Lecture for Meeting of CEO's – "Bar Lev Forum" - Bar Lev Industrial Park - 1 February 2012. Quick and continuous improvement process with employees. Lecturer: Ze'ev Ronen

1. Targets and indicators as a tool to help improve
profits and performance
Lecture for Meeting of CEO's – "Bar Lev Forum"
Bar Lev Industrial Park
1 February 2012
Quick and continuous improvement process
with employees
1
Lecturer: Ze'ev Ronen
Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

2. Objective: improving company profits and strength
• In every company, Management is the
forum that copes with emerging market CEO
challenges and opportunities.
• On one end of the spectrum, Management is
Secretary
a limited body, and its members are
overloaded,
Marketing and
Sales Operations Finance
• on the other end of the spectrum, their
capacity and creativity are limited and not
boundless.
Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012
2

3. Connecting employees to company objectives
and getting them involved
• However that same component which is not
handled by management enables the collection CEO
of a lot of money from the floor.
• And at the same time, as an after Secretary
effect, to connect the employees
to the company objectives,
enhance motivation and breathe Marketing Operations Finance
and Sales
new spirit at all levels.
• There is a huge treasure of
hidden knowledge and force
of thought at the levels below
management who do not take
part in the thinking processes and
coping with challenges.
Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012
3

4. Measurement
In order to improve, one must measure.
You cannot gain improvement without
measurement - otherwise you will
achieve random and marginal
improvement.
Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012
4

5. How shall we define and select the areas for improvement?
If the aim is to improve:
How will we select the areas for improvement?
Areas for improvement must reflect company objectives
Adapt to given priorities
Respective of certain criteria that are to be defined.
Or in other words, it is worthwhile to select profit
leverages,
Profit leverages may be used as a criterion for selecting
areas for improvement.
5 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

6. Identifying profit leverages and setting priorities
• Profit leverage indicates any small improvement in results
in any subject or field, which will in turn lead to a large
improvement in profits or in another objective which the
organization would like to improve.
• It is well known, that every NIS 1,000 that we save on
expenditures goes to profits.
• Or alternately, if we save 10% on Operations expenditures,
we will add about 5% from sales to profits, and that is a lot
(assuming a 50% net profit).
• When initiating an improvement program in a company,
the first task is to identify and agree upon profit leverages
according to priorities.
6 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

7. Handling profit leverages: performance indicators
• Profit leverages are handled via two corresponding routes:
• In the first route, quantitative and measureable performance
indicators are selected; on the one hand, the use of these
indicators may help obtain data to work on improvement,
and, on the other hand, may monitor improvement
processes.
• It is advisable to utilize performance indicators that are the
norm in international industry, with the necessary adaptions
for each company.
• Performance indicators are measured and handled on a
daily, weekly, or at least monthly basis.
Ze'ev Ronen Business Excellence M: +972.52.4767531
7 19 November 2012

8. Handling profit leverages: performance process
• Via the second route, we shall improve the results of
performance indicators.
• The process is based on work in small teams of employees
and on existing knowledge, both revealed and hidden.
• This is how we expand the group that copes with challenges
facing the company as well as increase the quantity of
knowledge that is incorporated within the existing knowledge
reservoir.
• A significant portion of both acquired and created knowledge
among employees remains hidden. The employees do not
share it with each other and do not pass it on to
management.
Ze'ev Ronen Business Excellence M: +972.52.4767531
8 19 November 2012

9. Improvement process with employees:
• In team work, when suggestions for improvement and
corrective action come from the employees, several
advantages are obtained:
• Employees spread the knowledge that was hidden, and
the company benefits from a wealth of untapped
information.
• Employees feel committed to implementing the steps
they themselves proposed.
• Employees' motivation is enhanced.
• You can work according to the aforementioned
methods in small teams and small companies as well.
9 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

10. The CEO's pivotal role in this process:
 We do not forget the
objective and the means Engineering
throughout the entire
process. Quality
Manager Finance
 The various targets and CEO –
indicators create a balance improving
company
in favor of the main profits
objective. Human
Operations
 Work is done in Resources
collaboration, while Marketing
maintaining a balance, and and Sales
not through struggles.
10 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

11. CEO's pivotal role in the process
Once a month, the Management discusses meeting of targets, and each
manager presents his/her results and how he/she plans to improve results.
98% - 92% of
Above 98% of target Under 92% of target
target
Target for
Target Issuing an Down time
Wage as Cash Meeting meeting Machine
Sales Sales wage order percentage
2011 percentage flow target supply supply Target effectivenes Target Target
2011 target percentag according to due to
of sales dates dates s
e original malfunction
JAN 73% 100% 131% 100% 8%- 100% 90%
FEB 112% 100% 89% 100% 46% 100% 90% 45% 100%
MARCH 91% 100% 100% 100% 63%- 100% 90% 33% 100%
APRIL 58% 100% 174% 100% 355% 100% 69% 90% 48% 100%
MAY 102% 100% 106% 100% 109% 100% 71% 90% 48% 100%
JUNE 87% 100% 129% 100% 147% 100% 66% 90% 55% 100% 12% 2%
JULY 93% 100% 126% 100% 3% 100% 68% 90% 97% 99% 49% 100% 14% 2%
AUG 95% 100% 123% 100% 162% 100% 75% 90% 84% 99% 57% 100% 13% 2%
SEP 107% 100% 98% 100% 100% 100% 73% 90% 88% 99% 62% 100% 10% 2%
OCT 97% 100% 118% 100% 142% 100% 92% 90% 82% 99% 63% 100% 10% 2%
NOV 122% 100% 92% 100% 52% 100% 90% 90% 91% 99% 66% 100% 8% 2%
DEC 107% 100% 118% 100% 60% 100% 95% 90% 93% 99% 72% 100% 2% 2%
Average 95% 100% 117% 100% 92% 100% 78% 90% 89% 99% 54% 100% 10% 2%
11 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

12. Feedback, evaluation and control
 Energy and focus of the team work evolves
through dialogue with CEO.
 CEO monitors meeting of targets and team work.
 CEO's involvement connects the entire company
to the improvement process and underscores the
importance of team work.
12 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

13. • Examples of working with targets, indicators and task teams:
13 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

14. Example of company indicators - Finance
Monthly dashboard Money wise: Engineering
 Operating profit
Quality
 Net profit Manager Finance
CEO –
 Cash flow improving
company
 Incomes and Expenditures profits
Human
 Market share
Operations
Resources
 Collection Marketing
and Sales
14 19 November 2012
Ze'ev Ronen Business Excellence M: +972.52.4767531

15. Control and handling of customers' debt in a small team
Customers' debt exceeding
• Each week the customers' debt current month or in arrears, for a
period not exceeding one month
is reviewed.
• Problematic debts are
identified, and tasks are
distributed, with
implementation monitored.
Improvement gained:
significant decrease in debt, and improvement in cash flow.
Graphic display of the data facilitates monitoring trends and provides clear feedback on
corrective activity, sharing the results with everyone and providing energy to continue.
15 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

16. Examples of indicators – Operations
Engineering
Quality
Manager Finance
CEO –
improving
company
profits
Human
Operations
Resources
Marketing
and Sales
16 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

17. Improvement machine performance in plant with 20 CNC machines
Machine effectiveness (producing good parts in gross hours that the machine works in
comparison to the quantity that may be theoretically produced) was reviewed during daily
morning meetings and once a week in the task team; the result is presented to Management
every month.
Changes at the beginning were more essential and created the infrastructure upon
which improvement was made later on.
100
Machine monthly efficiency
90
80
Target
70
64.9
60 Actual 56.6
59.7
55.9
50 43.6 51.5
40.2
44.4
40 49.9
29.9 42.8
30
20
10
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
17 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

18. Improving maintenance and reducing down time due to malfunctions
During the machine performance improvement process, it emerged that the low output was
significantly influenced by various types of down times (preparations and start-ups,
malfunctions, lack of operators, quality problems, and others).
Here we have an example of handling malfunctions. Great commitment on the part of the
entire system has been developed; each malfunction has been immediately forwarded to the
person in charge of maintenance, preventative maintenance, inspections, rethinking of parts
inventory and more.
All the changes were a result of work at daily and weekly meetings.
Machine down-time percentage due to malfunction.
16
14 14
13
12 12
10 10 10
8
Actual 8
6
Target
4
2 2
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
18 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

19. Example of quick improvement with the help of two task teams
consisting of employees.
Result: annual savings amounting to NIS 2 million.
After very slow progress,
without a breakthrough, we Percentage of raw materials and packaging
implemented two task in 58%
June 2009 teams and 56.7%
57%
57%
headquarter work. 56%
56%
Savings in half a year: NIS 1
million,
The investment: NIS 90,000 %2 55%
54%
53%
52%
52%
51%
50%
49%
II-09 I-09 II-08 I-08
19 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

20. Inventory Management Accuracy
Example of a measurement process and presentation of results for analysis
and improvement process
Materials inventory reliability
100%
91.7%
90%
80.5%
80%
65.0% 70%
60%
54%
50%
40%
30%
20%
10%
0%
Sep Aug Jul Jun
20 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

21. Handling deviations that emerged in the inventory inspection
Example of the inventory count results analysis process and
implementation of corrective measures.
The result: annual savings of NIS 170,000.
Sesame: difference between the inventory in the books and
the actual inventory as a percentage of monthly use.
Sep Aug Jul Jun
0%
-3.7% -4.7%
-10%
-16.0%
-20%
-30%
-40%
-50%
-54%
-60%
21 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

22. Example of indicators – Marketing and Sales
Engineering
Quality
Manager Finance
CEO –
improving
company
profits
Human
Operations
Resources
Marketing
and Sales
22 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

23. Tri-annual sales plan: selecting a target for the third
year and retroactively, up to next year
After a drop in sales for 3 years, some of the customers disappeared, or transferred
to imports, target set for 2012 to achieve 80% above the best year in 2007.
• Challenging tri-annual Annual sales: history and tri-
budget established. annual plan
• From which the 2010
budget was derived. 200%
• A designated team
%2 180%
160%
140%
headed by the CEO in 120%
collaboration with 100%
80%
various employees held 60%
a strategic meeting 40%
20%
about new sales niches 0%
and targets. 2012 2011 2010 2009 2008 2007
23 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

24. 2010 sales in comparison to the budget and in
comparison with 2009 (in K NIS)
The target was to sell 27% more than last year. In reality, they reached 42%
extra compared with the previous year.
The 2010 budget was converted
2010 Budget
1,200
into a monthly budget and a
marketing strategy and work
2010 ‫ביצוע‬ 1,000
plan were determined. 2009% 2 800
600
The team monitors orders and
sales on a weekly basis. 400
200
The team reviews monthly sales targets,
0
undertakes tasks and implements a
weekly follow-up.
24 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

25. ‫הצוותים בפעולה‬
25 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012

26. The End
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26 Ze'ev Ronen Business Excellence M: +972.52.4767531 19 November 2012