1. Hoshin Kanri Helps Toyota Improve for the Long Term

    October 21, 2014 by

    Originally posted by in Lean Leadership Ways

    When the 2008 Lehman Brothers bankruptcy triggered a global recession, Toyota Motor Company lost money. In December of that year, with a photo of Toyota board members bowing in shame, a New York Times headline trumpeted, “Toyota Expects its First Loss in 70 years.” “They’ve caught the same cold that Detroit has caught,” said Christopher J. Richter, senior analyst in Tokyo at Calyon Capital Markets Asia. “Everything is going wrong for Toyota this year.”

    My reaction was anger at the idiocy of some of these articles. How could Toyota be compared to the Detroit automakers who were on the verge of bankruptcy? Why isn’t the focus on the 70 years of profitability and the huge cash reserves Toyota had piled up for a crisis just like this?

    However, I soon discovered Toyota did not share my point of view. They were very unhappy about their loss. It was not because of the loss of a few billion dollars which they could absorb like an annoying mosquito bite. It was because, through serious reflection, they found serious weaknesses.

    In Toyota Under Fire we chronicle how Toyota responded to the worst global recession since the Great Depression. Of course they downsized, but they did it by reducing a temporary workforce designed to absorb inevitable downturns in the business cycle. Management bonuses and overtime were eliminated. Less energy was used. Travel was reduced. But the jobs of long-term team members were protected.

    I visited two of the hardest hit plants—truck plants in Indiana and Texas—and watched as people frenetically worked even though about half the production workers were not needed for production, with sales down about 40% from planned capacity. They were busy because they had gone from two shifts to one shift, maintaining a high production rate, and about half of the people produced cars for four hours, while the other half observed and worked on kaizen, and then they reversed roles.

    The Japanese executive in charge of the Indiana plant calmly explained that they were investing in the future: “Every winter has its end,” he explained to me. And they were preparing. He showed data on the average age of vehicles and how more were being junked then purchased, and they needed to prepare for the expected sales boom—the boom we are now experiencing.

    Back to the first loss of money in 70 years. Toyota did a great job of utilizing and developing their human resources with very low demand, but their reflection still identified a serious problem. There had been signs the truck market was declining in the United States, where gas prices were rising. There were even signs of the recession to come given the inflated housing market. Yet, Toyota in North America had built months of inventory of trucks. When gas prices almost doubled in the U.S. during the summer before the 2008 recession, Toyota was stuck with enough inventory to stop making any large trucks and sport utility vehicles for three months; during this time they did daily training and kaizen on the shop floor. Then the recession hit and the pain continued.

    Toyota could offset a good deal of the downturn, reducing labor costs by about 20% through eliminating the variable workforce (the temporary pool) and overtime. But still 80% of costs were fixed. The board of directors set a target to reduce fixed costs to 70% so that Toyota, famous for its ability to flexibly respond just-in-time, could be ready for the next downturn.

    Turning this goal into action is one of Toyota’s strengths and it is done through the hoshin kanri process. The target of lowering the break-even point required changes in all parts of the enterprise, including product development (e.g., more standard architecture and parts, value engineering), production control (satisfying customers while leveling the schedule, even with high variety), production engineering (developing simple, slim, flexible systems, often with lower capital investment and more manual work), supply chain (collaborating with suppliers to better respond to flexible volumes), and manufacturing (launching new vehicles more quickly, simple automation for material delivery, parts kitting, changing takt while balancing workload more quickly). Thousands of organizations developed plans for achieving higher flexibility and worked through the kaizen process of experimenting and learning.

    By the time Toyota had achieved the lower break-even and billions of dollars in cost reduction, another problem eased up—the yen went from about 80 yen per dollar to about 110 yen per dollar. Since Toyota is committed to keeping jobs in Japan to benefit Japanese society, and maintain their hotbed of innovation in Japan, they benefited greatly, leading in the 2013-14 fiscal year to the most sales and the most profit of any auto company in history.

    With the huge demand of 2014, and the deep cash reserves Toyota maintains, one might expect a massive spending spree—buying companies, buying new automated equipment, buying new plants in low-cost countries. Toyota did none of those things. They continued belt-tightening and Akio Toyoda announced there would be no new plants built. The hoshin kanri goals became: Do more with less. Find ways to utilize existing capacity while improving throughput, thereby producing more autos per square foot.

    Toyota does not want creeping fixed costs to put them in the same bad situation in the next big economic downturn. They will be ready because of intensive and continuous improvement with a purpose.

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  2. A New Model for Excellence in South Africa

    August 14, 2014 by

    Originally Posted by Christine Schaefer on Blogrige, the official Baldrige blog

    On August 1, the South African company Business Assessment Services (BAS)—acting on behalf of the new South African Excellence Foundation (SAEF)—publicly launched the latest South African Excellence Model (SAEMXIII™). The nonprofit SAEF will use the model as a basis for business assessment and development services for organizations in South Africa.

    The Baldrige Program has long participated in a global excellence council, and the Baldrige Award and Criteria for Performance Excellence have long been emulated in countries around the world. So it is not surprising that BAS CEO Ed van den Heever gives partial credit to both the Baldrige Program and the Fundação Nacional da Qualidade (FNQ) of Brazil for inspiring the new SAEM.

    I recently asked, van den Heever—developer of the SAEMXIII and co-author of the previous SAEM1997 standards model—to share more information about the history of organizational excellence initiatives in his country. Following are his responses.

    Tell us about your background and experience with the Baldrige Award and national program?

    I have great admiration for the leader role of the Malcolm Baldrige National Quality Award (MBNQA) program. I also have fond memories of (retired Baldrige program director) Dr. Harry Hertz—a great man! My support for MBNQA goes back to the mid-1990s when I attended a Baldrige examiner course in South Africa conducted by Dr. Richard Chua of Juran Institute Incorporated (JII).

    Ed van den Heever photo
    Ed van den Heever

    A year earlier, the Council for Scientific Industrial Research (CSIR) of South Africa had opted to go the Baldrige Award route. I had the great fortune, coming from the private sector, to join as an executive facilitator of CSIR Total Quality Management for four years. That role included exposing the CSIR Management Team to Baldrige examiner training. After 1995 examiner training in South Africa was presented by Dr. Chua of JII, I conducted the remainder of the Baldrige examiner sessions in 1996 and 1997. As lead examiner, I facilitated Baldrige Award-based assessments in 10 CSIR business units at the same time and publishing the consolidated findings.

    In 1996, the CSIR and the South Africa Quality Institute (SAQI) agreed to launch a South African Criteria model (SAEM1997) and a foundation. I was appointed as the inaugural CEO of the former South African Excellence Foundation, which was formally launched in August 1997 as a not-for-profit company with ten sponsors.

    How is the SAEMXIII model similar to the Baldrige Criteria for Performance Excellence?

    Besides the SAEM1997, the Baldrige Criteria revisions of 2006, 2008, and 2010 had a direct impact on the road ahead [toward the SAEMXIII]. However, involvement with BHPBilliton in Australia in 2008 and exposure to the FNQ Model in 2013 greatly impacted the final outcome.

    Among similarities, the SAEMXIII has merged the SAEM1997 Results Criteria (7–11) into a single criterion 7 (similar to the Baldrige Criteria and FNQ model). Also, similar to the Baldrige Criteria process evaluation factors of ADLI (Approach, Deployment, Learning, Integration), SAEMXIII uses PDCA (Plan, Do, Check, Act) elements for scoring of processes. And similar to the Baldrige Criteria results evaluation factors of LeTCI (Levels, Trends, Comparisons, and Integration), SAEMXIII uses RTCK (Results/Targets/Comparative/Key performance indicator match) elements for scoring of results.

    The Baldrige Criteria largely dictated the selection and qualification of Criteria guidelines, key characteristics, and Criteria description. Globally the Baldrige Performance Excellence Program led the way in this area.

    How have the Baldrige Criteria for Performance Excellence and the European Foundation for Quality Management (EFQM) helped inspire the development or updates to the SAEM?

    For the SAEM1997 (11 Criteria model), the EFQM (1997), consisting of nine Criteria, formed the basic framework. The EFQM Model had gaps that needed focus for application in a developing country such as South Africa. Revisions included adding Baldrige Criteria-based categories on customer focus and supplier focus.

    The SAEM1997 was adapted for application in large (Level 1), medium (Level 2), and small (Level 3) companies or organizations. Organizations could opt for Level 1, Level 2, or Level 3, using 100 percent, 50 percent, or 25 percent of the Criteria content, respectively. The related South African Excellence Foundation (SAEF) Awards process was accordingly structured.

    A classic case is that Mercedes-Benz SA opted to start at Level 3, then moved to Level 2 (in-house only) in final preparation for their Level 1 Application—culminating in winning the 2000 SAEF Award.

    A downfall of SAEM1997 is that it was never updated! Although the model was classic by U.S. and European standards, South African companies could not reach the expected heights at the time. Unfortunately, the original SAEF last issued awards in 2002 and was liquidated by creditors in 2004.

    Tell us about the BAS’s services and the kinds of organizations benefitting from those offerings in your country today?

    With a specialty in operational excellence, BAS offers an SAEMXIII-based toolkit and guides that were developed to facilitate the Management System of Operational Excellence (MSOE), which is concordant with ISO 9004:2010. The materials offered include training materials and case studies on governance excellence and operational excellence, as well as framework, criteria, and assessment guidelines. The toolkit fits the private sector (large/medium/small businesses) and the public sector (national/provincial/local government).

    Other offerings include cost of quality training, training based on the MSOE Toolkit, and SAEMXII Assessor Training.

    Users include the Eastern Cape Provincial Government (nine departments), the Department of Transport (Eastern Cape Government, winner of the 2009 Public Sector Innovation Award), SA Revenue Services (call centers), Tsebo Cleaning Services (South Africa) Ltd., Arwyp Private Hospital Ltd., and Border Cricket (South Africa) East London.

    What’s next for excellence in South Africa?

    This year we will finalize the launch of the SAEMXIII. In 2014 we also plan to find a not-for-profit company to house the intellectual property. And we plan to facilitate funding for SAEF outside governmental control (similar to the Baldrige Foundation) and promote the new SAEF on November 13, 2014, World Quality Day. We also plan to rejoin the Global Excellence Model Council. In 2015, we plan to relaunch the South African Excellence Awards!


  3. Governance – Aspiring to Greatness

    August 6, 2014 by

    Boards that aspire to greatness establish a culture of integrity, built on a strong ethical foundation and are rigorous in their endeavour to add value.


    Great Boards

    Create a healthy robust decision-making culture; one that creates a sense of loyalty among various stakeholders. Incorporating in their governance framework is a comprehensive and forward-looking risk oversight philosophy which includes developing a risk culture, an agreed appetite for risk, maturity assessments as well as aligning risk, strategy and disclosure activities.

    Board composition is built not only around size and diversity of talent but designed with the organisation’s sustainable future in mind. Succession planning is an agenda item and boards conduct director assessments regularly. Similarly they encourage board members to continually up-skill.

    Great boards demand a view of the bigger picture, make sure they understand what is the real problem and avoid focussing on ‘silo’ solutions.

    Great boards look forward rather than just responding to changing conditions, analyse what drives values, stress-test alternative strategies and allocate/reallocate resources accordingly.

    Great boards aspire to create a sound foundation by deliberating about their processes; for example, seeking to remove any bias from the decision-making processes.

    Great boards have directors who are all over the numbers and data’ carefully monitoring the financial situation and understanding the potential ramifications of them. Compliance is a non-negotiable item.

    Great boards have a Chair chosen on his/her ability not popularity.

    Great boards work collaboratively with managementto create direction and goals that are clear to all and are measurable. Everything that occurs within the organisation is linked to the desired outcome.

    Read other articles to help you govern better.


    How do you know when you don’t have effective governance?

    Read about the danger signs and call Bev or Nick for a confidential consultation on how to improve your board.

    Dr Bev Edlin and Nick Dangerfield are the executive directors of Boardroom360.

    Being a director brings with it responsibilities and accountabilities. Bev and Nick believe more needs to be made of these imperatives to not only improve governance but to protect the rights and entitlements of shareholders.

    Contact Bev on 027 618 4787 orbev@boardroom360.com
    and Nick on 021 273 6476 ornick@boardroom360.com


  4. EFQM Award 2014

    August 5, 2014 by

    The EFQM Excellence Award 2014 Nominees

    This year’s Nominees are (listed in alphabetical order):

    BMW AG Werk Regensburg

    Plant Regensburg has been manufacturing vehicles for BMW AG since 1986. In 2013, 295,417 vehicles (daily production output: 1,100 units) made in Regensburg were delivered to customers all over the world. So Plant Regensburg is the third largest plant in the BMW Group production network. Products include BMW series 1, series 3 (Sedan), series 4 (convertible), M3 Sedan, M4 convertible, Z4.

    BOSCH Tecnologie Diesel e Sistemi Frenanti S.p.A.

    BarP is an operational unit of the Diesel Systems Division which is part of the Automotive Technology Business Sector of the Bosch Group. BarP produces Common Rail diesel fuel injection pumps. With nearly 1,700 associates and more than 240 million Euros sales, it is the largest Bosch entity in Italy and the biggest automotive plant in Apulia.

    Infineon Technologies Austria AG IFAT

    Infineon Technologies Austria is Infineon`s globally leading competence unit for power semiconductors. It draws on synergies in R&D expertise, manufacturing excellence and global business responsibility to drive the company`s success worldwide.

    One Vision Housing

    One Vision Housing is a Registered Provider of Social Housing with more than 11,500 homes across Sefton, Merseyside. It was formed in October 2006, following a successful stock transfer from Sefton Council and are a not for profit organisation, regulated by the Homes and Communities Agency. One Vision Housing is part of the Sovini Group which was formed in December 2011 and also includes Pine Court Housing Association, Sovini Property Services and Teroma (trade supplies).

    Pompes Grundfos SAS

    Pompes GRUNDFOS SAS France (internally designated as PGF) is one of Grundfos fifteen production companies. Established in 1972 and located in Longeville-lès-Saint-Avold in Moselle, PGF is the result of the commitment to internationalisation and development of the Group outside Denmark. The key sectors of PGF are the customisation, manufacturing and distribution of circulators and pump systems.

    REGTSA – Recaudacion y Gestion Tributaria de Salamanca

    REGTSA is an Autonomous Body attached to the Province Council (Diputación Provincial) of Salamanca (Spain), established in 1992 with the purpose of providing tax management and collection services to the municipalities in the province. It started up on 1st January 1993, with the secondment of the staff of the former Provincial Tax Collection Service.

    Siemens Motion Control, Congleton

    Siemens Congleton, based in Cheshire UK, is an operational manufacturing unit within the Drive Technologies division (DT) which is a part of the Industry sector. DT comprises several business units with 45 factories worldwide. Siemens Congleton is a contract manufacturer for the Motion Control business unit (MC) within DT, supplying over 1.2 million electrical devices, including 500,000 variable speed drives (known as Inverters), to Siemens MC and is 1 of 9 global MC manufacturing facilities.

    The Cedar Foundation

    The Cedar Foundation (Cedar) is a leading voluntary organisation in Northern Ireland focusing on inclusion for people with disabilities. Cedar is a service provider and their purpose is summarised in their Vision and Mission statements. The Vision is a society accessible to all. The Mission is to provide exceptional services that support children and adults with disabilities to participate in all aspects of community life.

    Join us at the EFQM Excellence Award ceremony on the 20th of October in the Autoworld museum, Brussels. Click here for more information on the EFQM Forum and the Celebration Dinner.


  5. Learn Using the Latest Baldrige Education Case Study

    July 22, 2014 by

    The Baldrige Program is often asked for examples of how organizations use the Baldrige Criteria for Performance Excellence to improve—whether the organization wants to improve just one area, a certain process and its associated results, or the entire organization from end-to-end.

    The 2014 Baldrige Case Study: Buckeye City Schools (PDF) shows examples (both best practices and early approaches) of how a fictitious K-12 school system used the Baldrige Education Criteria to focus on its strategic challenges, improve student learning and other results, and leverage its core competencies and advantages.

    Written by a team of volunteer Baldrige examiners, Buckeye City Schools is a preschool and kindergarten through grade 12 public education school system located in Ohio. The school system was designed to show an organization that was mature enough to compete for the Malcolm Baldrige National Quality Award, with processes that resulted in excellent educational outcomes but also with prudent management of financial and other resources.

    The school system is challenged by uncertainty around state funding, the number of students choosing alternative educational offerings, cost containment and efficient use of resources, and competition for students and workforce members. At the same time, the school system is cultivating a culture of innovation, focusing on student achievement and learning, benchmarking from within and outside the education sector, embracing social media, and collaborating with other school districts to run an online charter school in response to voice-of-the-customer data.

    You can learn how Buckeye City Schools scored in an assessment against the 2013–2014 Education Criteria:

    For superintendents and other educators who want to get started with the Education Criteria, in addition to best practices and other examples found in this case study, resources are available on Baldrige in education and how to get started with the Criteria.

    Each year, the Baldrige Program produces a new case study that describes how a fictitious organization is fulfilling the requirements of the Criteria. The case studies rotate sectors from year to year in order to show examples for a variety of organizations using the three versions of the Criteria: Business/Nonprofit, Health Care, and Education.

    Baldrige case studies have at least three purposes. First, given that actual Baldrige Award applications remain confidential until award-winning organizations approve selected content for public sharing, the case studies are used to train examiners for the Baldrige Program’s annual award process. Second, case studies serve as sample applications for organizations interested in applying for a Baldrige Award. In addition, the case studies show organizations in every sector how they might use the Criteria questions to assess and improve their performance, even if they are not interested in applying for a Baldrige Award.

    Additional Baldrige case studies are available in an online archive of publications.


    Originally posted at http://www.nist.gov/baldrige/buckeye.cfm