By Kay Sever, Mining Improvement Specialist and Change Leader, CMC
Executives and management teams are taught to think in timelines, which means that it is easy to miss “moments” of significant financial risk that occur day to day in most companies. Why is that?
1. Moments that create profit and loss are not on management’s radar because financial reports are not designed to report them.
2. Financial reporting systems are designed to report profit and loss over a period of time… monthly, quarterly or annually.
3. Budgets are built annually by month; when extended over a five-ten year period, they are called “long-term plans”.
4. Executives and management teams are accountable for achieving budget goals for a specific time period; if they fall short, they make changes designed to make up for the loss. For example, if they need more production the last week of the month to meet monthly production goals, management may postpone scheduled maintenance to create more run-time and meet budget.
Management understands the moments of loss linked to unscheduled downtime. What does management understand about losses linked to people, not equipment?
1. Equipment is either running or not running. When it’s not running, it was either scheduled to be down or there was an unscheduled failure.
2. The moment an unscheduled failure happens, management knows that a financial loss was triggered. Their focus shifts to stopping the loss as soon as possible. Management can calculate the financial impact of an unscheduled failure and use that data to explain variance to budget or to help justify the purchase of new equipment.
3. There is little or no awareness of the links between profit and culture. Corporate culture characteristics (i.e., how people think and work together) affect the financial outcome of “moments” designed into common management processes.
4. Sometimes these culture moments are worth millions of dollars, but because management does not see these numbers and does not know how to calculate them, there is no search for solutions that stop the losses.
5. Culture losses offset profit and loss related to the production and sale of products and services, which means that reported profit is lower than it could be if culture weaknesses were corrected. Because management does not see the grossed up numbers, their perception about what is possible to achieve is incorrect.
Management generally views equipment and processes as sources for profit. Millions of dollars are spent to increase productivity and expand equipment capacity. Companies justify these expenditures because they can measure the expected impact on the business. Conversely, people are viewed as a cost that offsets profit. Corporate culture is not recognized as a profit opportunity. What if you viewed corporate culture as a source for profit? What if you could measure the impact of culture weaknesses, especially at moments of risk? What would change?
1. People promoted into management at any level enter a system for communicating, making decisions and solving problems. Moments with financial risk are linked to these responsibilities. If management teams knew how to recognize their moments of risk during day to day activities, how much more money could you make?
2. Managers may work hard to “protect” management system processes; in fact, these processes may be declared “off-limits” if a change initiative is being considered. If management’s moments of risk and their associated losses were known, would your management team consider changing their response at the moments of risk to prevent losses?
3. It has been my experience that most people in management really care if money is lost. If they understood the “profit points” within the management system and managed them as they would manage a production process, how much more money could you make?
Thought for the month: A focus on reducing losses at management’s moments of risk reduces unmeasured losses that steal millions of dollars from behind the scenes for FREE.
Kay Sever is a leading expert in reducing losses caused by corporate cultures. She has developed a management training system called MiningOpportunity which is based on her 20 years of experience working with mines and plants to reduce their losses and work together more effectively. MiningOpportunity Training Modules teach executives and management teams how to find and quantify their losses caused by their corporate culture, then apply strategies and tactics that stop the losses by SHIFTING TO A LOSS REDUCTION CULTURE. Exclusive insights from Kay’s 3-year study of management barriers to change and optimization are included in the content. In six short months, profit, culture and change can all be transformed with this training system without compromising safety or regulatory compliance. See MiningOpportunity.com for details and her contact information.
SOURCE: Kay Sever | April 1, 2019
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