Getting Started with Lean Six Sigma for Credit and Collections

John Donovan 00:05
So here I am writing the last hurrah of a prince. I want to thank you for doing the audio. It’s nice to have music when you start to get a little relaxed. I got a massage, so I’m all set. Hopefully you are too. It’s a short presentation. There’s a lot of material, so I have a tendency not to read the script, but to let the audience ask me questions all along. So if there’s a question, stop me. Because I want this to be your presentation, not my regurgitation of the slides. So I’ll cover a lot. And as I skip through some of this stuff, you can raise your hand or just get up and leave or whatever you want to do. Right. I want to make sure that what you get out of this, you can take back to your organization now. I’m part of HighRadius Academy, all hierarchical. I’m also sure you might see some articles that I’ve written for credit today, so I do that as more or less as a sideline, not an author. I certainly am not a guy that writes periodicals, but you will see it from time to time. I have an opinion, so you can call it an opinion rather than educational. The Highako Academy, just for those who don’t know, is a free service to anybody in credit in college. And we’re going into the Treasury as well, we’re going to other areas. And what we’re doing is we’re taking people, experts in the field who have had a few years of experience and we record. And for Highako, Highako puts up the presentations on their website. Anybody can go there any time and they can use it to train their personnel. They can update their knowledge base on something that might be new. We’ve even trying to get some technology pieces in there. We try to separate being HighRadius, Highako, or even the same company or subsidiary, same company. So the lot that you’re going to get here today and it’s all free. To take with you to go online. And so I hope that you get something out of the presentation other than the guy up there talking about something that most of you know, I’ve heard about others practicing it. And then there’s some like me who say it’s old, old school, but I go back to old school, goes back to 1930, and I go back quite that far. So is anyone here familiar with Six Sigma and Lean Six Sigma? If you practice it as your company, practice it. Anybody? Okay. So I’m going to try to give you a very high level view. I’m not going to get into the nitty gritty. I will tell you that if you are in the Six Sigma as a company, it’s a long process. It’s not. Oh, that’s the greatest and latest. Why it use it? It’s not like software. It’s a process. It’s all very revolving. So now I’m going to give you a history lesson. And I’m not a teacher, so I have a tendency to create the history. Right. So. It started back in the 1930s with the Japanese. And a lot of people don’t know that. When you talk about something that’s evolved from 1930 to date, people have been doing process improvement and the name has changed. It’s gotten better with technology. It’s gotten better with companies that really took it to heart like the Japanese. But the names changed. Now, my experience doesn’t go quite as I said, doesn’t go quite back to the thirties. But I’ve been involved in Told Quality Management. That’s where I was first introduced to what is now Lean Six Sigma or Six Sigma. And the total quality management was about process, it was manufacturing and we happened to be in the manufacturing business at the time and the company was struggling. And so they wanted to improve the process, manufacturing process, not the lean part, which was me, the back office. What happened was kind of moronic in the way that it happened. We were a manufacturer of plotters. I don’t know if you know what the plotters are. I don’t know if they even make them anymore. But anyway, it’s a drawing device. It’s electronically tied to the computer. We had a downturn in the business, so they laid a lot of people off and it was their opportunity to bring back better qualified people or keep the best qualified people. And then we would move into total quality management. So those of us that didn’t get laid off at time because the business was slow and we implemented it. And we had everyone in the room. Everyone was indoctrinated into the quality movement. What happened? Everyone was ready to go. Business started picking up. We tried to bring everybody back. None of them could pass the drug test. We really had a problem. Right. So the total quality that they were trying to fix. They had been laid off because they were all on drugs. So listen, learn if you’re going to do something, make sure that the people you’re doing with are going to be qualified to follow your instructions. So it was a lesson learned. It was kind of fun at the time because we had to hire so many people, but we had to train them. We had to treat them to what they were going to do. We had to implement the quality movement. At the end of the day, we did quite well. And the company was acquired and he sold it for a lot of money. So obviously what we did, we did right, but we improved the quality. And actually this little company in Austin, Texas, was outperforming Hewlett-Packard at the time because we had the quality movement. No. I have also mentioned other companies and. When you look at what happened, they started to move away from what they call total quality and they started moving into other areas in the back office, for example, you know, the billing and credit and collections. Oh, you’re here. You want to know how you are going to implement this? And I can tell you from experience, it’s not an easy process, but it’s a process that if you as a company or a department want to do it and you put your heart and soul into it and follow the rules and the guidelines, you will improve. But I will tell you this no matter how much you improve, there’s always room for improvement. And that’s the hard part, where do you stop? Most companies that I’ve worked with, including IBM and a few others, they stop. They said we did it. They let the quality guys go. They let the Six Sigma guys go. We don’t need you anymore. And then they fall behind again or they get acquired. So the standards. Throughout the world has changed. But if you go back, look at how far back this goes. I was in here. Okay. So I got to know the Six Sigma and total quality. So you practiced both. We’re the same. The name changed. But the process didn’t change. If anything, all I did was create another avenue for people to train you. For months and sometimes years. So when you look at Lean Six Sigma and there’s a lot of books out there, there’s still some colleges teaching it. And if you take the course. It’s analytics, it’s process, it’s understanding of the process. And to do that, you really have to know your business and you have to have support. So now they coined it. Lean Six Sigma. Name change. Same process. Different procedures, that’s all. But the procedure is what you do, not what the technology or the process improvement is bringing to the table. So I put this up here because this is the part that I hate. And I hate it because it takes so much effort, so much energy, and you lose people along the way. I don’t hate doing it, but I know that, you know, this is your second job. Somebody asked me the other day how do you start? Well, the first thing you have to do is get management, buy in. You don’t have to do it as a company, although they try to sell it to you as a company wide solution. And eventually that’s where you’re going to have to go to to really hit the top tier of and accomplish what you’re trying to accomplish. But if you look at the analytics. In Six Sigma, not lean. Six Sigma is to get in the middle. If you know, you don’t want to be in one extreme to get in the middle, eliminate some of your break out process, break down and and put some of your process improvements. But if you go that route, what you’re going to do is be satisfied halfway. And that’s where most companies fail in their lean Six Sigma, Six Sigma, total quality process, whatever you want to call it. That’s where they fail. We made it halfway. Well, what is all the way? Who knows? The technology may now have been invented. The company may be acquired and have a new technology coming in that you have to learn. And it’s got its work. So. When you look at the difference between Six Sigma and Lean Six Sigma. The only difference is once manufacturing is processed, both of them are processed. The Japanese are building cars. And if you look back into the 1930s and you look at today, have they improved? Are they at the top? They’d be General Motors. They’re voters, too. But there’s a lot to be learned. And General Motors got greedy, maybe sloppy. But I mean, I get a company can’t do a falls off. I know something’s wrong. And I worked for a gentleman who was the president of Volvo. And I said, how did you manage to get so successful at selling a Swedish car in the United States? And the answer was, we had a better product. And so it was the process that got him the better product that got him the customers. Now Volvo is now Ford. I went down a little again, but that’s the way it goes. And so you get the chicken and egg. You want to look at the process. You do want to look at the beginning or the end and how which comes first. You want to look at the process first, the people, who knows? But what happens is you end up with a chicken and egg the wrong way. All right. You end up with a one time deal. No more eggs, no more chicken when it’s gone. And that’s what happens with the organizations that look at it. Something, a fix, a Band-Aid, a process. It’s not a Band-Aid. Ongoing process. Now. But. I work there. I did some work for them. We acquired them. I used to bank there and I drive a Toyota. So I look at these companies. Eastman Kodak went bankrupt. Digital sold out. Now. Why? Because they stopped where they were and got satisfied. And they got complacent. Now, if they had done what they were capable of doing, maybe compact would have been. And Hewlett Packard would have been digital. But they gave up or changed management. I don’t know. I wasn’t there on the inside, but I acquired it. And I can tell you it was a mess. And I spent almost a year trying to untangle the mess. So they got sloppy. It was a great company, great product . Eastman Kodak. They filed bankruptcy. Why? Because they get complacent. Everyone’s going to use a camera. Yes. On their phone. And they’re not going to buy films anymore. And digress a little bit. The day that they fired George Fisher from Eastman Kodak, the next day I saw I was jogging, he was jogging and he passed me and I said, sorry to hear about losing your job. Yes, that’s life. They paid him enough to leave. He didn’t care. And that was the problem. He didn’t care. And he made some mistakes and the end result. A huge company that everyone loved. And I came from Rochester, New York. Everybody got a bonus every year. After he left and whoever took over what those people that had retired, they had beautiful homes. They had a bonus every year. I don’t care if you were the janitor or the president of the company, you all got a bonus. And it was almost equal across the board based on your your pay scale. Everyone got the same thing. It was no preference of who going to get what at the top. When Kodak filed bankruptcy. They took away the pensions of thousands of people. Because they get sloppy. They didn’t follow the trends. They had the camp, they had the chemicals, they had the plants and the people. They had beautiful camps. Every day I’d go for a movie at lunchtime or a free cafeteria, to get a free meal. And if I didn’t feel good, I could lay down for a while, go to the nurse’s office. How many companies do you know today that have all those things for their people and the way they treated their people? So. Again, Kodak developed the camera, the camera industry, the film industry. And then when they changed management, they changed philosophies and the processes broke down. And eventually the company went bust. Now. Continuous improvement, moving away from what we call it, Lean Six Sigma. No sense of continuous improvement. How many of you are here today to learn about new technology? Right. And if you buy that technology and I’ve been through it, everyone’s been through it. Anybody who’s been in the technology business knows nothing stands still or you are out of business. And you heard Sashi say it’s changing again. And if you’re not going to go with the change, you’re going to fall behind. I know I’ve done work for Microsoft, and Microsoft was introducing what they called Xbox. And they brought me and they said, how are we going to handle this? And so we laid out a plan and said this will be a process to bring it into your organization and sell it in the retail environment. And they said, well, we don’t have to do that because we’re Microsoft. In other words, they were going to dictate, just like Wal-Mart dictates. And a lot of other companies that you deal with dictate what the customer’s going to take from them and customers are going to go someplace else. You have that attitude, and Microsoft took a long time to ramp up Xbox. The technology was there. The process was there for the technology, but they forgot the operational side. They were going to treat everybody the same like crap. You’re going to pay me when I want to get paid. And I’ll tell you what, you can have the wrong attitude. And they had to change management. Not that they didn’t have a good product. Some of us don’t like it, but. So when you look at it, you’ve got to define first what it is that you’re trying to accomplish. As a company. You may not have any say over the guy in the manufacturing lines doing you may not have any say over the shipping department. And then if you go outside the company, you’ve got a logistics company is handling your product. You’ve got returns. You’ve got allowances. You’ve got salespeople that kind of stretch the truth one time or another with a. I call it a creative contract and they don’t tell you the clauses are in there and you get into trouble later on. So these are the first to define what it is. It’s trying to improve. And I say this to people in credit and collections all the time. You are part of an organization. It’s like the human body. If you overeat, you’re going to get fat. If you don’t eat enough, you’re going to get sick. So you have to look at the whole body. Who is it in your organization that is causing the issues that you’re trying to deal with? And most of the time, you’ll find out there are others that have to be involved. I’m not blaming myself. I’m saying ball as if you involve them in the process and their management has to kind of push down on it. There’s no there’s no way of doing any of this without management’s approval, because if management is not behind it, as soon as somebody comes to them and says, you know, I don’t like the way that they POCs because I’m getting all these damaged box claims back, creating work for me. So it’s that guy’s fault. They’re not going over and saying, you know, we’ve got to get together and figure out how we’re going to fix this. What’s the process that caused that in the first place? It was a box manufacturer, but yet the poor guy put it in boxes. The ones getting blown or ones picking it up is getting the blame. You know, not everybody’s involved. They start pointing fingers and they forget they have a process that they have to look at from end to end. So you want to improve and if you go from. Whether it’s the manufacturing side, I put both here because you can’t have one without the other. If you try to do it here and you ignore this part, which is the manufacturing part of Six Sigma, Y2K, or whatever you want to call, whatever, naming it today. It won’t work because you didn’t get enough people involved. I can’t tell you. I work for ACP too. I probably would. There isn’t a company I haven’t worked for, right? Not all as an employee, but as a consultant or an employee. But when you look at what companies are trying to do today. You look at. Margins profit. That’s all they talk about. You never hear. Once in a while, you hear an analyst ask a question about the receivables, but rarely. They’re more interested in what’s your margin, what’s your profit? You’re forgetting about the part of the organization that’s going to make a difference. So. Look at I put this up here because when I see it, I don’t see it as much anymore. You got to be Six Sigma qualified. Well. This is a newbie. Somebody starting out never had any experience with Six Sigma or any process improvement. As you work your way up here and I’ve had most people that have come into my organization, some Greenbelt. And my first question to them, how long were you a white belt? I didn’t know there was one. So they jumped here. Call themselves the greenbelt if they haven’t got the basics. So when you’re training somebody, hiring somebody to do something, they have to know the basics. Otherwise, they’re sitting there like an auditor and saying, Well, I can’t find her. Don’t look right. So it’s wrong. And and I’m I hope I don’t have any auditors in here, but, you know, when I when I have an auditor come to me and said, oh, I want to see your credit checks and say, I didn’t do any. Why not? Well, I can put them on hold. If they don’t pay, I’m in software so I can do it with a switch. I lose nothing. But if you’re in a hard environment that requires you to build something by the parts, by the components, pay people to put it together and ship it out. You’ve got a lot more to lose. So you have to look at every instance and every product differently. And if you try to have one size fits all, but when you say, well, greenbelt and what industry, what do you know about the end to end process and the questions that ask greenbelt and they can’t answer it. They don’t get hired. If we’re going to do a process improvement because you have to have the basics. And then when you get up here in the black belt, these guys, I mean, they know their stuff, but. Everyone I’ve had that worked for me. That was a black belt. Was more on the analytic side than they were on the process side. So I needed a part to help them understand the business. But boy, they could analyze it six ways this Sunday and tell me where to go. Sometimes they did. On what they should be doing first, and that’s what you have to do. Now, some of you know of a company called Salinas. I interfaced with Salinas quite a bit. For almost a year and a half now. Solana’s software goes into the process itself, sort of like this does. But what it’s doing is pointing out your delays in the process, not to breakdowns, but to your delays. So if you have a check coming in from a bank, which you have no backup, that’s a broken process. Now, whose fault is that? Treasuries. The banks. And the answer is probably no. It’s just the CFO who didn’t want to pay for the extra servers. So everyone gets involved in the process at some level. And you have to understand, if they’re involved, they have to be involved in the solution. And I can’t tell you how many times I’ve talked to a salesperson and I said, I need to peel. If any of you ever asked for a peel with an order. You know, I see my job. Well, whose job is it? Well, it’s a collector’s job because they won’t get paid if you don’t get it. So they transferred the problem to somebody else instead of saying, as a company, we’re not going to accept an order without a contract and without appeal. And if the contract is not a standard contract, Legal’s going to get involved because we have to make sure that we’re not breaking any rules, laws, antitrust. All of those things have to be looked at and a credit person should have to have that burden put on their shoulders. But if you don’t have a legal department or if you don’t have somebody looking at that, it’s your job. So you can have a software scanning it, looking for the exceptions, can overlook it and hope nothing happens. And that’s what a lot of companies do. They say we don’t have the time personnel or the. The proper level of understanding of contract law. Those of you that have been involved with seasonal seasons are a problem. How are you going to forecast who’s not going to pay you if they’re paying you late? Is it because it was a dispute because somebody didn’t deliver the goods, because the contract said they didn’t have to? I mean, there’s lots of things and I know that Jessica Butler was up here talking about disputes. Why did this happen? Did this dispute happen? Well, you haven’t done the work to determine and manage what the solution should be. You don’t understand the problem. How are you going to fix it? And most companies fix it by blaming somebody else for their problem because they inherited it. Not that they’re responsible for it, but they’re the last ones in the lines. It’s stuck. So if you’re going to do this and actually I’m not much on, are you a green belt? Black belt. This is the most important. Is your corporation behind you? If they’re not behind you and you’re going to do it on your own, you have to make sure everybody that’s involved in your process is part of the solution. Whether it’s the person supplying the cash, the bank, it’s sending you the information, the credit card company that’s sending you chargebacks. You have to know who’s involved and how you are going to work with them in order to get the solution. And there’s lots of ways to do it. We won’t get into those. So it’s the culture that you’re looking at a change in attitude, I call it, because if you don’t have the right attitude and I’ve worked with companies that are unbelievable. As a matter of fact, I went to training when I was in corporate wide training. It was mandatory when I had to go. And it was like a Myers-Briggs. And everyone’s personality was checked at the beginning and they put us in groups based on conflicts and personality working styles, and they couldn’t find it. They said it was the only group that they’ve ever had where everyone got along with each other. And I kind of laughed. I said, I don’t get along with him at all. But the fact of the matter is, we worked well together. We understood if there was a breakdown, we all had to join in and the solution and the CFO was 100% behind it. The first thing I ask somebody when they say, we want to do something, what’s your goal? What’s your purpose? Why are you complaining? And there’s a number of ways to address it. But the bottom line is, if you don’t know what the root causes and you don’t have a goal and how to fix it, don’t talk about it. You have to be involved in the solution, not in the problem. And when you look at solutions rather than problems, you have a different perspective. I know the story. But I had a portfolio. I had over 150 people working for me. They were remote. I was in San Francisco and they were in Texas. We had nine divisions and they were all doing it differently. Everything they did, they did well, but they all did differently. So I couldn’t transfer people. I couldn’t promote people easily because if they went someplace else and that same company, same product, same process, supposedly, but different procedures and it didn’t work. So I went to the CFO and I said, I need your support. Now I’m saying this because I didn’t go out and talk about sales, manufacturing, logistics. I talked about the process that I was involved in. I said, we’re going to build it from the ground up. And we’re going to start with us. We’re going to prove that it works. We did. I got more money. I got $2 million. And we built a system that the whole company could use that made everything uniform. And then we gave it to sales and said, this is something you can use, too. We’re going to give it to you. You can go online and see the orders in the queue. They hadn’t had that visibility before. We can see what was delivered. We can see who’s not paying, who’s going to go on credit whole. They thought it was fantastic. They didn’t like it when they were incredible, but they liked the idea of knowing what was going on before it was a problem. And. The head of one of the presidents of the division said to me, this will never work. And I said, Let us try it. We turned it on the first day, turned it on. They crashed this. The customers crashed the system because so many of them wanted what we were delivering, and it wasn’t available before, and no software company could give it to us. We built it from the ground up and we built it with people that didn’t know the industry. They knew the technology, but the people leading it were experts in the process. They knew what went wrong. They knew who to reach out to. They knew how to change things. SAP and Microsoft both looked at and tried to buy the technology from us. Now, I’m not. I know how to use technology, but if somebody said write to code, I’d say goodbye because I couldn’t write the code. So you needed a technology partner. And the guy that I picked eventually became president of his own company and a multi-millionaire. Pick the right guy. And that’s what you have to do. You have to pick the right people. It’s a people business, no matter what you’re doing. So. These are all of the things when you look at this slide and you can get it online. These are all the things that might be called, whether you want to call it Lean Six Sigma, Six Sigma, process improvement, cross-functional capabilities. It’s all the same. It boils down to what are you trying to do? Do you have the information? Do you have the groundwork set and everyone buying in? That’s going to have to buy in. You can’t do it alone. And then want to hear that things they can go in with a Six Sigma attitude and no relationship and support is going to fail. And I’ve seen the companies that have done it well, but they stop. Most of them stop. If you go today and say, IBM, Six Sigma, I’m going to Green Belts. So you have to probably have it on the manufacturing side. But there are consulting companies now. That’s their main thing, software consulting. And as a result of that, they think that it’s a different business, but it’s not. When you’re doing process improvement, there is no such thing as a business wall. This is the only thing I ever pay attention to. When I’m looking at process improvement, because none of this will follow if you don’t have people on the same page and support of the senior management, the dollars, the people, all of that’s important. So when you’re looking at this chart, look at what are my priorities? What are the company’s priorities? Is there a conflicting Agenda? the sales rule, the roost, and they do whatever they want. You have to pick up the pieces. Well, if that’s the case, you’ve got to say, okay, we’ve got to get together, because if we don’t, you’re not succeeding. And I’m not succeeding. And I hear this all the time while they hear the sales prevention department. I am I the sales prevention department. When I’m trying to help you. And I go because I want to do what I want to do. It’s like a spoiled kid and that’s not going to work. I’ve been in environments where you don’t have to have a title of Six Sigma Lean Six Sigma process improvement, total quality products ruined. The reason is people are working together. So you go to human resources and say, you better hire people that we can get along with rather than somebody who’s got a Ph.D. in psychology. Because I need a psychiatrist right now. So I hope that, you know, we haven’t got a lot of time here. I know I didn’t get into you know, here’s the analytics of it. But I think it’s important to know that even if you’re a master at analytics, if you don’t understand the processes at once and I’ve experienced it too, you’re not going to get where you want to go. You’ve got to have the right combination of attitude, people and understanding of the business needs. And I never say what the customer wants because they don’t know either. Right. And they’re not running your business. You’re supporting them. Right. So when you look at it, no matter who your customer is, that customer could be a salesperson, could be a CFO, could be the audit department. Whoever your customer is, you want to go buy the customer title. What do they want? Do they want to go home at 5:00? That’s their only objective is to say, here’s your work. See you tomorrow. Maybe it’s not necessary to work 12 to 15 hours a day. But you’ve got to make sure that that person understands. You’re depending on them to do some part of the process and the job. So get them involved. Don’t let them walk off at 5:00 without understanding that they’re leaving a bunch of people behind that are going to get stuck because the process is incomplete and the process mapping all of that technology that’s out there. There’s so much out there. I get so many emails, I get over 150 emails a day from somebody trying to sell me something and I’m a buyer, but they know I could influence a buyer. So here you go. And it’s really overwhelming to look at the technologies out there and really know. First thing I asked them, what’s your process for putting this in place and ensuring that if I buy it, it’ll work? Well, don’t worry about that. They’re out. Because I do worry about and I have to, because if I buy a software and it doesn’t work. I’m not the one who’s going to suffer. I might lose my job with the company. The customers are the ones who are going to suffer, and the very people who should be involved in the process are going to suffer because they may lose their jobs too. Use technology as a tool, not a crutch. I. I can’t tell you how many times I’ve had to sit and look at an Excel spreadsheet and go, Oh crap, I got to find the error. And everyone goes through that. But there’s no software that doesn’t have an error. And I’ve been in the software business, IBM, SuccessFactors,Siebel Systems. I’ve been in high tech for a long time and I can tell you it’s not perfect. So don’t look at it as the ultimate solution to have skipped through the process improvement. Well, thank you all for attending.