Project Kaizen: Wednesday

Today’s focus is how to go about making improvements when you’re dependent on other people -outside of your company- to contribute or help you (often called “workstream kaizen”). This topic will really apply to you if you’re hiring sewing contractors, pattern makers, sales reps etc. How can you get non-employees to help you and act in your best interest?

Now, before I use my prepared example, I need to explain the concept of transaction costs. Coase made the case that one of the reasons why an organization becomes an organization is to lower the cost of transactions. I know that sounds really stuffy and boring but he won the Nobel Prize for using these costs as a predictor of firm size (I’m interested in Coase’s transaction costs because I believe his work proves my theory of limits to optimal profit based on company size. I do not believe the larger the company, the greater the profit; I believe the opposite is true -at least in the needle trades anyway). For example, this is why you’d hire stitchers to sew for you in-house rather than hiring a contractor -if it were possible- because there are extra costs in hiring others to do a job for you than it would cost doing it yourself. I mention this because one of the things that makes production expensive is not just hiring contractors to do work that would cost less for you to do yourself, it’s that there are intangible costs associated with poor or limited communication between working partners and that is what my example of workstream kaizen is all about. Well, that and the garment industry disappearing pattern weight and ruler crisis…


As I mentioned to the point of redundancy in the Entrepreneur’s Guide (pp 187-188 “One reason corporations succeed”) you will need to create an artificial network between all of the parties you hire that don’t work for you in-house. In fact, the previous bears reiteration here. In a nutshell, the key to product improvement means honest and genuine communication between all of your related business parties. As threatening as you find the idea -ugly paranoia rears its ugly head yet again- you need to develop your organization to encourage cooperation and assistance between your contractors, shippers, suppliers, and sales reps. In short just because they aren’t employees doesn’t mean they can’t act as employees.

Let’s compare corporations which are usually thought of as really icky places with lots of inane rules and regulations that make little sense to nearly everyone; garment manufacturers usually are. Everything is linear, to get anything approved or to get any information, you have to go through your boss who has their own agenda. Trying to get things done requires an equal balance of stealth, subterfuge and circumventing the rules and regulations. Corporations take far too long to pass information to the people who need it. Many times, the information never arrives because management has decided the information is not important, or faulty. Unfortunately, in most factories, nobody is allowed to leave their work stations for any reason. I can understand why; it cuts down on social visits but the problem is that people are compartmentalized into different factions and they lose sight of the organization’s goal. Everything’s always a big secret. The people who need information the most, only find out once a problem has reached crisis level proportions. Designers are more guilty of this practice than anyone! (and saying so does not mean I’m mean if it’s true).

But there’s a funny thing about corporations. Corporations have a sub-culture or an underground as it were. It’s a group of people from different departments who have informally networked to improve the flow of communication, meet deadlines, and lower costs. Informal networkers have a whole view of the process and understand the intricacies of the roles of other departments. These are the real people who are lowering the transaction costs within a company. For example:

One day a networker disguised as a senior purchasing agent, came back and asked me if I had some eye drops, he thought I might since we both wore contacts. He said, “By the way, how is style 11303 coming? It looks really good”. I replied that contacts are such a bother, and that 11303 was ready to go, but I hated the fit and I couldn’t get approval to re cut it because preliminary sales wouldn’t justify the expense. Then he said “Thanks for the eye drops, contacts are a pain. Speaking of pain, Cindy will be here tomorrow. You know, the rep we love to hate.”

Translation: Sales on the 11303 are moving! It will be cut ASAP. Talk to the sales rep who will back you on the fitting problems, get the cost approved, re cut, and ready for production.

So we did. Our bosses just thought I worked incredibly fast, but it was due to the advance warning system. The informal networking system allowed me to work faster, more intelligently and more efficiently. I was able to work on the most pressing projects in spite of what was said at the last meeting.

Another example: The cutting room manager came to borrow a pattern weight from me and said, “Wow, style 21203 must really be going for a lot of money”. I said “Take the pattern weight; I stole it from your department anyway”.

Translation: Style 21203 is using way too much fabric; heads are going to roll.

Then I went to the design department (to retrieve a ruler the grader had “stolen”) and used the opportunity to tell the designer (another networker) about the crisis. We ran off some mini-markers and everything looked fine, but something had to be wrong. So I went to re-steal the pattern weight from the cutting department. By the way, the real reason pattern weights and rulers are in short supply in factories is because people steal them from each other on purpose. If we didn’t steal pattern weights or rulers, we’d never get must-know information. But if you’ve never worked in a factory, you probably don’t know about the Garment-Industry-Disappearing-Pattern-Weight-and-Ruler-Crisis.

The cutting room supervisor (who came to borrow the pattern weight I’d stolen from him) saw there was a problem and hadn’t even laid out the fabrics. The fabric came in ‘under spec’ (it wasn’t inspected at delivery). It was narrower than what had been ordered. Worse, these goods were custom loomed with a repeat match stripe. So back in design, we brainstormed like mad, devised an ingenious solution in ten minutes flat and then…we went to the boss. We’re not stupid. Networks can only go so far.

By the time we went, the solution was well in hand, the cutting room was up and running and the purchasing agent was re-negotiating the fabric price as it was being spread. Without the informal network, one of two things would have happened.

1. Following protocol, the cutting room would have advised management. The cutters would have been sent home with no pay until the problem was resolved.
2. The cutting room supervisor could have cut it anyway and kept his people on the job.

In the last scenario, the final cost of the garment would have been obscured for weeks or months, when auditing would have determined the company took a beating on that style. Management would have started the familiar feeding-frenzy, looking for a victim and much too late by the way, to pursue discounts from the fabric supplier.

Many managers -and designers- can be poor problem solvers. In many companies, the first priority is to find someone to blame. Since the approach to finding the guilty is convoluted anyway, this takes a while. Second, the guilty party -usually someone so unempowered they can’t defend themselves- is disciplined. Once management has purged, they may actually work on a solution amongst themselves. Regretfully omitted are those more creative at devising alternatives; so the solution is ineffective too.

Corporations are successful because of their informal get-things-done networks. Networks do not over-step the boundaries in informal decision making; they know it’s too easy to be discovered, so it’s simply not done. So if you are your only employee, how do you create an informal network?

You artificially create a network. Simple; it’s hard to trust people to act in your best interest but they will, provided you’ve hired professionals and you treat them that way. They have an interest in your success; they want your money. If you go broke, they lose money.

So how do you create a network? That’s easy; give the contractor the pattern maker’s phone number, and vice versa. Give the rep the phone number of the contractor, and vice versa. Let everybody talk to anybody. This is what will happen:

• Their opinion of you will skyrocket. They will be so thrilled with your professionalism and trust; there is no way they will compromise your trust.

• If one of the parties involved suspects that another segment of this arrangement is unethical, they will know before you ever will and they’ll tell you. Why? They know you’ll figure it out eventually and they don’t want to get blamed. Or maybe they just don’t like unethical people. Contrary to what you may think, people in the factory side of the apparel industry are honest to the bone with a highly defined sense of fairness.

• If there is a problem, these people will call each other, brainstorm, and then call you to present some decision options. That’s far easier than dealing with a crisis call from one party, fielding it to a second, then a third party; all the while your stress level climbs, and you start to hate your job.

• Informal networks save lots and lots of money. They are professionals who know the most cost-effective way to get the job done. They have dealt with problems like yours for years and can figure out what to do in a crisis.

Leadership is strength. Real leadership means being strong enough to set the standards for excellence and it’s not weakness if you’re not the expert. Not knowing is not weakness and if you can admit it, your people will respect you more, not less. Most importantly, if you set the standards of honesty, respect and integrity, your people will be more likely to admit their own limitations. If they don’t know how to do something, they’ll tell you. Then skill deficits can be addressed before they become costly problems.

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3 comments

  1. jinjer says:

    I remember this passage from yor book, my lip curling in disgust at the wastefulness of creating “artificial” networks that had to fight against the system, rather than official systems for information flow. I mean, that’s what lean is all about!

    One of the other 7 kaizen bloggers posted a fabulous article on monday (sorry, I don’t rememebr which blogger!) about how to create these networks for REAL: the author called it the oobeya (big room).

    The article had an image of the room where short, frequent meeting were held, with people from all departments invited. Each wall has a diagram, sketch or other image representing the product, development process, etc. (The Japanese have kaizen down–not only are the products kaizened, but the processes by which the products are made and the processes by which the development process is organized. all at the same time, in the same room.)

    On the diagrams, I saw all these yellow and red squares and thought “what the hell do those symbols mean?” Turns out they weren’t symbols, they were depictions of the sticky notes any member can post to indicate a potential or real problem they see. red= critical, yellow=potential. This is SO COOL, because everyone can simultaneously raise their issues, and everyone can SEE where problems are occuring, and all the departments are in the room, so if a problem needs action by 3 departments, they all know that at once.

    Of course, this assumes that you have in-house departments.

    If the out-sourced version of informal networks is exchanging phone numbers (I have less faith in the effectiveness of this than Kathleen, mostly because I’m a great problem solver, but I hate making phone calls), what is the outsourced version of the oobeya? It has to be simple to use, visual, & easy to access by everyone at the same time.

    I confused by seemingly conflicting statements in Kathleen’s post, thoug.
    she says:
    I do not believe the larger the company, the greater the profit; I believe the opposite is true
    but then also says:
    For example, this is why you’d hire stitchers to sew for you in-house rather than hiring a contractor -if it were possible- because there are extra costs in hiring others to do a job for you than it would cost doing it yourself.

    A company with one designer and everything outsourced would be smaller than a company with one designer/purchasing agent, a patternmaker, a cutter and 3 stitchers (only grading and marking is outsourced). So does the designer who outsources everything make a greater profit despite all the extra transaction costs? Or are you determining company size by something other than # of employees?

  2. Kathleen says:

    One of the other 7 kaizen bloggers posted a fabulous article on Monday (sorry, I don’t remember which blogger!) about how to create these networks for REAL: the author called it the oobeya (big room).

    I went and looked for that entry; I couldn’t find it either. I think Hal Macomber will be indexing the entries at http://projectkaizen.com/. Also, Hal tells me that they’ll be putting the entries into a book. If you find that entry, please update me.

    I confused by seemingly conflicting statements in Kathleen’s post, though. she says:
    ” I do not believe the larger the company, the greater the profit; I believe the opposite is true”
    but then also says: “For example, this is why you’d hire stitchers to sew for you in-house rather than hiring a contractor -if it were possible- because there are extra costs in hiring others to do a job for you than it would cost doing it yourself.”

    A company with one designer and everything outsourced would be smaller than a company with one designer/purchasing agent, a pattern maker, a cutter and 3 stitchers (only grading and marking is outsourced). So does the designer who outsources everything make a greater profit despite all the extra transaction costs? Or are you determining company size by something other than # of employees?

    I didn’t make it clear. There is also a limit to “smallness”. For example, I’ve found that for the first person a designer hires to work in house, their sales increase by about 1000% percent. Yeah, really. There are similar -but decreasing percentages- increases for additional workers added, up to the point of 19 people. Also, I do not agree with the way that companies are measured in terms of profitability. I prefer to look at sales per employee; I find that is a better measure of smaller companies (and favors them) than in terms of total sales. I was uncertain how to account for contractors in the profitability mix but I believe that the number of hours they work on a project must be considered and approximated into an employee headcount.

    What I am trying to say is that even a “designer who outsources everything” will “make a greater profit despite all the extra transaction costs” as compared to drafting, cutting and sewing everything on his/her own. At the level of one employee (one’s self) a designer is spread too thin. With a contractor (hours worked calculated/configured to represent employee headcount) one is able to get out a lot more product and consequently, sales.

    Regarding transaction costs; let’s say the contractor’s hours worked out to represent 4 people. If the designer were able to hire 4 people to work in house, there would be lower transaction costs than with the contractor. In spite of that, I recommend that a designer hire contractors at the outset if possible because while there are additional costs in the form of transactions, one is learning from an established work entity and I prefer to describe those additional costs as “tuition” for education. Having worked with a contractor first means one is less likely to make errors common to the process of reinventing the wheel. Similarly, one would have learned to avoid situations that were the cause of errors when working with the contractor, once one sets up their production in house.

    Lastly, there’s something else to consider. Contractors provide flexibility and as with all benefits, there is a cost for that as well. The flexibility contractors provide is that one is not forced to produce a line every season because one is not having to worry about pushing out product in order to satisfy payroll. If you have payroll, most owners feel a responsibility toward their workers to provide jobs because they know people are counting on them (trust me, once you hire someone, you’ll begin to feel the weight of this yoke) and also, you know you’ll be wanting them to work for you next season (in the event you skip a season) and workers are less likely to return to work for you -unless they have no other options- if you’re only offering seasonal or sporadic employment. This flexibility means you won’t have to produce a product line if you’re weathering personal difficulties or having a design block. While it’s not optimal to miss any seasons once you start, it’s better to do that than to put out uninspired products just because you have obligations to meet. A lot of designers have “dried up” under those kinds of pressures.

  3. Carnival of Lean Leadership #4

    Welcome to the fourth Carnival of Lean Leadership. There’s a lot of material to cover this time, so we’ll get right to it… The highlight of the past week has been the blogfest on project kaizen by The Gang of

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