Shape Up! With 7 Steps to Company Fitness

Companies, like individuals, must stay in shape, and both must search-in an environment of high demands on time and resources-for the right tools to achieve and maintain fitness. The pharma industry's current challenges suggest that the need for fitness may be greater than ever:

• Consumers are frustrated by rising healthcare costs, particularly for pharmaceuticals.

• Global public health crises threaten patent protection, potentially opening the door for generic invasion.

• New and disruptive technologies offer unparalleled promise and a breathtaking price tag.

• Direct-to-consumer brand awareness efforts have been met with state and federal legislative scrutiny.

This article outlines seven ways that companies can improve their "enterprise fitness" and remain lean, flexible, fast, and strong for the long haul.

The Holistic View

Companies are living, breathing, organic systems-fluid, dynamic, sometimes messy, and unique.

In humans and organizations, disease, injury, and chronic dysfunction manifest as symptoms such as pain and fever. But the "pain" is often symptomatic and eliminating it rarely fixes the problem.

Consider weight management. People may lose pounds through fad diets, but in most cases, keeping weight off depends on how many calories an individual eats and burns. And that behavior is controlled by a few core beliefs. One example is believing one can eat as much at age 40 as at age 30 without adding exercise. The same is true for organizational behaviors: Permanent change requires a permanent change in belief.

Although people may choose to behave as if parts of the body, or the company, can be adjusted without affecting other areas, outcomes say otherwise. After adding an abdominal crunch routine, a person may start to experience chronic lower back pain. Viewed independently, the stomach muscles may be getting tighter. Viewed interdependently, the crunches may have created the back problem.

Perceiving organizations as living systems creates an environment in which healing is considered as the first option and cutting as the last. Who would choose back surgery over bed rest as a first step? A healing methodology-which preserves resources rather than removing them-is the preferred alternative. It is unrealistic to try to tone and strengthen every muscle every day-or that doing so will result in systemic improvement. It is just as unlikely that trying to improve every part of an organization at once will bring everything into alignment. A more useful strategy is to identify problems and focus efforts where they will make the most significant difference.

The Complete Physical

An enterprise fitness approach analyzes the numbers that represent the symptoms of business problems, but unlike other improvement methodologies, it also "peels the onion" to see what lies beneath them. It starts with a complete assessment that views the organization, or business unit, as a single system. A comprehensive physical from a doctor covers a gamut of health issues-blood pressure, cholesterol count, oxygen intake-to establish a baseline and determine what functions fall outside the "normal range." Enterprise fitness also looks at the system holistically and asks, "What should we focus on to improve the organization?"

Of course, the answer differs for every body and every company. A physical usually reveals the need to change just a few things. And working on problems that are "in range" won't help those that are not. The principle applies to organizations as well. They need to focus energy where it will make the most impact. For companies with a volume/cost problem, for example, the cure might be as simple as expanding the capacity of a bottleneck resource. For those concerned with market share, getting products to market faster is the name of the game, and a high volume/low cost mentality may not be useful. Meaningful performance measurement depends on establishing the baseline and identifying where to focus attention.

Developing a realistic understanding of goals leads to the question: What problems-time demands, cost factors, relationships, facilities-are preventing the company from reaching those goals? The objective is to identify the key leverage points-the systems' constraints, limitations, or bottlenecks-wherever change can make a significant difference. Typically, there are only a few, but managers need to assess their impact. Are the problems sudden and chaotic, or are they indications of chronic, long-term conditions? Both can occur, pointing to the need to look at short- and long-term issues.

Age is important, too. Just as an exam for someone over 50 includes an EKG and a chest x-ray, focusing on new products requires a different strategy than supporting mature products or lines. Some ailments are simple and logical, and self-treatment is common. But only a complete physical can confirm whether effort is being spent in the right places.

The Right Issues

To pinpoint a problem, managers must understand the relationships within an entire system. Take, for example, the pharma company with a large investment in excess inventory.

It had been plagued with a persistent inability to deliver product to the right places, in the right dosages, at the right times, and customers were demanding large discounts as a trade-off for poor service. It appeared logical to increase inventory and try to anticipate demand, particularly in light of the company's belief system, which said:

• All distribution centers should be fully stocked to ensure good service.

• Only large scale production runs generate cost reductions.

• Cost management depends on keeping employees and equipment busy.

Viewed without regard for systemic interdependencies, measurements can be misleading and often result in erroneous conclusions about where problems occur. In this case, the measure was "efficiency everywhere," and it thwarted efforts at customer service.

The sales force viewed the problem as manufacturing's inability to make the right mix of products at the right time. The plant considered it a case of poor forecasting. In reality, too much product was being made in advance and much of it was packaged too soon. Plenty of finished product existed, but in the wrong strengths, packaging, or locations.

The enterprise fitness approach re-shaped the supply chain from a "push" to a "pull" system in which some raw materials as well as finished, but unpackaged, products were held back. When customer demand made it time to move, the company packaged and distributed product to the right places. Managers had to digest a new and radically different philosophy about idle manufacturing resources, but the results were powerful.

Once the company took control of the relationship between distribution and manufacturing, it achieved a 98 percent fulfillment rate and reduced inventory levels by about 30 percent. As a bonus benefit, the reduced manufacturing strain gave the company much more flexibility in dealing with unexpected problems and sudden shifts in the marketplace. Symptomatically, a neck pain feels like a pain in the neck. But is it a neurological problem or simply the result of a bad mattress?

The Right Tools

Using tools that are far more powerful and complex than the job requires is a common practice. For example, a 30-mile-per-week runner will buy the same shoes a marathoner wears during a race on the assumption that they can't do any harm. True or not, the shoes cost more and are likely designed for 30 miles, period, not 30 miles a week. The same assumptions are often made in organizations. But whether a large or small tool is called for, the right tool is the one with the best chance to succeed.

Consider the pharma company that faced a deceptively complicated challenge: getting product manufacturing moved from one facility and formulation to another. The move required FDA revalidation to meet current good management practices, and the bottleneck lay in quality assurance (QA), which was responsible for the final revalidation.

The available options were few: Hire and train more chemists, which would increase the short-term burden on the existing staff, or speed operations with existing resources, which were already working at capacity. An assessment identified several factors suggesting that simpler was better, and the company applied some "lean manufacturing" tools to prune wasted effort. It rearranged furniture to shorten travel distances between work stations and regrouped chemists' tasks to allow materials and finished product to move through the process more quickly. The result was a shortened stay in QA and a more timely FDA approval.

The right tools aren't always expensive or complex. Often they already exist within an organization. So it's more a matter of knowing precisely when and where to use them. A blister could indicate several things, but sometimes it simply means there's a hole in the sock.

Communication Matters

Although problems typically occur in the core of processes or functions, they are often aggravated by communication gaps at the junctions-places where functional disciplines share responsibility. Take, for example, a manufacturer whose ability to meet demand was limited by a capacity shortage in the granulation process.

For good reason, the company wanted to automate its granulation procedure. The existing practice was time-consuming and wasteful: An employee collected a scoop of product, climbed a ladder, and dumped the product into a granulation funnel 10 feet deep. He repeated the process until the funnel was full. On the surface, the fix seemed simple: upgrade to automated equipment, reduce labor time/cost, and dramatically increase productivity. But no one moved forward.

An enterprise fitness assessment identified why. What seemed like a straightforward manufacturing problem was, in fact, controlled by a complex array of external and internal policy issues, and no one knew where to start untangling it.

Manufacturing was only the locus of the constraint. The problem was also a regulatory issue that would involve tying up QA resources in revalidation. Quality management (QM) would need to be involved to develop new procedural documentation. The change would extend to human resources (HR) as well. Bringing in new equipment would make it necessary to create a new job category, salary, and benefit specifications as well as to modify hiring policy and develop appropriate training measures. The underlying concern of each group prevented them from even testing the automation concept. By clarifying the communication relationships that controlled the constraint, the gates were open to test the viability of automation.

The hand-offs between functions-manufacturing to QA, HR to QM, QM to QA-may seem clear under normal conditions, but "peeling the onion" often reveals communication issues that subvert efforts to address the problem.

Resource Protection

Runners know that carrying too much weight, running too often on pavement, wearing the wrong shoes, or modifying gait in response to an injury can spell knee trouble. And knees are, to say the least, a critical resource for runners.

In the pharma world, certain highly specialized categories of workers are a similarly precious resource, a lack of which can prevent projects from being completed. One company faced a troubling shortage in formulation science expertise, had no luck in acquiring experienced talent, and found that its scientists were unable to keep up with the workload.

Company managers identified key factors within, and upstream of, the formulation process that contributed to the problem. Then they shaped a solution that included the following steps:

• Identify the unique and essential skill set required for formulations-tasks that could be performed only by a formulation scientist.

• Offload non-essential tasks to support personnel-clerks, writers, technicians-to free formulation scientists to perform the tasks only they were qualified for. That extended to having support staff screen and answer e-mails.

• Ensure that products are delivered in prepared form. Scientists had received product requiring additional preparation before formulation began.

• Gate upstream of the formulation scientists. If they are the key constraint, it is imperative to determine whether the project justifies tying up the most scarce and valuable skills in the company. In other words, make sure that each task the formulation scientists are performing is worth the cost involved.

In an industry in which time to market is measured in years and first to market is measured in dollars, time may be the most precious asset. When a skill set is the constraint, time is often the key resource that needs to be managed and protected.

In the early stages of a fitness regimen, resource limitations are what they are-capacity shortage, perceptions about customer service, a technical shortfall-and companies must address each to move forward. In the long-term, however, companies must think strategically to maximize resources. If the ability to win the race depends on having healthy knees, the knees must be protected.

Leadership's Vital Role

The design of the human body is highly functional, but it is also symbolic. The head sits on top and has the best overall view. It communicates with, and directs the operations of, other body parts. When it fails to function properly, the limbs cannot act in harmony.

Consider the company that applied enterprise fitness methodology but was unable to make significant progress toward long-term goals. The business was beset by chaos, and the assessment identified several bottlenecks. Although it made many of the recommended internal adjustments, little change occurred.

An interview aimed at discovering why the changes had borne no fruit uncovered the root of the problem. The president, who had supported the assessment and made the recommended structural changes, had not personally been able to make the change. Although employees learned about new equipment and altered internal relationships, he carried on, business as usual.

Consultants finally asked, "Will you make the changes in yourself that will effect positive changes in the organization?" They advised the president to take a retreat and ponder the question. After five days away from the business, he returned, prepared to implement the changes from his office to the bottom of the chart. In a few short months, the company experienced a dramatic turnaround, a reduction in chaos, and greater profitability. Leadership may be the most challenging of all constraints. In the end, people look to the head for direction and example, and without it, even the healthiest body can't get the job done.

Practice for Better Health

Examples abound to indicate that the fit stand a better chance not only of survival but of prosperity. Yet, it is a popular and impractical myth that the only way to achieve a high level of fitness is to work on everything at once. In fact, there are only a few leverage points that really matter in terms of achieving and maintaining fitness, and they differ from company to company.

An enterprise fitness approach works within the company's existing framework and views it as a unique, fluid organism. It does not depend on a soon-to-be-released piece of hardware or software or on filling a vacant management post. It does not require scrapping the tools and techniques that are functioning well or re-inventing the company. In fact, it can usually incorporate aspects of programs that are already working. Some elements of customer relationship management, or knowledge management, or streamlining tools may be beneficial, and there is no point in tossing them out. Many performance changes that can have lasting, positive effects are not difficult or expensive. The key is to discover what is unique about the organization and its goals, identify the few places where change can make the most significant difference, and work at making those changes. Then repeat the process over and over again to realize continuing improvement.

Good habits work for organizations as they do for individuals. The person who walks for 30 minutes a day, year in and year out, is more likely to be in good shape than the one who jumps on each new exercise fad that comes along, then abandons it after a few weeks. Likewise, once good techniques and tools are introduced, it pays for companies to keep using them. It's human nature to revert to the old familiar ways when the going gets rough, but improvement requires getting out of the comfort zone to master new methods.

The keys to enterprise fitness-a willingness to view the organization as a living entity, make a thorough assessment of its health, and persist until good habits are established-underlie a company's ability to view itself in a new light. A hard look in the mirror may be painful, but it is fundamental to discovering where limitations exist and how to evoke permanent, positive change in the belief systems that control them.