Downsizing – Is it playing a role with today’s incidents?

Economists tell us we are 5 years beyond when the recession officially ended (I find this debatable).  Anyway, companies have undergone dramatic changes to remain profitable.  Supply chains have been squeezed, working capital cut, and cheaper materials sourced.  Discretionary spending has taken severe hits across the board.  Despite most organizations already being ‘leaned out’, for many managers, headcount reduction is one of the only levers left to cut costs further.  While downsizing is still occurring in places, overall it has seemingly run its course.  I believe many organizations have hit, or exceeded their lower tolerance level for staffing and realize to cut further would have increasingly negative economic results.

The heaviest downsizing occurred in 2008 & 2009 (US Bureau of Labor and Statistics).  In the years following, 2010-2012, many companies realized record profits.  Of course much of the record profitability was due to an economic rebound, but did workforce reduction contribute to the profitability?  Not entirely, but it was part of it.   Interestingly, fewer companies reported record earnings in 2013 and 2014.  During these last two years, I have seen a noticeable change in the magnitude of the events being encountered—they have grown considerably.  Coincidental?  Given that there hasn’t been a dramatic difference in the economic conditions the last 4 years, something has changed.  To borrow from Malcolm Gladwell, I think many organizations have reached the “Tipping Point” with their workforces.  For years, the events we investigated (with a fiscal trigger) typically ranged from hundreds of thousands to millions of dollars of loss.  It really didn’t seem to change much from year to year. However, in the last two years, the magnitude of the losses we are seeing is 4 to 5 times larger than it used to be just a few years ago.  (I think ten times larger wouldn’t be that far off.) 

Of course there are multiple factors contributing to the reduction in profitability, but I believe the heavy downsizing of the late 2000’s (and the continued reluctance to hire) has been a major cause for why event magnitude has grown markedly in the last two years and why profitability is now slipping.   

RCA Incident Triangle

Many of you are familiar with Birds inverted incident triangle--commonly used to represent the severity versus frequency of safety incidents.  

While the ratios may vary by problem type, if Bird’s model also holds for incidents of significant financial impact (I believe it does) then given the dramatic rise in event magnitude, it follows that there has been an overall increase in lower level incidents as well resulting in hundreds of millions in new waste that organizations are taking on. 

Most major incidents don’t materialize overnight.  Most are years in the making.    What we started seeing several years ago (and it continues today) is that when problems are in the larvae stage, they are going unnoticed for far longer periods of time as compared to the past.  Today’s problems are not more complicated than those of years past.  Not at all.  Fewer RCA’s and/or problem solving efforts  are being performed.  Why?  I see  fewer employees and fewer in-house SME’s (subject matter experts) available to apply critical thinking/RCA on small and mid-size problems.  Thus, more small problems are growing into big problems.  Its not to say that remaining SME’s and employees wouldn’t have noticed these emerging problems if they had the time to focus on them, because I think they would.  Expanded roles and responsibilities leaves less focus time on any one specific task.  A problem has to be big before it gets looked at anymore.

So who is watching for the signs of trouble today?  It’s a challenge, for sure.  There are still many great analysts and experts, and the deployment of expert systems is helping, but someone has to pay attention to, maintain and feed the expert system.  More organizations are beginning to hire again, but most of the new hires are not familiar with the processes/systems and it will likely take them several years to get up to speed.  So, what do you do in the mean time?  I can’t think of a better way to accelerate the learning curve for new employees and knock out some problems at same time than to have them facilitate an RCA on a lower level or mid-size problem in your area.  It’s a positive step for preventing incidents and a real-time, hands-on learning experience that will expose them to more aspects and people in your organization.  I know that many of you no longer have the time to do RCA on that lower level problem (that you probably would have investigated a few years back). But, if you make the time to show the new employees the ropes by allowing them to watch you facilitate, or if you invest in RCA Facilitator training and set the expectation that they lead the RCA with support from the SME’s, you will break the chain of problem escalation.   Eliminating incidents will cut your costs (as opposed to cutting more people) and prevent future losses.  It will also reduce the size of the problems you are dealing with by preventing small problems from growing into big problems.  

If you aren’t able to find someone to lead the RCA, or you don’t invest in developing someone else to do so,  Bird’s triangle probably won’t be taking the day off, so I might be talking with you down the road…….http://www.sologic.com/root-cause-analysis-services/rca-investigations  

I am hoping that we get to talk trout fishing instead of helping you figure out what caused 100,000lbs of unsalable off-spec taking up prime space in your warehouse. 

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