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What’s your ripple effect?

January 13, 2009

istock_000004920170largeThey say if a butterfly flutters its wings in Brazil, it creates a breeze, then a wind, eventually fuelling a storm on the other side of the world. Commonly known as “The Butterfly Effect”, it suggests that everything is connected to everything; where even the smallest change can have enormous consequences.

“Anyone who runs a business should see where our garbage goes,” says Remi Cormier, president of R.Environs, a sustainable landscape design company. “It will change the way you manage waste forever.” On a cold, rainy afternoon, we’re driving through mounds of debris. The smell is so putrid I clamp my nose to suppress my gag reflexes from actually doing their job.

Six months ago, the young entrepreneur challenged me to visit the city’s landfill so I could see what happens when my trash lands at the curb. He argued that, “Even though we’ve found creative ways to deal with waste, it’s not enough. Real change happens when we see how all of our actions are connected.”
A Disconnected Approach to Social Responsibility

This visit to the landfill opened my eyes as how businesses handle social responsibility. The choice of the word “social responsibility” might conjure in one’s mind a nebulous concept, completely disconnected from everyday’s reality. But social responsibility is quite simply “doing the right thing” for your customers, stakeholders or anyone else touched by your business.

Over the last twenty years, being responsible has meant different things to different companies. For some, it has meant investing in recycling programs or going paperless. For others, it has involved publishing reports about how the business is working with the community. Still others see it as nothing more than applying common sense to their work. But if more and more companies are making the effort to respond to their customers’ demands for accountability, why is it that it’s still considered another ‘do good’ project that gets cut when times are tough?

The problem – as some experts suggest – is that since there is no real framework for being sustainable and competitive, the result is a bunch of disconnected pet-projects that claim to make the company more ‘green’ or ‘responsible’, but that are so far removed from the actual business that they fail to translate into any real outcome.

A perfect example is the recent case of listeria found at Maple Leaf Foods, a meat processing plant here in Ontario, which killed 20 Canadians and made at least 70 others ill. In response, the company recalled more than 200 products, shut down and sanitized the plant for a month, hired a new chief safety officer, in addition to a number of new quality assurance inspectors and launched a national media campaign to reassure the public.

While all these efforts are commendable, the problem is that this approach is still too reactive to a given situation. Quality and responsibility should have been built directly into their processes, not reviewed after the fact. Although CEO Michael McCain assured the public that measures are taken every step of the way, all these deaths could have been prevented if the company had considered the precautions required from the beginning. Which begs the question – why wasn’t this all done before?

Being Responsible Makes Good Business Sense

At The Tatham Group, we believe that social responsibility is not just a nice thing to do  – being socially responsible makes good business sense. It makes sense to audit accounting practices and to create a safe workplace, because it means accurate information and happy employees. It’s a good business practice to ensure the utmost quality of your products, because you will be more efficient and contribute to a cleaner environment.

In our experience, when companies learned how to apply a simple, disciplined and systematic approach to redesigning their business processes, inevitably they embedded responsibility into everything they did so that at each step of the way, they were doing the right thing for the customer.

This simple approach includes four steps: having an open dialogue with their customers to find out exactly what they want and need, challenging the status quo and find a better way of providing only quality and value-added products, finding the root cause of the problem to eliminate waste, duplication and rework; and therefore leveraging their hidden capacity to become a more sustainable, ethical and accountable company. In doing so, they discovered that the ripple effect of redesigning each process was to save money, delight their customers, be more competitive and find more innovative solutions. Oh, and by the way, they became greener too.

FOUR STEPS TO “DO THE RIGHT THING” FOR YOUR CUSTOMERS

When a company adopts these four key steps as their core approach to making each of their processes socially responsible, the customer, the company and anyone else affected by the business can’t lose. The following diagram illustrates the ripple effect of applying the Tatham Systematic Method. Each step is connected with the other so that the end result is a better product and a better company.

1. Create an open dialogue with your customers

One of Tatham’s core values is teaching clients how to talk directly with its customers to find out exactly what they want and need. At the Bank of America, this translated into having a frank discussion with their customers to eliminate “33 dumb things” they did. For instance, customers complained that stop payment fees are waived, but still appeared on their statement. The bank fixed the glitch so that statements showed a zero charge. Toll-free numbers were added on all statements depending on account information. The bank stopped sending bills to customers that owed nothing on their safety deposit boxes. New cheque orders no longer had state identifiers (so that customers who moved didn’t have to pay ‘out of state’ fees every time they wrote a cheque). Finally, to avoid fraud where debit cards were stolen from mailboxes, the bank began requiring customers to activate their ATM cards before being able to use them. While none of these improvements were complex solutions, they addressed issues that mattered most to the customer. By taking fixing one small error in a process, the bank was able to save millions of dollars in waste and rework.

2. Challenge the status quo

In late 1997 Spectra Precision, a laser manufacturing company, set to become more competitive. According to one senior manager, “Our CEO [saw] there would be a time when we would have to compete as much with our lead time as with our price and quality.  He gave us the goal of 98/48 – that meant that 98% of the time we were going to ship equipment within 48 hours of the dealers request date, without increasing inventory.”  The company launched a team whose mandate was not only to achieve the 98/48 goal, but to also reduce the cost of material and manufacturing by 15%, warranty costs by 25%, field complaints by 50% and implement process controls on all critical operations. Before that, the company had been shipping this kind of quality about 40% of the time or less. The end result? “In a nutshell, we did it,” the manager said. But it wasn’t without being pushed and challenged. Even though the company had been coasting, it needed to break out of its every day reality in order to survive.

3. Find the root cause of the problem

One of the most important ways to eliminate waste and rework is to solve recurring problems once and for all. Our clients learn how to drilldown to the root cause of a problem so that they can remove rework, waste, duplication and redundancy. This adds profit to the bottom line and allows them to find solutions that will inevitably benefit the environment.

Tremco Global Sealants has been providing specialty sealants and protective coatings for building designers, developers, owners, and contractors/manufacturers since 1928. In the late eighties, Tremco’s management saw a decline in the economy and an increasingly aggressive competitive landscape. One of the products suffering was a sealant used between two panes of glass, which allowed contractors to place two pieces together without having any fog or condensation build up. The problem was that the seal kept failing – it would allow water and air to seep in, causing major losses for the company for almost a year. Tremco launched a team that would use the Tatham Method to find the root cause of the problem and eliminate thousands of dollars in waste. After experimenting, the team discovered that the fault lay in the adhesive strip placed on the rubber when it was being shipped. The team found that the tape left residue, which was causing a slow but deliberate deterioration of the rubber. After extensive testing, they were able to find a solution, save millions of dollars and eliminate hundreds of pounds of waste.

4. Leverage your hidden capacity

In 2001, Ken Steward, then CEO of Canadelle, a subsidiary of Sara Lee Corp., saw an opportunity to change. Although the company had been doing extremely well and was the market leader, customers were beginning to demand faster turnaround, shorter waiting periods and more product selection. After attending a Tatham Boot Camp, Steward put 40 of his best and brightest through the two-day simulator, and launched four teams whose mission was to redesign shipping and distribution processes. After a year-long effort, Canadelle was shipping at 95% fill rate (versus 84.5% a year prior), while operating with $5 million less in inventory. Profits rose 21%. Return on Investment rose 10 points. *Before starting with the Tatham Method, their largest customers (Wal-Mart) had an in-stock position of 84% and an order turn-around time of 10-14 days. After applying the Tatham Method, Wal-Mart had an in-stock position of 96.43% and order turn-around of 24-48 hours. In July 2002, Canadelle had the highest bonus payout in the history of the company. Steward wrote: “It has absolutely changed the thinking in our company. It has made us step back and look at all the business processes that we had, and frankly it has saved us hundreds of hours of time, days and money. It has got the organization back on track, where we focus on the customer.”
The same could also be said of Wal-Mart.

SOCIALLY RESPONSIVE COMPANIES WILL SURVIVE

Over the years our clients have learned that by adopting a more connected approach and building responsibility and sustainability directly into their businesses, ‘doing the right thing’ became a by-product of their initial goals. In the process of saving space, resources, materials, eliminating redundancies, waste and defects, our clients have created a shared value for both the company and its customers. And, by building social responsibility directly into their processes, it is no longer a matter of checking, auditing, fixing and making up for their mistakes; instead, it became part of the fabric and culture of the organization, giving them a competitive edge.

In the words of Paul Hawken, environmentalist, entrepreneur, and author, “If companies believe they are in business to serve people, to help solve problems, to use the ingenuity of their workers to improve the lives of people around them by learning from the nature that gives us life, we have a chance. The future belongs to those who understand that doing more with less is compassionate, prosperous, and enduring, and thus more intelligent, even competitive.”