Thursday, December 19, 2013

Focus and Leverage Part 289

For the past two days I have been performing an assessment of a company located in the deep South and I’d like to share some of my experiences with you.  One of my “blog readers” had contacted me about coming to his company to take a look at how they are running their business and I agreed.  When I asked this man what kind of business he was in, he told me it was a saw mill.  I have never had the opportunity to assess a business of this kind before, so I was very excited to do so.  I had no preconceived notions about what to expect at this sawmill, but I knew that everything that I knew about processes and systems would apply.  As always, I will not provide the name of the business or the names of any individuals that I met with.

 My assessment of this saw mill was to encompass two days of on-site observations culminating with a report of what I saw, plus recommendations for this company going forward.  I will tell you in advance, that in all of my years of doing this kind of work, I have never been more pleasantly surprised with what I observed.  One of the things I was most impressed with was the relationship between the owners and the entire work force.  For those of you who follow my blog on a regular basis, you know the level of importance I place on how the executive teams views and interacts with their work force.  So my posting today will focus on the relationships I observed plus another area that I feel is a business imperative for all companies......the recognition of constraints within a company.

Let me start by saying that when a company fails to understand the value of their people and recognize them as true assets, they will always fail to capitalize on the collective power of the entire organization.  In many companies I have been exposed to, the workforce is treated as a commodity rather than one of its most valuable assets.  This is a huge mistake for these companies because it is the collective wisdom of the workforce that determines their overall level of success.  When companies, like this saw mill, do recognize and understand the value of their workforce, great things do happen!  When companies do understand their workforce’s value, they listen to and act on ideas coming from their workforce and this is many times the difference between success and failure.

This saw mill is a family-owned business and is a third-generation enterprise.  This company has gone through great times and not-so-great times in their past.  In fact several years ago, this company was under contract with a very large parent company and all was well in the world.  But quite recently (i.e. within the last several years), this company lost their contract and was forced to go through a significant headcount reduction.  It was quite evident from talking to the owners that this was a very painful experience because of the value they placed in their workforce.  Unfortunately, in order for the business as a whole to survive, it was a necessary evil.

One of the owners told me that at their low point, they had outstanding checks for nearly $250,000 with a zero balance in their checking accounts.  It forced the owners to sell-off a major chunk of the forest holdings, just to balance their books.  I will tell you that the good news is, their saw mill today has overcome their financial problems and is quite a viable business today with revenues and margins in the millions of dollars.  So how did this company make such a dramatic financial turn-around?  Part of how this was accomplished lies in the realization by the owners that the true subject matter experts (SME’s) are the workers that cut the trees (although most of the logs come from outside contractors), and the direct laborers that saw, trim, bake, etc. the logs into a very high quality end product.

The SME’s in any company always know how to improve their business, but it takes ownership listening to them to make improvements a reality and these saw mill owners do understand this concept.  It seems like such a simple concept and maybe even “common sense,” but as Mark Twain said, “Common Sense ain’t Common.”

Another thing that impressed me about this saw mill was their apparent understanding of the Theory of Constraints (TOC).  Several years ago, one of the owners read The Goal and according to him it changed his whole outlook on how to run a business.  And although this owner acknowledges that TOC is in its infancy within his company, his understanding of “constraints management” is clearly visible.  Before his introduction to TOC, he, like many other executives from many different industries, he viewed localized improvements as very important.  But after he read The Goal it became very apparent that the sum of all local improvements does not equal system improvements.  He and one of his production managers, who has also read the book, looked at their total process and began identifying constraints and focusing their improvements directly on them.  This realization, combined with the recognition that their workforce was their most valuable asset, was a clear game-changer for this saw mill.  And the rest, shall we say, is history.

In future blog postings I’ll write more about this wonderful company in more detail, but for now, my hat is off to the executive team for recognizing their true assets and for using TOC to effectuate improvements.  As I walked around this saw mill and met with the workers, it became apparent to me that the entire workforce had a very positive view of the leadership and rightfully so.  One of the most important lessons for any leadership team in any company is the recognition of just how important it is to see the true value of their human resources.

Bob Sproull

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