As a provider of a unique and proprietary technology, ESCO had enjoyed a long history of success. In 2003, when Spencer Hoos joined the company as President and CEO, things were going well. But, Hoos was looking to the future. He saw opportunities for the company to be more profitable – and recognized that those opportunities would be difficult to pursue with the company’s existing operational culture. There were no initiatives to drive performance improvement, the workforce had not had training, and there had been no exposure to teaming. Employees in management, engineering, quality control, production and other groups worked in silos with very little interaction. At the same time, he found that the company had no strategic plan for growth.
With a 15-year background in Lean manufacturing and continuous improvement, Hoos believed that Lean Transformation was the key to enhancing ESCO’s success. By creating a Lean culture, he believed that the company would have the capability to pursue opportunities for continued growth and profitability.
Hoos contracted with DVIRC for the development of a strategic plan for growth, and multi-year process for deploying Lean initiatives in support of the strategic plan. “Lean success is driven by cultural change,” says Hoos. “My goal was to create a positive environment, where people work together, have a desire to learn, feel engaged in continuous improvement and are recognized for doing so,” says Hoos. Understanding that leadership had to be on board for cultural change to take hold, Hoos determined that management-level employees would be the first to be introduced to Lean concepts.
DVIRC designed a customized training process for 55 employees in management and leadership positions, creating a Winning Teams Certification Program. The managers participated in 60 hours of classroom training. They were also divided into teams, with each team developing a project to be implemented at the ESCO facility. The hands-on projects enabled the teams to put their training into action, generating an immediate return on the training investment.
The teams worked on their projects from January through April, focusing on a variety of improvement initiatives ranging from the purchasing of supplies to production methods. In May, the team projects were showcased in an event involving all ESCO employees. The facility was closed, and the employees were invited to a celebration where each of the teams gave a humorous presentation of their project and the results.
Lean was introduced to the shop floor shortly thereafter. “It was met with initial skepticism,” notes Hoos. “But, we made the commitment to them that no one would be laid off. That helped remove concerns about Lean being an effort to reduce headcount.”
One of the first Lean activities implemented in the plant was 5S – a method of clearing non-value-producing items from work areas. Junk was removed and walls were painted. Tools and equipment were organized to eliminate wasted time searching for needed items.
Kaizen events — intense, goal-oriented efforts focused on specific reductions in the time, effort, materials and systems — were held. Employees learned to use Value Stream Mapping to pinpoint areas of waste and guide continuous improvement efforts. Visual Control Boards were established throughout the plant to track and measure everything from safety and electricity usage to cycle times and productivity.
Training was provided on a continual basis to educate employees on Lean concepts. ESCO’s ongoing training initiatives involved all employees and included Winning Teams Certification, Mentoring Training, Team Building and Facilitator Skills Training, as well as ongoing training in Lean tactics related to specific projects.
A list of management and employee behaviors was developed to guide the workforce toward the achievement of the positive culture Hoos envisioned. Management was encouraged to build trust and respect, create a cooperative environment, develop robust processes, create a learning organization, seek innovation, keep employees up to date, and provide promotional opportunities from within. Behaviors expected of all employees included courtesy, a sense of humor, flexibility, integrity, safety, enthusiasm, teamwork and more. Educational and training opportunities, including Dale Carnegie courses, were offered to support employees in achieving behavioral change.
Recognition and Rewards
An essential component of the ESCO cultural change has been recognition and rewards. ESCO celebrates team and individual accomplishments on a regular basis with special company events. Each month an employee who is nominated for positive behavior receives a chance to win one of eight $100 cash rewards. Perfect attendance is rewarded with two extra vacation days.
ESCO’s Lean Transformation resulted in a number of early successes and ongoing positive results.
- Net income increased more than 300 percent over seven years.
- Cost savings of more than $1.5 million have been achieved.
- Working capital has been reduced, as ESCO has achieved the corporate expectation for a reduction of five percent annual.
- Purchasing and inventory savings of $400,000 were gained through a project that significantly reduced waste in the process of buying, receiving, storing and distributing hardware throughout the plant.
- Cycle times were reduced 50 percent by moving from a batch manufacturing process to a Lean production system.
- Sales per employee increased from $268,000 to $447,000 over seven years.
- Productivity gains have been achieved in the manufacture of ESCO’s crushable concrete blocks which are used to stop aircraft that have overshot a runaway. Six years into production, the time to complete the blocks has been reduced by 50 percent.
- Absenteeism has been significantly reduced through an attendance incentive program. In 2005, 48 employees had perfect attendance. In 2010, it was achieved by 166 employees.
- Internal job postings have resulted in 19 employees being promoted from within in 2010.
- Employee retention has been excellent.