To build on the previous post, one company I know went through the trouble of quantifying the cost of non-involvement at the time the company was sold. We're talking a billion dollar company that tripled its value in four years. Over the period, they had a strong people involvement in waste reduction program and they found overall that manufacturing cost as a percentage of sales reduced by 7% whilst materials, R&D and overhead remained constant - 7% that corresponds to the 7% increase in EBITDA (in percentage of sales) over the period. EBITDA overall increased by 60% over the period.
The interesting part of the analysis is looking at the situation plant
by plant. In the 6 plants least involved with improvement efforts, as
measured by operator involvement and speed of improvement, the
percentage of manufacturing costs over sales varied from 5% increase to
12% decrease. In the second group 6 plants group of high involvement
efforts, manufacturing cost to sales reduced by -9% to -30%.
Rigorous estimates such as these are rare, but the company explicitly
considered that improvements in people engagement and customer
satisfaction directly led to a $ 600 million increase in company value.
Hard results obtained from "soft stuff." Why so many senior managers
simply shrug off cash potentials of this magnitude remains a vexing (and