Avoiding the Corporate Death Spiral

Gregg Stocker

Description

Nowhere is it written that a company, regardless of how large it is or how successful it might seem to be, will survive. There have been too many highly visible and painful reminders of this fact over the last several years. While many of these companies fall apart seemingly overnight, the reality is that the decline is a process that usually takes several years and results from a number of actions, decisions, and behaviors that contribute to the demise.The purpose of this book is to present the warning signs of organizational decline, and provide a method for leaders to identify and eliminate them before the organization enters a death spiral. It provides detailed explanations of each warning sign, including an explanation regarding how the sign contributes to the decline, and also an assessment tool to determine the existence and extent of the signs within an organization. The principles and concepts present are equally applicable to healthcare, manufacturing, or service organizations. "A compelling and revealing account of why businesses do and do not survive. I and many of my colleagues consider it mandatory reading." Jim Schroth President J.L. Schroth Company "It is hoped that corporate executives will take heed to the message of this book to avoid (or end) death spirals of their companies, but time is running out for many formerly great companies!" Gene PerkinsbrGroup Vice President – Retired Emerson Electric "Gregg Stocker’s excellent new book captures the fundamental lessons all organizations must learn...This is a remarkable, must-read book for leaders and students of organizations everywhere!" Jeff Lickson President The Consortium"Gregg Stocker is a well-versed, lifetime advocate of quality and performance improvement. His book points the way." David Phillips Former CEO Sherex Chemical, Inc.

Sujets

• Business
• Qualité, hygiène, sécurité, environnement
• Gestion et management
• management
• Economics

Informations

• Publié par: ASQ Quality Press
• Date de parution: 30 juin 2006
• Nombre de lectures: 0
• EAN13: 9781636940700
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

Avoiding the Corporate Death Spiral

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Making Change Work: Practical Tools for Overcoming Human Resistance to Change Brien Palmer

Business Performance through Lean Six Sigma: Linking the Knowledge Worker, the Twelve Pillars, and Baldrige James T. Schutta

Leadership For Results: Removing Barriers to Success for People, Projects, and Processes Tom Barker

Inside Knowledge: Rediscovering the Source of Performance Improvement David Fearon and Steven A. Cavaleri

The Six Sigma Path to Leadership: Observations from the Trenches David H. Treichler

The Executive Guide to Improvement and Change G. Dennis Beecroft, Grace L. Duffy, and John W. Moran

To request a complimentary catalog of ASQ Quality Press publications, call 800-248-1946, or visit our website at http://qualitypress.asq.org.

Avoiding the Corporate Death Spiral

Recognizing and Eliminating the Signs of Decline

Gregg Stocker

ASQ Quality Press Milwaukee, Wisconsin

American Society for Quality, Quality Press, Milwaukee 53203 © 2006 Gregg Stocker All rights reserved. Published 2006 Printed in the United States of America

12 11 10 09 08 07 06 5 4 3 2 1 Library of Congress CataloginginPublication Data Stocker, Gregg, 1959– Avoiding the corporate death spiral : recognizing and eliminating the signs of decline / Gregg Stocker. p. cm. Includes bibliographical references and index. ISBN 0-87389-684-X (pbk. : alk. paper) 1. Organizational effectiveness. 2. Management. 3. Business failures. I. Title. HD58.9.S755 2006 658.4063—dc22 2006001952

ISBN-10: 0-87389-684-X ISBN-13: 978-0-87389-684-9

No part of this book may be reproduced in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher.

Publisher: William A. Tony Acquisitions Editor: Annemieke Hytinen Project Editor: Paul O’Mara Production Administrator: Randall Benson

ASQ Mission: The American Society for Quality advances individual, organizational, and community excellence worldwide through learning, quality improvement, and knowledge exchange.

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Printed on acid-free paper

Contents

Figures and Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv Part I The Corporate Death Spiral . . . . . . . . . . . . . . . . . . . . . . . . . 1 Chapter 1 The Corporate Death Spiral . . . . . . . . . . . . . . . . . . . . 1 What Is the Death Spiral? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 The Warning Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Part II The Warning Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Chapter 2 Lost Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 What Is Purpose? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Profits and Stock Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Holding the Organization Together . . . . . . . . . . . . . . . . . . . . . 16 Identifying Lost Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Chapter 3 Number Obsession . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 An Example of Doing It Right . . . . . . . . . . . . . . . . . . . . . . . . 29 It’s a Matter of Importance . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Stopping the Madness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Identifying Number Obsession . . . . . . . . . . . . . . . . . . . . . . . . 43 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Chapter 4 Supplier Squeezing . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Considering Total Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Supplier Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 What Is the Objective of Procurement? . . . . . . . . . . . . . . . . . 55 Being a Great Customer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Most Understand, So What’s the Problem? . . . . . . . . . . . . . . 58 Identifying Supplier Squeezing . . . . . . . . . . . . . . . . . . . . . . . . 58 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

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Contents

Chapter 5 Undervalued Employees . . . . . . . . . . . . . . . . . . . . . . . 61 Cutting Assets to Improve Profit . . . . . . . . . . . . . . . . . . . . . . . 62 Evaluating Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Respecting and Developing Employees . . . . . . . . . . . . . . . . . 75 Continually Reduce Fear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Identifying Undervalued Employees . . . . . . . . . . . . . . . . . . . 80 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Chapter 6 Dirt, Clutter, and Damage . . . . . . . . . . . . . . . . . . . . . . 85 Damage and Breakdowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Dirt and Clutter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Identifying Dirt, Clutter, and Damage . . . . . . . . . . . . . . . . . . 97 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 Chapter 7 Operational Fragmentation . . . . . . . . . . . . . . . . . . . . . 99 Departmental Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 What’s Blocking Teamwork? . . . . . . . . . . . . . . . . . . . . . . . . . 109 Defragmenting a Complex System . . . . . . . . . . . . . . . . . . . . . 112 More Barriers to System Performance . . . . . . . . . . . . . . . . . . 114 It’s a Matter of Leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 How to Identify Operational Fragmentation . . . . . . . . . . . . . . 118 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 Part III Addressing the Warning Signs . . . . . . . . . . . . . . . . . . . . . 123 Chapter 8 Improving the Organization’s Health . . . . . . . . . . . . . 123 The Need for Transformation . . . . . . . . . . . . . . . . . . . . . . . . . 123 Requirements for Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124 Appendix A Internal Organizational Assessment . . . . . . . . . . . . . 137 Prioritizing Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 Warning Sign Prioritization . . . . . . . . . . . . . . . . . . . . . . . . . . 144 Appendix B Statistical Process Control . . . . . . . . . . . . . . . . . . . . . 145 The Basic Statistical Formulas . . . . . . . . . . . . . . . . . . . . . . . . 146 Rules to Determine Stability of a System . . . . . . . . . . . . . . . . 147 Appendix C The QFD Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

Appendix D

Basic Reflection Questions . . . . . . . . . . . . . . . . . . . . . 157

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

Figure 1.1 Figure 1.2 Table 1.1 Table 1.2

Figure 2.1 Table 2.1 Table 2.2 Table 3.1 Figure 3.1 Figure 3.2 Figure 3.3 Figure 3.4 Figure 3.5 Figure 3.6 Table 4.1 Table 4.2 Table 4.3 Table 4.4

Figure 5.1 Table 5.1 Table 5.2 Table 5.3 Figure 5.2 Table 5.4 Table 5.5 Figure 6.1 Figure 6.2

Figures and Tables

Weakening of an organizational immune system. . . . . . . . 3 The death spiral and crisis-mode management. . . . . . . . . 5 Elements of a supportive improvement culture. . . . . . . . . 6 Reasons for the lack of fundamental change in business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Market capitalization values. . . . . . . . . . . . . . . . . . . . . . . . 13 Technology-induced product replacements. . . . . . . . . . . . 24 Customer needs in music media. . . . . . . . . . . . . . . . . . . . . 25 Causes of immeasurable but significant losses. . . . . . . . . 30 Plant comparison chart. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Warranty expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Warranty expenses with February result added. . . . . . . . . 37 On-time delivery performance. . . . . . . . . . . . . . . . . . . . . . 38 Historical on-time delivery performance. . . . . . . . . . . . . . 40 On-time delivery performance after improvement. . . . . . . 40 Example of total cost analysis for a supplier. . . . . . . . . . . 46 Total cost of purchased materials. . . . . . . . . . . . . . . . . . . . 48 Costs associated with purchase of supplies. . . . . . . . . . . . 49 Losses to a company resulting from delaying payments to a supplier. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Success and happy employees. . . . . . . . . . . . . . . . . . . . . . 62 The true cost of layoffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Steps before workforce reductions. . . . . . . . . . . . . . . . . . . 65 Intended benefits of performance appraisal systems. . . . . 73 Improving below-average employees. . . . . . . . . . . . . . . . . 75 Benefits of developing managers from within. . . . . . . . . . 76 Typical fears within an organization. . . . . . . . . . . . . . . . . 78 Example of a preventive maintenance schedule. . . . . . . . . 89 Example of preventive maintenance instruction sheet (on back of maintenance schedule). . . . . . . . . . . . . . . . . . 90

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Figures and Tables

Table 6.1 Figure 6.3 Figure 6.4 Figure 7.1 Figure 7.2 Figure 7.3 Figure 7.4 Table 7.1 Figure 8.1 Figure 8.2 Figure B.1 Figure C.1

Figure C.2 Figure C.3

Benefits of clean/organized work area. . . . . . . . . . . . . . . . 92 Using outlines to identify locations. . . . . . . . . . . . . . . . . . 93 Example of visual inventory control. . . . . . . . . . . . . . . . . 94 Overview of the PDSA process. . . . . . . . . . . . . . . . . . . . . 104 Lost-time accidents for North American plants. . . . . . . . . 107 Analysis of lost-time injury data. . . . . . . . . . . . . . . . . . . . 107 Partial cause and effect analysis of joint injuries. . . . . . . . 108 Factors that affect worker performance. . . . . . . . . . . . . . . 119 Reflection and PDSA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 The affinity diagram. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 Charts depicting data from unstable systems. . . . . . . . . . . 148 Level of involvement/leadership at each step of the process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 QFD matrix example. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Overview of the QFD process. . . . . . . . . . . . . . . . . . . . . . 156

Foreword

Most people, if told that they are in a death spiral, would pay great attention to the doctor delivering that startling message, especially if told there was a way out.Avoiding the Corporate Death Spiral: Recognizing and Eliminating the Signs of Declinedelivers the same message to leaders of the world’s com- panies. It is to be hoped that corporate executives will take heed to the mes- sage of this book to avoid (or end) death spirals of their companies. But time is running out for many formerly great companies! We have all witnessed/are witnessing the decline of great companies that have been dying for many years. Various leaders are brought in to save the company, but the decline continues. Sometimes, a high-profile leader is brought in to save the com- pany and a temporary lull in the decline occurs, only to be resumed when the miracle worker leaves. Intransigent workers, governmental action/inaction, and other forces are often blamed, but it is difficult for we who are leaders to look in the mirror and find the real source of problems. In a great many cases, the company in question could be saved and could prosper, but leaders do not pay heed to the rather simple (though not short-term) messages of this book. Most companies have corporate mission statements, affirming in writ- ing their reasons for being in business and their vision for the future. Instead of following their mission/vision and letting it drive their actions, however, many companies put the declarations on the wall and pay no heed in day- to-day operations. They never really decide who they are, who their cus- tomers are, and that their companies are in business to serve these customers. This type of mission/vision statement is a waste of time and paper. In my experience, shared vision is one of the most powerful tools at getting people to work together. Provided the course is right, this is vital to greatness. Many companies that are in death spirals could know that they are there by the numbers that they generate, but these numbers either come too slowly or management will not acknowledge their problems. They suffer a long-term decline of market position, profitability, customer service levels, successful new products, and an increase in waste (inventory, scrap, rework,

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