By Andre P. Pope (December 13th 2005)
".... I am confident that six sigma can play an important role of reducing variations and defects in various processes and improve operational excellence at all levels. Top companies in the United States and other parts of the world, for example, have produced outstanding results with Six Sigma...”
It is a known fact in Liberia that inefficiency runs deep in government. Successive governments particularly in Liberia’s recent past have had to grapple with this canker. Over the years, reorganization plans have come and gone, but the fundamental problem of inefficiency and mediocrity remains. This is why the President – Elect decision to get a first hand assessment of government is so important. I can only surmise here that the motivations and intentions would be to develop a plan to reorganize or reinvigorate government.
The purpose of this article, however, is not to address inefficiency in general government, (although we acknowledge its depth), but to address the question of performance in public corporations where the problem of inefficiency is sharpest, despite the fact that these agencies play a crucial part in the service sector of the economy and particularly important in post war reconstruction. There is no doubt that there are competing devices out there to make government work better at a cheaper cost, but I would like to throw out for national debate a new and different concept to make our public corporations operationally effective. I would like to propose the establishment of a National Public Corporation Commission that will basically help the various corporations achieve financial and operational excellence through the introduction of six sigma methodologies and programs. I believe that public corporation can harness the efficiency of the private sector for the service of the public. Public corporations should combine the flexibility of a business with the public purpose and public duty of the government.
Although public corporations have been a part of our national life, they remain basically unproductive and obscure in the general policy approach toward national development, a status they no doubt find convenient. While toiling in obscurity they manage communication, power generation, airport and seaport, petroleum, agriculture, housing and insurance. Public Corporations remain an important partner in reconstituting Liberia’s economy and in many ways the bedrock for economic stimulus. I am confident that six sigma can play an important role of reducing variations and defects in various processes and improve operational excellence at all levels. Top companies in the United States and other parts of the world, for example, have produced outstanding results with Six Sigma. Companies like Motorola, where Six Sigma started, GM, Coke, GE, and my former employer 3M have all dramatically cut costs, increased profits and improve operational activities by using this system.
This article seeks to shed some light on public corporations and ask some hard questions about whether these agencies are properly accountable for the vast sums they spend, and for the public power and benefit they enjoy. More is at stake than just money or operational excellence. If these corporations are left to run loose, they tend to infringe the basic tenets of accountability. This analysis will concentrate on public corporations in which the government appoints managing directors and board of directors.
Establishing a National Public Corporation Commission.
As a general or a first step approach to revamping public corporation, I would like to propose the setting up of a five-member oversight board of public corporations with desk officers responsible for each corporation. This commission will have oversight responsibilities to include a quarterly review of financial and internal governance and the operational effectiveness of public corporations. The challenge would be to have corporations systematically disclose information that would be relevant to measuring their performance over time. Two systems of disclosure will ultimately be needed: nationally mandated disclosure of company-wide data and voluntary customized corporation reporting. The first disclosure must force corporations to disclose revenues and expenses to the public on a quarterly basis. This section must include strategies and programs for operational excellence. The second disclosure as the term suggests should be left to the corporation to disclose any other information they see fit.
The NPCC will work with management at the various corporations to define a vision of societal wealth and see them communicate it to the teams through what I call targeted engagement, reallocation of assets and broad public discourse. These activities will need to grow and expand. To make this happen, the NPCC will need to encourage government to empower the corporations. One way is to limit the number of presidential appointees at public corporations, and shift appointment powers to the Managing Director with consent of the board. This will enable MDs to drive change and make them accountable for the direction of the corporation.
Public corporations can create long-term wealth and societal benefit when, in addition to generating productivity gains, they preserve resources for future generations, create value with society, and do not externalize costs onto society. I am certain that we can achieve all these through the implementation of six sigma methodologies.
What is Six Sigma??
Six Sigma is both a set of tools and a way of thinking. It leads to breakthrough improvement using the Define-Measure-Analyze-Improve-Control (DMAIC) process to improve existing products, work processes and behaviors. Six Sigma also encompasses innovation, utilizing Design for Six Sigma methodology to develop new designs or redesigns that result in competitively advantaged products, services, processes, and systems. To raise operations to the highest benchmark, Six Sigma programs constantly measure and analyze data on the variables in any process, and then use statistical techniques to understand what improvements will drive down defects.
Six Sigma as a Policy Choice
The classic reason given for the creation of a public corporation is that a public corporation will be more efficient at achieving a specific national goal, especially if the program envisioned involves market transactions. The national goal is ordinarily stated in the public corporation’s legislature. Thus, the National Port of Authority in Liberia, for example, exists to manage all seaports in the country. The public purpose is to assure nationwide movement of people and goods and to help improve national security. In the abstract, public corporations seem to promise an alternative that everyone including fiscal conservatives might find attractive. Public corporations conjure up an image of business efficiency as opposed to the traditional bureaucratic cabinet ministry. This is the chief reason why we should strive to make our public corporation efficient and effective. It is in this vein that the full deployment of six sigma to improve performance is necessary.
Dr. Barbara Goski, professor of Organizational Theory and Behavior at the University of St Thomas once said, “If you can’t describe what you are doing as a process, you don’t know what you are doing.” I found that statement to be true then as I do today. Beyond strategy documents, team meetings, and memos, performance metrics enable corporations to translate strategy into results that you can measure and manage over time.
Bridging the gap between overall strategy and day-to-day execution requires organizations to:
- Understand how well ongoing tactics are contributing to organizational goals.
- Make timely course corrections in response to performance issues and market changes
Organizations and initiatives fail not so much for a lack of "strategy" as for the failure to effectively execute. The goal of making measurements is to permit managers to see their company more clearly from many perspectives and hence to make wiser long-term decisions. The Baldrige Criteria (1997) booklet reiterates this concept of fact-based management: "Modern businesses depend upon measurement and analysis of performance. Measurements must derive from the company's strategy and provide critical data and information about key processes, outputs and results. Data and information needed for performance measurement and improvement are of many types, including: customer, product and service performance, operations, market, competitive comparisons, supplier, employee-related, and cost and financial. Analysis entails using data to determine trends, projections, and cause and effect -- that might not be evident without analysis. Data and analysis support a variety of company purposes, such as planning, reviewing company performance, improving operations, and comparing company performance with competitors' or with 'best practices' benchmarks."
A major consideration in performance improvement involves the creation and use of performance measures or indicators. Performance measures or indicators are measurable characteristics of products, services, processes, and operations the corporation uses to track and improve performance. The measures or indicators should be selected to best represent the factors that lead to improved customer, operational, and financial performance. A comprehensive set of measures or indicators tied to customer and/or corporation performance requirements represents a clear basis for aligning all activities with the company's goals. Through the analysis of data from the tracking processes, the measures or indicators themselves may be evaluated and changed to better support such goals.
There must be a national policy that spells out the performance metrics for public corporations. The NPCC will then be charged to evaluate the performance of each public corporation on a quarterly basis. These evaluations will then become benchmarks for judging progress and improvement. Business icon Peter F. Drucker said, “You cannot manage what you cannot measure.”
Someone has said that the real problem with measurement is it works! Study after study, experience after experience prove it; you get the type of behaviors that you measure and reward. Yet how can this be true? After all, don't most companies measure profit? So why don't they get more profit? The answer is that profit is a lagging indicator. You can only measure profit after the fact. What you need to examine are the behaviors and actions that generated that profit. When you look at it that way, we often see that the real drivers of profit are neither being measured nor rewarded.
We have long maintained that the right metrics, implemented in the right way can be used to pull an organization into alignment. They can function as a lever becoming a catalyst to help generate outstanding performance.
The converse is also true. Failure to measure the right things and monitor them can have a devastating effect on performance. A study published in the Harvard Business Review estimates the average "strategy to performance gap" stating that on average corporate strategies deliver only 63% of their potential financial performance. More than one third of the respondents placed that figure at 50% or less.
Companies, and in this case public corporations, need to build an effective "sense and response" system that ensures that everyone receives consistent information that allows them to see the causes of underperformance and understand what to do about them. These systems are built not on lagging indicators but on leading indicators - things that predict future performance. What good is knowing that you missed a goal, without knowing why and what to do about it?
Great results come from focusing more on things that create value and less on things that don't. It sounds simple. But it can be tough. How do employees decide what to do with a myriad of competing priorities and demands? And while it may be possible to do strategic planning with a small group of executives, execution must be delegated to a much wider group. Measurement provides the type of clarity to allow us to decide between conflicting priorities.
This approach has great rewards, but it requires effective implementation and a clear understanding of the barriers and resistance factors that can be expected. Measurement is about changing behaviors, and is always a tough task. It requires people to be accountable in a new way.
Implementing Six Sigma
In some very basic ways, Six Sigma methodology is no different from many private-sector implementations, although there are some little differences. Among them is the lack of free competition in the public sector because public agencies monopolize many services rendered to the public, and also there is no full accountability for the results, especially in corrupt countries.
To make Six Sigma successful in the operations of public corporations, there should be full accountability for success as well as for failure, commitment on the part of our leaders, moving away from “I am the boss” mentality and removing politics from public corporations to sustain Six Sigma when administration and leadership change. Six Sigma culture can only be embedded successfully under an honest, trusted and accountable government.
Public corporations are mandated to provide service without real competition from other competitors. Without real and free competition under the free market environment, many public corporations see no incentives to meet customers’ expectation. This is a real problem because defining customer requirements is crucial to success regardless of the nature of the organization. Let’s take NPA for example. The customers are business people and ordinary Liberians that use the seaport to conduct business and other commercial activities. Does it not make sense to identify the core processes, define key output, and define the key customers that they serve? A genuine focus on the customer, backed by an attitude that puts the customers’ needs first, as well as by a system and strategies that tie in the business to the particular and changing needs of the customer.
Additionally, six sigma can help improve the balance line of companies. Again, using the NPA’s example, let’s look at security at the port as a mechanism to reduce revenue leakage. Strengthening the Port security will no doubt ensure that everything that leaves the port was paid for. Six sigma doesn’t just stop here; it goes further by putting in place a control plan that takes care of whatever may go wrong. A typical control plan in this case might be a multi-layer of check and balance, including devices to scan receipts, undercover monitoring, random checks and even an incentive program for security officers.
Summary and Conclusion
Many Liberians who are frustrated with the poor performance of public corporations take the issue of reforming our public corporations seriously. The President-elect has taken what I believe is an important step toward understanding the problems with government and perhaps developing strategies to deal with them. While I would like to call on fellow Liberians to give the transition team a chance to assess the operation of government, I urge the transition team to be open to diverse concerns, views and recommendations from various sections of the public including advocates, elected leaders and ordinary citizens, and devise proposal to improve government efficiency. I am also asking the transition team to consider every idea, study every proposal and adopt a policy of transparency in conducting its task and identifying the problems as they are.
Finally, I would like to direct the rest of this contribution to the President-elect. Our country has seen presidents failed because they surround themselves with sycophants. Following this path will only add you to the long list of failed leaders. This is an opportunity of a lifetime; approach it with humility and tolerance. Adopt a vetting process for key appointments, let the press perform its role without harassment and encourage dissent within your ranks. This government must promote the basic tents of democracy. The success of your government would largely depend on how it would withstand and honorably accept the rigors of an evolving pluralistic culture.
My hats off to the people of Liberia for diligently conducted their national duty with dignity. .
About the Author:
Andre P. Pope, a Liberian Professional is Six Sigma certified and holds an MBA from the University of St Thomas in St Paul, Minnesota. He lives with his family and work near Atlanta, Georgia. Pope can be reached at firstname.lastname@example.org.