"Continuous improvement starts in people's minds"

November 27, 2017

by Dr. Klaus Patzak, Chief Financial Officer of Bilfinger SE

The first steps are always the hardest. This is no different for continuous improvement. But once success is achieved, the process strengthens itself.

Standing still is the same as moving backward. A company that wants to succeed on the market over the long term has to constantly improve. Long-lasting, day by day. Improvement programs can help mark the path ahead and serve as a framework, particularly for companies in transition. Ideally, this would be coupled with a sustainable cultural transformation from within the company. Because continuous improvement is mainly a question of attitude and starts in the mind of each individual employee - beginning with the company's management, who must strive to exemplify the pursuit of improvement.

Generally speaking, improvement programs have to address two factors at the same time: A continuous maximization of customer benefit and a minimization of the deployment of internal resources. Customers choose the services and buy the products from which they expect the greatest amount of value added. At Bilfinger, we promise our customers lower maintenance costs, efficiency gains in operations as well as reduced emissions.  To achieve this, we bank on our modular maintenance concept developed in-house as well as digitalization solutions that lead to cost savings on the customer side.

On the other hand, deployment of internal resources has to be constantly optimized to  counter cost increases and price declines. One example is the use of drones equipped with cameras for maintenance works on offshore facilities. The images that are produced as a result make it easier to quickly identify corrosion damage and, with the help of thermal images, it is also possible to detect leaks on seals and pipes - in areas that are difficult to reach. This is not only efficient, it also reduces the risk of injury among employees. And it allows us to show customers the condition of their assets with a high degree of quality and transparency.

Controlling the measures

The range of measures included in an improvement program covers both productivity and efficiency enhancing elements such as, for example, improvements to internal processes as well as growth initiatives. It is important to underscore each individual measure with precise targets and milestones and to continuously monitor the progress that is being made. This makes it possible to make adjustments at an early stage if progress in one measure is not in line with what was originally expected.

This controlling of measures has to be closely linked with the company's financial controlling. By doing so,  individual earnings contributions become measurable and clearly assignable. At the same time, this link creates an additional early-warning factor with regard to the company's future business development. A close Integration for controlling of measures and financial controlling thus also leads to an improvement in the accuracy of forecasts in financial planning. And if measures lag behind the original targets, countermeasures can be implemented in a timely manner.

Four decisive factors

Four main factors are essential for the success of an improvement program: Firstly, employees have to be convinced of the necessity and the potential of an improvement program. In the end, the objective is not merely to save costs. Successful programs create financial scope for innovations and growth.

Secondly, ambitious targets have to be agreed with those responsible. Also important is, thirdly, the derivation of measures, also through systematic benchmarking, and, as already mentioned, the definition of precise and reviewable milestones. And fourthly, successfully implemented measures also have to be commended - not only, but also monetarily.

Cultural Transformation

The current improvement program at Bilfinger includes, on the one hand, major projects like the harmonization of the IT landscape, which will have a positive impact on cost efficiency and lead times. Such projects are delegated to a project team which regularly reviews progress together with the company's top management. Just as important, however, are the many smaller ideas that are introduced within the company. Because the true power of continuous improvement is unfolded by them.

One example is the harmonization of the fleet management that has been initiated at Bilfinger. So far, almost twenty leasing partners in Europe have provided vehicles for the company. Through the Europe-wide bundling and the simultaneous standardization, the colleagues achieve a significantly greater purchasing volume and can thus negotiate much better conditions. We have also introduced a measure to process more procurement of small parts through an Internet-based purchasing platform. We can thus reach substantial efficiency gains.

Flywheel effect

In the end, the main objective of an improvement program is a sustainable change in corporate culture. At the beginning of a program, this requires tremendous effort to get the wheel moving. As it increasingly gains footing in the company, however, a "flywheel" effect is created, which Jim Collins impressively described: The flywheel rotates on its own. New ideas are constantly being generated, turned into measures and translated into earnings effects. Continuous improvement that is measurable.

Source: Börsen-Zeitung on 24 November 2017