
    • Cons: as with any change, this won’t provide the full expected return. Just the fact that things are being changed impacts the efficiency of implementation. Unanticipated blocks and resistance may hinder progress – don’t be surprised by this, it is predictable.
  • Implement SOPs that facilitate rapid response to change orders – starting now and with whichever option is chosen.
  • Generate a pick list of all possible change orders with pre-calculated costs to guide employee choices and keep customers informed.
  • Whatever solution is chosen, be sure to communicate frequently and consistently with employees to facilitate the change.

How Do You Boost Company Morale? Five Suggestions

Situation: A CEO is concerned that her #2 is being challenged by others in the company. An option is to hire a technical project manager; someone who carries the CEO’s authority and who can get things done. What are the obstacles to achieving this? How do you boost company morale?

Advice from the CEOs:

  • The technical project manager must have a non-threatening role – they shouldn’t challenge the technical skills of the developers. The role is to oversee schedules, progress, and to resolve barriers – both technical and personal. The job is to get things back into shape.
  • While the business involves highly technical software, operationally it is people centered, not software centered. People centered means a team that collaborates and supports one-another. The important questions are:
    • Where do the needed people skills come from?
    • How do the model and reality transition to a people centered business?
    • Look for someone who can nurture talent. People skills are more important for this role than technical skills, with the caveat that individual must be able to understand technical challenges.
  • An option is a 3rd party within company to straighten this out.
    • “COO” Responsible for Technical Direction – title is important because it conveys respect.
    • The CEO’s voice and ears.
    • Run weekly meetings and is the go-to person when the CEO us traveling.
    • The focus is to manage the primadonnas and keep them focused on their jobs instead of on interpersonal conflicts.
    • This role focuses inwardly on company vs. the CEO who focuses outward on the broader vision, key stakeholders, etc.
  • The bottom line – this is your company, your vision. Make it work. The task is teaching maturity – learning to give rather than worrying about making a name for themselves.
  • Have regular lunches with each of the developers and have frank conversations with them. What’s up and what’s wrong? Listen and let them air their concerns. Talk them through these concerns, but make sure that they understand that the CEO sets the direction both for the company and the boundaries of acceptable and unacceptable behavior within the company.

How Do You Maintain Company Culture in a Merger? Four Suggestions

Situation: A US-based company is in the process of merging with a foreign company. The US company has multiple locations across the US, and there are cultural differences between these locations. The CEO has worked diligently to mitigate these differences. The foreign merger presents new challenges. How do you maintain company culture in a merger?

Advice from the CEOs:

  • Between some of the US locations, there has been a “we make money, but you spend money” perception. How did the company get past this?
    • The company adjusted metrics to demonstrate the contribution of each division to short and long-term profitability.
    • This information was communicated selectively to key opinion leaders within the company.
    • Use the lessons from this experience to plan post-merger communications and protocols that will contribute to team integration post-merger and improve the chances of merger success.
  • Focus on the common vision and interdependency of the teams. This accommodates differences in culture and encourages teams to appreciate each other’s contribution. Use the same technique during the merger.
  • Have lunch with CEOs of other companies that have been bought by foreign firms. Learn how they adapted to the new reality. Ask what worked or didn’t work. Seek specific details of solutions that were developed that could be applicable to the planned merger.
  • Become better educated on business culture in the country of the company with which you will merge. Seek experts who can give seminars to company employees on what to expect and how to work most effectively with workers and executives of the foreign company.

How do You Minimize Inventory Damage by an Outsourced Manufacturer? Five Points

Situation: A company uses outsourced manufacturing but is concerned about inventory damage by the manufacturer. Tests have been established to assure both visual compliance and functional performance, overseen by a company employee. Still the company is receiving too many unacceptable parts. How do you minimize inventory damage by an outsourced manufacturer?

Advice from the CEOs:

  • It is perfectly acceptable for a vendor of consigned materials to bear the risk of product that is not to specification.
    • In any contract for manufacturing, require that the vendor carry insurance to cover the full cost of materials and processing in case of damage either during manufacturing or shipping.
  • It sounds like this is a new opportunity and situation for the company. In the process they have not guaranteed that both cost and risk are covered.
    • There is no point in assuming all this risk.
    • For future opportunities like this, take on the work as a time and materials project at an appropriate hourly rate for the market, and with a significant mark-up to cover risk as the project is transferred to a contract manufacturer.
    • Another option is to take on the project under a project management contract, and to bill engineering separately.
  • This situation sounds familiar for an evolving project. In the future try to unhitch the manufacturing piece from the engineering. Engineering should be more profitable, which will allow the company to more successfully manage the project into early manufacturing.
  • Strategically, this could be a good move for the company provided they partner with a reliable vendor to facilitate early stage manufacturing. One option for paying sub-vendors is to pay for yield – particularly if early stage work has a high failure rate.
  • If the market opportunity is there do two things:
    • Set up an organization with professionals who know early stage manufacturing.
    • Be aware this group will have a different culture and approach compared to design engineers.

How Do You Best Exploit a New Opportunity? Three Observations

Situation: A service company has developed the capacity to produce and sell a product. The CEO is considering two options for this new opportunity: create a separate entity for the new business or run the businesses in parallel under the current umbrella. How do you best exploit a new opportunity?

Advice from the CEOs:

  • Option 1: Create separate entity for the new business while the existing business continues in parallel.
    • How big is the potential win? The current company competes successfully for about 10% of the market. The new capability would allow the company to potentially compete for 100% of a larger market.
    • How different are the two opportunities? The current business requires specialized talent – it is a low volume, high margin business. The new opportunity is the reverse – high potential volume but lower margin. It is a more generic market with fewer specialized needs.
    • The separate entity option provides the most flexibility. The current model already functions well. A spin-off provides an additional option without losing what already exists.
    • Bring in another individual to develop and run the new entity. It’s a different game and requires a different focus. However, it will be a great opportunity for the right person.
    • The spin-off model will be more sustainable under separate management than under the current company.
  • Option 2: Operate both businesses under a single entity.
    • This option looks like a double compromise – it alters both the company’s current strengths and the fundamental business model.
  • A long-term alternative is to look for a financial acquisition for the current company. It produces good net margins, has good cash flow, a and spins off cash. This can be valuable to a financial buyer.

How Do You Manage Through a Difficult Period? Six Solutions

Situation: The CEO of a company is wrestling with issues concerning change orders and high labor and materials cost. To get back into good financial shape, they are considering options including reduction in estimator time and selling equipment; however, either of these could gut the business. How do you manage through a difficult period?

Advice from the CEOs:

  • It is critical to get on top of change orders. This is potentially a big profit-loss swing for the business.
    • Does everyone understand what’s happening?
    • If the answer is yes, teach them more about the business nuts and bolts so that they can help develop solutions? Share a portion of the savings in the form of spot bonuses for those who develop solutions.
  • Take a lesson from The Great Game of Business. Let employees know about the challenges and challenge them to help develop solutions.
    • As an example, look at change orders and the percent of change orders that are not correctly completed, approved and invoiced as a critical number. Let’s say that 50% of change orders are not completed, approved and/or invoiced correctly. The objective for the year is to reduce this to 25%. Calculate the value of lost billings from the past year. If this can be reduced by half, the value will be $X. If the company can meet this objective, consider making half of $X available for distribution as gifts or prizes.
    • To support this, allow each new project to design its own minigame to reduce the number of incomplete and uninvoiced change orders.
    • The idea is to have the project and inside teams design the minigames and come up with ways to reduce incomplete and uninvoiced change orders. They will learn new ways of being more efficient from this process. This is the long-term benefit to the company.
  • If it is necessary to reduce staff, cut early instead of later. This is painful but laid-off employees can be hired back on a contract basis as necessary.
  • A common solution during a difficult period is to cut back to core, reducing overhead as a survival strategy, and focus on winning as may bids as possible to rebuild the business.
    • Look at all departments and the gross margin that each produces minus the overhead that each requires. Focus cutbacks on those that are not positive.
  • Increase annuity contracts – contracts with major companies that are growing and frequently require the company’s services.
  • Transfer equipment to a separate corporation. Lease it back as business requires. This increases cash flow flexibility – for example, don’t make lease payments when cash is tight.