Who’s got class?

What is world class manufacturing? Guests at TM’s Directors’ Forum Dinner in June debated the point long into the night.

Companies in attendance at the Manufacturer Director’s Forum included:

Automotive Insulations, Caterpillar, Drallim Industries, Lander Automotive, NSK Europe and Royal Mail.

TM extends its thanks to Newton Europe for sponsoring this event.

TM hosts Manufacturer Directors’ Forum dinner debates regularly in locations around the UK. To enquire about locations and themes for upcoming dinners, contact Grace Gilling (g.gilling@sayonemedia.com) on 0207 202 4890.

While a clearly defined World Class Manufacturing system does exist, and is followed dogmatically by companies like Fiat-Chysler and Caterpillar, most use the term in a looser sense – as a marketing tool to express a commitment to being the best. But what should we actually expect of any manufacturer claiming to be ‘world class’?

Lean and world class manufacturing

The Toyota Production System (TPS) is undoubtedly the world’s most thoroughly documented example of lean manufacturing and a system which has become a touchstone in attempts to define what it means to be a world class manufacturer.

Drawing on his experiences with the Toyota University in Japan in the 1980s Roger Whitehouse gave a few ‘starter for ten’ thoughts on the role of lean management in creating world class companies at TM’s directors’ forum dinner in June.

While admitting himself “a lean nut,” he was willing to strip away the almost sacred vestments that some have wrapped around TPS, revealing its original purpose and core features.

The child of necessity, TPS was invented in dire economic times, explained Mr Whitehouse, “After the [Second World] War, Toyota was broke. With little thought for growth, they were simply only financially capable of making today, what they would sell tomorrow.”

As any lean historian will tell you, Toyota looked West for ways to cope with this demand. Melding a number of production and training models, it came up with its own methodology for just-in-time production based on a set of ‘pull’ systems.

But it was not this tool kit which made Toyota and TPS so singularly successful observed Whitehouse. It was the strategy and philosophy behind the way the kit was deployed. “In TPS terminology I’m talking about Hoshin Kanri,” he explained. “Anyone can have an effective tool box, but Hoshin Kanri describes is a very specific way of defining objectives and getting people engaged in achieving them – using the tool kit along the way.”

This template for cascading strategic objectives throughout the business allows every individual at every level to understand how their measures relate to the achievement of a clearly defined ambition – an organisational end goal which, crucially, must be defined with employee input.

Steve Knight, a consultant at Newton Europe, agreed that Hoshin Kanri is essential in helping companies achieve world class operations. It helps move people’s thought process away from the minutiae of tool implementation – of “doing lots of sensible stuff,” he said – and toward “defining where the biggest opportunity is.”

This differentiation is critical in defining world class companies from merely good companies, said Mr Knight. As is an organisation’s ability to align measures with that opportunity.

Soft cultures and hard cash

As discussion continued over dinner, it became clear that this is much easier said than done. Approaches to management have changed dramatically in the last 20 years to support more lean and flexible operations. Most attendees expressed a rejection of old school ‘command and control’ management in favour of approaches which encourage independent decision making by employees who should be recognised as “masters of their process”.

But in adopting this kind of management, with its reliance on ‘culture’ and ‘empowerment’ some, including Frank Walsh, plant manager at Royal Mail, felt that there was a risk of increasing, rather than reducing, mismatches between every day operations and the most fundamental aim of any commercial enterprise – creating wealth.

Mr Walsh has a varied engineering and manufacturing background

Frank Walsh, Plant Manager, Royal Mail

and is now a plant manager for Royal Mail which is working on its biggest ever enterprise transformation programme. As talk among this group of manufacturing leaders turned from management cultures to community engagement, business ethics and, inevitably, to skills gaps and the importance of communicating with schools, he broke the usual escalation of complaint about the failure of the UK education system and the image of industry.

How are his peers measuring the success and the return on cultural and community investments in relation to wealth creation, he asked.

His challenge, refocused debate on whether the softer elements of business strategy really align with the most basic purpose of any business, and whether they can be made to align through changing and developing accepted KPIs.

Walsh acknowledged that measures and organisational culture are inextricably linked, but reminded his peers of the old adage ‘Show me how I am measured and I’ll show you how I’ll perform’. “And what do we want from performance?” he asked. “Let’s not forget that we create lean cultures in order to achieve an organisational goal. And that goal, is to create wealth.”

Jim Griffin, MD, Automotive Insulations

Jim Griffin, MD of the rapidly growing SME Automotive Insulations agreed, admitting “there is no point in being productive unless you are also profitable,” but stressed that he believed strong ethics were at the heart of any truly sustainable world class. Without them, “it will all come crashing down around your ears in the end,” he asserted.

Automotive Insulations has grown from a turnover of £5m to £12m in two years based on the principle of “treating employees like people”.  Mr Griffin described how building an intimate knowledge of individual employee “reasons behind performance” has been key in allowing the company to grow and mature successfully.

It’s a personalised work culture which the company is taking overseas as it expands internationally – in Sweden and Germany – with the intention of hitting £30m turnover in the next 18 months. But NSK Europe’s director of IS, Tony Doran, warned that the proof of this approach as a meaningful basis for a world class business would be in its scalability.

Quote unquote: key comments

David Mooney, MD, Drallim Industries

“We have a problem with the concept of ‘world class’ because we are such a diverse company. We have survived on an ability to start making a product one day that we have never run before in order to sieze an opportunity. You can go too far with that, but it is certainly difficult to define what ‘world class’ or lean production means for a line with such high variation.

“We have found that our largest global customers have their own ideas of what world class is to them and are setting their own requirements for performance. So for us, being world class is more about meeting customer expectations than any particular set of tools or metrics.”

Roger Whitehouse, MD, Lander Automotive

“I don’t agree that ‘world class’ can’t be clearly defined. Whichever industry you’re in there are certain metrics which you are always competing against: quality, cost and delivery. Always know where you are on these and what the gap is between you and the competition. ”

Frank Walsh, plant manager, Royal Mail

An example from a previous company shows how easily an ill-calculated measure can drive the wrong performance and stop companies becoming world class even though they are committed to the right principles.

“To improve safety, I demanded that a plant should not exceed two lost time accidents a year. But because of the culture of the organisation, all this resulted in was people hiding incidents. They lied – which became very obvious when I changed the measure to ask for as many reports of ‘near misses’ as possible. This KPI got the desired effect.”

Steve Knight, consultant, Newton Europe

“Where lean fails people on the journey to world class is in the prioritisation of activity. Any organisation will have thousands of problems which it could devote resource to solving. But perhaps just five or ten of those represent fifty per cent of the real business opportunity. World class organisations have astonishing clarity about their use of problem solving to drive profitability.”