Michael Needham is the Principal Consultant at MKN Advisory Services Ltd. He previously worked as a lecturer and module coordinator for the MBA modules ‘E-Business’ & 'Supply Chain Management'; and the MSc Business Improvement module ‘Strategic Operations and Quality Excellence’ at Ulster University along with working as a consulting manager at PWc, global procurement manager with Procter & Gamble and supply chain co-ordinator with the Irish Dairy Board. His wealth of hands on, real life experience combined with in-depth research, including papers on the role of knowledge for process improvement and outsourcing, and a Phd that investigated the factors that influence the internal transfer of process improvement knowledge within service organisations led us to wanting to ask him more. All too often people are experts in theory or experts in practice but Needham is one of those insightful individuals who seems to have mastered a balance of both, which has no doubt increased his understanding and abilities in both doing and communicating what he’s doing.
In 2011 you presented a paper exploring the role that knowledge plays on outsourcing performance, specifically delving into non cost elements like trust and relationships. Is this something you’ve seen taken into consideration in organisations and do any of them stand out as being great at this?
Interesting that you refer to trust and relationships as non-cost elements. For me, both are key determinants to how an organisation controls its costs.Trust, in instances where there is a lack or absence of trust the parties to the knowledge exchange, be it a service provider or internal stakeholder, have a need to put in place safeguarding mechanisms. This can be in the form of creating barriers to knowledge exchange, buffers in inventory (information or materials) and a general reluctance to commit, which leads to a need to maximise returns in the short term. At its most basic level, relationships are about whether the parties to an exchange are committed to a short or long term one. An apt analogy is a one night stand versus a marriage. In the one-night stand outsourcing arrangement, all of the organisation's chips are placed on red with a single way bet. If it happens, the leader is a hero, if not he or she is released. Both parties aim to maximise returns in the short term. Whereas in the marriage approach to outsourcing there is a commitment by both parties to work together to resolve issues as they arise, be open and transparent in communication and genuinely seek to do what is best for both parties.
An old employer of mine, Procter & Gamble, trained its strategic purchases personnel in two types of negotiation approaches. Negotiating to win and continuum negotiating. The first was concerned with the traditional win/lose, how to outsmart the opposition as it were. Whereas, continuum negotiation was about creating the win/win. In the case of P&G, research was done to see which type of category required what type of strategy.
As part of your PHD you built an improvement methodology. Would you like to tell us a little bit about that?
The central premise of my PhD research and subsequently my approach to improvement advisory work is that tacit knowledge is a key source of competitive advantage for any organisation. Due to its intangibility and difficulties of measuring and managing it. The question pertains to how does an organisation identify, leverage and control it in relation to reaching and beating its objectives?
This is not an easy question to answer. To understand this in a real context, I engaged with a number of service organisations that were embarking on various shades of Lean and Lean Six Sigma improvement programmes across multiple locations concurrently. To help illuminate the key points I will give you a flavour of two of the cases.
The first was a large service organisation that was in the process of implementing Lean across 60 different service operational locations. This was a huge programme that involved the engagement of all employees from top to bottom. The programme struggled to gain momentum and eventually fizzled out. The reason for this as based on my analysis was that each site location had created a number of knowledge boundaries between locations that inhibited the transfer of valuable process improvement knowledge i.e. the tacit components that would have led to the creation of a competitive advantage.
Similarly, another large organisation analysed had 132 operational locations across the globe and had a long established improvement programme with a deep bench of six sigma champions, both centrally and at the site level. Despite this depth of expertise something seemed to be amiss. As for example, the home operational location of the CEO and global Six Sigma leader had in place an operational practice of supervisors regularly checking for quality errors within long established standardised processes. For me, an organisation that is on a true Lean path using Six Sigma as a tool should not need to check for quality, poor quality should have been engineered out.
How does that happen? That an organisation with a great awareness of process improvement principles wouldn't have them fully in place?
Opportunism is one of the reasons. Opportunism is defined as self-seeking with guile. It comes from economics. For example, a CEO has a tenure of four years. Lean Improvement is a long term philosophy. If the CEO really commits to this he or she will take the painful medicine and make it happen for the long term success of the business. But the real benefit may not come until the CEO’s replacement arrives, meaning someone else will get the glory. It's a typical problem with a politician, the country gets the benefit in fifteen years’ time, but I lose the election in the short-term. In terms of being CEO, if I do something short term that ramps up volume and the organisation collapses in three years, it doesn't matter. I've got my money and I'm gone.
How does your improvement methodology differ from others?
The answer to that is simply human behaviour as we know it. The systematic nature of the application of improvement methodologies tends to be mechanical in nature. Looking back at the first principle of improvement, the genesis of it as a concept was the Toyota approach, which was based on a long term commitment to continuously learning and improving. In recent years, Toyota lost its way by pursing break-neck volume growth by diverging from its traditional strength by outsourcing swaths of production and employing short-term contractors. Neither was steeped in the long term philosophy of continuous improvement and learning.
The need to manage a person’s knowledge with the goal of achieving an organisations strategic aims has been lost in much of the application of improvement approaches such as Lean and Lean Six Sigma. People are irrational and unpredictable and so a methodology that will deliver sustainable improvements needs to reflect this reality.
I developed the methodology on three core areas; Human, Organisational, and Physical & Locational. Each of which are sub-divided into nine categories of focus. The Human stream aims to understand the underlying individual factors that can impact upon improvement efforts, and how they support or inhibit improvement efforts across operational locations. The second, Organisational, looks at the structural dynamics in place and how they support or inhibit improvement efforts. The final area, Physical & Locational, looks at the site specific asset and process configurations that impede standardisation of improvements across different internal locations. It's a holistic approach that builds on existing approaches by addressing the gaps in understanding the role of individual’s tacit knowledge and an organisations path dependent tacit knowledge. Its main aim is to help organisations identify were the barriers and enablers to process improvement are.
You mention enablers and often we hear a lot more about the barriers. What are some of the most common enablers?
Probably the biggest enabler is untapped talent. Someone in an organisation might be 25 years old, and just not let off the leash but has the ability and the hunger to do it. We all grow by being able to have space to grow into, so holding back people who could do something, in favour of people who just won't, that's a big problem in the public sector. “I've been here for forty years so I'm the manager. And you're thirty years old with all these ideas, sit there twenty years and you'll get a go.” It will be bred out of you at that stage. Another enabler would be the structure and design of the organisation. Generally, flatter ones are better for sharing information and communication. Rotating people between geographic locations is a key one, because there's a barrier within a location. Knowledge tends to reside in a location.
And at the moment you’re working on a process improvement initiative at a university. Could you tell us more about what that involves?
The University decided to centralise its support functions into one central administrative hub (student finance, records, exams, admissions, service). This required both the physical consolidation of people and teams to one location and the implementation of a new supporting IT system. My role is to renew existing processes, roles and structures to identify ways of improving performance. As with all the public or semi-state organisations that I have advised, the classic problem arises in that a culture of measuring and managing by way of performance metrics was not in place. From a process improvement perspective this raises an immediate difficulty in being able to show what the current state is versus an improved future state.
The main benefits of the improvement programme will be greater processing speed, improved staff morale and standardisation of operational processes. To show the benefits, myself and the team created baseline metrics (capturing both the hard and soft benefits) for each of the more than 200 sub-processes included within the hub.
The main challenge so far, has been in relation to convincing those involved that this is not another improvement exercise that leads to no lasting change and also to how to break the pre-existing silos that contain person specific knowledge.
You also help companies with risk and cost control. Is this really just another facet of process improvement or is this quite different?
The key principles of process improvement are simplicity, measurability and transparency. When I engage with an organisation I look first at answering if these three principles are adhered to. If they are not, I believe that organisation is exposing itself to risk and is not making the best use of its valuable and scarce resources.
Is there a recurring problem you’ve seen within organisations involved in process improvement initiatives? Something you’d forewarn a business considering one of? Or at least something you’d note they should be prepared for?
Yes, not knowing that there is a better way. From the discipline of economics the term bounded rationality has particular relevance here. Bounded rationality refers to a person’s ability to know so much, we all have limits on our knowledge base, which is a function of our age, experience, cultural background and education. In organisations that require the most change, I find that organisational actors are bound by their current view of the world that they are unable to see that a different way could possibly exist. Another way of thinking of this is by a saying that my mother often uses, “travel broadens the mind”. Organisational actors and indeed organisations that are inward looking tend to not know or appreciate the existence of another way.
Have you published your paper(s) and if so, where can those interested in learning more find it/access them?
At this stage I am in final stages of editing my PhD thesis, which at the moment is just shy of 100,000 words. Once complete this summer, my aim is to publish its findings in the top international academic journals that lead the field within knowledge on Operations management. In parallel to that, this interview is the first step in seeking to promote my organisation MKN Advisory Services Ltd and the way that we can deliver sustainable improvement to our clients.
Michael told us about what it feels like walking into an organisation where there is room for improvement...
I can go into an organisation and get a sense pretty much instantly, if it's well run or badly run, but if I said that to the senior management team at that point, they'd say, “You don't even know what we're doing.” I've seen similar things, I know enough about what should be and I can see what's different. After a while you get a feel for an organisation and you can sense if it's working. I'll give you an example, you walk onto the floor and it's supposed to be a shared service centre, everyone is sitting and no managers are visible, no managers are walking around, that makes me think there's no communication and leadership. The best ones engage with their staff. There's a thing called a Gemba walk in Lean, and another management theory called ‘Management By Walking Around’ and what does that mean? So you and I are working in a company, I run the operations, you do the marketing. And I go into our head office in the middle of San Francisco, “Hi Dee, Hi Mary, Hi James, what are you up to?” And the response might be, “I'm doing this, or something's wrong Michael.” Feedback straight away and it's informal, which is how things should always be done, you get the pulse of the business. Too many executives do not really understand what happens on the floors of their organisations.
He also told us an interesting story about what might not be spotted in a process, and how much of a difference a very small change can actually make...
There was a pasta factory in Italy, and they were trying to replicate the taste of the pasta. They had pictures of the process, same ingredients, same machines, same duration but they couldn't get the same flavour. So then they observed the old man doing it and he was left handed and he wiped the machine anti clockwise instead of clockwise, and that was the bit that made the difference.
Is there an ideal BPM project or type of organisation that you'd like to take on and use your methodology for?
An organisation that is growing by acquisition or just organic growth and they've hit the wall and slowed up and the owner or owners have an interest in making it run better and are open to making a sustainable long term business. What I'm looking at there is a multi-site, large-ish organisation that is open to improvement. And I suppose the best one for benefit, is where they're adding on lots of different companies over time and they haven't looked at how it all works. You've loads of complexity there and loads of opportunities for real, cashable improvement, and if you have the CEO with you or the owner, you have somebody on your back saying we'll stick with this to get it done.
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