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Making 'big' work 'small': the smaller converters and private label producers can take a page from the Kimberly-Clark and Proctor & Gamble books on management techniques to dramatically improve their own profitability.

Making `Big' Work `Small'

Just because a company's bottom line says it is "small" does not mean it can't think along with the "big" guys in the field.

Carefully modifying big company practices to fit the special needs of small to medium sized manufacturing companies will yield remarkable results. In the nonwovens and disposables industries, I have seen these smaller guys increase production up to 35% and reduce waste up to 45% through re-applying some of these big company practices.

So what are these big company management systems and techniques and systems and how can smaller companies utilize these methods to improve their profitability? That's what we are here to find out.

The `Big' Methods

The following list identified just a few of the management systems and techniques that are typically used to monitor, direct and control large companies:

- Organization Charts

- Job Descriptions

- Performance Expectations

- Annual Performance Reviews

- Manufacturing Budgets

- Capital Forecasts

- Manufacturing Capacity Plans

- Yearly Improvement Plans

- Materials Utilization Reporting

- Product Cost Reporting

- Daily Operation Meetings

As we've discussed in some of our previous articles, these management systems and procedures are not inherently complicated. They do not require "rocket science" to understand. They are just proven techniques for implementing sound management fundamentals.

Unfortunately, the entrenched bureaucracies in many large companies and academic institutions devote their careers to making these management methods overly complex, therefore making it even more difficult for smaller companies with limited resources to understand and implement similar procedures.

When small companies do try to implement similar procedures, they are often unsuccessful. Simply forcing extensive "big company" practices onto smaller companies will not automatically improve results. These systems must be simplified and streamlined to meet the needs of the less structured, "leaner" small company. Additionally, the smaller company will often compound the problem by attempting more changes than the organization can absorb at once.

Successfully applying these proven management practices to small and medium sized companies really comes down to just key questions:

1. Because small to medium sized companies have only limited resources and there are numerous potential choices, which management systems are the most important?

2. Once you decide what systems to implement, how do you successfully simplify the systems to work in the smaller, less sophisticated organization?

Stick to Fundamentals

Small and medium sized companies cannot afford to be diverted by the latest management fads. They generally have fewer management personnel and more limited financial resources. Therefore, when selecting which techniques to implement, it is important to stick to fundamentals.

There is nothing more fundamental than first being sure your managers know what is expected; second, accurately measuring manufacturing results; and, finally, using these measurements to evaluate performance against the expectations. The formal management systems large companies use to perform these functions are typically called:

-Performance Expectations

-Results Reporting

-Annual Performance Reviews

While there are many other "big company" systems and procedures that can help smaller companies, these three are the best place to start. Any manufacturing operation will need these systems in place to approach its full potential.

Performance Expectations

For performance expectations to work with a small company, they should be simple, focused on results and tailored to fit the situation.

The best performance expectations I've seen are a brief listing of the top five to eight things that a manager expects his subordinate to accomplish. Often, the longer and more extensive they will be. A short list that the subordinate can easily remember will be much more effective than a lengthy manuscript that gets filed away and forgotten.

Expectations should focus on results, not activities. Unless you intend to do all the subordinate's thinking for him or her, describe what you want, not the activities involved. Nevertheless, don't be afraid to include some "soft" areas like safety or training. Only be sure the expectations still identify a clearly defined result.

There are no "standard" expectations. Each individual and each business situation is unique. The best performance expectations are tailored to the particular situation; take into account the individual's capability and the specific business problems and needs.

An example of the annual performance expectations for a production manager in a disposable diaper plane is:

- Reduce customer complaints by 25%;

- Increase average production to 100,000 pads per shift by the fourth quarter;

- Reduce scrap from 5% to 4% by the end of the year;

- Accelerate the training of the second shift supervisor to prepare her for a promotion by the end of the third quarter;

- Develop and implement plans to improve third shift results so they are comparable to the other shifts;

- Reduce back injuries by 50%.

Of course, just setting expectations will not make the desired results happen. Still, clearly defining the desired goals is a vital prerequisite to the subordinate developing and implementing the plans that will achieve the goals.

Results Reporting

If you have difficulty identifying goals that are as specific as the above examples, you may have a problem with how results are measured and reported. Until you can measure manufacturing performance, it will be extremely difficult to set goals and develop plans to achieve these goals.

Like performance expectations, manufacturing reporting should be simple, focused on results and tailored to fit individual company needs.

In addition to applying these three principles, successfully modifying big company reporting systems requires correcting an error commonly found in the results reporting of smaller companies. In these companies with only limited manufacturing staff, the reporting systems are generally established by the accounting department so that accounting can report monthly expenses and profits to upper managerment. This leads to accounting accumulating piles of information that is not timely or useful to manufacturing management.

Only be developing reporting systems specifically aimed at providing manufacturing management with the information it needs to improve results will there even be profits to report. Therefore, results reporting should target manufacturing information needs first and then fill accounting needs.

Ultimately this will put more accountability on manufacturing, where it belongs. Manufacturing management must clearly understand the information it needs to control and improve the operation. It cannot rely on the excuse that "these are just accounting's numbers."

Annual Performance Reviews

Again, keep it simple and results-focused, plus provide training for each manager on how to conduct performance evaluations. This will help with the biggest problems smaller companies have with performance reviews. Often managers dread annual performance reviews even more than subordinates because the managers are uncomfortable sitting down eyeball to eyeball and discussing performance.

Keeping it simple and relatively informal will help both the manager and subordinate be more comfortable and concentrate on the actual content of the performance review.

The performance review should focus on "results" rather than the individual himself. This will help make it a professional evaluation rather than a personal attack.

But most important, train managers how to do performance reviews. You wouldn't expect a person to understand and repair a complicated machine without being trained. So don't expect managers to diagnose and correct someone's performance without training.

A simple format for performance reviews that works extremely well is:

* Strengths and Accomplishments: The manager lists the subordinate's overall strengths and how he or she is relative to the performance expectations.

* Improvement Areas: The manager identifies areas where the subordinate needs further improvement and is not meeting expectations.

* Future Direction: The manager and the subordinate jointly develop the subordinate's personal improvement plan. A good plan will identify specific actions to build on the strengths and improve the weakness, in light of the overall business needs.

No Quick Fixes

In our industry, there are no tricks or quick fixes to improve profitability. But, the smaller converters and private label producers can learn from the large roll goods producers and the disposable diaper giants like Kimberly-Clark and Procter & Gamble.

By simplifying "big company" management techniques to meet the special needs of small to medium sized companies, the smaller companies can dramatically improve the profitability of their manufacturing operations.
COPYRIGHT 1989 Rodman Publications, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:Profitable Manufacturing
Author:Frankenfield, Frank
Publication:Nonwovens Industry
Article Type:column
Date:Nov 1, 1989
Previous Article:Western European nonwovens update.
Next Article:Medical/hospital nonwovens: healthy, but not without minor ailments; cost, infection control and the disposability of its products continue to drive...

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