Profit margins in the manufacturing sector continue to narrow as costs increase and buyers become more insistent on maintaining or lowering current prices. This leaves manufacturers with little room for error.
The Symptoms. This is particularly challenging in the automotive industry where any unnoticed quality flaw can result in the car-maker charging the manufacturer to disassemble all or part of a vehicle to replace an under-par part.
These facts troubled the president of a parts company where quality was running below expectations.
The president had begun to notice a continual increase in the monthly parts reject rate. His concern was elevated by an increasing need to run special trucks to deliver parts that had not passed quality inspection when their normal truck left for its daily rounds.
The pressure from these added expenses and quality inspections was taking a toll on tempers. Departments were fighting amongst themselves blaming each other for the failures.
The president had finally had enough of the lack of teamwork and requested an extreme leadership make-over.
The Diagnosis. The diagnosis phase started with a series of interviews and assessments. From these assessments it became clear the company's leadership had a lack of teamwork and team orientation.
The major finding of the diagnosis was that management was living in denial of the impact they were each having on the quality of failures. Likewise, the president and chief operations officer were oblivious to the wall between salaried and hourly workers.
Self-awareness and personal discovery would be necessary to end the epidemic of denial.
The Prescription. A series of spaced, repetitive learning workshops were conducted on-site. Attendees included all levels of management -- from entry-level to the president. Several topics were placed in the series to create a team atmosphere and to bring the union-management issue to the table.
Progress was evident following each workshop. The president was impressed that his leadership was putting their new learned skills into immediate action. Although the parts failure rate continued its gradual rise, production had increased at a faster rate. More money was being made -- but the quality rate indicated a greater exposure to penalties from the auto-makers.
A key breakthrough occurred in the morning of one of the sessions. An accident had occurred on the expressway near the manufacturing facility. Reporters were on the scene interviewing witnesses, including the driver of a car that was now wedged top-down against a retaining wall.
Before this session a tour of the facility added another element to the breakthrough. The president himself conducted the day’s tour. Watching parts progress along one of the production lines, the project's lead consultant asked the president a simple question – “What happens when a mistake is made?”
The owner replied, “Someone dies.”
“Someone dies?” replied the consultant inquisitively thinking the owner meant an employee would be written up. Jokingly he replied, “Is not killing an employee a little harsh?”
The owner, in a very firm voice said, “No, I mean someone really dies. The part will not function in an accident and someone will probably be dead.”
Somewhat stunned, the consultant said, “Do the workers know that?”
The president replied, “Well they should not have to be told. It's obvious!”
What may have been obvious to the president was not so obvious to the employees. They knew they were making safety equipment, but did not realize the minor flaw in the temperature on the production line could cause the part to fail. Managers thought the Quality Control Department was being too strict, hourly workers thought management was being picky in an attempt to fire them and hire lower paid new workers, and the Production Managers felt everyone misunderstood the importance of production speed.
Based on this discovery company-wide meetings were held using an agenda with key points carefully crafted for ultimate understanding and impact. Results were impressive. The foundation was laid for a rekindled spirit of teamwork. Hourly workers were informed of the life-saving importance of their work and management learned to view the union as a partner at achieving company goals.
Future Prognosis. The reject rate dropped by 52% within two months of the company-wide meetings. Although no employees were fired or laid off, the increase in production rates allowed additional savings as attrition was once again feasible.
Despite the downturn in their automotive business, the increased profitability allowed them to purchase a struggling competitor's accounts the year after the project was completed.
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"Dr. Max" shares his success stories by looking at the symptoms of a business problem or opportunity, his diagnosis of same, his prescription for success, and the prognosis for the future. For more case studies, click here.