Wednesday, March 17, 2010

Theory of Constraints POOGI Part 67 -- Employees Need Time Off? That’s unproductive!

We are continuing our series based on The Goal by Eliyahu M Goldratt and the Theory of Constraints. {This series was co-written with Brad Stillahn}

Dr. Lisa: Each employee has a life outside his or her job in a business. They have family, financial and other pressures. Time off is sometimes needed.

Brad: Of course, but business owners have to run the business to satisfy their customers, as well as make enough profit to stay in business. Time off can be a real issue. In some businesses, it is the main issue.

Dr. Lisa: In many businesses, employees have holidays and earned vacation. Normally there are paid breaks for non-exempt employees. In addition, depending on the company, they might also have paid sick leave and/or unpaid time off.

Brad: Often times, the more senior the employee, the more earned vacation they have. And senior employees are frequently the most skilled. When they are off, it's tough to maintain productivity. Early in my career, I supervised a small department of highly skilled employees. We were responsible for the production of a large group of paper mills. It didn't take me long to realize that on average, one person would be off on vacation every day. And of course, it didn't work out that way. Half the department would be gone the whole month of December. Most small businesses have this problem, although they cope with it in different ways.

Dr. Lisa: Yes, I've seen all kinds of different ways business owners cope with this, including NOT dealing with it at all. But, to maintain due date performance, there needs to be some predictability and consistency of resource availability. In the Velocity Scheduling System (based on Theory of Constraints drum buffer rope), machine shops are comparing load to capacity for several weeks into the future. Often the company policy requires less notice for vacation than the scheduling horizon, meaning that significant variability is added from even planned time off, not to speak of unplanned time off that happens with no notice. Due date performance is jeopardized.
Dr. Lisa: Then there is the impact on profitability. Paid time off is an operating expense. Throughput (Throughput equals Sales dollars minus Truly Variable Costs in Theory of Constraints Throughput Accounting) dollars must exceed Operating Expense to make a Profit. During some weeks and months of the year, there isn't enough productive time available to produce enough Throughput to make money. This puts the business owner in the position of having to make enough more money in the more productive months to make up for the loss months.
Brad: And, customers don't care about the people scheduling issues the supplier has. They expect what they want when they want it (or at least when it was promised). For sure, the demands placed on a supplier by a customer do not neatly fit into the preferences of when employees would like to work.

... to be continued in Part 67
Hello? Is anyone reading? Please add your comments (just click the comments hyper link at the bottom of the post)

Here's to maximizing YOUR profits!


Dr Lisa

(c)Copyright 2010, Dr Lisa, Inc. All rights reserved.

14 comments:

Mike from Shreveport said...

Since you invited comments, I thought I would give you mine. This newsletter was very fragmentary and incomplete. By the time this is continued, who will care? Even if it's part of a multi-part series, every issue that you send out should be conceptually complete in itself and express an entire idea. If not, you will lose interest of everyone.

And let's face it, it's just too easy to take a longer piece and arbitrarily break it into parts. Laziness will get you nowhere when you're trying to hold people's attention!

Ron said...

Dr. Lisa, You have stated the problem of time off and I look forward to yiur answers: In our 20team-member precision machining plant we deal with this problem as follows: 1. When entering order put ship date a few days before due date from customer depending on customer policy on early shipments. 2. Focus on jobs which can be shipped this month 2. Schedule vacation time on two month calendars. 3. Cross train almost every position so can substitute when needed. 4. Plant Mgr. has authority to move people or jobs or add OT as needed depending on customer schedule and changes. 5. If we see a problem, we call the customer to see if due date can be moved. By focusing on on-time delivery we have improved from 86% on-time 5 years ago to 98.6% last year and increased throughput speed. We just need more work to "put through"!

Gilles said...

I disagree with Mike since our comments were allowed and not our "morale" about things. I approve of the "continual" concept of all topics so far and here is my comment.
I own a small box manufacturing plant in Redlands California and we experience all sort of issues when come to time off and meeting orders due dates. If we must stay competitive it is imperative that a "culture" of responsibilities be implemented instead of a culture of personal needs. In my business we accomodate everyone to keep them happy but it takes its toll on those who never miss work. Any idea?

Anonymous said...

Lisa & Brad, I read all of your blogs; they are insightful and informative. TOC rules and tools would work in almost any business if the owners and managers buy-in to the process; agree on the problem, agree on the direction of the solution, agree on negative branches and how to trim them and agree on implementation obstacles and how to overcome them. That's a lot of agreement and faith in a process where almost no one has experience or formal training. The inability of most owners and managers to be open to the possibility that, "What they're currently focusing on and how they choose what to focus on next," is really the root cause of their problem. How do you overcome the natural resistance of most everyone to this reality; that they, themselves, and their worldview of these problems are in fact, the root cause of these problems? Thanks, Spuds

aikiden said...

I second what Mike from Shreveport said, by the time I read the next, I've forgotten the previous. There's often not enough info in a single entry to think about or comment on. The content seems sound, just the format obscures its value.

Steve said...

Dr. Lisa:

Excellent blog and continued insights. I appreciate it.

I have always scheduled vacation time by eligibilty and department- not allowing everyone to go on vacation at the same time.

Secondly, I allowed employees' dependents who had completed their high school education to work at basically unskilled jobs during the summer months. We would pay them 70% of the rate, with no health benefits- especially since we were already paying benefits for their parents. It was a Win-Win for the Company, the kids, and the parents since these kids would be going on to college. We actually made project work for them during the Christmas and New Years' holiday.

Secondly, I offered "mental health days" to my direct reports. I did not want to judge what they were doing during the days off. The only issue was that they had to inform me that they needed a "mental health" day in advance of taking the time off. Only they knew. Since they were salaried, they would be still paid despite taking time off.

There was also no need for "sick days" since we didn't have to condone folks being sick.

There was no calling in with the "sniffles" and stating that they couldn't come to work that day.

There was no guilt on ther part that they were taking the day off.
They came back refreshed, relaxed and with their minds focused on the task at hand.

It drove my boss crazy, but I was able to schedule proactively rather than from a reactionary point at the spur of the moment.

Best regards,

Steve from Massillon, Ohio

Jim Cronin said...

I'm reading!

Dr Lisa Lang said...

Hi Mike,
I appreciate your feedback and here's what I've done.

1) You may have noticed that my next email did contain one complete thought and I will try to do that more often.

2) If there is enough interest, I will offer to send emails monthly to those who want the whole series at once.

So if enough people incidate this preference, I will add that option. Just add a comment here if you would like to switch to a monthly or complete email.

Dr Lisa Lang said...

Ron,
Congratulations on your improvement in DDP and thanks for sharing your process.

Based on your response, I think you could further benefit from our Velocity Scheduling System Coaching Program. 100% sustainable DDP is within your reach.

Dr Lisa

Dr Lisa Lang said...

Gilles,
Thanks for the positive feedback on our approach.

Did you read the follow up to this post and what Brad did at his plant? Let us know what you think and also feel free to discuss with Brad. BTW -- he used to schedule corrugated plants.

Dr Lisa

Dr Lisa Lang said...

Hi Spuds!

Nice to hear from you. Ready for a beer sometime?

In Parts 65 and 66 I covered some of the ways we handle and have improved buy in. Currently we're writing about "The biggest constraint we Theory of Constraints consultants find is ...".

They are all related to how we think and I think this will cover some of what you commented on.

Dr Lisa

Dr Lisa Lang said...

Thanks Jim and aikiden for your comments.

Dr Lisa Lang said...

Steve,

Sounds like you've got a good system. Thanks for sharing!

Dr Lisa

SDW said...

25 Jul 2011

I discovered VSS this past Friday through various links in an article in CNN. I like what VSS and TOC have to offer but being a Black Belt Lean Six-Sigma and advocate and having experience in this field since 1996, the ideas of TOC seem to be a subset of LSS, not an entirely new concept.

Does VSS/TOC primarily help specialized job shop production only? If so, I can definitely see this as a great business model because those "ma and pa shops" usually work on a fine line between being financially red or black depending upon any hiccup occuring. It can be devestating to these shops when issues pop up.

IMO, Ron and Steve from Massillon, Ohio seem to have the better vision of sustaining performance during vacation/sick days through a change of culture which IMO is the number one thing and it begins with top management. Without top management's support, the lower tier's will either not understand or they won't care and nothing will change. Support, communication, and walk-the-talk will bring respect and happy employee's because they'll see through the lies very quickly if anything else occurs and this will only darken their moods. If they're happy, they'll be willing to put more effort and performance into their tasks. Lastly, cross-training is a must.

I was in manufacturing and engineering up until 2003 when I becamse a federal worker in LSS and Finance. In my particular admin office, our supervisor has allowed us to cross-train, create work instructions, communicate freely and become transparent which has improved our communication and culture within our group ten-fold in the past three years. If a coworker of mine is gone, there is a 75%+ chance that I can follow-through with his tasks and help the customer; be it outside or inside our base. At the very least, I can get information to help the customer until my coworker returns. Our culture is very healthy.

I am going to be reading more about TOC and VSS and it is on my plate of things to do this summer.

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