Making the Case for Quality

Turn Around or Shut DownHow an Indian Organization Used Self-directed Teams to Save a Failing Business Unit

In 2007, the CEO of Trident Group changed how the companys chemical unit would report its financial results, a decision that revealed the unit was missing revenue projections by more than 90 percent.

With just a year to transform the failing chemical unit, the unit head formed an improvement team to analyze performance metrics and find a solution. The team learned the units employees portrayed signs of low morale which, according to international research firms, can impact profitability.

The head of the chemical unit explored the concept of self-directed teams, which are highly trained groups of employees responsible for work with minimal management supervision. While it was an unconventional approach, the unit head recognized self-directed teams can promote process alignment, customer-centeredness and employee empowerment.

Nine months after implementing self-directed teams, the units overall process score increased from 13 percent to 65 percent, which resulted in a 70 percent increase in revenue and $3.4 million saved.

At a Glance . . .If a business unit isnt making money, many organizations assume that more involvement from management is needed to lead the team to profitability. After all, managements role is essentially to help employees achieve the organizations goals. But when an Indian conglomerate learned that one of its business units was in the redand to its surprise, had been for many yearsit found that the traditional management approach might be killing the money tree instead of providing it the nurturing it needs.

About Trident Group

Trident Group, a conglomerate in Punjab, India, is involved in the paper, textiles, yarn, chemical, energy, and IT industries. With businesses spanning across more than 75 countries, Trident Group is a $1 billion USD enterprise that employs more than 10,000 individuals, and is an indirect employer of 20,000 people.

Recent awards that Trident Group received include the Golden Peacock Environmental Management Award, the JCPenney Innovation Award, the Best Supplier of the Year Quality Award from IKEA, the Institute of Company Secretaries of India National Award for Excellence in Corporate Governance, and multiple supplier awards from Wal-Mart Stores Inc.

Restructuring Revealed the Truth

For many years, the paper and chemical units operated independent of each other and reported finan-cial results together in profitability statements and balance sheets. In 2007, the CEO divided the paper and chemical units into standalone entities and required each to do its own financial reporting.

It soon became clear that the chemical unit had been in trouble for years, as it had been piggy-backing on the profitability of the paper unit. Between April 2007 and September 2007, the chemical unit brought in a mere $2.8 million toward its $28.62 million projected revenue. The news was so shocking that the management team toyed with the idea of closing the chemical units doors altogether.

The CEO, however, didnt want to turn his back on the failing unit just yetpartly due to sentimental reasons, and partly due to its earning potential. The chemical business was the first unit established by the organization in 1986. As it grew, the chemical business kept the organization financially afloat. The CEO gave the head of the chemical unit an ultimatumturn around or shut down.

by Sumeet Kumar

May 2013

ASQ www.asq.org Page 1 of 4

Do or Die

Given 12 months to transform the chemical unit, and the freedom to do so by any means necessary, the business head quickly enlisted the help of a project team to dive into perfor-mance metrics and scour research for a solution.

The team collected data on three key dimensions: customers, employees, and internal process capability of the chemical unit. Data revealed that the overall customer satisfaction score was a healthy 72 percent; however, the employee satisfaction score was at a grim 51 percent and the overall process performance score was a dismal 13 percent.

The business head observed that with the possibility of unem-ployment looming overhead, morale had sunk to very low levels among the units 71 employees. Research from Fleming & Asplund and the Gallup Organization has suggested that engaged employees drive profitable business outcomes. It was strategi-cally decided that the primary area of focus in the chemical business would be to improve the people score. That, inturn, would boost efficiency and hopefully recover losses.

The chemical unit head felt a high-magnitude approach was needed. During this time in India, the concept of self-directed teams was

being promoted by local consulting firms. For most organizations, this way of doing business was a hard sell and it demanded a radical shift in thinking. As the chemical unit head explored the approach, he realized it stood on a sound foundation of organizational pro-cess alignment and customer-centeredness. He also recognized it includes lean thinking, a distributed leadership model, and people management through empowerment.

Hands-free Management

A self-directed team is a highly trained group of employees responsible for working under minimal management supervi-sion. These teams are different from most others in that they often have more resources at their disposal, a broader range of cross- functional skills, greater decision-making authority, and better access to information. Self-directed teams are equipped to conduct planning, set priorities, coordinate with others when necessary, assess the state of processes, and take corrective action.

A 22-step road map to people excellence under the name Acknowledge, Qualify, Transform, and Embrace (AQTE, which is pronounced equity), is illustrated in Figure 1. This approach was developed by the business head to deploy the new work sys-tem. It breaks down the concept of self-directed teams into four

ASQ www.asq.org Page 2 of 4

Figure 1: Acknowledge, Qualify, Transform, and Embrace (AQTE)

Acknowledge Qualify Transform Embrace

Acknowledge linkagebetween organizational

strategy and role of Human Sigma

1

Identify gaps in customer, process,and people scores

5

Reorganize people in teamsto suit redened processes

12

Reevaluate physical and IT infrastructure requirements

16

Identify resources required to createvalue at value convergence points

8

Dene/redene processes in linewith customer request

9

Map current skill levels for operatives and

competencies for nonoperatives

10

Identify customer segments

6

Prepare location plan for identied members

13

Communication and change management3 4

Identify value convergence points

7

Develop position description and authority matrix

14

Dene service levels between teams

15

Develop PMS for new structure

17

Identify skill and competency gaps

11

Prepare deploymentcharter

2

Administer self-tracking system to manage

value and CPP score

21

Establish knowledgemanagement system

22

Devise criteria for reward,recognition, and growth

18

Facilitate training and development for members

19

Establish leadership development process

20

PMS = Process management systemCPP = Customer process people

ASQ www.asq.org Page 3 of 4

phases, which are shown in Figure 2. It also includes the principles of Human Sigma, a process for improving and reducing variability in employee and customer engagement.

AQTE discards a function-based structure (FBS) and replaces it with a process-based structure (PBS). Most organizations have a traditional FBS, which is hierarchal and rid-den with silos, giving employees little opportunity to gain knowledge outside of their specialty areas. A PBS is supported by a flatter organizational structure. Because this structure emphasizes working toward a common goal, there is more collaboration among teams, fewer silos, and more engagement.

Fostering Accountability, Relationships, and Transparency

The workforce was arranged into four cross-functional teams called business units (BUs) in both upstream and downstream operations along the value chain. Supervisors on the shop floor would be replaced by a teamelected leader, who was empowered to make all decisions in his or her BU during a shift. Team-elected leaders would operate for a specified termanywhere between one month to three months, depending upon what the team feels is appropriateand everyone on the team would receive a chance to lead.

Workers who were supervisors in the former structure were either placed in a BU or they were transferred to the newly formed Center of Excellence (COE), which also included one representative from each business unit. Some supervisors left the company on their own terms because they did not agree with the self-directed teams concept.

Most functions handled by other departments were transferred to each BU so each was nearly self-sufficient. Examples include human resources, IT, and supply chain management. Additional measures were taken to improve the people score and support staff in this new way of doing busi-ness, including:

Employees received training to broaden their skills and expertise.

Performance-based monetary incentives were offered for teams and individuals.

The installation of visual boards to monitor team performance during shifts.

Stronger sales efforts so that BUs sold what was being produced in the required quantities.

A focus on the root cause of the problem and the process instead of placing blame on individuals.

Empowering employees to experiment with new ways to complete old tasks.

The CEO assured staff members that they would be placed in a different area of the organization if the self-directed teams approach failed and the chemical business was shut down.

Employees underwent a compre-hensive training program that was facilitated by the COE. First, skills needed in each BU were identified. Then, each employees mastery of technical skills was assessed and ranked among seven levelslevel one being basic, and level seven being expert. Not surprisingly, most employees ranked highly in skills related to their core area and lower in skills they didnt routinely use. Based on the skills and expertise level required in a particular BU, employees received additional training to better support their team. Once an employee acquired a new skill and demonstrated independent use, a percentage of their salary was permanently increased.

A Acknowledge the role of Human Sigma in realizing organizations vision.

Q Qualify the gaps in meeting customer and process requirements.

T Transform people processes to unleash the power of Human Sigma.

E Embrace the learnings for sustained growth.

Figure 2: Phases in forming self-directed teams

Qualifying the Opportunity: As-is customer process people (CPP) scores

Y axis

X axis51%

13%

72%

People score

Custo

mer sc

ore

Process score Y axis

Z axis

People and customer scores are derived from responses received on the surveys conducted using Gallup framework

Process score is derived from economic value add (EVA%), i.e., PBIT/capital employed WACC%

PBIT = profit before interest and tax WACC = weighted average cost of capital

ASQ www.asq.org Page 4 of 4

Since a self-directed team culture depends on accountability, functional relationships, and transparency to be successful, training sessions focused on the development of soft skills, mentormentee relationships, knowledge transfer, and leadership.

Waiting for a Shift

The initial results were not promising and the chemical unit lost more money than before implementing AQTE. Processes were not stabilized and morale was still low. As time passed, the teams became stronger and trust in the system grew. The results began to shift in the ninth month.

After deploying AQTE, 90 percent of the work done inside each BU was completed without any assistance from supervisors. Each business unit formed became self-sufficient and performed activities that helped real-ize targeted gains. For the first time, data and knowledge flowed freely instead of being limited to the privileged few.

The people score jumped from 51 percent to 67 percent and the customer score increased marginally from 72 per cent to 78 percent. However, the breakthrough was in the overall process score, which went from 13 per-cent to 65 percent. This resulted in a net margin of 8 percent, a revenue increase of more than 70percent, and savings delivered to the tune of $3.4 million.

Project Management Matters

Keeping key stakeholders engaged and maintaining close watch on the project timeline was instrumental in the projects success. In addition to bottom-line improvements, the chemical unit enjoyed several intangible benefits, such as less employee turnover, reduced absenteeism, better utili-zation of manpower, and a more nimble and skilled workforce.

The CEO was so pleased with the results that he made duplicating the approach in the yarn business a strategic priority.

The chemical unit continues to thrive. The CEO has invested in additional infrastructure to expand the chemical units manufacturing capacity and to pro-duce even higher grades of chemicals.

For More Information

Learn about lean at asq.org/knowledge-center/lean/index.html.

Explore the different types of teams at asq.org/learn-about-quality/teams/overview/overview.html.

Read another case study by Sumeet Kumar entitled, Six Hospitals Combat Regional Emergency Department Congestion With Lean, at asq.org/2012/11/lean/emergency-department-congestion.pdf.

About the Author

Sumeet Kumar is a mechanical engineer, MBA, a certi-fied Lean Six Sigma Black Belt and Project Management Professional with 17 years of experience in the automotive, fast food, chemicals, consumer durables, and healthcare industries. Sumeet, who has copyrighted a customer rela-tionship management (CRM) model, leverages domain expertise, technology, and knowledge in performance excel-lence models to stimulate new business growth, increase revenue and profit, and reduce overhead. Sumeet is the director of quality performance at North Bay Regional Health Centre located in northeast Ontario, Canada. In his previous job at Vancouver Coastal Health in British Columbia, Canada, Sumeet helped spread lean culture and promote operational excellence across eight hospitals that provide mental health and addiction services. Recently, he presented his paper at some of the leading international conferences on combating congestion in emergency depart-ments and improving patient flow across six hospitals under Vancouver Coastal Health. He formerly served Trident Group as vice president and quality deployment leader and led a team of 17 Black Belts and 25 Green Belts as he built an infrastructure to support cultural change. He is credited by the CEO for being instrumental in turning around a fail-ing business unit to a net margin of 8 percent, increasing revenues by more than 70 percent, and delivering savings of $3.4 million.

Acknowledgments

Paras Surana: Project Black BeltPramil Pal: Production ManagerAmardeep Singh: HR ManagerSanjeev Banga: Sales and Marketing Manager Rajesh Garg: Procurement & Supply Chain Manager Ajai Dyal: Consulting advisor on Self Directed Team

methodology Vibhu Bhatia: Executive Assistant to Business Head

Turnaround: Project benefit

Y axis

X axis51% 67%

65%

13%

72%78%

People scorePr

oces

s sc

ore

Custo

mer sc

ore

Process score Y axis

Z axis