Mistakes routinely occur in all businesses. Some mistakes are minor, while some significantly impact the bottom line. Smart managers see errors not only as negative experiences, but also as learning opportunities. Mistakes that arise from objective, sound reasoning or following an established process often provide fertile ground for the cultivation of new ideas and strategies. Ultimately, the result is an improved product and process.

For the mistake to become an effective learning experience, it is important for manufacturers to take steps to solve the problem and create an environment that encourages employees to learn from the inevitable mishap.

Common and Costly Mistakes
There are several common mistakes readily visible in the manufacturing sector. Communication errors are one, especially incomplete or incorrect information that leads to scheduling errors. Another common mistake, and one that can be fatal in the current environment, is utilizing faulty or weak inventory controls. This is particularly true as the country copes with recession and factory inventories are at lows not seen in decades.   

Errors can also arise on the manufacturing floor. Some errors stem from poor or problematic engineering and are revealed at the critical design phase of product development or during production handoff. This can be especially damaging for OEMs and job shops that typically make smaller runs of specialized products. Poor preventive maintenance is also a problem that results in costly down-time, unbudgeted repairs and delays in getting orders to customers.   

While there is an expense associated with any kind of mistake or error, some mistakes clearly can be more damaging than others. Defective products or high rejection rates might seem like the costliest forms of errors, and indeed, they can be the most high-profile. However, a general rule is that the costliest errors don’t make the news: the damage to reputations and relationships that results when manufacturers can’t meet their obligations to customers go beyond a financial impact. Losing a valued customer can cost businesses millions of dollars a year and take years, even decades, to repair.   

The impact of a mistake on the bottom line is calculated through a process called “problem costing.” Normally plant engineers look at downtime, direct labor costs, direct material costs and applied overhead in addition to rework job costing. These costs are relatively simple to calculate. The most overlooked problem cost is often the most significant.

Scheduling errors and defective product errors create “upside-down marketing impact” on the customer base. This problem cost can be measured by determining what the company would have to spend on marketing to offset the negative impact. Upside-down marketing has put many companies out of business – and that’s paying the ultimate price.
   
Making Things Right
Fixing a mistake can be a simple matter of following a repair manual – or it could be much more complex. When a facility’s management crashes, there typically isn’t a pat rebuild process. In these cases, simply identifying the problem can be difficult if management and the employee’s self-preservation instincts mask the problem.

Or, management and employees can become blind to the problem over time, letting dysfunction become the norm. Substandard becomes the new standard, and no one can remember when things were any different. Sometimes the only solution is a fresh set of eyes and shaking up managers and supervisors.   

Human behavior, then, is the root cause for many problems. It’s also why some problems tend to repeat themselves. Typically, people problems are merely symptoms of an underlying problem. Oftentimes, it’s easier to treat the symptoms than break managers and employees out of their routines. Usually, the underlying problem is structural; that is, the problem is caused by how the manufacturing facility is run. Weak areas of centralized controls are the culprit.   

Many manufactures consider ISO certification as a good solution, but it needs to be approached with caution. ISO certification is most commonly used as a marketing aid in order to attain a business relationship with a customer who requires the certification. The actual technical benefits of an ISO certification will depend on a plant’s operations and what is being produced.    

Defining commonly agreed-upon sets of standards benefits any business. There is a variable diminishing return pertaining to the degree of sophistication of standardization implemented and the operations that the business is implementing. While some businesses become bogged down by over implementation of standardization, others have lost businesses because of an underutilization of standards. Common sense should prevail.

It’s a Cliché, But…
Learning from mistakes needs to be the top priority of every manufacturer once the crisis period has passed and the problem has been at least temporarily dealt with. When managers foster an environment of respect and learning that allows employees the freedom to make mistakes, but holds them accountable for them, they are able to address deficiencies and learn from the incident.   

Managers who destroy subordinates’ self-esteem are not likely to create an environment in which employees can learn from their mistakes. Conversely, coaching fosters personal and professional growth. A strong manager uses negative and positive reinforcement to make his case and help the employee develop.

Getting the staff to take responsibility for their mistakes and become proactively involved in the organization helps avoid future problems while improving procedures. Once this kind of environment is in place, managers need to implement a system of measured accountability. By setting targets for quality, backed up by incentives, managers can hold employees accountable for their work in a transparent manner.

Quality Begins with People
Remember, quality control (QC) is not performed by micrometers, X-ray equipment or gas chromatographs. In fact, it’s not even performed in the QC department. QC is done by human beings long before the product hits the diagnostics. The art of quality control is nearly all behavioral, and positive behavior can be encouraged and rewarded by measuring and rewarding good work. 

Scott Wood is assistant managing director of IPA, a full-service business development group and general management consulting firm focused on small- and medium-size privately held companies in North America. For more information, visit ipa-c.com.