“We’ve shaped the agenda to address your questions and interests. We’ll start with an introduction to our business and products; then we’ll tour our facilities to give you a feel for how things work here. Beyond that, we haven’t prepared a formal presentation. You came here to learn from us, but I can tell you that we intend to learn from you as well. We’ve captured each of your requested topics on the agenda. I’ll be with you for the first session and again at the end of the day. Dan will be your host for the remainder of the day and will have others join you as appropriate. Greg, please call me at any time if you have further questions after your visit with us.

“We can empathize with your position and probably your skepticism, too. We were in exactly the same position almost four years ago. We had a profitable business at the time, but looking back from a perspective of what we’ve learned since them, we really had no technical right to be that profitable and should have been far more profitable. We were disorganized; we used brute force to run the business; we burned out and blamed our people for mistakes that were caused by the management system we created; we buried our problems with inventory. At the same time, we had a terrible customer service record; our costs were increasing; and we had systems and processes that people paid lip service to while they ran the supply chain from spreadsheets. You told me a bit about your challenges, Greg. Let me tell you that we had every one of them and then some when we started our Class A journey. But before we get into those details, let’s have Dan give you an overview of the business.”

Dan Rogers projected a series of slides describing the history of Capital Equipment, including its recent expansion into new product lines, and reviewed its organizational structure. In the final portion of the presentation, Dan covered the changes in business results Capital attributed to the Class A initiative. “We justified the expense of the Class A journey based on our estimate of bottom line business benefits,” Dan said. “Because we were still a bit skeptical, we were very conservative in our estimate of those benefits. I’m happy to report that we far exceeded what we thought we could deliver. Frankly, we were astounded with the improvement. Let me show you what I mean.”

“Before we began the work, our customer service was terrible. Only 68 percent of our shipments were delivered on time, and that performance was based on a very loose standard. We considered ‘on-time delivery’ as a shipment delivered on the requested date or up to five days after that date. We were absolutely incapable of delivering early and rarely hit the requested date. Today, our customer service level is regularly more than 98 percent on time and complete. And what’s even more remarkable about that result is that we now consider a delivery to be on time when it is delivered complete on the day we promised the customer.”

“That is absolutely awesome, Dan!” Sara chimed in. “Before we leave here today, we must learn how you did that!” Greg and David echoed Sara’s comment.

Greg’s mind was doing more than just echoing Sara’s comment. He thought to himself, “That kind of improvement will save my job if what they’ve done here will work at Cosmetics Products. I’m not going to get my hopes up, however, because we’ll probably find that it won’t. But I’d better listen carefully just in case.”

Dan continued, “I wish I could give you a simple answer. Fact is, there was neither an easy nor quick solution to our customer service problem. But I think we’ll give you a good idea before you leave today of everything we had to go through to accomplish that improvement. Closely associated with that measure, and absolutely counterintuitive to our thinking at the beginning of the initiative, we were able to reduce our inventories by 45 percent.”

Greg interrupted, “Wait a minute. Did you say 45 percent?” Dan nodded.

“Up until that point in time, we always assumed that to improve customer service you had to increase inventory. We learned, to our amazement, that the traditional industry paradigm was absolutely wrong. We found that when we built products to increase inventory, we usually built products our customers didn’t want. That no longer happens. We are now much better at building what the customers want and when they want it. We keep inventory, to be sure, but we now are clear and disciplined about what kind of inventory we keep, meaning finished goods, assemblies or component parts, how much we keep, why we keep it and where we keep it.”

Greg interrupted again, “Hold on a minute, Dan. I recently directed our Manufacturing organization to build inventory to improve customer service. Now you’re telling me my directive was exactly opposite of what I should have told them to do? Are you saying that when I get back home I should have David cut inventory by 45 percent? Pardon my cautious nature, but that sounds like a prescription for disaster in my company. We would be out of business in a week if we slashed inventories like that.”

“That’s a great observation, Greg, and it’s a good lead-in to what we need to talk about. Along a Class A journey, be careful not to allow a little information seem like a revelation; it might lead you to an unenlightened solution. We were very good at doing that in the past. In fact, we often refer to the way we used to make decisions as our ‘ready, fire, aim’ era of decision making. We did not cut inventories precipitously at the beginning of the Class A work. That would have been a disaster for us, too. At the start of the first initiative, the Capable Planning and Control Milestone, we didn’t have the processes in place to cut inventory of any kind, except for obsolete and defective items. By not having the people, processes, and tools working together, we were bound to have high inventory levels.”

Greg had heard a similar comment before and was now beginning to recognize that inventory might be an outcome of some of the tangled interdependencies he was learning about. He knew he’d need to understand better at some point and made a mental note to talk about it with David.

“Our forecasts were poor, our manufacturing processes were unpredictable, we had quality problems, and we never trusted the inventory numbers in our planning systems. Sound familiar, Greg?” This time the presenter was, indeed, addressing Greg personally; Greg nodded. Dan explained, “Periodically, we would reduce inventory when our Controller made a fuss about how large our inventory had grown. Each time we did it, customer service would suffer and we would refill the warehouses with even more product than before, usually at the insistence of Sales, and always using manufacturing overtime and expedited material shipments. It took us a while to learn why and where we need to keep inventory, and even longer to discover how much to keep. It also took time to improve performance on everything from forecasting through shipping so that we could demonstrate the technical right to reduce the working capital we had tied up in inventory without degrading customer service.

Inventory came down steadily with each improvement in our internal supply chain, and at the same time, those improvements led us to a better than 95 percent customer delivery performance. And here’s another unexpected benefit. We continuously modified our business model in the ERP system to reflect our internal supply chain process redesign. Slowly but surely, the planners gained confidence in what the system was recommending and moved away from their spreadsheets. They began doing all their work inside the ERP system and delivered even greater benefits.”

David looked visibly relieved. “Thanks very much for that clarification, Dan. You just saved me a huge headache. I was having this horrible vision of getting back to the office and having Sara and Greg tell me to cut my inventories to the bone!”

“You’re quite welcome, David. Keep in mind that results don’t improve overnight; Class A is a change in the corporate culture that takes a good deal of time. Sure, you get some early improvements from harvesting low-hanging fruit, but there’s a ton of work to do on business processes and people’s behaviors before you see the type of benefits we realized. A key part of that change for us executives was implementing the Sales and Operations Planning process that we later evolved to Capable Integrated Business Management. I presume Stan talked quite a bit about Integrated Business Management during the Seminar.” Greg and David nodded in agreement again, and Dan continued. “You’ll find that most of the behaviors needing modification have been in place for years. Those of us in senior management needed the results improvements and pushed other people to change the way they worked. But, as we discovered, we ourselves were among the worst at being able to change what we always did. It seems to me that people generally embrace change so long as it is someone else who needs to change. When we started seeing the new processes working, and people following the processes with discipline, the results began building synergistically. That’s one of the benefits of real process integration.”

“Just look at the impact of our performance improvements on sales volume. Because we reduced lead times and could provide outstanding customer service, our sales increased by 21 percent. That improvement provided top-line growth to go along with significantly reduced costs. Bottom line, we saw a 268 percent improvement in profit over the past three years. Other projects going on at the same time contributed to the improvement, but we are absolutely confident our Class A Milestone implementation either delivered directly or enabled most of these benefits. The improved control of our business achieved through the Class A work gave us the time we needed to work on other improvement projects. Otherwise those initiatives would still be on our wish list.”

At this point, Dan suggested a tour of the facility so they could get a feel for some of the changes made by Capital Equipment. Following the tour, the group returned to the executive conference room to continue the discussion. Greg commented first.

“That was a useful tour, Dan. I was really impressed with the people we met. Everyone was positive and very knowledgeable about customer service and production priorities. I also liked the fact that everyone sensed the importance of their individual performance in executing plans and in meeting the needs of customers. I’m not sure how to describe what I felt when I was touring, but it seemed like things were happening routinely out there. I didn’t see people running around expediting customer orders like we do. But I suppose what impressed me most was how proud everyone seems to be about their accomplishments. Is that different from what it was in the past, or has that always been part of your corporate culture?”

“I can’t begin to tell you how big a change that has been for us, Greg. You just described a critical part of the culture change required in what you’ve seen and heard today. Had you visited before we began our Class A journey, you would have seen a negative, even cynical, organization. We provided a good deal of education to a broad spectrum of the company’s population, including our executive team and managers. People learned how everything they do must be focused on meeting the needs of the customer. We also learned how functional barriers compromise our ability to serve those customers. In the past, Sales, Manufacturing, Purchasing, Engineering, and Planning were always at each others’ throats. Everyone now has a much better perspective of how the company works from one end to the other, and how what they do affects everyone else. As I said before the tour, these changes, especially the culture changes, don’t happen quickly. But when they happen, the whole company begins to perform better.”

Sara asked, “What are people doing differently today to deliver these enviable results you shared with us?”

“Good question, Sara. Let me give you a few of the most important changes. We now have very formal and documented business policies, processes, what we call procedures, and in some cases even detailed work instructions. These define why we do things, what we do, and finally how we do our work. Executives and their direct reports own the ‘why.’ The senior and middle managers own the ‘what.’ And the people who perform the work develop their own procedures and work instructions, the ‘how.’ The why, what, and how are all integrated so that there are no rogue ‘personal’ procedures at work undermining formal processes. This is completely consistent with ISO9000 guidelines that we follow here in Capital Equipment. Each project team worked hard to create these processes, made sure they were fully integrated with the policies, processes, and procedures created by the other project teams, and then trained all the appropriate people on the changes they made.

“Here’s another equally important difference, maybe the most important. The business is now driven from a single set of operating numbers and plans. This starts with our Integrated Business Management process through which we produce an approved set of product, sales, supply, and inventory plans that support our customers and business strategy and are driven down through the entire supply chain, even into our supplier base. Everyone knows what he or she is accountable for in achieving those plans.”

“That sounds quite rigid to me. Doesn’t it restrict your flexibility and responsiveness? I get a sense that our customers might be quite a bit less predictable than yours.”

“I wouldn’t bet that our customers are any more predictable than yours, but we had a similar initial reaction, Greg. Then our coach explained a simple truth to us. I’ve got the slide here” [Figure 7.1].

“If you believe in continuous improvement, you have to believe in standardization. To improve any process sustainably, you have to control it first. That’s where standardization comes in. When it’s in control, you can implement process improvements while retaining or redeveloping control. We were asked to consider this simple analogy: What is two times two times two? Answer, eight. All the factors are in control, so the outcome is consistent. It’s always eight. Now how about this: two times two times v, where v is a variable? There is no definitive answer. There is a range within which any answer might lie, but you can’t run a supply chain cost effectively with uncontrolled variables. The level of control we have today enables our 98 percent customer service level. Now we’re looking at completing our Class A journey and know we’ll have to do an even better job of controlling variables to enable 99.5 percent customer service. We know without question that we’ll have to do an even better job of refining our processes and behaviors.

“There’s another change, Sara. We’ve implemented a suite of measures and continuous improvement analytical tools that allow people to track performance and identify actions necessary to improve their results. We no longer just report a bunch of numbers; we now use measures to drive improvements. That alone is remarkably different for us.

“As a result of the single set of plans, the suite of measures, the continuous improvement tools, and the fully integrated business processes, trust has improved dramatically within the company and with our customers and suppliers as well. People believe the numbers they see on their computer screens, they don’t second-guess the forecast, and they believe that others will do what they say they will do. We no longer have to waste time double-checking things or checking up on what people committed to do. If there is a problem, people speak up immediately. We operate under the principle of ‘silence is approval.’ If you don’t speak up, we assume you can and will do what you said you would do. When you put all of that together, it’s what we sometimes call ‘Integrated Supply Chain Management.’ ”

David and Greg exchanged a knowing glance with each other at the mention of “silence is approval.” They had joked on the way home from the seminar that Stan Stevens had used those words a hundred times.

David commented, “What you just described is a totally different world from ours. I can now see what you mean by culture change and appreciate the amount of time it required. I can’t even imagine how we would get there from where we are today.”

“I had exactly the same concern when we started the work, David. It takes time and effort, but we used the well-tested ‘Proven Path’ methodology for making the transformation. Don’t let the gap discourage you. You’ll begin seeing improved business results with every milestone long before you reach Class A. With outside education and coaching, we succeeded. The rewards have been well worth the effort.”

Greg stood, walked over to a serving cart and poured himself a cup of coffee while he determined how to raise a nagging concern. “You know, Dan, what you’ve accomplished is amazing. I see how what you’ve done works in your industry. Sounds to me that you pretty much make products based on orders from your customers, but we don’t have that luxury in Cosmetics Products. You mentioned how well the Integrated Business Management process works for you. I know a little about that process from Stan Stevens’ seminar, at least enough to know that there is a heavy reliance on forecasting. In the cosmetics industry, it’s nearly impossible to forecast what consumers want. We work a lot on forecasting, but our customers and their consumers change their minds about what they want at the drop of a hat. A particularly effective advertisement, a coupon in the Sunday newspaper, or even a casual comment on a late night television talk show can change everything. That’s one of the reasons we need so much inventory. In addition, our products are constantly changing. If we don’t say ‘new and improved’ on our products and packages, our customers lose interest and buy some other company’s ‘new and improved’ product. And very often, our competitors drive the timing of those changes. When they introduce a change to one of their products, we have to respond quickly and try to leapfrog their design during our next cycle of product changes. All in all, we’re in completely different businesses.”

“I can certainly understand your concerns, Greg. I also had Stan as an instructor in the class I attended. I enjoyed the class and his presentation, but was a little dubious about the whole thing. I don’t know how many end items or stock-keeping units (SKUs) you have to plan and forecast, Greg, but for comparison, given the number of options we offer our customers, we have well over a million different end items. Actually, nearly every end item is unique, so we assemble our final products on the basis of our customers’ orders. Rarely do we get an order for multiple copies of the same end item. Even though we assemble products to order, we still must forecast the business to have the right components, assemblies, and capacities available when orders materialize. When we realized the importance of dramatically improving our forecasting ability, our demand manager was ready to submit her resignation. We had to change our forecasting strategy and techniques. Since then, we’ve increased forecast accuracy from 22 percent to 65 percent and it’s still improving. Our demand manager has also made great progress on narrowing the range of forecast variability, another important measure we’re now tracking.

“Based on the coaching we received, we also changed how we master schedule. By modifying our process and adopting a more Finish-to-Order approach, we reduced the mountain of end items and parts we had to master schedule to a small but significant mound. We also have to deal with customers who change their minds right up to the minute when we ship an order. Our Manufacturing Director jokes that if he can catch the truck before it reaches our customer’s dock, he can still fulfill a customer change request.” Greg still looked doubtful.

“I admit there are probably some similarities, but your business is far different from ours, Dan. Your planning and supply processes are undoubtedly so different that they just don’t translate to our environment. I really wish we could apply them directly because we certainly need the improvement you’ve delivered, but I just can’t make the connection.”

“I wouldn’t jump to that conclusion, Greg. I visited a Class A manufacturer and distributor of meat products about four years ago and reached the same conclusion that you just reached. Over time, however, I realized that their basic business processes—forecasting, demand planning, master scheduling and production planning—are similar to ours. They have things like bills of material and routings, just as we do. Our products are significantly different from theirs, as are the ways we had to apply the concepts and principles of Class A, but their fundamental business processes are almost identical to ours. While we were both performing the same business processes, the company I visited was executing those business processes far more effectively than we were at the time. When I finally woke up to that fact, I could get past the ’my company’s different’ thinking that had been blocking my creativity.”

“That’s an excellent point, Dan. I know that I have to think differently about my business, and you’ve certainly given me a different perspective on how a company can operate more effectively. Guess I’m resisting change, too!

“You told us there was a big effectiveness gap between you and that meat products company when you began your Class A journey. You also said something about a methodology you used to help close that gap. Tell us more about that methodology if you can.” Dan paused for a moment to compose his thoughts.

“A couple of us had heard about Class A from business associates. We made arrangements to visit the meat company I mentioned, and later bought some copies of the Class A Checklist that they used to guide their improvement effort. We really thought we could get to Class A on our own, but over time realized we were stumbling around in a disjointed effort. That’s when we called Effective Management (EM) and spoke with Jim Clark. We were in trouble, needed to get better results quickly, and just couldn’t afford to waste any more time on our own. As with other EM people I’ve met since then, I found Jim to be very knowledgeable. What he said on the phone made a great deal of sense. I learned that Jim had been part of a Class A initiative as a senior executive with a client company before he began consulting. Since then, he’s educated and coached many more companies to Class A. I phoned a few of his Class A clients who recommended him highly, so we asked him to work with us. He and a small team from his company brought clarity to our efforts and took us through a very disciplined and structured approach to achieving excellence. He and his colleagues got us aligned on a common vision and enabled us to move in the right direction quickly. In fact, had we been better listeners and stayed away from our ‘we’re different’ excuses, we would probably have achieved Class A much sooner. You know, Jim and his team were pretty tough on us. They wouldn’t do the work. Instead, they educated and coached us on best practice processes and behaviors so that we could do the work more effectively and efficiently ourselves, and so we could realize sustainable benefits sooner. Jim said over and over, ‘You have to do the work yourselves so that you know what to do when we leave’. If it weren’t for Jim and his team, we would still be stumbling around and undoubtedly would have given up without achieving the benefits. Had we not turned around our results, we might not even be here today. I’m sure you heard Stan Stevens say, ‘If it isn’t your blood on the pavement, you won’t be successful.’ We weren’t sure what that meant at first, but soon realized it meant that to be successful, we would have to roll up our sleeves and do the work ourselves.”

Both Greg and David chuckled, but realized the wisdom and the challenge of that statement.

Greg, Sara, and David spent the rest of the visit asking more detailed questions about the objectives, results, business process changes, and the methodology recommended by Jim Clark. They had time to meet with their counterparts at Capital and found them open and eager to share what they had learned. They heard a good-news story—one that they desperately needed to duplicate in their own company. They wrapped up the day with Bob Radcliff, who said, “Let me just add one other thought. We did our Class A work using an earlier edition of the Class A Checklist, but continuous improvement is also alive and well in Jim’s organization. Effective Management is on a journey to excellence as well, and constantly incorporates new and improved best practices into their Checklist and into their coaching. Their latest edition is far more comprehensive and more broadly business oriented than the last one. We’re still learning about it and have Jim coaching us on how to incorporate the latest ideas into our business processes. We’ve become a learning organization. With our continuous improvement culture, we never take a ‘time out’ from learning. If we did, we would quickly slip to the back of the pack among our competitors.” Bob went on to summarize the benefits realized by Capital Equipment and again invited the group to call with any follow-up questions they might have.

On the way back to Atlanta, Greg, Sara, and David compared notes and impressions. The visit was enlightening and caused them to think differently about the challenges they faced. Capital was a company that had faced similar challenges and pressures several years ago. Capital not only survived, it prospered as a result of its Class A initiative. Greg, Sara, and David wondered privately whether changes similar to those made by Capital could produce the same outcome for Cosmetics Products. They saw for themselves what Capital had accomplished, but still had no real idea how to implement the required changes in their own company.

For Greg, there was also the concern about using outside consultants. For a long time, he held a personal bias against relying on people outside his own company, but Capital was singing the praises of Effective Management and how its approach was different from that of other consultants. Apparently they operated more as educators, mentors, and coaches than the others. They seemed first to focus on education and then coached Capital to Class A processes and results. One of Greg’s personal development objectives was to open his thinking to new possibilities and challenge some of his personal paradigms. But he was still reluctant to use a consultant; changing his long-held views was proving difficult.

Shannon Stillwell, President and Chief Operating Officer of Tender Care Pet Products, and Allen Burke, her Operations Vice President, hosted the visit. They greeted the team from Cosmetics Products enthusiastically and immediately began a tour of the headquarters and plant facilities. Following the tour, they settled in the executive conference room. “That was an eye-opening tour,” Greg began. “I’m not sure what I expected to see, but I was surprised by the cleanliness and orderliness of your operations. I was also surprised to see very little inventory in the production areas. Everything seemed to be moving so smoothly compared with what I see in our operation. I don’t know how to describe exactly what I mean, but I sensed something different, perhaps a different rhythm than what I sense in our company, or perhaps a different level of focus and control. Things seemed to be ‘humming,’ although that doesn’t describe effectively what I felt during the tour.”

Matt and Alexandra nodded in agreement. “I would expect you have some rather impressive results coming from that level of focus and control. By the way, why did you choose to go after Class A, Shannon?”

“That’s an interesting observation and good question, Greg. Regarding why we decided Class A was right for us, I wish I could say that it was leadership brilliance on our part, but in reality we were in deep trouble. In retrospect, we should have initiated the work much earlier, but you know the old saying—‘necessity is the mother of invention.’ We implemented new ERP software in the fall of 1999. Our old software was rather archaic anyway, and we were worried about potential Y2K problems affecting our ability to run the business. We invested more than $50M on software and training, and saw no benefits. Six months later, people were still running the business using spreadsheets and the same procedures as before the investment. If anything, our ability to service the customer was worse because everyone had been distracted by the software implementation project. We missed product launch dates because we were too slow creating bills of material. We missed shipments because we promised deliveries based on what the system told us, and then couldn’t find the product that was buried somewhere in the warehouse. We ran out of raw materials. We couldn’t ship product because the information required by the computer was incorrect or missing. We couldn’t pay our suppliers because of corrupt data in our supplier and material masters. You name it: it happened to us. Customers were getting poor service, we had some suppliers refuse to do business with us, and we had a few of our best customers actually fire us.”

“Shannon, your description is eerily familiar. You just described our company. I guess the good news, besides your success in solving all those problems, is that I now know we are not a uniquely dysfunctional company!”

“We are living proof, Greg, that you are not alone. There are lots of companies profitable enough to stick their heads in the sand and cover up problems with either money or inventory,” Allen Burke interjected. “I know that for a fact, because we did it for a long time. We had some ‘designer’ lines of pet food that were so profitable they covered up our problems. Our motto at that time was, ‘Denial is a river in Egypt.’ We weren’t so much in denial about our problems as we were simply blinded by our success. We couldn’t appreciate how much money we were wasting in operating the business that way. It finally caught up with us when a few competitors improved their products and supply chains, lowered their prices, and beat our customer service level. We lost some long-term customers. All this happened at a time when we were still paying for our ERP system investment. We raised prices a couple of times, watched our inventory spill out into additional warehouses, and found ourselves right in the middle of a crisis. Had we been using Sales and Operations Planning at that time, we would have seen what was coming and would have taken corrective action to prevent the worst of the problems. At the time, we thought that long-range planning meant looking at next month’s forecast. We had major problems and were totally unprepared to deal with them. We didn’t understand that our business processes could deliver good functional results and, at the same time, undermine our overall business results. We had a Cadillac of an ERP system, but had no idea how to make it work for us.”

“Allen has described our situation very accurately, Greg. We didn’t know whether we could recover in time to avoid bankruptcy. Just out of curiosity, are the problems Allen described really that similar to the problems in your company?”

Matt was first to respond. “I can only echo Greg’s earlier comment that you have just described Cosmetics Products perfectly. We have all of those problems. Let me ask you this. When you realized you were in trouble, how did you come up with a game plan for recovery?”

Shannon thought for a moment. “A few of our supply chain experts kept trying to tell us that we couldn’t fix our problems with a new ERP system alone. They told us that we needed to focus on improving our business processes first and needed some outside help. Our leadership team, however, was convinced that we knew what to do, and that we were smart enough to solve our problems. Of course, we were distracted at the same time by product launches, budgeting issues, and myriad other priorities called ‘running the business.’

“We had been a successful company and had little interest in the changes our supply chain experts said were needed. We paid a big price for that decision. But it was only when the CFO pushed the numbers in front of us and actually shouted, ‘You better do something about this now!’ that we admitted we were in crisis and asked for recommendations. We talked with our own experts, not for the first time mind you, but for the first time we really heard them. They told us about Class A and about all the work that we should have done before implementing the new software system. They told us that we needed to reimplement the software, but this time doing it properly. I have to confess that I said to them, ‘Okay guys, go do it; you have my blessing.’ They just stared at me. One of them finally and quietly spoke up and told me that the core of the problem was me, the executives, and senior managers. He told me that the executive team needed to implement Sales and Operations Planning (S&OP). I was a bit perplexed and told him verbatim, ‘We manage the business; we pay others to be planners.’ Looking back, I can’t believe I said that. Know what they did? Have a look. This is what they handed to us. It’s a definition of Planning. I keep this on my wall in the office as a reminder of that day:

“You see? ‘The first step in management.’ That really hit home. Of course we’re planners. So I decided to implement the latest evolution of S&OP—Integrated Business Management, at the Capable level—and led the Task Team myself, with the help of Effective Management, of course.” David smiled. Greg was certain he knew what David was thinking. Shannon continued.

“They suggested that we needed to revisit the company vision as a first step, and say it in two sentences! I thought this would be easy, but when the executives met, we discovered that each of us had a different understanding of the vision. That was a revelation and an important first step for us. You know the sayings, ‘If you don’t know where you’re going, any road will do!’ and ‘If you don’t know where you are, a map won’t help.’ We asked individuals at all levels to state the company vision. That was enlightening and more than a little disappointing. Even those of us on the executive team couldn’t pass that test. Unfortunately, that’s who we were at the time.

“We had to reexamine our leadership and who we are as a company. As a result, we established and communicated throughout the company a clear vision and mission; then we renewed our business strategies and our strategic business objectives. We literally reevaluated how we want the market to view us by restating our Value Proposition so that everyone in the company, and outside the company for that matter, can understand our distinctive contribution in the marketplace. At that point, we knew where we were headed.

“As to ‘where we were’ at the time, we took a different path. We needed a meaningful assessment. Two of our people had been in Class A companies earlier in their careers and presented a compelling case for outside, professional help to ensure the assessment would be useful and objective. We began working with a small EM team led by Roxanne Barnes.”

Over the next few hours, Shannon and Allen described Tender Care’s transformation. They shared the remarkable turnaround of their bottom line business results. “In a two-year period we first set our sights on the ‘Capable Planning and Control’ and ‘Capable Integrated Business Management’ Milestones. Then we expanded that work to include the ‘Foundation Enabling for Sustainable Improvement’ Milestone to improve our people and continuous improvement best practices. And we’ve just recently completed the ‘Advanced Supply Chain’ Milestone. As you can see, we focused our efforts on becoming a benchmark company that all our competition would envy. Our customer service climbed steadily from 88 percent, to 95 percent, then 98 percent, and is now routinely above 99.5 percent.” Greg and his team gasped audibly at this statement.

“Greg, I’m not finished,” Shannon said. “Our sales volume grew by 34 percent; cost of goods sold dropped 9 percent; inventory was reduced by 23 percent; and profit increased by 66 percent.”

The story, the approach, the method and tools used, and the results improvements were remarkably similar to what they had heard from Capital Equipment. Matt and Alexandra took copious notes, while Greg mentally compared the similarities and differences between Capital and Tender Care. Greg then moved on to considering the similarities between Tender Care and Cosmetics Products. Despite the obvious differences in products, the message from Capital was nearly identical to the message they were hearing from Tender Care. Either because Greg was hearing it for the second time, or because Tender Care and Cosmetics Products were both in the consumer goods industry, the message was getting through.

As they wrapped up the visit, Greg said to Shannon, “If you can, I’d like you to summarize the three things that enabled you to deliver the incredible results you’ve shared.”

“I really wish we hadn’t made it sound that easy, Greg. Listing three things would sell short what we had to do. I won’t even try to get it down to just three things, but I suppose the first key step was to select a standard of excellence against which to measure our performance.” Tender Care had used the same standard as Capital Equipment, the Class A Checklist for Business Excellence, and they also studied benchmark performance levels of companies in their industry.

“Until that point in time,” Shannon explained, “we always measured ourselves against what we had done in the past and against the budget.

“Next, we brought in the outside counsel to educate and coach us about excellence and how to achieve it for ourselves, not to do the work for us. Roxanne and her team caused us to be disciplined, and gave us a structured approach to achieving excellence. That turned out to be critical to our success.

“We educated a broad cross-section of the organization on those best practices, what they mean and the power of integrating them. We also conducted two types of assessment to determine where we stood against Class A companies. Roxanne Barnes called the first type of assessment a Diagnostic assessment of the organization. She facilitated that assessment for our executive team using maturity maps as calibration benchmarks. This set of maps covers the full scope of business excellence as defined in the Checklist. That helped us get a feel for where we were at the time, specifically our level of development or organizational maturity in each of the business process areas. I have to tell you that the maturity maps enabled us to reach consensus quickly on our overall company’s effectiveness. In most business processes, we found ourselves pretty much in the firefighting mode when we started. The Diagnostic identified the areas where we were the weakest and where we needed to focus our efforts to solve our highest priority problems. It also enabled us to begin defining the sequence of improvement milestones against which we would target our efforts.

“After we had agreed on the initial milestones, we worked with our coaches to define the project behind each improvement milestone, formed cross-functional project milestone teams, and charged them with closing the identified gaps and improving specific business results.

“With those milestone teams in place and chartered, our next step was to educate the teams and some additional subject matter experts at a much deeper level. This education prepared them for the second type of assessment, a detailed assessment of our business processes against Checklist elements relating to the Capable Planning and Control and Capable Integrated Business Management Milestones. In those assessments, we involved the milestone teams and our own subject matter experts for each of the business processes. They compared our current procedures and behaviors to the details contained in the Checklist. We needed to know specifically where we stood against the best companies.

“We did a couple other important things differently in the areas of education and measures,” Allen added. “We now recognize that people in planning roles must be professionals just like people in sales, marketing, product development, and engineering. Seems pretty logical, now, but it didn’t occur to us in the past. After all, planners are the people who must balance our capabilities with the ever-changing marketplace needs. We’ve learned that is no small task. The planners need to know our customers and their requirements, our products and services, our internal capabilities and the capabilities of our suppliers. They must be knowledgeable in the concepts, principles, and techniques of production and inventory management. For that reason, we started putting highly capable people in planning roles. First we brought them up to speed with current knowledge and best practices by using Effective Management courses. This was a fast process. For longer-term maintenance of knowledge, and to increase the professional status of our planners, we insist that all planners work steadily against a personal goal of achieving certifications from external Associations. This takes longer, but reinforces our commitment to planning excellence. Additionally, we have some senior supply chain people now involved in several supply chain forums.

“We also require our planners to be expert in the use of the ERP planning systems. In the past, we moved people through those roles frequently, but we’ve learned how shortsighted that was. We now have career paths in planning and logistics enabling people to be recognized and rewarded as experts in those areas.

“Turning to tracking performance measures for just a moment, in the past we had all kinds of measures, but they were mostly functional measures. With the help of our coaches, we developed a set of integrated measures that allow us to better monitor the health of our business processes. That, in turn, caused us to examine how well we were driving those improvements to the bottom line. Our measures are now more forward looking. We structured the measures so that we can predict what our business results will be in the future and prevent rather than react to crises. It was quite a challenge to define and implement the metrics behind each measure, meaning exactly where, when, who, and how to get the necessary data; what calculation to use; how to make the results visible; and how to integrate these back up to the Executive Dashboard. You’d be amazed at how many exceptions were being ‘forgiven’ in our old measures. We had been fooling ourselves about our reported results for years! But those days are gone.

“I’ll give you a few examples of our new measures. Sales plan performance, forecast accuracy, bill of distribution accuracy, bill of material accuracy, routing accuracy, master supply schedule performance, inventory accuracy, and supplier delivery performance are all measures that we didn’t have in place a few years ago. They’ve now become so important to us in monitoring the health of the company that we can’t imagine trying to run the business without them.

“We used to take enormous pride in our skills as crisis managers. We thought that was the ultimate mark of a successful manager. Some of our best crisis managers were legends in their own time. We were probably among the best at that in any industry, mostly because we had so many opportunities to practice. Talk about an expensive way to run a business! With this new set of measures we’ve become skilled in listening to the business through the measures and taking action to avoid most of the crises altogether. That’s not just a major change in our culture; it’s a major improvement in relationships among our business partners and in the quality of work life for all of us. I’ll give you an idea of just how much a change it has been. We’ve had to learn how to recognize and reward people’s ability to prevent problems and avoid crisis management heroics. That’s not as easy as it sounds. It’s much easier to see and reward people running around and reacting to a crisis than it is to see the creativity involved in avoiding one.”

“That’s well said, Allen,” Shannon interrupted. “We now use the measures and our balanced scorecard almost like a panel of aircraft instruments. We no longer have to ‘fly blind’ or by the ‘seat of our pants.’

“From a business perspective, some of the improved bottom line results are attributable to a solid Integrated Business Management process, and the single set of operational plans and numbers used by everyone to run the business. We trust the numbers we see and make better data-based decisions. We also trust each other to do what we say we will do all along our supply chain, both internally and externally. And we have the ability to do scenario analyses, and more recently some modeling, to test the implications of decisions before we execute them. Our people now let the computer crunch the numbers while they spend their time working on ways to improve the business. That’s many more than three things that we did, but I hope we answered your last question, Greg.”

“You did indeed, Shannon, although you used a number of terms, especially the measures you referenced, that I don’t understand. Seems that every time I get an answer to a question, I learn there is even more that I don’t know!

“A concern with what I’ve heard so far is that I’ve had some disappointing experiences in the past with consultants, and I want your opinion. I’m more inclined to rely on internal experts, but both you and Capital Equipment, whom we visited last week, told us that using outside resources has been a critical success factor. Speaking specifically about Effective Management, how do you rate the people who worked with you? And, based on your experience, would you recommend I call and set up an appointment with them?”

“Yes, without any reservations. You’ll find that their personnel have a real passion for what they do because they have been through it themselves as clients of their consulting firm. So don’t expect a bunch of people who tell you what you want to hear. I can promise you from firsthand experience, they will tell you what you need to hear. The real enlightenment and improvement, however, came from our doing the work, with their coaching, and applying what we learned to create breakthroughs in business processes and results. Our people really take pride in what they accomplished.

“Our coach was Roxanne Barnes. She asks difficult questions and has tough standards that she insists you meet. On occasion, she gave me some pretty straight feedback about my own behavior. From time to time, some of our project team members didn’t like her very much because she held them accountable for their results and accepted no excuses. But she enabled all of us to deliver some pretty remarkable improvements.

“Let me give you a little more to think about, Greg. Since we began our journey to Class A business excellence, we can see that we have even further to go; it’s a never-ending journey. We intend to keep improving and to become one of the most effective companies on earth. To that end, we’ve asked Roxanne and her group to continue coaching us toward full Class A Business Excellence so that we can move on and mature as a company. That’s probably more than you want to think about now, but if I were in your shoes, Greg, I would call her, or one of her colleagues, as soon as you get back to your office and hope that one of them has some open time in their calendar to work with you.”

Matt and Alexandra seemed as excited with what they observed at Tender Care, as did Sara and David at Capital. They were eager to produce the same turnaround as their host companies, but knew they would need help if they were to be successful. Greg sensed that among his leadership team he was creating a critical mass for changing the organization, but was still a little reluctant to involve a consulting firm.

That night when he arrived home, he shared the details of the trip with Penny. “You know, I’m becoming painfully aware of just how much I need to learn and how little time I have to learn it. I’ve now seen two companies that used to be in just as much trouble as we are. But based on what we observed firsthand, you would never believe they were in that kind of trouble a few years ago. It gives me a lot of hope that we can do the same thing, but I’m still not sure how to do it. You’re aware of my bias against consultants, but both company Presidents said the people who worked with them were critical to their success. They must have found consultants who work differently from those I’ve worked with in the past.” Penny smiled; she knew that Greg was already beginning to open up to new ways of thinking.

“Sounds like you’ve had a good couple of weeks to me. You may not yet have the answers you’re looking for, but I hear more optimism and excitement in your voice than I’ve heard in a long time. I know you enjoy learning, and I sense you are on a pretty steep learning curve right now. But why not give the consultants a chance? What do you have to lose?”

“You couldn’t be more right about that, Penny. The good news is that I seem to be on the steepest learning curve of my career. The bad news is that it may be the longest learning curve of my career. I simply have to learn faster; perhaps this Roxanne person can help me with that. I’m just not completely comfortable, yet.”

Later that week during his Leadership Team meeting, Greg and those who accompanied him on the Class A company visits summarized what they learned for the others. They discussed the challenges involved in making the changes needed, especially the resistance they would have to overcome with the amount of change ahead of them. They also discussed the obvious risk of doing nothing and quickly concluded that doing nothing was not an option. At least now they knew there was a tested and proven path forward. What they didn’t know was how, specifically, they could achieve the needed results. One thing was clear. They did not have the knowledge and expertise to get there on their own, at least quickly enough to survive. Greg’s staff knew that they needed the outside help suggested by both Capital and Tender Care, but they could still sense Greg’s hesitation. They asked him to articulate the specific concerns fueling his resistance.

“I’ll be straight with you. In part, my concern is purely personal and emotional, and I’ll admit that. Susan brought me here to solve our problems. Hiring a consultant is an admission that I don’t have the answers. I know full well that neither Susan, you, nor anyone else expects me to have all the answers. Nevertheless, that I don’t have the answers is an admission I don’t like to make. That consideration gets in my way, and I know I have to get over it.”

Sara was the first to respond. “Greg, I think I can understand your concerns. Most of us have worked with consultants in the past and probably share some of those concerns. And not one of us in this room likes to admit we don’t have all the answers. Having said that, I didn’t pick up on any evidence of what you’re concerned about during the visit to Capital, and I didn’t hear any negative comments from your trip to Tender Care either. Sounds like the consulting group that these companies used has a unique consulting model. I’d recommend having one of them come to see us. Let us address your concerns head-on and find out how the consultant proposes to work with us. Now, let me ask you a direct question if I may, Greg. What’s our alternative? We’ve been unable so far to solve the problems on our own despite our best efforts. We’ve seen two companies that we could try to emulate, but we don’t have time to do the necessary research and learn all the details about what they did to achieve their results. Don’t forget, they said they tried it on their own and failed. I think we are just flat out of big ideas about what to do next. So what’s our next step if we don’t bring in this consultant?”

The others nodded in agreement, and Greg replied, “You’ve made a good point, Sara. If we invite a consultant in for a visit, we could at least have that person address my concerns. We know that Roxanne Barnes has been successful in helping another consumer goods company and, to be honest, I just feel more comfortable working with someone in our industry. I know that’s probably wrong, but it’s just how I feel. I also feel comfortable knowing that Roxanne is highly recommended by the Chief Operating Officer of Tender Care. Since you put it to me straight, Sara, I know I need to make the decision about what to do next and make it soon. I’ll call Roxanne tomorrow and will let you know what I find out.”

Early the following morning, Greg called the cell phone number given to him by Shannon Stillwell and spoke directly with Roxanne. Greg introduced himself and told Roxanne about his visit with Shannon and her staff at Tender Care. After recapping all the good things that the company had to say about her work, he shared with Roxanne some of his concerns about working with consultants. He also assured her that he was impressed with what she was accomplishing with Tender Care and might need her help in delivering similar business improvements for Cosmetics Products.

Roxanne explained that there was a proven process to help Greg and his team at this early stage. She outlined for him what she called a “Facilitated Diagnostic” through which they would collectively gain a better understanding of where they were and insight into where they could be. She explained why this would take at least two days, a heavy commitment for executives.

Roxanne proposed an agenda for the ‘Facilitated Diagnostic.’ “I’ll be using a set of our simple, but powerful, maturity maps as a tool to help you define where Cosmetics Products is today. At the beginning of the first day, I’ll want to hear from you and your team the nature of the problems you’re dealing with and your business objectives. I’d also like a tour of the facility, especially if you have supply operations there, just to get a better feel of how the organization works. I also need time alone with some of your key managers from across the Division during the day. Toward the end of the day, I’ll facilitate the Diagnostic for you and your Leadership Team, and also share my initial observations. Then on day two, having talked about the gaps, I’ll give you some insight into our business excellence expectations, so you have a better view of what Cosmetics Products could look like in the future. You’ll also see more clearly by then how my colleagues and I could work with you. We can then talk about the potential costs and the benefits of a Class A journey and discuss what your next steps might be.”

Roxanne offered Greg a few dates, the earliest of which were at the end of the following week.

“Our need is urgent,” said Greg, “So I’m going to bite the bullet. Next week it is. I appreciate your ability to respond quickly and look forward to meeting you.”

Greg already had an opening on Thursday of the following week, but had to free up Friday, which he anticipated would not be a problem. Greg now had to break the news to his team and get everyone else to clear those days. He could only imagine the groans he would hear from them.

After the call, Greg was a bit less apprehensive about working with a consultant. He was also more energized since he had put in place at least one step toward improved results. He notified his Leadership Team and asked them to clear the following Thursday and Friday for meetings with Roxanne. At the end of the day, Greg called Susan and further updated her on his visits to the other companies and on his plan to meet with Roxanne.

Greg also closed the loop, as he promised, with Stan Stevens to thank him for the contacts, to review the results of his company visits, and to let him know that he had invited Roxanne for a visit.