A Quality Lesson from Hopeulikit

Manage by processes, not by departments

Published: Monday, July 17, 2006 - 22:00

Last year I had the good fortune of doing some consulting with B&C Specialty Products in Hopeulikit, Georgia. B&C does light manufacturing, primarily plastic molding and assembly, and they also distribute imported products produced by companies in the Far East. They have about 150 employees and are the biggest employer by far in Hopeulikit. B&C was a perfect place to learn about managing and quality. Every day presented a new lesson. Usually the lessons were hard-learned, but those are the ones that really stick with you. B&C was gracious enough to allow me to interview their personnel about things that came up during my time there. Here’s an interesting lesson: Manage by process instead of departments. The scenario is described by the people who actually lived it.

—J. T. Ryan, president
"One of the things we’ve been very successful with is building a sense of departmental pride. Most employees feel strongly that the people in their department are their teammates. They assist each other, share information and help the group improve. The feeling of camaraderie is incredible. It’s just like a good football team, where everyone plays their role and strives to excel.

"About six months ago, we even held a slogan contest in each department. It was open to everyone and it generated a lot of interest. Everybody submitted at least one slogan, and some people came up with three or four. Employees voted on what they liked the best. Those are the banners you see hanging above the entrances to each department. Over in shipping they chose, ’We ship it like it was going to mama.’ I especially like that one.

"The team spirit has led to some friendly competition between departments. I’m a competitive guy, so it makes perfect sense to me. We’re all trying to achieve the same ultimate goal, but each department tries to conduct its business like they have their own money invested in it. There’s a lot of personal accountability, in other words. You can’t buy that kind of accountability and dedication. It has to be cultivated slowly over time, and I’m proud to say that we’ve successfully cultivated it.

"We also have metrics in each department. These have been very effective in focusing our people on what matters to our success. What matters is usually output, percentage of good parts and cost control. The departments have bulletin boards where charts are posted, showing the performance against metrics. Each employee gets an incentive bonus based on his contribution to departmental metrics. Every department strives to maximize its performance, which in turn maximizes company performance. All these things come together to create an engine for continuous improvement. Departmental pride and friendly competition: those are our secret weapons."

—Jesus Rivera, molding operator and department trainer
"I love the incentive system based on departmental performance. It enables me to get rewarded for things I can personally control. If I do an especially good job, I get paid more. Makes sense, doesn’t it? I can’t imagine working in a place that doesn’t reward employees for doing a good job. I wouldn’t want to work there.

"I’ve worked here for over ten years, and I understand our processes quite well. This helps me to perform well with the incentive. For instance, I know for a fact that it’s much easier for the finishing department to handle underside defects. They have the right equipment and tools for it, and they can perform rework in the normal production flow. It doesn’t take them an extra two seconds. We’re supposed to rework underside defects in my department, but it counts against our incentive and it really makes more sense to let finishing handle it.

"Another thing I’ve learned over the years is that it’s smart to produce a few extra pieces for each order. This accomplishes two things: it covers us for any problems downstream if products have to be scrapped and it also boosts our output. This is a win-win arrangement for everyone. I get a bigger bonus, and the other departments have a cushion in case any parts are bad. Those underside defects I mentioned earlier are usually easy to fix, but sometimes the finishing department might have to scrap some parts. This way, they still make the order quantities.

"All these things take years to learn. A new guy on the team would have no way of knowing all these tricks of the trade. I’m a trainer in this department, so I make sure that everyone gains from my experience. Everyone’s on the same page here and most folks make a pretty decent bonus.

—Dennis “Cowboy” Kelly, finishing department supervisor
"The good news is that everyone is focused on their department’s performance. The bad news is that hardly anybody is focused on the company’s performance. Here’s an example. It’s an open secret that employees conceal defects so the next department has to deal with them. This is supposed to help people get their bonuses. It may do that, but it’s a headache for the department that ends up doing the rework, and it’s also a disaster for the company. Do you know there are some defects that can be hidden all the way to final inspection? We end up fixing a lot of other people’s mistakes here in finishing, but final inspection gets hit with even more problems than we do. The whole process is one of deferred accountability, a haze of smoke and mirrors.

"Another problem with the departmental focus is the competition it causes for resources. We could easily cross-train employees to move from job to job in different departments as demand requires. There’s no incentive to do this, though. You see, even the departmental managers get a bonus based on their department’s performance, so why help a different department? The current system requires that you watch out for your own department, regardless of the effect it has on the company as a whole.

"The competition is not just with human resources, but with materials and supplies too. Everyone has their secret storeroom of supplies. We’re like a bunch of squirrels hoarding acorns. Don’t think for a minute that one department would even consider sharing their supplies, either. The philosophy is, ’Hands off. This stuff belongs to my team. You guys can go find your own stuff.’

"We’ve had to resort to raiding parties, in fact, just like Vikings. One time my department needed gear oil so bad, that we broke the lock on another department’s supply cabinet in the middle of the night and borrowed what we needed. Yes, they got a little angry, but it’s what we had to do to survive. Now that department has a bigger lock on their cabinet and they don’t brag so loud anymore about their stash of supplies. Don’t worry, though. We’re low on gear oil again, and now I’ve got a bolt cutter. By this time tomorrow I’ll have what I need."

—Max Cracker, inspection supervisor
The way we do things around here is completely insane. It’s a company of magicians. Now you see the defect, now you don’t. You can’t imagine the mess we have to sort out here in final inspection. Since we’re not a production function, we’re not on the production incentive plan. Everybody in production departments says, ’Let inspection handle the rework. They get the same money anyway.’ So we’re the mop-up crew for everybody else’s sloppy work and magician tricks.

"You think that’s crazy? Here’s something even nuttier. Since there’s a productivity incentive based on output, everyone overproduces. You should see our finished goods inventory. We’re popping at the seams. If you happen to need any obsolete parts, just let me know. We’ve got them. I figure we’re carrying about 10 million dollars of inventory. That’s a huge amount of money for a company like ours and it’s growing all the time. That inventory is like an anchor around our necks, yet people are rewarded for adding to it.

"You know what I would do if I were in charge of this place? Abolish departments altogether. The whole production process would be one integrated process. Instead of having four or five different teams, we would be a single team. That would give everyone a better understanding of how their job fits into the whole operation. I think it would also reduce the need for supervision, since there would be fewer fiefdoms requiring oversight.

"I would cross-train employees in multiple jobs, and people would move around depending on the workload. This would reduce costs tremendously. There are many times we have one department very slow and the next department working at 100 miles an hour. We’ve even had to pay employees overtime in one department while they’re idled in a different department. What sense does that make? Train everyone on multiple jobs and let them go where they’re needed.

"Finally, there would be no incentive for micro-level performance. People would be rewarded based on how well we do as a company. If the company does well, we all do well. Doesn’t that sound logical? It’s not the way we do things now, though. If we stay on the present course we’ll be out of business within the next twelve months."

When managing your company, remember:

• Encourage pride among departments, not competition
• Strive to structure your organization around processes, instead of by departments. Most processes span departmental boundaries. The arbitrary departmental boundaries impede the flow of information, increase the need for overhead and limit everybody’s understanding of the broader organization.
• Cross-train employees on a variety of jobs. This boosts employee morale and makes for a more efficient and flexible operation.
• Focus on metrics that indicate the success of the organization as a whole.
• If you find you need functional-level metrics, make sure that they don’t have unintended consequences.

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