Like most U.S. manufacturers, Carlisle Companies Inc. had been using various lean and Six Sigma tools to make operational improvements for decades. But even though it was keeping up with competitors and consistently outperforming the S&P 500 index, something was missing.

That something was clear to CEO David Roberts when he first started visiting the plants after joining the company in 2007.

“When I walked into a factory, I would have no idea how they measured productivity,” he recalls. “Every plant measured it differently. It was obvious that we needed a consistent

operating method for all of our factories.”

But consistently measuring productivity was just the start. There were, Roberts believed, significant opportunities to perform better, much better in fact. “Frankly, I was tired of hearing about lower-cost manufacturing in China. I was convinced that if we did the right things in the organization, we could

compete with China.”

Since TBM helped it roll out the Carlisle Operating System (COS) almost four years ago, the company has started to realize many of those opportunities. Since 2009, COS initiatives have generated more than $70 million in cost savings and reduced the company’s manufacturing and warehousing footprint by

www.tbmcg.com

June 2012 | Issue 2

OpEx Review

A TBM Consulting Group Publication

“ I was tired of hearing about lower cost manufacturing in China. I was convinced that if we did the right things, we could com-pete with China.”

— David Roberts Chairman, President and CEO

Carlisle Companies Inc.

(continued on page 4)

Also in this issue:technology: Improvement opportunities abound in ITleadership: Carlisle CEO talks about strategy deployment and growth

lean Progression: Insights into real-time triumphs and challenges

2|

5|

6|

Enterprise-Wide Operating System Connects Strategy to Execution, Delivers Dramatic Returns

Carlisle competes in five major business segments, including interconnect technologies for aerospace

What would happen if a team of employees met to hold a kaizen event and found that suddenly no one could speak? Or that everyone could speak, but no one could hear? Or that everyone could speak and hear — but in different languages?

Obviously, no problems would be solved during that kaizen.

Lean process improvement can’t happen without open communication and immediate action. Increasingly, both require IT tools. Many in process improvement focus only on the ills of organizational-wide IT systems, which often are the cement of silo walls and the breeding grounds for misapplied data. But we can’t ignore the fact that these days, all types of business communication and transactions happen via real-time electronic connection, and these connections are as much a part of process infrastructure as warehouses and machinery. Many problems/solutions reside in IT systems, and as use of these systems expands, so does their role in lean continuous improvement.

Consider what happened at Milbank Manufacturing Co. when the IT department created value stream maps for all of the IT systems used in various departments.

“The one for the sales department was beyond a spaghetti map,” said Brad Skinner, Vice President of Sales & Marketing. “It was obvious that we weren’t set up to serve the customer.”

Skinner decided to make his department the focus of lean process improvement and so began a series of kaizen events. During one of the events the team discovered a crucial disconnect that was causing a tremendous amount of waste and service issues. Milbank’s private-label partners used IT systems that spoke a different language than Milbank’s; so as soon as private label orders came in, they lost visibility. No one could track them. Well, one person tracked them. It was the only job that person did — full time.

The solution was simple. An IT specialist wrote a patch of coding to connect the two systems. Now, all of the private-label orders have as much visibility and automation as others, and the person who used to track them performs work that creates much more value for customers.

2 | OpEx Review | June 2012 | www.tbmcg.com

June 2012 | Issue 2

Technology MattersLeading Thoughts

Invisible Waste and Hidden Opportunities in IT By Tonya Vinas

Lean IT: A Process Is a Process

Here’s a familiar situation: People are more focused on technology and technical details than on business processes, performance and end results. When problems pop up, which happens frequently, everyone goes into

firefighting mode. There’s little root cause analysis or attempt to identify underlying issues that would prevent recurrence. Management priorities shift every six months.

I could keep going, but what I’m describing is a typical corporate IT department. Fortunately, the same operational excellence practices that can transform a production line or product development process can transform an IT organization and dramatically improve the service it provides to company employees and partners.

For example, single-minute exchange of dies (or SMED) was one of the first tools that American companies adapted from Japanese manufacturers. It boils down to completing all setup work that can be done externally when equipment is still running, and accelerating all setup activities that have to be performed when the equipment is shut down. A machine changeover team becomes more like a racing pit crew.

TBM has helped companies implement such quick changeover techniques in a variety of industries, some far removed from the factory floor. In the IT realm, the techniques can be applied to system updates and routine maintenance, reducing downtime and making it possible to perform such updates more frequently.

Applying operational excellence practices to IT processes thus improves uptime. But there’s more to it than that. When IT becomes more flexible, responsive and cost effective, users gain access to new technology sooner, which means that they can do their jobs more efficiently and serve your customers better. That, in my experience, is always a good thing.

Keep up the good work,

Bill RemyExecutive Vice President,International Operations

Send OpEx newsletter feedback and story ideas to opex@tbmcg.com.

“Private-label orders were stumbling, and it was our fault,” Skinner said. “Now they are taking off.”

In addition to process disconnections, IT systems house mountains of waste: redundancies, excess inventory (irrelevant and outdated data), overflowing email inboxes, clogged servers, etc. IT systems and process leaders, then, need to be part of process improvement not just because they enable work, but also because IT processes are as broken as all other processes. Convincing IT experts of this can be difficult, but there’s plenty of precedence in what has become known as “office kaizen.”

Robert Abel, Director of Global Process Improvement for Armstrong World Industries, said his company

uses standard lean tools to root out waste in administrative work.

These include:• Value stream mapping for

waste identification;• 3P/2P (product and process

creation to eliminate waste) and,

• MDI (visual management, daily accountability, workplace observation, standard work and 5S).

You might think that a clear loading dock means everyone is doing a good job managing inventory and that an improving OEE means assets are running efficiently, but what about your IT systems? Just because you can’t see those processes doesn’t mean they aren’t loaded with waste and problems — or, if included in lean process improvement — efficiency and opportunity.

Tonya Vinas is a freelance writer and editor specializing in business and leadership issues.

OpEx Review | June 2012 | www.tbmcg.com | 3

Technology Matters, continued

LeanSigma® Global Summit 2012This column is based on presentations made at TBM’s 2011 LeanSigma Global Summit. Sign up for this year’s summit September 19–20 in Atlanta today to hear more lean process improvement success stories. www.LeanSigmaGlobalSummit.com

DATA OVERLOAD

WASTECLOGGED SERVERSEMAIL

EXCESS INVENTORY

Armstrong World Industries uses standard lean tools to root out waste in administrative work.

3P – Product & Production Preparation

Create Your “Product”

Lean Tools for Continuous

Improvement

Transactional Work

Environment

2P – Production Preparation

Create the Process that Optimizes Making the “Product”

Optimize to Eliminate Waste

Vigilance in Waste Elimination

3P/2P in a Transactional Work Environment

The principles of 3P/2P are the same in both manufacturing and transactional workplaces: If we don’t design the product and the process to create the product correctly, we introduce waste and cost into the product in our ongoing work. How a customer experiences an order for a spare part, for example, is as much a product as the part itself. The customer can experience poor quality in the form of waiting, excessive processes (too many steps), part mix-ups, shipment mishaps, etc. Source: Robert Abel, Director of Global Process Improvement, Armstrong World Industries

From Strategy to Execution to Dramatic Results, continued from page 1

4 | OpEx Review | June 2012 | www.tbmcg.com

nearly two million square feet. Like most U.S. companies, Carlisle saw revenues fall in 2009 during the recession. But unlike most others, the company’s net income increased that year, in part because of its COS initiatives. For 2011, Carlisle posted record sales of $3.2 billion, up 28 percent over 2010.

“Because of the productivity improvements that we’ve implemented, we’ve even brought work out of our China plants and back into the United States. We’re cost competitive with the Chinese, particularly with the cost of wages in China going up,” Roberts reports.

Such results are only the beginning. Rolling out COS across five major business units — which all operate fairly independently — and 75 manufacturing locations worldwide has been no small feat. What ties everything together at Carlisle, as this case study reviews, is strong leadership engagement; a clear alignment between improvement priorities and five-year business goals; and a uniform, clearly communicated operating system that continues to expand as Carlisle’s needs evolve.

Begin With the end in MindAn overview of the Carlisle Operating System doesn’t start with the elements of the system itself. It starts with Carlisle’s strategic vision. As stated in the company’s annual report, Carlisle’s road map to 2014 has five key targets: global sales of $5 billion, an operating margin increase to 15 percent, an increase in sales from outside the United States to 30 percent, a reduction in working capital to 15 percent of sales, and a total return on invested capital of 15 percent. Each business unit has its own roadmap with specific targets that, when achieved, will roll up to the corporate objectives. Those targets are fixed and don’t change from year to year. (See Q&A with CEO David Roberts, on page 5.)

How each unit will achieve its objectives is determined during the “strategic deployment” process, which establishes annual improvement priorities (AIPs) and key performance indicators (KPIs) at every level of the business. Monthly management team reviews of performance metrics, linked to their objectives, maintain focus and prompt fast corrective action when any area falls behind. The approach forces leaders — and the organization as a whole — to focus on a small number of initiatives that will make the biggest impact on growth and profitability.

“In the beginning, each of our businesses had six, seven or eight AIPs. Now each business has three or four,” says Mike Voigt, Vice President of COS. “You have to be able to resource them right. You’re better off working on the business and executing three AIPs really well.”

Today, well over half of Carlisle’s workforce has received COS training, mostly in the context of kaizen events. To date the company has conducted 1,500 weeklong and point kaizen improvement events.

Carlisle regularly assesses how each site is doing in terms of management

Carlisle Companies Inc.Headquartered in Charlotte, N.C., Carlisle Companies Inc. is a global manufacturer with five major operating businesses: construction materials, transportation products, brake and friction products, interconnect technologies (wire, cable, connectors and related assemblies) and foodservice products. Founded in 1917, today the company has 75 facilities worldwide. Carlisle reported annual sales of $3.2 billion in 2011. In 2011, the company won TBM’s Perfect Engine Corporate Award.

Q1 ‘09 Q2 ‘09 Q3 ‘09 Q4 ‘09 Q1 ‘10 Q2 ‘10 Q3 ‘10 Q4 ‘10 Q1 ‘11 Q2 ‘11 Q3 ‘11 Q4 ‘11

22%

20%

24%

26%

28%

30%

32%

Working Capital as a Percent of Net Sales

Systems and procedures to improve demand-forecasting capabilities, procedures that reduce payment cycle times, and implementation of best payment practices, have improved Carlisle’s working capital and return on invested capital metrics.

Carlisle regularly assesses how each site is doing in terms of management behavior through a process known as managing for daily improvement (MDI).

behavior through a process known as managing for daily improvement (MDI). The MDI program includes SQDC boards (for safety, quality, delivery and cost) that display performance in each work area and for the whole site and sustainment of 5S. The metrics displayed on the boards align with the overall business and corporate goals. During daily facility walkthroughs, plant managers review performance in each department and work cell, noting areas that require action. The system has instilled accountability and ownership for daily decisions and forced cross-functional cooperation.

“Now I can walk into any factory or distribution center and those boards are there,” Roberts says. “The measurements are different. They might be measuring a different cost metric in a tire plant from what they’re measuring in a foodservice product plant. But at least I can understand what they’re trying to measure, see that they’re measuring it every day, see that they’re going on their walks every day, and see if they have corrective actions in place for any issues that have come up.”

see the full case study at tbmcg.com for more information about the Carlisle operating system.

OpEx Review | June 2012 | www.tbmcg.com | 5

David Roberts will be a keynote speaker at the LeanSigma® Global Summit in September 2012.

Visit: www.leansigmaGlobalsummit.com to view the agenda.

From Strategy to Execution to Dramatic Results, continued

Executive Q&AWhy Operational Excellence? An interview with David Roberts, Chairman, President and Chief Executive Officer, Carlisle Companies Inc. (www.carlisle.com)

How do you gauge the impact from the Carlisle Operating System?If you look at our true hard savings over the past three years, it’s been a little bit north of $20 million each year. And frankly, we have $20 million in savings forecasted for this year. It would have been difficult going for us during the downturn that started in 2008 until now without having implemented lean. What we were able to save over that period was the result of the COS efforts of all of our people. Our profitability in 2009, in the midst of the downturn, was higher than in 2008 before the downturn started, on 23 percent less revenue.

How do you use strategy deployment to prioritize improvement activities?Every month we have a strategy deployment meeting with my staff. It’s usually on the telephone. We go through the bowler charts and KPIs and determine how we’re doing. We have five strategic elements: revenue growth, margin improvement, globalization, return on invested capital improvement, and working capital improvement. That’s what we look at every month, if they’re red or green. If it’s green, we don’t talk about it; if it’s red, we talk about what we need to do to turn the objective to green.

What are the primary challenges and goals that you’re working on this year?We work toward the same five strategic goals every year. They never change. They’re the same, and everybody’s compensation program is tied to how we do against those five goals. Consistency is important. You can’t keep changing the goals because if you do, your employees would have no idea what our overall vision is for the company. Our goals remain consistent, and we talk about them every time we get together.

Early analysis of benchmarking data from TBM’s Lean Progress Assessment reveals some fascinating insights about the progress companies make and the challenges they face.

In a 2011 IndustryWeek survey of business leaders, more than half of respondents indicated that their continuous improvement (CI) initiatives are failing to meet operational and market objectives. Such experience supports TBM’s view that the mere initiation of a CI program, the creation of a CI office and a stable of Lean SixSigma tools will not guarantee success. Instead, a wide range of forces and factors must be in place to assure that continuous improvement strategies are, in fact, aligned with core business objectives and contributing meaningfully to revenue growth and profits.

To help our clients and similar organizations assess the extent to which their CI efforts have progressed, earlier this year we developed the Lean Progress Assessment. Companies taking the assessment answer a variety of questions that yield progress scores for leadership, lean value chain, growth and tools used. Component scores and the total score place each participating organization into one of three discrete groupings — tool-driven, system–driven and principle–driven — which allows them to compare and contrast their efforts with those of their peers.

Lean Progress ObservationsBased on participant responses to date, here are some of our initial observations:

• The Shiny Wears Off. In comparison to the average score, respondents four to five years into their lean journey rate their progress highest (see Figure 1). Companies in years six through nine struggle to sustain gains and therefore score noticeably lower (see Figure 2). This suggests that many companies’ CI efforts hit a plateau around the five-year mark. Potential reasons for the plateau may be changes in leadership, changes in strategic direction, lack of sustainment or inability to extend improvements throughout the enterprise.

• Older and Wiser. In contrast, companies 10 or more years into their continuous improvement programs rated their progress significantly higher overall and twice as high in the quality of their lean value chain, leadership and tools used (see Figure 1). These organizations have internalized and institutionalized lean principles from the top down and enjoy segment-leading growth and profit performance.

Management Update: Lean Progress Assessment

CI Program Satisfaction High in the Early Years and Over the Long-Term; Many Firms Struggle Around Year Five

6 | OpEx Review | June 2012 | www.tbmcg.com

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Years 15–21+

Years 10–14

Years 8–9

Years 6–7

Year 5Year 4Year 3Year 2Year 1

Companies that are at least a decade into their CI programs rate their progress significantly higher than those with shorter tenures.

Final Score LVC Scoring Tools ScoreGrowth

ScoreLeadership

ScoreYear 1Year 2Year 3Year 4Year 5 8%Year 6–7Year 8–9Year 10–14Year 15–21+

Y1 vs. Y15+Y1 vs. Y10–14Y1 vs. Y5Y2 vs. Y5

-46%-9%-4%16%

-16%-7%12%22%

-88%-65%-59%-19%

17%

-48%-15%-18%21%

-31%-21%19%29%

-107%-82%-77%-38%

8%

-51%-18%-4%19%

-24%0%13%28%

-110%-73%-65%-28%

5%

-59%-1%-1%9%

-12%-7%15%21%

-102%-85%-68%-7%

6%

-28%-10%1%19%

-7%-5%2%14%

-49%-30%-37%-17%

Respondents in Years 4 and 5 of their lean journey rate them-selves the highest when comparing their progress with the average overall score.

By Angela Scenna

Figure 1 – Comparison to Overall Average Figure 2 – Short-Term Vs. Long-Term Performance

Management Update: Lean Progress Assessment, continued

• Stuck in the Middle. Interestingly, smaller companies (<$100 million) and very large companies (>$5 billion) rate their progress higher than organizations with revenues between $3.1 and $5 billion (see Figure 3). Companies in this size range may have grown through acquisition, experiencing rapid expansion and growth, and they are likely focused on how to become even bigger. Oftentimes, these organizations are at a critical point where they need a comprehensive business system and a disciplined management process for profitable growth. One can argue that larger (>$5 billion) organizations have learned their lean lessons well, sustaining gains, leveraging competitive advantages and breaking through revenue plateaus.

• Vertically Challenged. Non-manufacturing companies rate themselves marginally higher than manufacturers (see Figure 4). And healthcare companies score substantially better than their peers in many other vertical markets. In leadership alone, healthcare companies rate themselves almost 29 percent higher. What’s interesting here is that CI is relatively new to these types of organizations; they may not have hit the six-to-nine-year sustainability challenge so they are largely positive about the benefits of their CI programs.

The potential for loss of momentum is high with so many manufacturing companies nearing or entering the six- to nine-year maturity range for their CI programs. Now is the time for these companies—possibly yours—to prevent that from happening by more tightly aligning your continuous efforts with your strategic plans and business results. In the near future we will be asking our pool of participants to map their CI progress to their actual business results. Look for this data in an upcoming edition of OpEx.

OpEx Review | June 2012 | www.tbmcg.com | 7

Final Score LVC Scoring

Tools Score

GrowthScore

LeadershipScore

ManufacturingNon-Manufacturing

Ag., Forestry, FishingConstruction 54.0Educational ServicesHealthcareInformationMgmt. of CompaniesMiningOther servicesPublic AdministrationReal EstateUtilitiesWholesale trade

43.647.2

37.0

66.051.634.045.034.030.746.046.044.056.0

7.0

9.0

5.3

11.5

11.3

19.5

10.3

16.0

10.5

7.78.3

4.5

10.08.64.010.0

5.77.57.59.0

10.8

8.48.7

6.5

8.09.45.08.0

5.78.08.06.0

18.8

15.416.8

15.5

25.017.617.017.0

10.316.516.514.0

14.0

12.013.4

10.5

23.016.08.010.0

9.014.014.015.0

Less than $100M

$101 to $499M

$500 to $999M

$1B to $3B

$3.1B to $5B

More than $5B

Leadership ScoreTools Score Growth ScoreLVC Scoring

Final Score

30%

-30%

-40%

20%

-20%

10%

-10%

0%

Companies at each end of the size spectrum rate themselves higher than those companies in the middle.

Non-manufacturing companies rate themselves higher than manufacturers, perhaps because big efficiency gains early on are common.

Key Take-aways

1) Executive leadership engagement is the most critical determining factor in the success of continuous improvement initiatives.

2) Broad, senior management-led participation in strategy deployment is needed in order to achieve breakthrough objectives.

3) Companies need to step back and align CI improvement initiatives with their strategic plans. Managers working “in” the business must also be working “on” it.

Figure 3 – Small Companies Vs. Large Companies Figure 4 – Scores by Segment and Vertical Market

Alignment: Three In-depth Articles AvailableBelow are summaries. Full versions available at www.tbmcg.com Resource Center.

The Lean Progression Model: Maximize the Returns From Your Operational Improvement Efforts Over the Long TermBy Ken KoenemannRecognizing the maturity of your organization’s operational improvement efforts and culture—whether you’re at the tool-driven, system-driven or principle-driven stage—can ensure that your process improvement efforts continue to deliver significant results year after year. The briefing describes the top priorities at each stage of the lean progression model that need to be targeted to move forward.

Continuous Improvement and Business Alignment: Link Operational Improvements to Financial ResultsBy Ken KoenenmannDepending upon whom you talk to, somewhere between 5 and 50 percent of business improvement initiatives actually deliver the targeted benefits. One of the characteristics of companies that are successful is a tight alignment between improvement activities and business objectives, including financial ones. This TBM management briefing explores the connections between business improvement projects and financial returns, and some of the steps that management must take to capture the financial gains.

Align Projects With Strategic Objectives: Achieve Annual and Longer-term Objectives by Maintaining Strong Connections Between LeanSigma Improvement Projects and Business StrategiesBy Anand Sharma, Bill Remy and Ken KoenemannMore and more companies are using policy deployment—a management tactic that’s also known as strategy deployment, hoshin kanri or hoshin planning—to keep change and process improvement activities aligned with strategic objectives. Achieving business targets depends in large part on how well policy deployment itself is executed across multiple businesses, sites and teams. As this management briefing describes, companies that maintain a strong linkage between projects and objectives are more likely to make business changes that contribute to both cost savings and revenue growth year after year. The extent of that contribution depends on how well projects are executed at all levels.

OpEx Review is a publication ofTBM Consulting Group4400 Ben Franklin BoulevardDurham, North Carolina 27704800.438.5535 www.tbmcg.com

TBM, the TBM logo, and LeanSigma® are registeredtrademarks of TBM Consulting Group, Inc.

Find us on our blog

8 | OpEx Review | June 2012 | www.tbmcg.com

Updates and Events

Publisher: Anand Sharma: asharma@tbmcg.com

Executive Editor: Angela Scenna: ascenna@tbmcg.com

Contributors: David Drickhamer, Bill Remy, Angela Scenna, Tonya Vinas

Art Direction and Design: Crossbow Group, crossbowgroup.com

Printing: Carter Printing & Graphics, Inc., carterprintingnc.com

Most corporate-led, enterprise-wide business improvement initiatives will fail. Observers put the failure rate somewhere between 50 and 95 percent. Recalling past grand initiatives and subsequent failures, it’s no wonder that employees are always skeptical of any new acronym-riddled improvement program promising to help them do their jobs better.

For those companies that succeed though—for companies that make the commitment, change expectations and change how they work—the returns can be impressive. For example, companies that have adopted lean manufacturing and Six Sigma practices (which TBM combines as LeanSigma) frequently report double-digit productivity increases year after year. They achieve cost savings that add up to millions of dollars annually. Their revenue growth exceeds the industry average by a healthy margin, and net income increases even faster. (See boxes, “How Operational Improvements Can Add Up,” and “Long-Term Performance of Principle-Driven Lean Businesses” on pages 7 and 8 for examples.) Many case studies over the past 20 years or so have documented such performance gains again and again in industry after industry.i

Why then do so many business improvement programs fl ounder and fail to achieve anything close to their full potential? This TBM management briefi ng describes how understanding where your company’s business units and facilities fall within the lean progression model— the tool-driven, system-driven or principle-driven stage—can help maintain momentum and ensure that you realize the maximum fi nancial returns from your performance improvement efforts.

By Ken Koenemann

800.438.5535 | www.tbmcg.com

Executive Summary

This management briefi ng by TBM Consulting Group describes how recognizing the maturity of your organization’s operational improvement efforts and culture—whether you’re at the tool-driven, system-driven or principle-driven stage—can ensure that your process improvement efforts continue to deliver signifi cant results year after year. The briefi ng describes the top priorities at each stage of the lean progression model that need to be targeted to move forward.

To get from the tool-driven to the system-driven stage, for example, requires: a leadership-driven method for prioritizing improvement projects, process improvement work beyond the factory—such as engineering and new product development—and a more thorough effort to develop employee skills and knowledge.

Understanding where your company is in the lean progression model—the tool-driven, system-driven or principle-driven stage—is the � rst step toward avoiding the improvement plateau and keeping your organization moving forward.

MANAGEMENT BR I E F ING

THE LEAN PROGRESSION MODEL

Maximize the Returns from Your Operational Improvement Efforts Over the Long Term

Make the connection between continuous improvement initiatives and fi nancial returns by understanding the links to shareholder value and capturing the benefi ts of performance gains.

Operational improvement initiatives often lead to dramatic improvements in throughput, inventory levels, quality, productivity and overall effi ciency. Such efforts can make the workplace look better and make employees feel like they’re working more effi ciently. But despite double-digit gains in productivity and other operational metrics, many companies have a diffi cult time realizing the benefi ts from their work on their fi nancial statements.

Today, the top priorities of manufacturing executives are revenue growth, improving cash fl ow and containing costs, according to a recent study of business improvement activities by IndustryWeek magazine. If such results aren’t achieved and documented, it will only be a matter of time before an operational excellence program loses both momentum and management support.

This TBM Consulting Group management briefi ng explains how key performance indicators (KPIs) should align current and planned improvement projects with business priorities and directly contribute fi nancial benefi ts.

Translating Lean and Six Sigma Gains Into Shareholder ValueAt a fundamental level operational improvement programs build shareholder value by increasing profi t and reducing the assets required to generate it. Shareholder value can be expressed as a simple equation of profi t over assets, or return on assets (ROA). Profi ts consist of revenues minus costs; and assets consist of net working capital plus fi xed assets (see Fig. 1). This may be obvious to most business executives, but it’s important for the management team to clearly defi ne and review these factors to make sure improvement activities are aligned with fi nancial performance goals.

Building deeper fi nancial literacy within the organization is one of the primary priorities—often overlooked—that companies must address when committing to a long-term business improvement program. Many supervisors and department heads, and even business managers, tend to focus on hitting and protecting their own budgets.

800.438.5535 | www.tbmcg.com

Executive Summary

Depending upon who you talk to, somewhere between 5 and 50 percent of business improvement initiatives actually deliver the targeted benefi ts. One of the characteristics of companies that are successful is a tight alignment between improvement activities and business objectives, including fi nancial ones. This TBM management briefi ng explores the connections between business improvement projects and fi nancial returns, and some of the steps that management must take to capture the fi nancial gains.

By Ken Koenemann

CONTINUOUS IMPROVEMENT & BUSINESS ALIGNMENT

Link Operational Improvements to Financial Results

MANAGEMENT BR I E F ING

Achieve annual and longer-term objectives by maintaining strong connections between LeanSigma® improvement projects and business strategies.

Leadership, at its heart, is largely about recognizing the need for change, determining what kind of change is necessary, and pushing the organization in that direction. Strategic planning processes determine the direction. But as grueling as such planning sessions can be, that’s the easy part. Execution requires a day-to-day and week-to-week focus that is diffi cult for any organization to maintain, which only becomes more diffi cult as business size and complexity increase.

Projects are the best refl ection of management’s true intent Cathleen Benko and F. Warren McFarlan argue in their book, Connecting the Dots1, that most companies fail to capture the full value of their projects, and do a poor job of connecting projects to the organization’s top priorities.

800.438.5535 | www.tbmcg.com

Executive Summary

More and more companies are using policy deployment — a management tactic that’s also known as strategy deployment, hoshin kanri or hoshin planning—to keep change and process improvement activities aligned with strategic objectives. Achieving business targets depends in large part on how well policy deployment itself is executed across multiple businesses, sites and teams. As this management briefi ng describes, companies that maintain a strong linkage between projects and objectives are more likely to make business changes that contribute to both cost savings and revenue growth year after year. The extent of that contribution depends on how well projects are executed at all levels.

MANAGEMENT BR I E F ING

By Anand Sharma, Bill Remy and Ken Koenemann

Effective execution boils down to three primary management roles:

1. Make sure the organization is working on projects and process improvements that will have the greatest impact realizing the strategic objectives.

2. Ensure that changes are implemented and institutionalized, with minimal backsliding.

3. Understand the leverage points and effectively convert process changes into fi nancial results, for example, by closing facilities to reduce fi xed costs, or using the newfound capacity to boost sales.

This management briefi ng describes how to align business improvement projects with strategic business objectives by using policy deployment, a strategy execution tactic also known as strategy deployment, hoshin kanri or hoshin planning.

GET MORE OUT OF YOUR BUSINESS IMPROVEMENT INITIATIVES

Align Projects with Strategic Objectives