Executive and Senior Management Misalignment with Reliability

Starting at the top with executive management, it is important for you to recognize that most CEO's and other senior managers come from accounting, marketing, or sales backgrounds, not manufacturing. Many have been educated at top level MBA programs. If you ask a CEO or senior executive what comes to their mind when you mention manufacturing, a large majority will reply "cost" or "necessary evil". Wow, and you thought Maintenance held that distinction all on its own. Wrong.

Table 1 - How Executive and Senior Managers disable Reliability

Realize that most executives view a manufacturing site or service facility as a liability. We, as Maintenance and Reliability professionals tend to think the whole world revolves around us because we live in the manufacturing and service worlds. The reality is that manufacturing sites are just a small component in a much larger supply chain model; just one piece of the puzzle. In the executive managers' ideal world, they would much rather limit their liability by employing a contract manufacturer where they could simply place an order, receive the products, and sell them in the marketplace. For some, this reality has proven just the opposite of their ideal with contract manufacturing producing lead-tainted toys and melamine-laced pet food, creating a much greater liability.

Rather than investing and preserving the site assets, the focus for many senior leaders is making the site a low-cost provider using corporate liposuction. Isn't that what the MBA programs teach, provide short-term shareholder results and cost-cut your way to prosperity? Cost-cutting does have its place, but it's only one solution, and not necessarily the right one. Typically, executive management is not fully educated on the financial impact of investing in the right Maintenance and Reliability Best Practices. Since many senior leaders don't understand these practices, they truly don't know the questions to ask to ensure site reliability. It's foreign to them. They don't realize that investing in the right practices has repeatedly made manufacturing sites the low cost provider; yielding a far greater return on investment than cost-cutting alone. Sadly, many lower-level managers within the site don't realize it either. If they did, these leaders would know that the components of reliability are some of the most controllable costs in the Profit & Loss (P&L) statement. Every dollar gained in the "Cost of Goods Sold" from investing in the best practices goes directly to the bottom line in profit. This is opposed to only a percentage of "Net Sales" dollars being returned as profit at the bottom of the P&L statement. 

Reliability is equal to and drives Safety performance

Further impacting costs, reliability is not held at the same priority or equal to safety. Interestingly, in the economic downturn safety budgets have been somewhat preserved while maintenance budgets have been repeatedly slashed year after year. Yet, the majority of safety incidents are a direct result of upsets in steady state processes. Consider an environmental oil spill in Alaska due to corrosion in a pipeline, or a hand caught and mangled when an operator bypasses a safety switch trying to make the production numbers with the packaging equipment that is constantly jamming cartons. Add to that a slip and fall from a leaky pipe pooling water on the floor when a person hurries to stop a jammed main conveyor piling product on the floor. So, when they ask about cutting the budget, ask how much they are willing to not spend on safety?

How the indiscriminate budget slashing process unfolds

Having personally lived the reviewing of the site budgets for liposuction, I know the first cuts wipe out the travel and training budgets. This runs counter to Lean accounting principles which tell us that to remain competitively agile, we need to invest in and polish our people's skills and knowledge. As examples, some leaders view conference attendance and learning seminars as a waste. It's only a waste if management fails to set expectations or hold people accountable for experience outcomes. One idea is to use the "train the trainer" approach and set the expectation of the attendee to train others on their return.

Looking for more budget cutting opportunities, the focus moves to the production budget. Due to becoming "lean" (the incorrect application of the word), the few production workers left can only do about 75% of their job responsibilities now leaving no time or process for continuous improvement activities. As the number of people required to produce a given amount of product has been well established in the previous liposuction activities, there is little opportunity to reduce production labor without capital investment to automate the jobs. Without capital investment, you can't do much with the energy costs either. The cost of raw and packaging materials is contractually set based on global demand along with logistics costs as well, so there is no relief there. With all other budget possibilities exhausted, only the maintenance budget remains. With no other budgets remaining and the bulk of the cost cutting task unmet, the maintenance budget is indiscriminately slashed and bearing the largest percentage of loss within the site. Due to the frustrating experience of previous liposuction efforts, the maintenance manager most likely gave up on a bottoms-up budgeting method so there was no maintenance budget to the line item level based on equipment criticality and priority.

People as Commodities

Once liposuction has pulled the Maintenance budget dry and the cost reduction tasks still loom, you typically see a turn to the people for more cuts. We treat the people as disposable commodities. With nothing left, reality is that your people may be your only competitive advantage. We displace our core workers and hire temporary workers again, against the lean accounting principles and we end up disappointed. In the economic downturn, you might find great workers who have been displaced but as the economy recovers, they vanish to rewarding jobs. Couple that with the few baby boomers you have left disappearing on improved stock prices to their 401k plans.

Aligning the Organization

With the misapplication of "Lean" concepts in the name of becoming the least cost producer, the organization becomes misaligned. Supervisors are relegated to administrative duties rather than inspecting performance and being a resource at "gemba" (a lean term for where the work occurs, the living place). Since they are behind the desk doing paperwork such as entering employee timesheets, there is no coaching on the production floor for performance or addressing the development needs of their people. Often in team centered organizations, which are created to eliminate supervisor positions for example, there is no accountability as there is a different team leader in the role every week. This leads to there being no empowerment to drive performance. In many organizations, there is no Maintenance Planner Scheduler to improve the efficiency of your most expensive hourly resource, the maintenance craftspeople. Those craftspeople are left to expedite parts and hunt for information. Sometimes, the Maintenance organization is placed under the control of Operations Managers who hold a different perspective due to their responsibilities resulting in reactivity when those individuals are not educated on Maintenance and Reliability Best Practices. Reliability and Condition Monitoring groups are either eliminated or outsourced with a directive of reducing their ongoing costs. Sadly, some of these reductions are due to Reliability management becoming complacent and not communicating the benefits and ongoing successes of Reliability Engineering activities to upper management.
 

No continuity of vision with little real communication

As mid-level managers and the people below are perceived to be less and less valued , there is a constant changing of the guard. People leave and yes, even the CEO's fall victim to the markets. Current initiatives become short-lived, considered "flashes in the pan", as new managers at all levels come into their jobs with the need to make their mark within the organization, touting their own new initiatives. Ten year plans are reduced to 18 month "hope we make it" goals. Rather than setting expectations and holding individuals accountable, senior management often elects to measure people with a forced ranking, in a forced distribution system that celebrates the individual and destroys teamwork. With this, even more good people leave.

Since everything is in a constant state of turmoil with no real trend toward stability, there is no clear direction or strategy for people to rally around. Unfortunately, there is usually little evidence of communication from the leadership other than an impersonal video or email from behind a desk somewhere. Retreating to the safety of the corporate offices, senior management is not accessible to the people who are doing the work. Sadly, those same leaders are the ones who dictate the collection of engagement surveys in times of radical change when they are cutting pensions, health care benefits, and jobs. This process in turn infuriates the people required to respond who are already suffering from poor morale, instability and uncertainty for the future.

Unfortunately, mid-level managers down to the front-line supervisors share in disabling reliability with their participation in a number of those items above as well. While not setting corporate strategy, the mid-to-lower level managers do define an implementation strategy to accomplish the objectives and run the day-to-day operation of the manufacturing and service facility. When it comes to the day-to-day operation at the local level, how is it that these managers limit reliability?

 Table 2 - Ways Other Managers disable Reliability

When I go into facilities, I always ask if real partnerships exist between the various functional departments like Maintenance, Operations, Purchasing, Materials Management, Project Engineering, and Quality. What I find is that most of the time only the illusion of partnerships exists and real partnerships don't. If you hear things from Maintenance like "I never have the parts, information, or time to do my job right", or from Operations like "Maintenance never responds, and when they do, it's never fixed right", you need to look deeper at your partnerships. With Maintenance and Operations owning two-thirds to three-quarters of the plant population, you better have a real partnership there for starters. By the way, a real partnership is NOT a supplier-customer or subservient relationship. With respect to not having real partnerships, take a moment to consider how the practices of Project Engineering, Purchasing, and Materials Management in your site disable reliability. I could write a separate article on how every one of those groups impacts site reliability and I bet you can too.

Shepherd of the flock

Rather than deal with conflict, many managers look the other way. When you don't deal with the toxic apples, they poison the rest of the apples. Morale goes down along with productivity. Most people want to do the right things. Help them by setting expectations and holding your people accountable. You can't do that from behind a desk. I know there are many, many administrative things you are required to do, but the people you manage are on the production floor and therefore you should be too, even if you are the plant manager. Recognize that as a manager, you are the shepherd of the flock. You are there for the people, not the other way around. They are always watching what you say and do. While you have to be the messenger, in some cases bringing bad news; that shouldn't change your relationship with your people. Even without a training budget, what are YOU doing to develop your people? Don't pencil-whip their yearly evaluation and development form either, they're watching you.

You get what you inspect

Many organizations don't have standard operating procedures, start-up checklists, lubrication routes, and preventive maintenance procedures. These help set expectations and enable reliability. I've done many Failure Modes Effects Analyses (FMEA) where if operators operate the equipment incorrectly, there is no reliability program that can overcome that issue. Sadly, while some companies do have these, no one audits or enforces their use. You get what you inspect and you can't do that from behind a desk. With fewer people, many managers are not carving out resources for continuous improvement or root cause analysis. They choose to struggle everyday rather than trying to make it better, and therefore promote the vicious cycle of reactive chaos to march on.

Sometimes, we measure what we treasure

Sadly, many organizations don't have shared common metrics that predict success - as a team. Worse, many organizations don't have real metrics period. How do you know where you are going if you don't have a trend of how you got where you are today? If you establish real partnerships, then it should become "we" versus "I" where everyone is educated on the meaning and impact of the measures. I've seen some organizations misuse singular metrics which disable reliability, e.g. tying Maintenance Supervisor pay to Schedule Compliance. In that case, you want a supervisor to choose between doing the right thing for the site and impacting their paycheck.

Reliability is a culture that can take many years to establish and very few to disable. Educate yourself on the best practices so that you, with the best of intentions, don't commit actions to disable it. Recognize as a manager, there will always be many things you can't control. Yet, there are many things you can. Within your span of control, don't allow others to disable reliability. Be persistent and work together to educate others about the impact of their actions. Establish partnerships to help the process.

So, what are you waiting for?

About the Author
Jeff Shiver, CMRP is a strategic Maintenance and Reliability professional for People and Processes, Inc. where he has educated and assisted hundreds of people and numerous organizations in implementing the Best Practices for Maintenance and Operations. Prior to People and Processes, Jeff was a practitioner who has implemented cultural change and the Best Practices for Maintenance and Operations. Jeff has more than 25 years of manufacturing and facilities experience. If you have questions or comments for Jeff, he can be reached at jshiver@peopleandprocesses.com

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