Labor Productivity and Six Sigma

Key drivers from your culture, leadership change and accountability, simplicity, strategy in organization cost leadership in Six Sigma, and to be honest with you, we also have the significant economy tailwind. Yeah, you can say, in the capacity last year. Because of the restricting we could anticipate fairly fast on this. So we were very fast and early in the process in the pricing in the market, and made the right choice as to where to go after pricing, and where not. So you can say those are intermingled, and yes, we had this tailwind, but we could respond to this environment very fast.A little bit about sweep of the house. I like this language, not to be blunt, but because, I think, it tells a story clear. If you would like to sweep the house, you do not start to sweep on the ground floor. You start at the top floor. That is an efficient cleaning process. I call this step zero. We have seen all kinds of processes today, and the kind of steps you need to take to drive an important change. For me this is step zero. You need to ask yourself, “Do I have the leadership team in place to make the major change?”Yes, you do not need to be drastic if you only go after a relatively smaller incremental change and improvement, but if you need drastic improvement, like we need in AVEBE? Yeah, you need to also make drastic binary choices on leadership teams. In our situation we moved from a 20-plus direct structure to a six direct structure. From a complex product business organization, before product businesses, we each own a direct team of directors and overarching group directed teams to control those product businesses. They still do the wrong things together.We went to in a very simple functional organization. So I am responsible for operations-so everything in between order process, and global distribution, including sourcing. I have a second operational colleague; he is taking care of marketing, and sales and product innovation, and that is about it. There you have the typical classical…like HR, and finance, and of course, I also have a boss and that is our CEO.Then our CEO will also make a call at a moment of time. He made the call, I want to do Six Sigma as a key driver for this change, and basically because he made that call, I was hired for GE to help him to take care of the operational part of the change. It is an important starting point.There are two more points to make on this one, on leadership. So it is not only about structure. You need to be leaned on a leadership structure otherwise you cannot drive a lean organization. It is also to do with quality. Quality in a way like, How can you ask the establishment to lead a significant change? Because the establishment has failed. So that for me it is an important one line, it is a little bit anecdotal perhaps, but one of my learning rules is never ask these establishments to drive a major change. It does not make sense.Define a simple strategy. So basically our strategy was based on a three stage process. First, rationalize. Stop with hiding that your core activities have a significant disease, by starting all kind of ship standard, non familiar activities to compensate the losses. Then there you are, basically, you go moving in the wrong direction. So it is a kind of camouflage.So basically we made a decision to peel that away again. So we stopped all the activities that were not our core activity. We had operation units in the Pacific, in Brazil, on all kind of other starches not coming from potato, and basically we did not have the system or the size to control that business that way. So it was only a risk to the core activity. We are now basically in the second phase: I call it Six Sigma optimization.So optimized the core activity, and basically that put us in a very competitive position, when we go to the free potato economy, because as you might know, there are subsidies going on in this real world, also in potatoes. Those European subsidy systems that will change and subsidies will dissolve when we move into what is roughly 2013. So we need to be ready for that free potato economy. So the takeaway here is this, we need to have a sustainable healthy future, and give the best potato price to farmers, and get prepared for the free potato economy. I think yesterday some speakers talked about vision.I have a very simple lesson regarding vision, but then from an operative perspective they talk fairly different about vision. Vision in the definition of an operative is, if I have a boss who can tell me, and treat different occasions the same way, that guy has vision. Most of us are incapable to do so. So that is the incentive, it is as simple as that, you only need to make a story for yourself which can repeat in two minutes. You need to repeat it in three different occasions, and you will be rewarded by your team, and it is powerful, because it is not so much about the content of the vision itself, it is about whether you can make it repetitive, and I like to make pictures, because I like-I love-elevators, if you cannot all make a story in two minutes you do not have a good story.I really like pictures, because it memorizes. I used this picture already two and half years ago, and when one of my MT members is doing a presentation on one of the locations, he always used this kind of simple…To be honest, this is not a smashing vision that you need to improve basic processes like we have a lot of pitches about it these days, and that you need to grow through Cross Leadership. There is something nicer than restructuring. I want to grow through Cross Leadership, because that will provide me with cash for innovation, otherwise I cannot fuel my innovation.So I can only work on productivity if I have fixed my basics, so now we can repeat a story. I can only lead Six Sigma productivity programs if I have fixed my basic processes, and it can only do innovation if I have the money to fuel it. Now that I can repeat that one, that is not so easy. And then for a year plan alignment, every year we link nine key topics to that strategy. So everybody, to be honest, independent, whether you work in commerce, or in operations, you can find your nine points linked to this vision. And then the only check to John’s point yesterday, you might need to make sure that those are tied to the ledger as well, and then you basically have a simple framework recognizable for the total organization.Little bit on the labor productivity, this is what I like, most of you recognize that labor productivity has two dimensions, and that is nice, because one is in the…than the other one. It is such tons of contribution margin per year, per employee. So if you work on free capacity by stable operations, and on organizational redesign simultaneously, this is what is happening, I do not like this kind of incremental targets of 2 percent or 3 percent, that is why I am a GE grown-up, I like to stretch targets. So you need to talk 25-30 percent kind of targets. If you do that, you put yourself a target of 25 percent on both, you get this for free, because this is just mathematics, you will 67 percent. So it multiples, and helps you here on labor productivity.So if you do two things at the same time, you will get incremental on 17 percent on labor productivity. We do a redesign with DFSS, and a little bit on the consultancy, I do not like to talk about consultancy too much, but I like to talk about consultancy to start things at every moment. So we start at a lot on DFSS, both in capital investment, but also in organizational redesign. If we have a project above 500,000, it is just AVEBE law that you have to follow the (Inaudible) process otherwise you simply do not get money. Now I will do the toll gates myself, I should step in the middle of it, and I know what it is. So you cannot come with poor quality DFSS with me, otherwise you simply do not get the money. We also do that with 10 minutes, we are tough.So we also do that with redesign, and each time we make a step in doing something new, we look for a consultant who can help us with that. But only in that initiation phase, in the stable ops period, and DFSS and GE helped us very well, but it does not say that I am married with L&G. For instance, in another example, in the back room optimization, we have a lot of end to end kind of process, which we feel that optimizing that kind of processes helps us with SubApp, and I work for instance with IBM on the implementation of SubApp in AVEBE, here is an example. I think I covered this already. It is organization redesign, you can treat it exactly in the same way as if you would start a new facility. It is a kind of mental mode, the traditional way is that you take your organization headcount diagram. That you said, I do not need this, I do not need, but that is not restructuring. You need to restart, you need to think as if you start again from scratch, so we basically designed our organization as if we would start again in 2010. And how would you then organize, what is then your designed state organization, then basically then you build your transition plan, and you manage that fear of DFSS process.A rich test that you would take as a starting point to keep processes of value chain, or whatever you name them, and not how I can satisfy the boss in the most efficient way, that is not how you make an organization. We did it on teamwork, so do not go in a kind of direction boardroom and tell how the organization should look like. You should do this design process together with the teams, and that is how you get buy-in for your aggressive plan. So this then it gets something energizing, rather than a threat. It is too nice if people really like it, that would be too beautiful, but it helps that you can create your own working environment, and that you can create meaningful jobs which might sustain in the future. That takes at least I would say, most of the heat away. For speed reasons, I will skip this one.We have seen this before I think. I want to talk a little bit more on granularity, because this is one of the biggest leadership problems this bridge. How can you learn from variants if managers continue to ask questions about evidences? This is also a financial department asking this kind of question. I ignore them. Finance should provide me with variance based information by production line, contribution margins by lot by line, that kind of detailed analysis, then he helps me to see the opportunity. He should not ask me a question about why is the average (Inaudible) cost on gas high, I in that manufacturing side? I said, if you want to ask me that kind of questions, you better can leave my room, because I am not going to answer it.So that is the paradigm-we want to learn, and we can only learn from variance, and that means that managers should ask questions about variance, and should stop asking questions like, how much did you produce yesterday? A site manager reporting to me asking these kind of stupid questions, they do not get appointed, they do not stay too long. It is a stupid question, and they do not get to point, he will not stay too long. It is a stupid question, how much did you produce yesterday? So this is about the power of granularity that is what we are talking about, how can you lead an organization if you do not know what a viable distribution and granularity and…elasticity is or you cannot pronounce or articulate it?So you need to understand the power of granularity. So stop talking about days, weeks, and months. You need to compress this to hours, minutes and seconds, and also the granularity of your operation you need to improve, you need to talk line unit operations on equipment level. Then you come into the world of Six Sigma Stable Operations. This is traditional stuff for guys who do not want to improve.So I think in the…presentation yesterday, I think I liked that, I can see that there was kind of same school education, that is, you need to change your glasses, otherwise you cannot see the opportunity. If you remember this one, it is only a takeaway from my pizza, I would say that is OK for me. If you need to be aware, if you want to improve things, you need to change your glasses, otherwise you do not have the right level of granularity, you cannot see the variance, and as a result of that you cannot learn.I need 10 seconds extra. I mean this is interesting about statistics, because if you look to a distribution, you have your normal process of stable operations, and then you have affiliate process, which is viable distributed. That is the reason why, when you first reduced the variance, your mean will shift. If you would have a normal distribution, your mean would not shift, right? So that is why this is firm. So if you work on your defects, and you work on your affiliate process, you will shift the mean. But your mean will shift more than just cutting off the viable distribution. It will also improve, because you will learn how your processes really work, so you know exactly where your bottlenecks are, and therefore you can basically increase your capacity with very small investments rather than building new production lines.So it is understanding the variance, and again, the leadership point here is that you need to ask variance-based questions, that you have your measurements systems, different measurement systems to see that variance at the right granularity. So this time we talked also about standard. For me, standard is law, and I use that word. Standard is law. It is not something like, Shall we do the standard today? But the most problem is that we even do not have a standard in most plans, that we have a standard where we expect that we need to produce 400 tons per week of something. But what does it mean on the variable, which is leading a stability of that production line?So that feet flow-that is the standard in cubical meters per hour, that is the right granularity on the standard, and if you have that granularity, you can see the variance, because if you have then a dent, then you know you have an event on your viable distribution, and you have a learning opportunity. If you have organizations that also have this, this is a reflection of both, that is what I call a behavior issue. That is because you have leaders beneath, who are asking the wrong questions, because if my response is not operated on, a manager would be disappointed. I will try to catch up, because I do not want to disappoint you tomorrow, right?As a result of that he is going to tweak the process, and he creates the instability of tomorrow. So this kind of deviation, that is an undesired behavior issue, and it is not the behavior issue of an operator, it is the behavior issue of both. Then you can learn; if you have this kind of simplicity in your day-to-day improvement process, this is what I call the essence of table operations. Then you can have continuous free capacity improvement brochures. So the positive version is-and in English it is more beautiful than in Dutch. So each dent is a learning event. So it is not something where a traditional leader would say, why the hell did you have to technical disturbance yesterday, oh, that is not nice communication? The right question is, when did you have a deviation from the standard? Oh, it was 10 minutes past 1o yesterday morning.OK, what happened? What is the cost? What could you do to prevent that from happening again? Or can I contribute as a leader to help you in preventing that tomorrow? Then you have the right dialog. Well, for time reasons, I think this is summarizing what has already been said. But Six Sigma, so you can say stability is a kind of open door, and yes of course, everybody wants their operation stable, but you need to lead that differently to make it really happen, that is the point I would like to convey. So it needs some brochure steps and cookbook to do so. You need different management behavior to really come to spectacular improvement due to stabilizing your day-to-day operations.A little bit on organization. So it is not about again about support, you need to encapsulate your whole organization with Six Sigma DNA.So that is why I got this role in AVEBE, because I was a Master Black Belt certified. I want to have a Master Black Belt in my team as well, but Shivona, she is sitting over there, do not touch her, because she is valuable to me. But that is how you can do this together, and you need a lot of Black Belts in your organization as well, and your leaders need to be trained as least Green Belts. I stole it from General Electric, I call it Six Sigma DNA, and you can say the top rendered finishings in operations, we have now 80 percent DNA, 80 percent, so 80 percent of the rendered operations are minimum trained for Green Belt, and the last 20 percent we will fix in the next two years. You need to take care that you cannot escape, so you need to encapsulate that with metrics and operational redemption. So organize for success, because this guy is winning the marathon, not because he was running fast at a moment, but he was running stable the whole match. I think this is the last page for your convenience. I think many speakers already talked about how to sustain and align things.I laugh as I memorize. I give employees their passport, because it can only on be an AVEBE joiner, if you have a passport, if you want to go with me, and the passport has your individual year plan tied to the strategy. That has some reflection on your personal competencies, and has your personal development plan included. Then the more senior managers do have personal cockpits, so they have a kind of finished version of their individual year plan. So it is a very personal dashboard. But you can only make that meaningful if you will also talk about it.So I included it in all my operational…if I have my one on ones, I talk about this cockpit. If we have a strategic and team meeting, we always talk about the cockpits. I need to make sure that you have to write functional deployment of your year plan also crucial. I will not dwell on this too much. I would like to complete with this. I think I did not forget about the most important points here. So the year starts here, we start with the question on leadership quality as a kind of step zero to your change program. Keep it simple, stick to the guidance, more results with less projects. Lead by example, so support by senior management is not the right wording, you need to be in the middle of it, so you need to lead it by example. This is kind of key mechanism from a process point of view; it is basically what I would like to share with you.