Recognizing Minor Process Abnormalities Should Be The Norm
You should prepare employees to recognize process abnormalities before they jeopardize business continuity
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This Week’s Summary:
Business continuity is best maintained when key process points are monitored for abnormalities.
Experienced people often think that “obvious” is “obvious” to everyone which is usually not true.
Experts can define steps to simplify monitoring of complex situations.
This way complex monitoring advice can be done by less experienced employees.
Last week we talked about employees being an early warning system for potential business continuity problems. Just like the canary in the coal mine, they can see when something is abnormal early enough so that the organization can deal with it before it becomes a major issue. This week we will take a closer look at exactly how you can make this happen in your organization.
You can only recognize something as abnormal if you understand what normal looks like. So, what is normal? Let’s look to the Merriam-Webster Dictionary for a formal definition of normal. It defines normal as “Conforming to a type, standard, or regular pattern; characterized by what is usual, typical, or routine.” I like this definition when discussing normal in a business continuity context, because the entire point of business continuity is to keep a business’s value creation process functioning as “usual.”1
Created by Ed Paulson using Copilot in Windows and then modified in Adobe Photoshop.
While we are looking at definitions, let’s see what the dictionary says about abnormal. Marriam-Webster defines abnormal as “deviating from the normal or average.” It also includes that these deviations are often “unusual in an unwelcome or problematic way.”2
Interestingly, abnormal can either be a positive abnormality, such as an exceptionally high return on my investment, or a negative abnormality such as COVID shutting down an entire production line. We rarely are concerned about positive abnormalities because they usually work in our favor. It is the unwelcome abnormalities which interrupt business continuity that concern us.
Last week we I presented business continuity as preserving a company’s idealized value creation process flow so that it continues without interruption. This flow is comprised of major steps, minor steps, and individual tasks performed by a combination of people and machines. Business continuity planning starts with a clear understanding of this idealized process flow and is important because it makes future planning easier and more reliable.
However, as we all know, people have good days and bad days. People also get sick, retire, and change jobs. Machines break or go out of tolerance from use. Vendors and customers have their own problems to deal with. Mother Nature may step in with a storm or natural disaster. Political issues may cause civil unrest that interferes with shipments or purchases from foreign partners. Lots of events can happen to disrupt the idealized process flow and vigilance is warranted to recognize these disrupting events as early as possible. We will call events that disrupt the flow exceptions because they represent a deviation from the usual process.3
A major exception, such as a COVID related work stoppage, can completely shut down operations. These are easy to spot because everything stops, and everyone focuses on fixing it. A minor exception such as one of three parallel machines breaking down can slow down production but will not cause a work stoppage. In either case, the company that most efficiently corrects the exception and gets back to its idealized process flow will win in the marketplace. This is why developing an approach for efficiently recognizing and managing exceptions as early as possible is important critical to business excellence.
A major challenge to early recognition of exceptions is that the minor symptoms preceding the major event may not be obvious to an untrained observer.
An untrained observer may hear a specific sound and even recognize it as being out of the ordinary, but they may also not realize that it indicates a more serious problem.
A few years back I had a past small business client with cashflow issues, so he brought me in to take a look. After reviewing his average receivables collection time, and seeing it was over 60 days, I asked about his credit policy. He said his credit terms were “Net 30 days” but most of his clients paid much slower than that. His perceived “normal” was that folks in his industry paid slowly so he did not think that slow paying customers were out of the ordinary. When I told him that this was not normal, even for his industry, and the slow collection period was the reason for his cash problems, he was a little shocked.
As we dug deeper, we realized that a few of his major customers were over 120 days past due. For you accounting types, this was done through a “Receivables Aging Report” which my engineering-oriented client didn’t know existed. His business had survived on timely payments from the majority of his customers, but several of those that he perceived as his “best” customers due to their larger purchases were seriously late paying him. When he had pushed them in the past about receiving the overdue payments, they told him that they were strapped for cash right now and “would pay as soon as they could.” This statement was often followed up by, “Oh, and by the way, when can I get my next shipment?”
My client realized at that moment that they were upgrading the equipment in their own organization with the money they owed him, which made him a little angry! He decided, with advice from me, to put them on “Cash Only” basis for each new order and, additionally, they could only receive new product if they paid at least half of what they owed from selected past individual orders. They could return to ordering on credit after their long overdue obligations where paid.
Most responded well to the requests and did their best to catch up, but a few serious offenders got irritated with him and “took their business elsewhere!” My client was a little concerned by the loss of sales revenue until I helped him realize that he was previously producing his products and paying his bills to basically fund his deadbeat client’s business growth. This was good business for them, but not for him, and he should say, “Goodbye to bad business!” My client’s collection problem was not obvious to him, but it was to me as soon as we ran an aging report.
My client was a great design and manufacturing engineer with no accounting background. That is where I came in. To support him after my engagement was over, we set up regular process whereby he ran an aging report every two weeks. He then compared his prior aging report to the current aging report, looking for positive or negative changes, and also compared it to a set of industry standard metrics that I set for him. If the results were within acceptable parameters, he had nothing to worry about. If the results were outside of acceptable parameters, then he had a set of steps to follow to determine which were his problem customers along with steps he should take to bring their payments current. What was previously a complicated process for him was now made simple by incorporating my experience into a set of standardized steps.
Experience matters, but it is not needed all the time if the right communication framework is set up. Experience is needed to determine where to look for the potential problems and to develop a solution that includes the steps for monitoring the future effectiveness of that solution.
Experienced people should be used to analyze a situation and then provide a simplified process that can be followed by a less experienced person.
Next week we will look at the steps you can take today to incorporate these concepts into your specific operation, immediately improving your organization’s resilience.
Have a great week and thanks for stopping by! ☮
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For those of you interested in learning a little more about process monitoring and control, check out this URL. It is a solid, high-level overview of this important topic. https://dimofac.eu/2022/09/02/manufacturing-monitoring-systems-overview/#:~:text=Process%20monitoring%3A%20warns%20the%20operator,correction%20is%20being%20made%20automatically.
Another excellent article, Ed.
Thank you Dr. Biz!