SOURCE: Kay Sever | July 30, 2024
The Renaissance Period was rooted in a desire to explore and discover new knowledge. Renaissance thinking focused on discovering “what was unknown, overlooked, missing or misunderstood”. In 2024, we will be using Renaissance Thinking to understand what’s missing from a traditional optimization scope and how to broaden that scope to capture millions of additional dollars with no additional capital.
In February we explored the history of accounting and learned that the 800-year-old accounting system developed by merchants to track trade (i.e., “buy and sell”) transactions, inventories and profit is still in use today (with few modifications). Companies around the world use it to track/report revenue, costs, inventories and profit. We also learned that if your goal is optimization (i.e., “best possible” performance), the financial system does NOT contain and/or report metrics for that goal.
In the months since February, we have shared thoughts about what that means to your business… why optimization metrics are important, what happens when they are missing and how management is weakened in their ability to achieve and sustain optimization/”best possible” results. In this article we will review the change process and how it can be powerfully affected by metrics. But first, let’s briefly define optimization metrics for those that are not familiar with the term:
Optimization Metrics quantify “how good you can be” and give executives and management teams a new context for their “upside potential” or money they “left on the table”. The gap between today’s performance and your “best possible” performance is defined by:
- Existing but hidden production capacity that has not been tapped.
- Profit potential (profit that equipment and people were capable of generating but didn’t).
- Hidden financial losses linked to organizational weaknesses.
Optimization Metrics and Change
When companies decide to pursue performance improvement initiatives, they focus on processes that are weak or broken and make changes to fix the weaknesses, which is great work! When making these changes, they may encounter barriers that make change harder. They are taught that change itself is a barrier and that the fear of change will prevent them from raising the bar on performance and sustaining those efforts. They have also been conditioned to believe that some barriers to change cannot be removed and that the change process involves finding “workarounds” for those barriers.
In my work, I have found that fear of change is NOT the greatest barrier to change. Invisible barriers within the organization and management system are the REAL ENEMIES of sustainable change, but are seldom understood or discussed. These barriers sabotage the great work of employees, cross-functional teams, management teams and executives, and do it in way that operates from behind the scenes to stop change and threaten the sustainability of gains that were made. These barriers cause unreported financial losses that, if known, would be treated like equipment breakdowns… with urgency and objective solutions.
Optimization metrics can quantify hidden losses linked to barriers to change… something that budget numbers cannot do. When these losses become known, they are often bigger than anyone thought they would be and quickly become a high priority for executives and management teams. Some of these problems will be rooted in traditional management beliefs, tools, practices and processes that were NEVER DESIGNED to help management achieve “best possible” performance. Once numbers are attached to barriers to change and optimization, it makes it easier for management to take action and quickly remove them.
The “Management System Mismatch”
When “best” becomes a goal for executives and management teams, they are unaware of mismatches between strategies, tools, processes and policies used to “run an operation” and the strategies, tools, processes and policies needed to “achieve best performance”. These “management system mismatches” create invisible barriers that will negatively affect success with optimization and the sustainability of process changes that deliver additional dollars to the bottom line.
The very system that executives and management teams work in every single day will make change harder and sabotage improvement efforts without their knowledge. Executives and managers will
- Make less money than they could have.
- Revert back to old ways of doing things.
- Lose the “future gains” they worked for.
- Attribute these failures to a belief that change is just too hard or “it’s just the way it is here”.
They will not realize that the root causes of these losses were disconnects within the management system itself.
“Management System Mismatches” and Flavor of the Month
Over the years, most companies have chosen to pursue at least one improvement initiative. In the name of continuous improvement, some companies move from initiative to initiative, spending millions of dollars seeking one initiative that would deliver and sustain the expected/desired ROI and process changes. This strategy for change management is sometimes called the “flavor of the month”.
Think about your own experience with change initiatives. The first year was likely spent designing and installing new processes and training personnel. The second year management and employees followed the new procedures, hoping to see or experience a measurable change. They did recognize or experience improvements and fewer problems in some areas. After two years passed, did management begin drifting away from the new ways of working?
- Did management stop reviewing reports or attending meetings linked to new processes and procedures?
- Did management default back to the old ways of doing things, especially when it came to their own processes, roles and responsibilities?
- Did the executive team begin looking for another initiative that would deliver a higher ROI and sustain change?
- If the initiative that everyone worked so hard to design and install two years earlier was abandoned, did the management team and the employees understand why this happened?
“Management System Matching” is Like “Equipment Matching”
By applying optimization metrics to the disconnects between what leaders need to optimize performance and what’s currently in their toolbox, executives and management teams can see the cost if management processes are misaligned with their optimization goals in the same way they view mismatches between loading and hauling equipment. Every mine management team knows the importance of matching trucks and shovels to both safety and productivity. What if matching management system features to optimization requirements was just as important to achieve and sustain their goals for “best-possible” performance? Well… it is!
FROM SEPTEMBER TO NOVEMBER… we will be exploring some specific examples in great detail to gain more insights into “management system mismatches”… how they are linked to optimization, how much they can ultimately cost a company WITHOUT a company knowing that a loss has occurred, and how mismatches can be “aligned” to give leaders what they need to succeed!
Thought for the year: Renaissance thinking has a direct application in positioning your company for success with capital-free optimization. If executives and management teams foster and nurture the desire to explore for hidden profit potential everywhere, what they learn will give them a huge advantage when they want answers to “what’s possible to achieve.
Kay Sever is a Performance Optimization Expert and Optimization Management Strategist/Coach. Kay helps executive and management teams quantify and tap their hidden profit potential to reach their optimization goals. Kay has developed a LIVESTREAM management training system for Optimization Management called MiningOpportunity – NO TRAVEL REQUIRED. See MiningOpportunity.com for her contact information and training information.
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- About Us
Kay has worked side by side with corporate and production sites in a management/leadership/consulting role for 35+ years. She helps management teams improve performance, profit, culture and change, but does it in a way that connects people and the corporate culture to their hidden potential. Kay helps companies move “beyond improvement” to a state of “sustained optimization”. With her guidance and the MiningOpportunity system, management teams can measure the losses caused by weaknesses in their current culture, shift to a Loss Reduction Culture to reduce the losses, and “manage” the gains from the new culture as a second income stream.
