Lesson Learned #42
We are often asked by our clients to help build their internal performance improvement (PI) groups. The concept of developing internal skills to reduce their reliance on high-cost consultants is appealing to many companies. We always tell our clients that the most important lesson we have learned about these groups is that if you want them to be successful, you have to make them accountable. This may sound obvious, but it’s not. As a result, most groups have a limited shelf life. When times get tough and executives are looking for costs that can be cut out quickly, an internal group that isn’t obviously accountable is a pretty easy target. We have seen this history repeat itself many times over with quality specialists, re-engineering teams, and more recently Six Sigma and Lean groups.
The reason is because many internal groups simply aren’t truly “accountable.” We define being accountable for a PI group fairly simply: the group needs to improve the company’s profits by some magnitude greater than its total cost to operate (salaries, office, travel costs, etc). This is much harder to quantify than you might think. First, the cost to operate these groups is often higher than many realize (which is why they are periodically an appealing target). Second, many projects have measurable outcomes, but the link between the outcome and how it affects a company’s profits is not always easy to calculate. You may improve customer satisfaction by answering calls on the first ring, for example, but how does this actually improve profits?
But as difficult as it is sometimes to determine cause and affect, if the internal PI group does not figure out how to make these correlations, or choose projects that have a more obvious connection to profits, the group will eventually become part of their CEO’s cost-reduction project.
