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The Learning Organization

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4) The cornerstone is performance measurements.

The cornerstone for holding and maintaining the atmo­sphere for the Learning Organization is performance mea­surements. Performance measurements are not new to American manufacturers, nor is the process of managing by the numbers. Formal financial systems have been in use for many years. These systems take on many shapes and sizes, but the basics are relatively common; accounts payable, accounts receivable, general ledger, inventory evaluation, etc. The problem is that our present accounting systems are not able to summarize a company's manufac­turing operations in terms of world class. In fact, they may be even misleading and promote the internal competitiveness that breaks down our organizational effectiveness. Our people and our world class competitors are laughing at us.

Let us take a look at efficiency and utilization for an example, the foreman who's stuck with a goal on numbers. He cannot do what is right. If he would stop and do needed repairs on the machinery, he would miss the goal set for him and add cost to the product. After all, it might hold up through the shift. Sound familiar? The fact that he's producing scrap has nothing to do with it. Budget based measurements present problems all throughout the shop. They present an inadequate picture on our overall perfor­mance in manufacturing. The interesting thing that I find is that our people realized this a long time ago. But guess what? Here we are in 1994 and we are still measuring the same way.

World class performance and building an effective Learning Organization require valid measurements that include:

• Quality. A total commitment to quality. This includes major changes in the way we design products, our relationships to our suppliers, train and educate our employees, and perform maintenance and operate our equipment.
• Inventory. This includes not only our basic under­standing of optimizing inventory. It also requires us to extend this to include the elimination of waste in setup times, reduction of work-in-process, and the overall reduction of inventories elsewhere.
• Productivity. You may say that we measure produc­tivity today within our financial systems, such as value added per employee or output per direct labor hour, but as direct labor cost decline compared to total cost, we are missing opportunities to focus in on total factory output. We can not in effect relate these measure­ments by looking at aggregate data from profitability statements. It requires a very detailed look at units produced, labor used, materials processed, and capital utilized. In the 60's and 70's many U.S. companies earned a significant profit but were unable to identify that their productivity was declining.
• Innovation. Whether you produce mature products or specialty type products, innovations are a key to staying competitive in a world class market. This includes every aspect of a manufacturing business from the manufacturing process itself to service and distribution. If we realize that technology is doubling every 20 months, we need to tap into every resource we have to make this work to our advantage. The gateway resource to this advantage is our people. The compa­nies that are not able to do this may not be here in the next 10 years. Our performance measurements need to tell us how well, or how well we are not doing in this area.
• Employee Empowerment This includes the ability to measure the skills, training, and morale of the work force. Our current financial system do a very good job of measuring our businesses in terms of dollars and cents. But business is people whose team objective should be success in achieving a goal. The goal could be the order, the contract, or eliminating waste. The key is giving each of us the sense of personal responsi-bility for what happens to their department and to the company. People are our greatest asset, let's manage them correctly.

I have highlighted a few measurements which I felt needed special consideration for this paper. We still require all of the measurements that we tend to think of in general terms within APICS, such as top management planning, opera­tions management planning, and the operations manage­ment execution areas. The key is measure, measure, and measure. A thorough understanding is necessary by all people in the areas they are responsible for and the effects on other functions within the company. Peter F. Drucker said, The measurement used determines what one pays attention to. It makes things visible and tangible. The things included in the measurement become relevant; the things omitted are out of sight and out of mind."

Summary and Conclusion

The Learning Organization has to be something that is freely accepted by all. It actually is a process of voluntary and responsible participation. This cannot be dictated. If it is, you will get hostility to the new, and loyalty to the old. Alport, one of our early leading social scientists said, "It's an axiom that people cannot learn who feel that they are being attacked." It is for this reason that group work methods are so vital in today's manufacturing environ­ment, where change is the norm.

As change occurs towards the Learning Organization, it is imperative that our performance measurements change as well. Performance measurements are in fact the controls that allow us to navigate our company to greater and greater success in quality, productivity, and service. This then becomes our ongoing continuous improvement process.

Learning to reason productively and bringing about change are probably two of the most difficult things that we will ever do within our manufacturing organizations—even painful. We must change if we are to compete in global markets. But first, we must prepare our organizations for change just like the farmer prepares the ground before he sows the seed. If not properly done, the yield will be disappointing. Chris Argyris of the Harvard Graduate School said, "Every company faces a learning dilemma: the smartest people find it the hardest to learn."

For balance of this article, click on the below link:
Lean Manufacturing Articles and go to Series 02


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