June, 2008

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Article Index

Book Review: Developing a Lean Workforce
Article by: John Hehre
Everyone agrees that training is a necessary foundation for implementing and sustaining Lean. Although each company will succeed in different ways, there are some fundamental elements that each training program should include.
Justifying Your Facilities Budget
Author Unknown
Imagine your CFO asking you to submit an optimized five-year budget for maintenance, repair and replacement of your facility components (boiler motors, chiller compressors, roof flashings, etc.)
MN Supreme Court Adopts Federal Sexual Harassment Liability Standard
Article by: Gregory Peters
On May 30, 2008, the Minnesota Supreme Court adopted the federal standard of liability for sexual harassment committed by a supervisor in a case brought under the Minnesota Human Rights Act (“MHRA”).
MN Economic Outlook
Article by: Dr. Ernest Goss
For the month of June 2008, reported July 1, 2008. For the fourth time in the past six months, the Business Conditions Index from a survey of supply managers in Minnesota slipped below growth neutral.
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Book Review: Developing a Lean Workforce
Everyone agrees that training is a necessary foundation for implementing and sustaining Lean. Although each company will succeed in different ways, there are some fundamental elements that each training program should include.

The book, "Developing a Lean Workforce" covers those elements in a very simple and straightforward fashion.

The book is divided into ten chapters and includes thought provoking questions and suggestions for each topic presented. Examples are provided from a fictitious company to illustrate the concepts. The first two chapters describe the infrastructure and systems that should be in place prior to the start of actual training. In chapter one the traditional roles for an HR department are compared to those more appropriate for an HR department actively involved in a Lean implementation. The second chapter addresses the basic questions for developing a training program: who needs training, when and where they should be trained, and what information should be covered. The chapter also discusses issues like scheduling during the work day, attendance by upper management, session length and frequency and others. Although conclusions reached may not be perfect for your company, there is enough food for thought to support your own analysis.

Chapters two through seven cover training for specific Lean topics including Workplace Organization, Value Stream Mapping and One Piece Flow. Each chapter includes a brief overview of the topic which, although possibly useful for someone new to the subject, does not provide much depth. There is an assumption that any organization intending to develop a training program already has a strong grasp of Lean Manufacturing.

The final three chapters provide a framework for developing what might be called bench strength. One chapter covers cross training to develop a flexible workforce. The next chapter discusses the training required for people in lead positions and supervisors. The final chapter covers the ongoing needs once the initial training rounds are complete, including new hires, promotions and ongoing training.

At first look, this book appears simplistic, but anyone who has struggled with the development of a training program knows the actual implementation requires persistence and hard work. There is enough depth in the book to get most programs off the ground, assuming the organization has the knowledge of Lean to begin with and has, or can develop the training materials. The book does not address the more traditional aspects of HR including performance, retention or rewards, for example. Nor does it address some of the softer issues of culture and overcoming resistance to change. There are other good books out there that take on those issues, but that's another review.

Learn about a new workshop offered by the Manufacturers Alliance on HR in a Lean Environment by clicking Here.
John Hehre is a senior operations executive and provides interim management and project based consulting to mid-sized private companies in need of transformative change. He can be reached at jhehre@cprocess.com.

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Justifying Your Facilities Budget
Imagine your CFO asking you to submit an optimized five-year budget for maintenance, repair and replacement of your facility components (boiler motors, chiller compressors, roof flashings, etc.)

Knowing your annual compensation depends on the measurable return on investment (ROI) you deliver, how and when will you recommend spending the company's financial resources? How will you demonstrate ROI?

During a typical facility lifecycle, owners can expect to spend two to three times the cost of construction in operating, maintenance, repair and replacement costs1, yet forecasting and justifying these costs is difficult for most firms. Operating and maintenance costs are relatively predictable; however, repair and replacement forecasts are usually much more subjective and are not always supported with objective financial analysis. While most companies understand that taking a 'run to failure' approach is not the wisest course of action, few have the information available to determine when, where and how much to invest in repairs and replacement of facility components.

A data-driven Facility Asset Management (FAM) strategy provides companies with the objective financial information to help them answer this difficult question. FAM converts facilities into financial terms and provides the business case required by the C-Suite to approve or deny funding requests.

The first step in a FAM strategy is to understand the organization's objectives for their business and facilities: strategic goals, ROI objectives, mission criticality of various facilities, growth plans, scorecard metrics, etc. The next step is to do a complete inventory and assessment of facilities and building components, documenting discrete defects for each asset. Using algorithms the inventory and assessment data are carefully analyzed to determine the condition of each asset and identify which repairs would extend the life of the asset. By combining the information for all of the assets that make up a facility, repair and replacement recommendations can be made in an overall context. For example, it would not be prudent to install a new 20-year roof if the remaining building components only have 5 more years of useful life. This analysis also allows the company to forecast when the asset will reach "financial failure" and should be replaced. "Financial failure" of an asset is defined as the point in time when the annual cost to maintain and repair the asset exceeds the annual cost of ownership.

With FAM, the asset manager can easily create multiple scenarios and determine the optimum mix of expense (repairs) and capital investment, justifying funding requests with data-driven ROI analysis that aligns with the company's objectives.



In addition, FAM can provide analysis to support critical repair or replacement decisions. For one organization, utilizing FAM analysis allowed them to achieve a net benefit of $10.15 million dollars and an ROI of 451% on their facility repair expenses. When faced with the decision of whether to repair, replace or delay action altogether on the roofs on 81 of their facilities, this company turned to FAM to help them make their decision. Unless immediate repairs were undertaken, it was projected that the roofs would need to be replaced within a year. However, by making the investment in specific repairs suggested by the FAM analysis, the company was able to extend the service life of their roofs by an average of 5 years, delaying a capital investment of over $49 million. Since the investment of $2.25 million in repairs over the study period is less than the annual cost of ownership, the investment was financially justified.

So when the CFO requests your facilities budget, you can provide not only a forecast, but the ROI information to justify your budget request - and a means to demonstrate the savings your plan can generate for the company.

1. US Government Study "Cost Analysis of Inadequate Interoperability in the U.S. Capital Facilities Industry," NIST GCR 04-867. Prepared and sponsored by the National Institute of Standards and Technology, August, 2004, p. I-16, http://www.bfrl.nist.gov/oae/publications/gcrs/04867.pdf.
Author Unknown

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MN Supreme Court Adopts Federal Sexual Harassment Liability Standard
On May 30, 2008, the Minnesota Supreme Court adopted the federal standard of liability for sexual harassment committed by a supervisor in a case brought under the Minnesota Human Rights Act (“MHRA”).

In Frieler v. Carlson Marketing Group, A06-1693 (May 30, 2008), the Court resolved the issue of when employers will be considered responsible for supervisor's harassment under the MHRA.

In Frieler, a female employee expressed interest in an open shipping position to the shipping department supervisor. The employee alleged that after expressing interest, the supervisor coaxed her into a limited-access room, and sexually harassed her on multiple occasions. Despite being offered the position, she subsequently resigned her employment.

The plaintiff argued her employer should be held strictly liable for the supervisor's harassment. On the other hand, the employer argued that it should not be held liable unless it knew “or should have known of the harassment” (meaning that the supervisor’s own knowledge should not be imputed to the employer).

The Court rejected both arguments. Instead, it adopted the federal standard for claims of supervisor sexual harassment under the MHRA. Under this standard, an employer is vicariously liable for sexual harassment created by a supervisor. In circumstances where no tangible employment action is taken against the employee (i.e., termination, reduction in wages or work hours), the employer will prevail if it can show: (1) it exercised reasonable care to prevent and correct promptly any sexually harassing behavior; and, (2) the employee failed to take advantage of a reporting policy or other method of correction.

In addition, the Court also adopted the EEOC’s broad interpretation of a "supervisor". Under the EEOC’s definition, an individual qualifies as a supervisor if the individual has the authority to undertake or recommend tangible employment decisions or the individual has authority to direct the employee. Consequently, lead persons without authority to hire or fire may now be considered supervisors for purposes of vicarious liability under the MHRA.

What are the practical implications for employers? First, where no tangible employment action is taken, employers with harassment reporting policies may avoid liability. Accordingly, employers should review their anti-harassment policies and train their supervisors, lead persons and employees regarding inappropriate conduct in the workplace and how to report such conduct. If employers do not have an anti-harassment policy, they should implement one immediately or risk potential strict liability. Second, employers need to be aware that lead persons now may be considered a supervisor for purposes of vicarious liability in harassment claims under the MHRA. Consequently, employers may expect more lawsuits involving leads' conduct in the workplace.
Gregory L. Peters, is an attorney with Seaton, Peters & Revnew, P.A. whose practice is limited to representing employers in labor and employment matters. Mr. Peters has worked with companies in all areas of employment counseling, employment litigation, labor arbitration, union organizing and labor negotiations. Mr. Peters can be reached at (952) 921-4607.

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MN Economic Outlook
For the month of June 2008, reported July 1, 2008. For the fourth time in the past six months, the Business Conditions Index from a survey of supply managers in Minnesota slipped below growth neutral.



The index, a leading economic indicator, declined to 49.0 from May's tepid 51.8. Components of the overall index for June were new orders at 48.1, production at 50.9, delivery lead time at 57.4, inventories at 49.1, and employment at 41.5. "Minnesota firms experienced weak business activity for June. Pullbacks for transportation-equipment manufacturers and food processors more than offset expansions for other manufacturers. The Minnesota business confidence index at 29.6, was the lowest in the nine-state region and reflects the economic uncertainty facing firms in the state," said Goss.
Dr. Ernest Goss of Creighton University, used the same methodology as The National Association of Purchasing Management to compile this information. An index number greater than 50 percent indicates an expansionary economy, and an index under 50 percent forecast a sluggish economy, for the next three to six months.

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