All over the country – all over the world, for that matter – managers are confronting year end surprises from annual inventory counts. Strenuous efforts to reach profit goals have been undone by inventory write-offs they never saw coming. Too late to do anything about it at this point, they resolve to take steps to assure it doesn’t happen again. How the problem is defined is the key to the whole matter.
The manager could assemble the staff and tell them, “We have to come up with a plan to eliminate these year end inventory adjustments.” Or the staff could be assembled and told, “We need to get inventory under tighter control in order to assure accuracy.”
The first approach defines the problem broadly, opening the company to a wide range of options – the best of which is to get rid of the inventory, thereby eliminating the problem all together. The second is based on the assumption that all of the existing processes are OK and the task is limited to controls over those processes.
As one CEO recently told me, how we define problems is 90% of the game. He is absolutely correct – maybe even conservative. Far too often we assume we know the root cause before we even get out of the starting gate. We assume that all of the existing processes, policies, procedures and so forth are necessary and inviolate, putting people into a very small box in terms of the range of solutions at their disposal.
Challenging people to reduce direct labor costs, or to cut material prices, rather than challenging them to improve profitability ignores the reality of integrated processes that cust across the business. It assumes the problem – and the solution – lies entirely within a particular functional silo.
Of course, as a consultant I hear this all the time. Would be clients call me asking for help with problems so narrowly defined that it is apparent they have already made assumptions about the root cause, and have limited the scope of recommendations from which they want me to make a recommendation. A typical one is a request for my help in their selection of an ERP system. They don’t want me to look at the underlying problem that led them to conclude that ERP is the solution. Typically they blew right past that step. When I ask them what the problem is they are trying to solve, a typical answer might be, ‘we built a second plant and now we are having problems delivering on time because our old system can’t support multiple locations’. My response is usually, ‘if you want me to look at your supply chain processes and help you solve the delivery problem, with more robust ERP as simply one option among many that might help, I will be glad to do so, but if you have already determined that all of your processes are fine and you simply have a computer problem then I am not the guy for the job. You need an IT consultant.’
Of course, how we define problems is not just a manufacturing issue, or even just a business issue. Husbands, wives and kids complain long and loud about their each other’s attitude or laziness in supporting each other in the execution of basic household chores, never thinking that the basic process for getting those chores done might be at the root of the problem.
Now would be a great time to take a long look at the problems the organization is tasked with solving in 2013. I bet most of those definitions doom the company to having this year look a whole lot like last year. Redefining the problem just might be the key to fundamentally changing the trajectory of the business.