Firms Look In-House for Ideas
COMPANIES are dusting off their suggestion boxes to help bolster profits and productivity.
In the 1980s, management techniques such as total quality management (TQM) largely sidelined traditional suggestion programs. Many managers dismissed these programs as antiquated.
TQM's goal was continuous improvement, rather than the sporadic successes associated with the suggestion box. With TQM, suggestions became part of a larger quality culture and were expected to flow thick and fast. Yet TQM requires a complete change in corporate culture and can take years to successfully institute. For many companies looking for a quick fix, the TQM siren failed to live up to its promise.
An increasing number of companies are returning to basics, bringing back the suggestion box, and revamping long-neglected ideas programs.
In San Francisco, a group of United Airlines employees developed an innovative repair procedure for turbine engines, which were being discarded at a cost of $42,000 each when they broke down. The company saved $544,103 last year alone.
Honda shop-floor worker Rick Kavanagh suggested his company scrap its old carpet-cutting machinery in favor of a simpler water-jet process. His suggestion saved $111,607 in the first year. Savings will reach into the millions over the next four years, company officials say.
These ideas, two of thousands submitted by employees across the country, are saving American business billions of dollars.
According to the Chicago-based Employee Involvement Association (EIA), employee suggestion programs have saved businesses and organizations more than $2 billion annually since 1988. Few companies participate
About 6,000 companies have formal suggestion programs in the United States, EIA estimates, with an equal number running less-structured programs.
But in a country of 200,000 companies that employ 50 people or more, the numbers are small.
Why aren't more companies on board? "There's still a lack of knowledge of the concept," says Cynthia McCabe, president of EIA. Poorly managed programs have also put companies off, she says.
Yusang Chang, professor of operations management at Boston University, says that the poor reputation of suggestion systems hinge on three characteristics:
* Not enough employees participate - less than one-third.
* Not enough suggestions get implemented - on average only 25 percent.
* Too much money is paid to the suggester - traditionally 10 percent of the first year's annual saving. Often the cash award is so great that the company takes months to approve suggestions. Existing programs expand
Companies with suggestion systems already in place are paying closer attention to them, says Ron O'Conner of O'Conner Partners Inc., a St. Louis consulting firm that helps companies set up suggestion programs.
The recession and growing skepticism about newer quality-management methods that yield few measurable improvements have bolstered the revival. A recent Ernst & Young report found many businesses were wasting millions of dollars instituting quality-improvement strategies that actually hampered performance.
A new aspect of this revival is the refinement of the suggestion system. Some companies are combining the best of the traditional suggestion box with the best of the quality-management approach.
"What they are coming back to is a kind of melding between the old-style suggestion programs and the new-style quality processes to come up with a kind of continuous-improvement/suggestion process," says Gary Allen of Maritz Motivation in Southfield, Mich., a consulting firm focusing on employee motivation.
From the suggestion processes, he says, companies are bringing the idea of rewards for suggestions, and the concept of submitting a suggestion and having it evaluated and implemented in a formal way. From the quality side comes the concept of teamwork.
Rewards and recognition for good suggestions were done away with in many companies on the new quality kick and with them went the incentive for employees to make improvements, Allen contends.
"A company might ask people to voluntarily form quality-improvement teams. But where they weren't supported [by management] and there was no reward structure, there was no incentive," Allen says. Looking for cost savings
Many companies also stopped looking at cost savings and concentrated on measuring quality improvements in their products and processes, he says.
Quality gurus told managers it might be five to 10 years before they would see measurable results.
The new melding of both approaches "is generating high participation, dollar savings, quality improvement, and the results are all measurable," Allen says.
And the added bonus: When communication between workers and upper management improves, employee morale is boosted with the ripple effect of less absenteeism and more ideas generated.