My unique approach to Right-Sizing can save the DOD $Billions by requiring Defense Contractors to implement my efficiency reforms in their office areas. Defense Contractors have always had contractual requirements for insuring efficiency in manufacturing processes and in other areas but the company’s office areas have been ignored by company management and by Defense Procurement.

In the early 1980’s while on the staff of Hal Yost then President of the McDonnell Douglas Missile Systems Co I proposed to Sandy McDonnell CEO the Reform of the Company’s bureaucratic organization to a Team Managed organization based on the companies QWL teams. The proposal was implemented and used successfully for over ten years when the company was sold to the Boeing Company. It became obvious to me that the company’s office personnel was over-staffed by as much as 30% but the company’s management was unwilling to reduce personnel. Now I have developed a method using Lean Manufacturing as a foundation for making a difficult major reform a smooth and inexpensive transition.

I am submitting the following proposal as a pilot project to the DOD designed to increase the efficiency of
Defense Contractors. See also Article 15. Bringing Life to a Manufacturing Company’s Dead Zone.

The following is a Proposal for a Manufacturing Company’s major reform including changing from a bureaucratic office organization to Team Management organization with significant Right-Sizing. The document is intended to be used to promote understanding of the method used and to start discussion on consulting activities.

Proposal for Defense Contractor Office Reform
By Lawrence Rosier Principal Management Consultant

This proposal is for the pilot implementation of my General Reform Model to be implemented by a Defense Contractor in the company‘s office and shop support environments. The Model was developed by Lawrence Rosier Principal Management Consultant. The method implements Lean Teams throughout a company from the office to shop support areas such as Production Control; all areas which are currently unmeasured for efficiency. The Lean concept was developed by Toyota to involve employees in increasing the efficiency and the continuous improvement of their jobs. The benefits to the company are from efficient operations but also the change in the way employees view their jobs. The General Reform Model uses the data developed by the Lean Teams for Work Measurement and from that staffing and budgeting is determined. The objective of the model is to get the highest efficiency possible, maintain production and support services and turn a difficult major reform including downsizing into a relatively smooth operation.

Role of the proposed Defense Procurement and Company Reform Committee:
A proposed Reform Committee will have oversight of the Reform Model implementation and will be made up of a Defense Procurement representative and Company Management personnel. The Implementation Team lead by the Consultant Lawrence Rosier will report to the Reform Committee. The Committee will also at the end of the implementation confirm the reduction in Company staffing and the resulting benefits to the Company.

The Role of Consultant Lawrence Rosier:
The Consultant Lawrence Rosier will build and train an Implementation Team of Budget Analysts and Industrial Engineers on loan from various departments within the Company for the implementation of the General Reform Model. The consultant will confer closely with the proposed Reform Committee whose purpose is to provide oversight and to insure that Work Measurement and staffing data is firmly documented by the company’s Budget Analysts and Industrial Engineers.

Goals:
After the High Level Lean Team’s review of material and document flows and the elimination of unnecessary and redundant activities the main goal is to get the highest productivity possible with the company personnel while maintaining desired production levels and support services. The method empowers employees through Lean Teams involving them in work process decisions and continuous improvement to their jobs. Lean Teams have been successfully implemented in many companies but mostly in manufacturing areas leaving the bureaucracy of the company’s offices and support services untouched. But imbedded within all bureaucracies are inefficiencies nearly all are 10% overstaffed and most are up to 20% overstaffed. I have in my experience found overstaffing in some areas at more than 30%. A second goal is to wrest the power for maintaining budgets solely from the bureaucratic Departments and restore Functional budget transparency to the company‘s budgeting personnel. The General Reform Model is a method designed to accomplish these goals through Work Measurement. Other Reform Models may be implemented when appropriate such as the Consolidation Reform Model which brings together disparate parts of a company such as support services.

The key to successfully implementing this approach is in doing Work Measurement. I will use the data developed by the Lean Teams for Work Measurement however if this should fail for any unforeseen reason there is a backup method. The contingency method authorizes the Analysts and Engineers to time-study company operations to determine the correct staffing and budgeting. The premier downsizing consulting firm Alexander Proudfoot uses time-study done by as many as fifty or more consultants. In contrast the Lawrence Rosier approach (my approach) reduces the company staffing even more especially in management areas but with remarkably more positive results and at one tenth the cost using company personnel.

The Proudfoot approach controls job assignments using Short-Interval-Scheduling a tool which guarantees that the job gets done on time. Proudfoot also maintains the bureaucratic organization with near dictatorial power of the frontline supervisor over employees. The Rosier approach eliminates the frontline supervisor being replaced by the Team leader of the Lean Team who is elected by members of the team. The result is a self managed Functional Team. In contrast the Proudfoot approach leaves the company with disgruntled employees forced to maintain a tight schedule causing problems with union employees lasting for decades.

The Proposal by Lawrence Rosier:
I suggest a one day meeting to allow Company Senior Leaders and Budget and other staff members to become fully familiar with the primary method I am proposing using my General Reform Model and the contingency method. Also a review of my other reform Models my be appropriate. All are based to some extent on the concept of employee involvement in Lean Teams. I suggest this meeting be an across the table discussion of my proposed Models and how they can be implemented successfully in your company and not a lecture or a slide show.

The first step is the selection of the Defense Contractor for the pilot implementation and the formation of the Defense Procurement and Company Reform Committee with broad powers to lead and implement the reforms. This is necessary for legitimacy and to make sure that data developed through Work Measurement belongs to the company’s Budget personnel and not to the bureaucratic Departments where it was obtained. The Management Consultant should then form the Implementation Team with Budget Analysts and Industrial Engineers on loan from within the company. The required number is entirely dependent on those who can be made available and the size of the company. I do not bring any of my own staff to the job but chose to train current company employees to fill key jobs during the implementation. The advantage of this is that the trained employees will become valuable assets to the company and not walk away like most consultants do.

The first act of the Implementation Team should be in planning for the implementation of Lean Teams within the company. The purpose is to resolve issues related to Lean training, Facilitators, Budget Analysts, Industrial Engineers and specifically what the Lean Teams must do to meet the requirements for determining staffing and budgets. Lean training should begin immediately by the company’s training staff. I would suggest that the company’s normal training curriculum be suspended and an all out effort be made for Lean Training. Training should be made for staff members first followed by management and then Lean Facilitators. Lean facilitators organize and train each employee Lean Team work group which meets for one hour on a weekly basis. There are three major Lean Team endeavors, a high-level Steering Lean Team, a mid-level Lean team made up of mid-level managers to make document flows efficient and at-the-work-place Functional Lean Teams those who do the basic work of the Agency. The Steering Lean Team will report to the Management Consultant and will assist in the management of the implementation. Mid-level Lean Teams are tasked to study inter-department and agency document flows. A key element for all these Lean Teams is their roles when converting from the bureaucratic organization to the Team Managed organization.

After a period of about three to six months most Functional Lean Teams, those that were organized and trained by Facilitators, should have their Value Stream Analyses completed. I have had success with doing the flow of the current method on long butcher or brown wrapping paper taped around a conference room on the walls. The proposed improved method is done directly under the current method to highlight the differences between the methods. I would now allow the Lean Team to present the improved method to management. After the presentation the rolled document is given to the Analysts and Engineers to determine the savings from the proposal.

Activities of the Management Consultant:
The management consultant will play a key role in being sure that the Lean teams are properly trained and in the selection and approach of the high-level Lean teams. The Management consultant will insure that the activities of Budget Analysts and Industrial Engineers currently employed within the company can determine the correct staffing level through Work Measurement and any expenses needed during the process. Some may find the proper staffing for variable processes difficult to determine. If so they should wait for the Management Consultant to make this determination. This data combined with the number of occurrences of the Function over time, obtained from a daily log kept by each Lean Team, provides the basis for an accurate Functional budget. The data collected from the Lean Teams should be Transferred to a spread sheet by Analysts and Engineers and then summarized in a database where all of the company’s Functional Data is stored by the company‘s Budget staff. The activities of Analysts and Engineers are important and will be followed closely by the Management Consultant.

The Consultant will make a final review of the data to determine the actual staffing required. Note that in most cases this is not a simple calculation due to variations in the times required to do some processes. Consolidation of company employees is required meaning most employees who currently do not have a job that takes up their full time will have to be trained to also do a second job while other employees will become redundant. A Special skill is required in balancing the work load to give the remaining employees a full time job. This may be further complicated by jobs which continually change as in some offices which will require the training of a Work Planner to balance the work load assignments for each employee on a weekly basis.

The Management Consultant can now begin the process of organizational reform by replacing the Bureaucratic office organization with a Team Management organization. A Top Management Leader manages the Agency’s activities through the Steering Management Team with those managing Group Teams followed with those managing several Functional Teams. The Lean Teams at the Functional level will become self managed Functional teams with each of their elected leaders reporting directly to a Group Managed team. The Steering Management Team and the Group Managed Teams will assume their new management roles from the pre-organized high-level and mid-level Lean Teams. There is some flexibility in how this process actually occurs but it is necessary in order to eliminate the bureaucratic organization. One advantage of the Team Management organization is that the savings will continue year after year but within a few years a bureaucratic organization would gain back its present staffing level. This is also the period of time for downsizing the entire company once it is known where staffing can be reduced. Layoffs should be completed within a month.

Current knowledge about staffing has shown that nearly all bureaucracies are overstaffed by at least 10% and most are overstaffed by as much as 20%. But I have also found overstaffing up to 50% and higher.
I usually assume an estimate of 10% to 20% overstaffing among employees and management in an office environment. The actual savings to the company will most likely be more than this estimate.

Savings to the company is based on the amount of salaries and benefits of redundant employees found in each department where the implementation is made and from improvements to the company’s processes. Additional future benefits come from employee involvement in continuous improvement to the companies processes. Note that one of the primary reasons for changing from the bureaucratic organization to the Team Management organization is that while the Team Management organization can continuously improve the companies efficiency; in only a few years the bureaucratic organization will most likely return to its old staffing level.

All work involves continuous decision making it is just that we are so unaware of the routine decisions that we make that we don’t recognize them as decisions. Even first time decisions can have a preset approach that can lead to more efficiency.

When a Steering Management Team is involved in making open broad decisions the leader should consider the following process.
1. Prepare for the meeting by visualizing possible alternatives then write down the key impact items for each alternative. Try to assess the size of each impact item and determine where more information is required.
2. In the meeting bring up each of the possible alternatives and call for other alternatives. Review the key impact items for each alternative and quickly eliminate nonviable alternatives. Try to narrow the alternatives to two or three and end the meeting by identifying all the key items where background data is required. The final decision will be based on the results of the background data and reviewed at the next meeting. In the above approach you should allow time for first time decisions but you should never try to put a time limit on them because the quality of the decision outweighs the time spent in making the decision.
Routine decisions are entirely a different matter they can be made efficiently.

The following is an example of routine decision making. A roofing company that replaces asphalt shingles on homes provides estimates to customers. The estimates involve mostly routine decisions. When rare first time decisions are made they quickly become another routine decision. The key impact items in each decision are: driving distance; one story or two story; roof slope, low or high; number of gables; and type of shingles, simple or special. Estimates can be calculated using a simple matrix chart format allowing the estimate to be simply picked off the charts and totaled during a phone call with a customer. Note that all first time decisions are added to the matrix charts and become routine in future estimates. You can think of most first time decisions as simply a routine decision with some new added element.

Lower level decision making, those made by Functional Teams those focused on improving their work processes, are another example of first time decisions. Decisions should be pushed down in the organization as far as practical. Functional Teams usually meet once a week for an hour. This time is primarily spent in finding ways to improve the function’s processes this involves the collection of data and the development of Process Flow charts leading to the decision for the improved method. The important element is that time is provided for making decisions and the process should not be rushed.

The following is a Proposal for a Company’s major reform including changing from a bureaucratic office organization to Team Management organization with significant downsizing. The document is intended to be used to promote understanding of the method used and to start discussion on consulting activities.
Kindest Regards Lawrence Rosier

Proposal for a Company Team Management and Downsizing Reform
By Lawrence Rosier Principal Management Consultant

This proposal is for the implementation of the General Reform Model to be implemented by a manufacturing company throughout the company. The Model was developed by Lawrence Rosier Principal Management Consultant. The method implements Lean Teams throughout a company from the office to the shop. The Lean concept was developed by Toyota to involve employees in increasing the efficiency and the continuous improvement of their jobs. The benefits to the company are from efficient operations but also the change in the way employees view their jobs. The General Reform Model uses the data developed by the Lean Teams for Work Measurement and from that staffing and budgeting is determined. The objective of the model is to get the highest efficiency possible, maintain production and services and turn a difficult major reform including downsizing into a relatively smooth operation.

Role of the proposed Company Reform Committee:
A proposed Reform Committee will have oversight of the reform implementation. The Implementation Team lead by the Consultant Lawrence Rosier will report to the Reform Committee. The Committee will also at the end of the implementation confirm the reduction in Company staffing and the resulting benefits to the Company.

The Role of Consultant Lawrence Rosier:
The Consultant Lawrence Rosier will provide consultation for Lean Training provided by the company training staff. He will build and train an Implementation Team of Budget Analysts and Industrial Engineers on loan from various departments within the Company for the implementation of the General Reform Model. The consultant will confer closely with the proposed Reform Committee whose purpose is to provide oversight and to insure that Work Measurement and staffing data is firmly documented by the Budget Analysts and Industrial Engineers.

Goals:
After reviewing material and document flows and eliminating unnecessary and redundant activities. The main goal is to get the highest productivity possible with the remaining company personnel while maintaining desired production levels and services. The method empowers employees through Lean Teams involving them in work process decisions and continuous improvement to their jobs. Lean Teams have been successfully implemented in many companies but mostly in manufacturing areas leaving the bureaucracy of the company’s offices untouched. But imbedded within all bureaucracies are inefficiencies allowing a minimum of 10% and up to 20% overstaffing. I have in my experience found overstaffing in some areas at more than 50%. A second goal is to wrest the power for maintaining budgets solely from the bureaucratic Departments and restore Functional budget transparency to the company‘s budgeting personnel. The General Reform Model is a method designed to accomplish these goals through Work Measurement which gives staffing transparency to the legislative budget leaders enabling them to control Departmental budgets.

The key to successfully implementing this approach in in doing Work Measurement. I will use the data developed by the Lean Teams for Work Measurement however if this should fail through mass objections of employee unions there is a backup method. The contingency method authorizes the Analysts and Engineers to time-study company operations to determine the correct staffing and budgeting. The premier downsizing consulting firm Alexander Proudfoot uses time-study done by as many as fifty or more consultants. In contrast the Lawrence Rosier approach (my approach) reduces the company by nearly the same number of employees but with remarkably more positive results and at one tenth the cost.

The Proudfoot approach controls job assignments using Short-Interval-Scheduling a tool which guarantees that the job gets done on time. Proudfoot also maintains the bureaucratic organization with near dictatorial power of the frontline supervisor over employees. The Rosier approach eliminates the frontline supervisor being replaced by the Team leader of the Lean Team who is elected by members of the team. The result is a self managed Functional Team. In contrast the Proudfoot approach leaves the company with disgruntled employees forced to maintain a tight schedule causing problems with union employees lasting for decades.

The Proposal by Lawrence Rosier:
I suggest a one day meeting to allow Company Senior Leaders and Budget and other staff members to become fully familiar with the primary method I am proposing using my General Reform Model and the contingency time study method to insure success of the implementation. All reform Models are based to some extent on the concept of employee involvement in Lean Teams. I suggest this meeting be an across the table discussion of my proposed Models and how they can be implemented successfully in your company and not a lecture or a slide show. The discussion and decisions from this meeting are strictly confidential.

The first step is the formation of a Company Reform Committee with broad powers to lead and implement the reforms. This is necessary for legitimacy and to make sure that data developed through Work Measurement belongs to the committee and not to the bureaucratic Departments where it was obtained. The Management Consultant should then form the Implementation Team with Budget Analysts and Industrial Engineers on loan from other companies within the company. The required number is entirely dependent on those who can be made available and the size of the company. I do not bring any of my own staff to the job but chose to train current company employees to fill key jobs during the implementation. The advantage of this is that the trained employees will become valuable assets to the company and not walk away like most consultants do.

The first act of the Implementation Team should be in planning for the implementation of Lean Teams throughout the company. The purpose is to resolve issues related to Lean training, Facilitators, Budget Analysts, Industrial Engineers and specifically what the Lean Teams must do to meet the requirements for determining staffing and budgets. Lean training should begin immediately by the company’s training staff. I would suggest that the company’s normal training curriculum be suspended and an all out effort be made for Lean Training. Training should be made for staff members first followed by management and then Lean Facilitators. Lean facilitators organize and train each employee Lean Team work group which meets for one hour on a weekly basis. There are three major Lean Team endeavors, a high-level Steering Lean Team, a mid-level Lean team made up of mid-level managers to make document flows efficient and at-the-work-place Functional Lean Teams those who do the basic work of the company. The Steering Lean Team will report to the Management Consultant and will assist in the management of the implementation. Mid-level Lean Teams are tasked to study inter-department document flows. A key element for all these Lean Teams is their roles when converting from the bureaucratic organization to the Team Managed organization.

After a period of about three to six months most Functional Lean Teams, those that were organized and trained by Facilitators, should have their Value Stream Analyses completed. I have had success with doing the flow of the current method on long butcher or brown wrapping paper taped around a conference room on the walls. The proposed improved method is done directly under the current method to highlight the differences between the methods. I would now allow the Lean Team to present the improved method to management. After the presentation the rolled document is given to the Analysts and Engineers to determine the savings from the proposal.

Activities of the Management Consultant:
The management consultant will play a key role in being sure that the Lean teams are properly trained and in the selection and approach of the high-level Lean teams. The Management consultant will insure that the activities of Budget Analysts and Industrial Engineers currently employed within the company can determine the correct staffing level through Work Measurement and any expenses needed during the process. Some may find the proper staffing for variable processes difficult to determine. If so they should wait for the Management Consultant to make this determination. This data combined with the number of occurrences of the Function over time, obtained from a daily log kept by each Lean Team, provides the basis for an accurate Functional budget. The data from the rolled document should be Transferred to a spread sheet by Analysts and Engineers and then summarized in a database where all of the company’s Functional Data is stored. The activities of Analysts and Engineers are important and will be followed closely by the Management Consultant.

The Consultant will make a final review of the data to determine the actual staffing required. Note that in most cases this is not a simple calculation due to variations in the times required to do some processes. Consolidation of company employees is required meaning most employees who currently do not have a job that takes up their full time will have to be trained to also do a second job while other employees will become redundant. A Special skill is required in balancing the work load to give the remaining employees a full time job. This may be further complicated by jobs which continually change as in some offices which will require the training of a Work Planner to balance the work load assignments for each employee on a weekly basis.

The Management Consultant can now begin the process of organizational reform by replacing the Bureaucratic office organization with a Team Management organization. A Top Management Leader manages the Agency’s activities through the Steering Management Team with those managing Group Teams followed with those managing several Functional Teams. The Lean Teams at the Functional level will become self managed Functional teams with each of their elected leaders reporting directly to a Group Managed team. The Steering Management Team and the Group Managed Teams will assume their new management roles from the pre-organized high-level and mid-level Lean Teams. There is some flexibility in how this process actually occurs but it is necessary in order to eliminate the bureaucratic organization. One advantage of the Team Management organization is that the savings will continue year after year but within a few years a bureaucratic organization would gain back its present staffing level. This is also the period of time for downsizing the entire company once it is known where staffing can be reduced. Layoffs should be completed within a month.

Current knowledge about staffing has shown that nearly all bureaucracies are overstaffed by at least 10% and most are overstaffed by as much as 20%. But I have also found overstaffing up to 50% and higher. I usually assume an estimate of 10% to 20% overstaffing among employees and management in an office environment. The actual savings to the company may be more than this estimate.
Actual Management Consultant Fees can be negotiated after determination of approximate savings based largely on the size of the company being reformed.

Lawrence Rosier & Associates 12143 Cedar Grove Rd. Rolla, Missouri 65401
573 364 8789 Websites: http://leanmgtconsultant.blogsome.com/ and http://managementconsultant.blogsome.com
I am always available to answer confidential questions by email: lawrence2007@embarqmail.com

There are two Lean implementations in a company the first is the normal high level management Lean Team and the second is the Lean teams at the organizations functional level. It is the second implementation which this article addresses.

The roles of Facilitator and Budget Analyst play a very important part in the implementation of Lean Teams at the functional level. This role is different from the normal implementation of Lean which is at the management level of the organization. This implementation of Lean starts the same but ends in the transformation of the organization bureaucratic structure with a downsized streamlined Team Management organization with fewer levels of management that encourages innovation by empowering both management and employees.

The implementation of Lean Teams begins with an company’s development of a new Mission Statement reflecting the change in the organizations goals and policies incorporating the Lean philosophy of process quality. This step should reflect the input of as many of the company’s personnel as possible with open discussions of what the new direction of the agency should be.

Facilitators are needed to organize and train employees in the Lean process at each functional work station and are selected from the current training staff. Budget analysts are selected from the budgeting staff. The facilitators and budget analysts are given special training in Lean and analysis of Flow Process Charts. When the training is completed a facilitator and a budget analyst are selected to work together as a team in identifying each of the organization’s Functions. A Function is a standalone budgeted entity which produces a product or performs some service for the public. Each Function will have its own Lean Team made up of all the personnel who work in the Function.

The facilitator will organize the Lean Team and provide training at the it’s weekly meetings. At the first meeting the Team will elect its own leader. Subsequent meetings will involve finding the best way to do the work of the Function through the development of a Process Flow Chart. The budget analyst will assist the Team in the development of the process Flow Chart. When the new and best method has been documented in the Process Flow Chart it is presented to the top management. This is an important step which signifies top management’s support and recognition of the Team’s accomplishments. Upon approval of the new method the Process Flow Chart is given over to the budget analyst to cost out the savings of the new method and to identify the proper staffing for the function. The budget analyst then documents the new method and its costs in a spread sheet which will provide input to the next budget.

It is important to understand what is actually happening in the agency during this process. First the top management must support the Lean implementation in the development of the new mission statement, the training of the facilitators and budget analysts and the organization and recognition of the Team’s accomplishments. Support from much of the rest of the organization’s personnel may be negative but this can be ignored for the time being. You can think of this process as the facilitator and budget analyst team reaching into the organization and pulling out (identifying) a function and its personnel. The key here is that the team interviews workers in the function to find out the names of those who actually work in the function. This saves some time later when personnel who find that they do not have a functional job may be assigned to a function. This is a little like musical chairs for those who do not work on a function may find themselves redundant.

At the same time when functions and their personnel are being identified the facilitator and budget analyst will meet once a week with top management to coordinate the implementation at the functional level.

The management level Lean Team is the beginning of what will eventually become the Steering Management Team and Functional teams become the Functional Management for each function.

All that remains now is to identify the support functions and their personnel who support the company's functions. Now is the time to decide how to organize support organizations. Human Resources, Facilities, Information Technology and Purchasing should have only a single representative as a coordinator on the Steering Management Team. These functions should be centralized within the company.

Now we turn our attention to all those left in the organization those deemed as redundant. Under the current difficult budgeting time these personnel will be laid off. In better times they could be retrained for new jobs. In any case we now know what the proper staffing should be for each function and unless the work actually changes the staffing should not change. The yearly budget for a particular function should not rise over 4% from increased salaries and other expenses.

Please note the analysis of Process Flow Charts are not as straight forward as I have presented. The difficulty occurs when the amount time to do a process is the same or varies each time it is done. When the time is the same the method is easily calculated but when the process varies as most do, other special methods must be invoked.

Each of the function’s processes must be examined to determine which are varying and by how much. Those that vary no more than 10% should be averaged (from historical data) and treated the same as a non-varying function. But if the function varies significantly for example a process which varies as much as 100% involves decision making and should be approached as a decision making process. This involves breaking the decision making process down into parts those that are common repeatable decisions which can be assigned a time allowance and the part which is unpredictable. This smaller part of the decision is estimated and the total is summed for the proper staffing.

The goal is to establish a staffing base for the Function’s budget. You should not make something difficult out of this process just because you are unable to get the exact number of hours required for the process. The reason is you are staffing with the work of a full time person. The establishment of a staffing base may sound difficult but I think that it is not beyond the capabilities of a budget analyst.

Insurance firms have been using Work Measurement to measure office work since the 1940s. Alexander Proudfoot the premier downsizing Consulting Firm has been using Work Measurement since 1947. Note that all Work Measurement came from time-study of work processes until now. The Work Measurement data in this method comes from the Lean Team's data and is developed by the budget analyst.

From: BUYZSAVE blog at: http://www.buyzsave.com/blog/2010/10/22/THE-BEST-STATES-FOR-BUSINESS-AND-CARERS.aspx

THE BEST STATES FOR BUSINESS AND CAREERS
Posted on Friday, October 22, 2010 9:31 PM
Utah tops our fifth annual ranking, knocking longtime leader Virginia from the top spot. When voters in 37 states select their governors next month, the overriding issue will be, of course, the economy. A recent CBS News poll found that 54% of adults think the economy and jobs are the most important problem the U.S. is facing today. Health care ranked a distant second, with 7% of the tally. Almost every state experienced decreased output, a loss of jobs and budget shortfalls during the economic downturn. Nationwide employment has declined by 7 million jobs over the past two years while gross domestic product growth has been sluggish this year after a 2.6% drop in 2009. No state has emerged unscathed. But some areas are doing better than others, and for many of them, it isn’t an accident.

Who’s doing the best job when it comes to fostering growth? Utah, according to our fifth annual look at the Best States for Business. The Beehive State captured the top spot in our rankings for the first time, after a four-year run by Virginia at the head of the list. Utah’s economy has expanded 3.5% annually over the past five years, faster than any other state except North Dakota. This is three-and-a-half times faster than the U.S. as a whole. Total employment in the U.S. has shrunk over the past five years, but in Utah it increased 1.5% annually, fourth-best in the nation. Household incomes have surged 5% annually, which is tops in the country and twice as fast as the national average. “We have a fiscally conservative government where we are trying to keep government off your backs and out of your wallet. We want the free market do what it does best,” says Utah Gov. Gary Herbert, a Republican running for a full term this year after taking over the job in August 2009, when then Gov. Jon Huntsman was appointed U.S. ambassador to China.

Utah lowered its corporate tax rate from 7% to 5% in 2008, to the delight of businesses. The rate is now one of the lowest in the country. The regulatory climate is also pro-business, with the Pacific Research Institute rating Utah second-best in the regulatory component of its U.S. Economic Freedom Index. “We want to make sure we don’t have any nonsensical regulations that inhibit the private sector from expanding and having a profitable bottom line,” says Hebert.

Other factors the state have going for it include energy costs 35% below the national average; an educated labor force, with 90% of residents holding a high school diploma (and 29% a college degree); a great quality of life with low poverty rates; a healthy populous; and ample recreational opportunities. Utah boasts a triple-A debt rating from Moody’s (NYSE: MCO - News), S&P and Fitch. Earlier this year Forbes crowned Utah the country’s most fiscally fit state government. Companies across the country are taking notice. Goldman Sachs (NYSE: GS - News) keeps expanding its operations in Utah, and its Salt Lake City office is now the company’s second-largest in North America. Adobe (Nasdaq: ADBE - News) announced plans in August to build a new campus in Utah that will create 1,000 new jobs there, building on its $1.8 billion purchase of Orem-based Web analytic firm Omniture (Nasdaq: OMTR - News) last year. Oracle (Nasdaq: ORCL - News) and eBay (Nasdaq: EBAY - News) are both building massive data centers outside Salt Lake City.

Our Best States ranking measures six vital categories for businesses: costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life. We factor in 33 points of data to determine the ranks in the six main areas. Business costs, which include labor, energy and taxes, are weighted the most heavily. We relied on 10 data sources, with research firm Moody’s Economy.com as the most-utilized resource.

Our former No. 1-ranked state, Virginia, falls to No. 2 this year. Virginia still boasts a very favorable business climate, with an educated labor supply and solid economic growth. But Virginia’s business costs (namely labor and energy) have crept up, which allowed Utah to leapfrog it. Rounding out the top five are No. 3 North Carolina, No. 4 Colorado and fifth-ranked Washington. The Northeast isn’t dead yet, judging by our rankings, despite high business costs and crippling budget deficits. New York, New Jersey and Massachusetts all rank among the priciest states when it comes to labor, taxes and energy costs. Yet each state moved up the rankings this year, thanks to improving current economic climates and growth prospects relative to the rest of the country, compared with last year. Massachusetts made the biggest move of any state this year, climbing from No. 34 to No. 16. Business costs in the Bay State are highest in the country: 22% above the national average. But venture capital continues to pour into the state, looking to take advantage of the bright minds at elite universities in and around Boston and Cambridge. VCs invested $2.9 billion in Massachusetts companies last year, second only to California. The state enjoys the highest college attainment rate in the country, with 38% of adults possessing a degree. Bringing up the rear this year is Maine, which replaced No. 49 Rhode Island at the bottom of our rankings. Growth prospects in Maine have deteriorated relative to the rest of the country. Job growth is expected to increase 1.3% annually over the next five years–one of the worst forecasts in the country. The state has endured a rash of business closings the past three years as well. Mainers head to the polls next month to choose a new governor. The state’s current chief, democrat John Baldacci, is off the hook though; thanks to term limits, Baldacci cannot seek reelection.

No. 1 Utah2009 Rank: 3
Business Costs Rank: 8
Labor Supply Rank: 5
Regulatory Environment: 6
Economic Climate: 1
Growth Prospects: 20
Quality of Life: 18

No. 2 Virginia 2009 Rank: 1
Business Costs Rank: 24
Labor Supply Rank: 3
Regulatory Environment: 2
Economic Climate: 4
Growth Prospects: 14
Quality of Life: 6

No. 3 North Carolina 2009 Rank: 5
Business Costs Rank: 3
Labor Supply Rank: 15
Regulatory Environment: 3
Economic Climate: 18
Growth Prospects: 9
Quality of Life: 32

No. 4 Colorado 2009 Rank: 4
Business Costs Rank: 33
Labor Supply Rank: 1
Regulatory Environment: 15
Economic Climate: 6
Growth Prospects: 6
Quality of Life: 9

No. 5 Washington 2009 Rank: 2
Business Costs Rank: 28
Labor Supply Rank: 2
Regulatory Environment: 5
Economic Climate: 11
Growth Prospects: 4
Quality of Life: 29

Sources: Moody’s Economy.com; Pollina Corporate Real Estate; Pacific Research Institute; Tax Foundation; Sperling’s Best Places; Better Government Association; Census Bureau; SBA; FBI; Dept. of Education; Forbes. See the full list of The Best States For Business And Careers at: http://www.buyzsave.com/blog/2010/10/22/THE-BEST-STATES-FOR-BUSINESS-AND-CARERS.aspx

Comments by Lawrence Rosier:
The competition isn’t over for 2011 already governors John Kasich of Ohio and Rick Scott of Florida has “Declared Their States Open For Business”. If they follow Utah’s lead in lowering their corporate tax rates there could be an even closer competition. The best way to lower corporate tax rates is to get the highest efficiency possible in State Government using my General Reform Model. While Utah currently has a Corporate tax rate of 5% by increasing the efficiency of state Government corporate taxes could be eliminated altogether making the state truly open for business. The result could be the generation of thousands of new jobs.

Federal Corporation taxes at 35% are the highest in the world. This causes businesses to move offshore. I recommend that we lower our corporate taxes to be competitive with that of Canada at 16%.

Alexander Proudfoot is the leading consulting firm in the US and in Europe doing downsizing or as they call it “reengineering and consolidation”. An announcement in the news that Proudfoot has entered into a contract with a company will cause an immediate rise in the company’s stock price on Wall Street in anticipation of increased profits. Typically after signing an agreement with a company Proudfoot while working with top management will place their consultants throughout the company. They will time-study all of the functions performed by the company on the manufacturing shop floor as well as within the company’s offices. This a very expensive operation with as many as one hundred highly paid consultants time-studying nearly every operation within the company, the entire operation taking as much as six months. The results are generally dramatic from 20% to 30% reduction in company employees. This must be the case to offset Proudfoot’s substantial consulting fees. See my Article 16. Alexander Proudfoot Management Consultant Implementation.

In contrast the Lawrence Rosier approach (my approach) reduces the company by the same number of employees but with remarkably more positive results and at one tenth the cost. The Proudfoot approach uses consultants to do Work Measurement by time-study and controls the new job assignments using Short-Interval-Scheduling a tool which guarantees that the job gets done on time.

The Rosier approach uses the company’s own Lean trained personnel empowered to find the “best way” to do the function (reengineering at the work place). Later the data generated by the Lean Team is used for Work Measurement which determines the correct staffing for each function. The Lean Teams also keep a daily log of all activates. The daily log provides a record of all activities and the number of times that functions are performed. This data is the input needed to make a Bottoms-up Budget for each function.

Both approaches require some consolidation due to fewer employees but here there is a difference. Proudfoot maintains the bureaucratic organization with near dictatorial power of the frontline supervisor over employees. The Rosier approach eliminates the frontline supervisor replaced by the Team leader of the Lean Team who is elected by members of the team. The result is a self managed Functional Team.

Both approaches reduce the number layers of unnecessary management found in all bureaucratic organizations. But the Rosier approach goes further by changing the bureaucratic organization to a Team Managed organization with Group Steering Teams providing management guidance for the front line Functional Teams. This results in a more innovation company empowering its employees to make continuous improvements to its processes. In contrast the Proudfoot approach leaves the company with disgruntled employees forced to maintain a tight schedule causing problems with union employees lasting for decades.

Other differences arise from Proudfoot's reliance on the bureaucratic form of management it has failed to appreciate the benefits from using the entire organization for getting continuous improvement to the company’s processes provided by Lean.

The Rosier approach provides the highest improvement in efficiency possible at a low cost mostly using the company’s own resources. This makes the approach affordable for small companies, state and local governments as well as the Federal Government.

Example of an Alexander Proudfoot Management Consultant Implementation. This is the leading Consulting firm doing downsizing in industry. The firm gets the highest level of efficiency possible from the work force by using time-study to do Work Measurement. Their approach uses Short-Interval-Scheduling to control the work done by the remaining employees. They also do consolidation of functions and implementation of IT systems.

My Reform Models do the same thing but with much less hassle for employees and one tenth the cost. Actually my implementation improves employee morale encouraging them to innovate and improve their jobs.

Job cuts boost Ohio Casualty By James McNair and Mike Boyer
The Cincinnati Enquirer Wednesday, May 5, 2004

On a net basis, Ohio Casualty posted profit of $19.2 million during the quarter, compared with $19.9 million in 2003.

Comments by the author Lawrence Rosier
So what’s wrong with this method of downsizing? Nothing if the plant is in danger of shutting its doors and quick solution must be had. But the method destroys employee morale by such severe measures and may create a permanent problem with unions resulting in ill will lasting for years. The "Short Interval Scheduling" reporting system forcibly maintains employee productivity. The costs are high in that there is little or no employee innovation for continuous improvement to the work methods. Note that this approach is used by Alexander Proudfoot throughout the plant and in the office areas. It’s a real killer for morale and employee innovation. This is a very expensive operation because there may be as many as fifty consultants on the job receiving a substantial fee for their efforts.

I recommend instead my General Reform Model which uses Lean Teams from the clients own workforce to do Work Measurement. This approach saves $millions when compared with the consulting fees charged by Alexander Proudfoot. My approach also gets the highest efficiency possible through staffing and budgeting but maintains employee morale and continuous innovation by changing the bureaucratic organization to a Team Managed organization.

In order to analyze a manufacturing company’s potential for investment I prefer to break it apart into four zones. The company’s future success is tied closely to its performance in these four zones: the Management Steering Zone, the Product Development Zone, The Manufacturing Zone and the Dead Zone (the most inefficient part of the company).

1. The Steering Zone consists of Top Management and those high level decision makers that directly influence the course of the company namely: its strategic direction, in what products it manufactures, product advertising and company expansion and mergers.

When Warren Buffett invests it’s the Steering Zone that gets the acid test. Failure in performance or more precisely the promise of high performance gets a no vote. But he will also look at new product development and manufacturing before a final decision.
Case in point Warren Buffett, who is 78, was intrigued by the entrepreneur behind BYD, a Chinese electric car manufacturer headed by a man named Wang Chuan-Fu. The company itself is frugal. Until recently, executives always flew coach. He was appalled when he learned that Ford, which lost billions last year, had staged a gala at the Hotel George V during the Paris auto show. By contrast, the last time BYD executives traveled to the Detroit auto show they rented a suburban house to save the cost of hotel rooms. Last fall Berkshire Hathaway bought 10% of BYD for $230 million mainly because of its CEO.

2. Product Development Zone or more accurately termed new product development. Its best measure of efficiency is the “time from concept to market” similar to a skunk works.

3. The Manufacturing Zone should include all the relevant Japanese quality tools and techniques for achieving the highest efficiency in the flow of raw materials to manufacturing and delivery of products to distributors. Most successful manufacturing companies do a reasonably good job in this zone.

4. The Dead Zone; the below the radar, the in the swamp zone consisting of everything not in the above three zones. Nearly 90% of all manufacturing companies have this dead zone. When you examine the development of large manufacturing companies you will find that the original bureaucratic functions are still in place in the offices of the company. This often overlooked inefficient bureaucratic section of the company may be responsible for a company’s inability to compete in the market place especially if it is large in comparison with the rest of the company.

Most manufacturing companies have bureaucratic management that is no different from that found in government. Unaware of the need for reforming its 19th century management practices the poorly managed company looks only at two factors raw material costs and factory labor costs. Unable to control its raw material costs it seeks the lowest world wide labor cost it can find. Labor costs are union labor costs which are diligently measured using Work Measurement (time-study). But they never measure overhead employees and instead allow unnecessary over staffing with multiple layers of management in its bloated dead zone bureaucracy.

In contrast the competition Toyota and Honda use the Total Quality Management form of organization even in its offices to get innovation throughout its work force. Yes they have unions but the members realize that their fate is closely tied to the fortunes of the company they work for. When sales are not so good the union may even forgo asking for a raise. Most of their corporate leaders use mass transit to get to work rather than chauffeured limos.

The point is that there are serious problems in the way many American companies are managing their dead zones most are using the 19th century bureaucratic organization with all its flaws. The most poorly managed companies are more likely try to solve their financial problems by seeking cheap labor abroad rather than reforming themselves.

Here is how I propose to bring new life to this dead zone.
Companies should be implementing Lean Teams, using Work Measurement for staffing its overhead employees and reduce the levels of bureaucratic management. I advocate the replacement of the Bureaucratic Organization with a Management Steering Teams and Functional Teams. The following steps describe the process for making this reform.

A. Top Management Support and understanding of the problem.
This is a critical step for without top management support this reform is going no place.

B. Lean Training
Lean training is widely given throughout the organization both to the top managers and lower level employees as well. The focus of Lean is on making the process flows of the organization more efficient. Outside training consultants may have to be brought in to train the internal trainers in Lean methods. Value Stream Mapping is the primary useful Lean tool in offices. Value stream mapping is a Lean manufacturing technique used to analyze the flow of materials, documents and information required to bring a product or service to a consumer.

C. Organize Lean Teams
Organize Lean Teams where recognized process flows exist within office areas both for high level cross functional process flows and low level process flows within a function. The high level Lean Teams are made up of personnel who actually work in cross functional management and the Functional Lean Teams are from the work place where the function’s processes are performed. The best people to do an analysis of processes is Lean trained employees who actually do the work whether this is a high level skilled team or employees just loading trucks it is up to the team to define the best practices for doing the job.

D. Lean Team Meetings
I recommend flexibility in meeting times for busy managers this may be one hour before work while they are fresh in the morning or the setting aside of a half day during the week. In any case the Lean Management Team should meet at least one time a week. The first order of business is to get organized by electing a leader of the Team by secret ballot.

Low level Functional Lean Teams may require the services of a Lean trained facilitator to assist in getting the team organized and electing its leader. I would suggest that these teams meet for at least one hour each week. I have found that the best way to study process flows by these teams is on a large Process Flow Chart taped to the wall of the conference room with each process taped to the wall chart. This provides a flexible way of making changes to the chart during its construction. The method should start with the current process flow and after that is completed the improved process flow is added to the wall chart.

E. Top Managements Role
Top management’s role is to encourage the implementation of Lean by being supportive of the Teams. They should send representatives at times to the Team meetings showing complete management support.

F. Costing-out the New Lean Process Flow Method
A Lean trained budget analyst will cost-out the savings between the old method and the new method and identify the staffing and other budget costs associated with the new method. Once this is done the budget including the staffing is established for this set of processes. The new method with the savings is presented to top management.

The Process Flow Charts provide a record of the costs associated with each process. If a process were to be eliminated all of its costs are also eliminated. A Process Flow Chart is done for each Function and if a Function were to be removed all of its budget will also be removed. The budget analyst will document the improved process flow and all its related cost information in a spread sheet.

What you have now is the real budget for doing the companies office functions. True, you must add in the cost of managing the functions but now for the first time you know what that cost is. This is a bottom-up budget with actual costs for doing the work known. All other costs are for management and fluff (which can be significant). This is an example of Work Measurement in my experience in industry most unmeasured office areas are over staffed by 10% or more. Once you know what the real costs are for doing the company’s work and top management is working closely with the Teams the management reform process can begin. The reduction in staff can be significant remember you have removed all of the employee wait time between tasks and consolidated the employee functional teams.

G. Replacing the Bureaucracy with Steering Management and Functional Management
First the Lean Management Team is combined with the new Steering Management Team headed by the company’s top manager as team leader. The Steering Management Team has the role of guiding and steering the organization. Some but not all of mid management may become part of the Steering Management Team but most mid level managers between the Functional management and Steering Management will become redundant.

So where do savings come from in this reform? If the dead zone office areas have never had Work Measurement performed and most have not, the minimum savings is at least 10% plus the savings from all the Lean activities this may be a minimum of 5% or more plus the reduction in management personnel which could be another 10% for a total of 25%.

Given the cost of a company building a plant in China and transporting the manufactured items back to the US there is a good chance for a reformed company that the move may not be economically feasible.

A lumbering bloated beast is threatening American Industrial Supremacy forcing it to become a cliché of the past the beast is Industrial Bureaucracy. Many American manufacturing companies are grossly inefficient and unable to compete in world markets. Companies become top heavy by default since most use the same bureaucratic structure that has been in place since the company was first organized. When the economy is vibrant these companies can produce a reasonable profit but when economies sour sales slump top management panics. Most respond by laying-off shop floor workers first, followed by the most recent employees in support areas but the bureaucratic over staffed management areas remain mostly intact to survive for better times.

The problem is not so much gross mismanagement but gross ignorance on the part of top management. They assume that the company’s management areas are operating efficiently and that all they have to do is to make the right marketing decisions while monitoring raw material and labor costs. Many of these companies under competitive pressure focus on reducing raw material costs and shop floor labor costs. Unable to stem rising raw material costs they look at where they can get the lowest labor costs. These are the companies that are most likely to move their operations off shore.

American companies have always been envious of Japanese industrial quality. And most of the Japanese quality tools have been adopted by US companies but still US companies lag behind in competitiveness. The main problem is that they focused on the tools and failed to change the culture and the work environment. What they missed was the subtle difference in the culture between Japanese management and the US bureaucratic management. Even though a Japanese company may appear to have the same organizational chart structure as a US company the “Team Spirit” of Japanese management has not been matched by all but a few US companies making it the critical competitive difference.

So how do you interject this “Team Spirit” into an American company? The answer is you can’t. The high level of Team Spirit found in Japanese industry is so much a part of their culture that it can not be duplicated in American bureaucratic companies. The problem being that the bureaucratic structured organization is incompatible with Japanese Team Sprit. But there is a way to fix this problem; get rid of the 19th century Industrial Bureaucratic organizational structure and replace it with a 21st century Team Management structure.

In Fortune Magazine’s annual list of the “Top 100 Companies that Employees Want to Work For” most of the top 10 are managed by Teams. These companies push decision making as far down in the organization as practical. While bureaucratic companies rely on silos for the independent management of: Production control, Production, Manufacturing Engineering and others. The new Team organization has the personnel actually doing the work as self managed Teams. The structure of the organization is simple Shop Floor Functional Teams report to a Group Steering Team. The Group Steering Team leader is Member of The Top Management Team. This keeps Top Management closely connected to the shop floor.

The best example of the problem is the competitiveness of Toyota and America’s Big Three General Motors, Ford and Chrysler. Toyota has been successful in increasing its market share against the Big Three. While GM and Chrysler have implemented Japanese Quality Tools with some success with Ford has being a little more successful all three have missed the big “Team Sprit” picture. The failure to understand the critical Team Sprit is evident throughout the big three’s management. When was the last time you have seen an American CEO to commit hari-kari because he has failed to make his company profitable.

We are going to lose a lot of companies to competition from Japan and from other mostly oriental companies who understand the competitive advantage of Team Spirit before US companies catch on. Many companies which have sent their manufacturing off shore may be able to bring their manufacturing back to the US once the secret of Team Management is known.

I discuss how to reform a US company using Lean Teams to find the best way doing all the operations within the company. The logic of this is to find the best method of doing an operation document the process. Then bring in a budget analyst or an Industrial engineer to determine costs and staffing. When the Lean Teams have completed their tasks they replace the bureaucratic organization. See my Article 13. for more information.

In the rush for top management to get the most efficiency on the factory floor and find and nurture the most talented managers they miss the obvious, the organization of the company itself. Companies become top heavy by default. Most use the same bureaucratic structure that has been in place since the company was first organized. When the economy is good “Top Heavy” companies can produce a reasonable profit but when economies sour sales slump top management panics. Most respond by laying-off shop floor workers first, followed by the most resent employees in support areas.

Many of these companies under competitive pressure focus on raw material costs and shop floor labor costs. Unable to stem rising raw material costs they focus on the where they can get the lowest labor costs. These are the companies that are most likely to move their operations off shore.

In Fortune Magazine’s annual list of the “Top 100 Companies that Employees Want to Work For” most of the top 10 are managed by teams; Management Steering Teams and Functional Teams at the work place. These companies push decision making as far down in the organization as practical. While “Top Heavy” companies rely on bureaucratic silos for the independent management of: Production control, Production, Manufacturing Engineering and others. The new Lean team organization has the personnel actually doing the work within each of these functions organized as a self managed functional Team. Functional Teams report to a Group Steering Team. The Group Steering Team leader is Member of The Top Management Team.

So What’s Different?
The most critical difference is in the culture of the organization. The old bureaucratic culture delivered mostly top down directives. Bottoms-up communication was considered to be a complaint and career ending for the employee. In the Lean team organization employee innovation is highly desirable all suggestions and complaints are heard by the Teams.

The career paths to management are reduced to one from the Functional Team to the Group Steering Team along with the reduction of many redundant managers.

While Top Heavy companies focus on Raw Material and labor costs, Lean Team Managed Companies focus on obtaining “competitive advantage” in every thing it does. The latter widens the scope of possibilities to obtaining efficiencies throughout its organization.

Moving From a Top Heavy Company to Lean Teams
I would start the First Phase by breaking down Departments into their functions. A Function is the name of a part of an organization that uses a unique set of processes to achieve a product or service that satisfies a specific company or customer need. Processes are the steps required to achieve the desired product or service and are studied by the Functional Lean Team using a Process Flow Chart (PFC) to determine the best way to perform the function. Because functions can precisely describe a task, breaking down the budget into functions simplifies the budgeting process. Begin the process by requesting all organizations to make a preliminary break down of their current operations into functions. This is done to prepare the way for identifying and organizing the functional Lean Teams.

In the Second Phase Work Measurement is done by an Industrial Engineer or a Budget Analyst to determine staffing and other functional costs.
In the Third Phase Management assumes the role of a series of Group Steering Management Teams. The top level Lean team and possibly some but not all of mid management may become part of a Group Steering Management Team. Steering Management has the role of guiding and steering a group of functions while Functional Management deals with the day to day operation of the companies business. Steering Management is responsible for telling Functional Management “what to do” but not “how to do it”. This is a loose-tight organization with Steering firmly in control of the budget leaving Functional Management free to determine how best to do the job. This is straight from the book “In Search of Excellence- Lessons from America’s Best-Run Companies” by Thomas J. Peters and Robert H. Waterman Jr., Harper and Row, New York, 1982.