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Profit-Ability Management Principles

The Profit-Ability Management Principles listed below are an enhanced version of traditional Total Quality Management (TQM) Standards reflected in ISO certification requirements. MCTS has modified the traditional list to clarify the unique nature of our approach and what we see to be key constraints commonly overlooked by many other improvement strategies. Like Total Quality Management (TQM), Profit-Ability Management, in our view, is essential to providing visionary leadership and effective management in any organization.

Similarly, Profit-Ability Improvement is to Continual Improvement as Profit-Ability Management is to Total Quality Management (TQM). The goal of a strategy must be clearly stated if it is to be achieved. Profit is the goal. Quality strategies and Improvement strategies provide conceptual objectives for achieving that goal. 

How people are inspired, empowered and rewarded for their ability to adapt to changing conditions is the means by which objectives are achieved and/or revised; how promises are kept; how products or services are delivered—profitably. Organizational profitability is derived from the Profit-Ability of employees. If employees do not have a concrete means to change, align and improve their habits—the same means that is understood and utilized by management for the improvement of its own strategies—there will be breakdowns in communication. There will be distorted perceptions that compromise the vision of leadership. There will be wasted action and profitability will be compromised.

What is a Profit-Ability Management Principle?

1 A Comprehensive And Fundamental Rule Or Belief,

1 For Leading And Operating An Organization Aimed At

1 Continually Improving Long-Term Profit-Ability,

1 Customer Satisfaction And Stakeholder Sanction.

The Profit-Ability Management Principles, listed below provide a guideline that organizations can develop and modify to benefit “stakeholders,” i.e., customers, owners, employees, suppliers and society at large. Operating principles cannot be vague if profitably is your goal.

Principle 1: Customer-Focused Organization

1  Organizations need customers and therefore should understand all current and future customer needs, customer perceptions, changing customer requirements, and strive to exceed customer expectations.

This principle must be applied to both customers outside the organization and “customers” inside the organization, i.e., the same customer regard and priority is extended internally and externally throughout the organization such that conformance to defined customer requirements are assured.

(See: GET-DO-GIVE Cycles & Internal Supplier-Customer Chains)

Principle 2: Authentic Leadership & Accountability

1  Leaders inspire a constancy and unity of purpose for the continual improvement of organizational Profit-Ability.

All stakeholders are willing to provide or accept leadership when needed and will follow directives when the goals and means and deadlines are clear. Strong leaders know how to follow what matters and can coach, facilitate, and empower people. The authenticity of every thick-skinned visionary inspires trust, truthfulness, integrity and a willingness to inspire others to find new ways to solve old problems that are both intrinsically and extrinsically profitable.

(See: Developing Organizational Integrity)

Principle 3: Integrated Management Systems

1  Identifying, understanding, and managing a system and sub-systems of interrelated processes for specific goals objectives improve organizational effectiveness, efficiency and profitability.

ERP, Enterprise Resource Planning, is a company-wide management strategy and philosophy for making and keeping promises. It is the best of its kind. Successful ERP companies do not view ERP as only a manufacturing system or a software tool. They apply the concepts and techniques of ERP across all functions of their companies in ways that honor the contributions of their people and strategically improve the performance of every functional area of the company. The supply and demand sides of any business are better managed using directly integrated management systems. The focus is on results -- improving competitiveness in the marketplace and improving the company's overall business performance.

(See: What is ERP?)

Principle 4: Involvement & Empowerment of People

1  People at every organizational level are change-agents who, when properly empowered, inspired and guided, come alive with vitality, intelligence, and exceptional profitability-potential that can make or break the future of your organization.

Your Workforce is a Living Organism. If leadership is to effect dramatic change in your company, your workforce needs to know how to follow and how to correctly respond to changing events. Profits increase when a workforce can truly see and map the cause & effect of each individual’s actions upon the group. Your strategies must inspire people to follow what is profitable. A competent work force proficiently manages day-to-day uncertainty; always improving it’s ability to do so. Measuring the effect of an action, with feedback to adjust the next action, improves skill. A proficient management system is a tool that supports improvement of skill; rewards correct action; and build the integrity of a competent workforce.

(See: Profit-Ability & Empowerment)

Principle 5: Strategic Planning & Results Measurement

1  Strategic Plans are only as valid as the accuracy and timeliness of the data and perceptions used to create them; knowing how you will measure the results of your plan before it is released, is fundamental to effective communication and accountability—it is the only way promises can be made and kept profitably.

Hoshin Kanri was developed in Japan but it is based on the US techniques of Management by Objectives and the classical Plan-Do-Check-Act improvement cycle. Hoshin Kanri is used to communicate company policy to everyone in the organization. Its primary benefit is to focus activity on the key things necessary for success. Japanese Deming Prize winners credit Hoshin as being a key contributor to their business success. Progressive US companies, like Hewlett-Packard and Xerox, have also adopted Hoshin as their strategic planning process. Almost all Malcolm Baldrige National Quality Award winners use some form of "Hoshin like" planning process.

In its simplest form, Hoshin Kanri is nothing more than a system of forms and rules that encourage employees to analyze situations, create plans for improvement, conduct performance checks, and take appropriate action. In practical application, however, is much more than forms and rules - Hoshin is a philosophy for effectively managing people, resources, and promises on-time at least-cost.

(See: What is Hoshin Kanri?)

Principle 6: Process Modeling for Systems Development/Improvement

1  The process approach leads to better understanding & involvement of stakeholders, better use of resources, shorter cycle times, lower costs and improves accountability to internal & external customers.

Every company, department, or person has a system that it uses to manage events and other people even when it is the "no-system" system. The purpose of a system, formal or informal, is to establish strategies that consistently meet the demands of a company's market. "Market-Driven" is a term that should be extended to every aspect of a company's operating systems. Why? Because increasing or holding market share is impossible otherwise. Processes must be continually reviewed, documented, revised and re-defined in ways the fully and directly integrate into upstream and downstream management systems. Follow the USA-Principle as an implementation/improvement strategy.

(See: Processes & Work-Flow Mapping )

Principle 7: Continual Improvement & Performance Measurement

1  Continual improvement of interrelated processes, individual skill and associated systems is a permanent organizational objective that requires continual measurement and evaluation of results and satisfaction.

Quality improvement is a continual effort, aimed at ever-higher process effectiveness and efficiency. These activities often require new values and behavior focusing on measuring and reviewing performance and acting on results. Through management review, internal/external audits and corrective/preventive actions, continually improve the effectiveness of the Total Quality Management (TQM) System—this improves profitability. Set realistic and challenging improvement goals, provide resources and give people the tools, opportunities and encouragement to contribute to continual improvement of processes.

Deming

The Plan-Do-Check-Act cycle by Dr. Deming Is Commonly Used When Describing Continual Quality Improvement. Essentially The Cycle Says:

The Plan-Do-Check-Act cycle by Dr. Deming Is Commonly Used When Describing Continual Quality Improvement. Essentially The Cycle Says:

P - Plan activities
D - Implement the plan
C - Check the result
A - Improve the process


The cycle was first developed by Dr. Walter A. Shewhart & Later introduced by Dr. Edward Deming in Japan.

(See: QMP Home Page)

ISO 9004-4 Quality Improvement Standards Describe The Methodology In 8 Steps:

1. Involving the whole organization
2. Initiating quality improvement projects or activities
3. Investigating possible causes
4. Establishing cause-and-effect relationship
5. Taking preventive or corrective actions
6. Confirming the improvement
7. Sustaining the gains
8. Continuing the improvement

Tools And Techniques For Quality Improvements Are Brainstorming, Affinity diagram, Benchmarking, Cause-and-Effect diagram, Flowchart, Control chart, Histogram, Pareto Diagram, Scatter diagram, Etc.

Principle 8: Factual Approach to Decision Making with Stakeholder Buy-In

1  Effective decisions and actions are based on the analysis of data, information and consensus perceptions.

Management by fact is a management concept for preventing management by "opinion". Facts are unknown until they are established through the collection of measurement data that shows verifiable results. The analysis of relevant data allows informed decisions to be made and significantly reduces the risk of opinionated decisions not based on fact. Shared vision is essential for high-risk decisions. Decisions and actions should be based on the analysis of data and strategic information used to improve results, processes, systems, two-way communication and accountability.

Management decisions and actions for Total Quality Management (TQM) Systems are based on analysis of factual data and information gained from reports on audits, corrective action, nonconforming products, customer complaints and other resources. Decisions and actions are based on the analysis of data and information to maximize productivity and to minimize waste and rework, minimizing cost, improving performance and market share through the use of suitable tools and technology.

(See: Performance Measures & Verification of Results)

Principle 9: Strategic Supplier Chain Partnerships

1  An organization and its suppliers are independent, and mutually beneficial relationships in supplier chains enhance profitability when both internal and external supplier chains are mutually beneficial within the organization as well.

Based on mutual trust and open communication, partnerships for quality are established with selected primary suppliers for jointly understanding current and future needs of the end-customers. Adequate definition and documentation of requirements for sub-contractors is a must. Review and evaluate performance to assure the supply of quality products and services. Establish strategic alliances or partnerships, ensuring early involvement and participation defining the requirements for joint development and improvement of products, processes and systems. Develop mutual trust, respect and commitment to customer satisfaction and continual improvement.

(See: Supplier Chain Relationship – Best Practices)

Also See: Applying The Principles

Reference: Short Version - Profit-Ability Management Principles )

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ERP-MRP Evolution…
ERP & Hoshin Kanri…
ERP Implementations… 
Profit-Ability Improvement... (¬Click here to see definitions)
Profit-Ability Management Principles... (¬Click here to see definitions)

People, Empowerment & Profit-Ability (¬Click here to access articles)
Hoshin Kanri & Deming's Plan-Do-Check-Act... (PDCA) Cycle…



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