Managing A Crisis Using Continuous Improvement

By Ron May, Executive Consultant at Riverbank, with Kaylee Somerville, Project Manager at Riverbank

We have little control over when or how a crisis occurs. However, we can control the choices we make to respond. I worked for over 30 years at DTE Energy, the largest utility serving Southeast Michigan, eventually becoming the executive vice president. During the great recession beginning in 2008, like many, my firm had survival decisions to make. As an indicator, two of our major customers, Chrysler and GM, went through bankruptcy, and other businesses and banks were in deep trouble. We were in crisis mode. Faced with several options, the most obvious being slashing costs and laying off employees, we decided to go in a different direction. We decided to declare no layoffs to our employees and prioritize buying from local manufacturers in support of the economy of Michigan. We chose to respond with strength and positivity. We focused on Continuous Improvement and made employment commitments to our employees, high focused service to our customers and earnings support for our stockholders. These decisions set the stage for a company that went from approximately $49 a share in 2009 to $120 in 2021. Instead of laying off employees, the leadership team asked the employees for help. They were asked to help the company save costs and build revenue in other ways.

Continuous improvement was vital to this success. Continuous improvement is the ability for the organization to “pursue incremental and innovative improvements in its processes, products, and services.” Later changes are controlled by the knowledge gained from each previous change.<1> This process involves focusing on the customer needs, relying on worker ideas and willingness to implement, ensuring leadership support, and, most importantly, driving incremental change.<2> It may seem counterintuitive to focus on continuous improvement during a crisis. However, these principles were our main focus during the crisis and essential in helping us emerge successfully. The process followed lean manufacturing principles used in the auto industry and followed a scientific method of problem description, root cause determination, setting a hypothesis of how to resolve, and using a plan, do, act, and check cycle. We used this process in hundreds of cases, including fundamental processes in project management and procurement, customer service practices such as low-income support, physical work in power plants, and distribution systems improvement.

Be thoughtful in your decisions during a crisis Our decisions have signals. For us, it showed all employees that they mattered and had an important role in meeting our financial, engagement, and customer satisfaction goals. In return, as a whole, we received increased engagement, including our classified employees. By focusing our procurement dollars locally, we demonstrated loyalty to the community. In return, we retained their business. Keeping all employees was undoubtedly a non-additive cost, while providing certainty for the employees’ future. Research shows that providing certainty is one of the best things you can do as a leader.<3=">3"> With so much going, we needed something that felt rock solid. Our employees were talking to customers every day who were in turn facing layoffs. This decision provided them with stability and allowed them to focus on serving the customer. In the end, we couldn’t control much during the crisis. But the choices we made provided the entire community with a sense of “we are all fighting together.” One of the major reasons for our success is that we defined our “ideal state.” We wanted to be the “best-operated utility in North America.” We decided to measure ourselves against targets definable by others than just by ourselves. These same principles helped me through another leadership crisis years earlier. As the Senior Vice President of Distribution, I was the person leading the charge in putting the pieces back together after an event in another state caused a blackout of our system. We had no direct procedure for dealing with the situation. We were not sure what the problem was and, therefore, how to restore the system. DTE Energy’s CEO knew that our system was vital to the fabric of society and announced to the press and of course, all stakeholders, that we would restore the power in three days. It was my responsibility to help the organization meet that promise. Now, this was a real crisis. You can’t take too much time trying new things in true crisis mode, but you can envision an ideal state and use your existing knowledge and talent to get there. We leveraged continuous improvement principles to move to resolution of the situation. We asked ourselves, “What is the best way possible to work this issue?” In their collective roles at that moment, I knew that the team was best able to restore their part of the system. I made an active effort to listen instead of giving direct orders. But communication was constant and continuous. In the end, the power was back within three days, and the entire situation was primarily resolved within a week or so. Most importantly, we leveraged continuous improvement in our “after-action” and set up a team to help continuously improve to avoid future problems. “At the heart of reengineering is the notion of discontinuous thinking — of recognizing and breaking away from the outdated rules and fundamental assumptions that underlie operations. Unless we change these rules, we are merely rearranging the deck chairs on the Titanic. We cannot achieve breakthroughs in performance by cutting fat or automating existing processes. Rather, we must challenge old assumptions and shed the old rules that made the business underperform in the first place.”<4> — Michael Hammer  We can’t control a crisis, but we can control the decisions we make during a crisis. Focusing on Continuous Improvement and retaining employees was certainly not the only choice, but it was the best choice. Continuous Improvement is helpful as it keeps you prepared for the next thing: always focusing on doing better each step.

To summarize: 1) Our choices have signals: what you signal to your broader stakeholders can influence how they respond during a crisis. 2) Your employees will be valuable to your success, so include them in your crisis decision-making. 3) Learn while you go: even during a crisis, organizations can solve problems in the best way possible and ensure progress the next time. Sources:  <1> Business Process Re-engineering Assessment Guide, United States General Accounting Office, May 1997 <2> “The Seven Guiding Principles of Continuous Improvement.” Home. Last modified June 29, 2021. https://www.eonsolutions.io/blog/the-seven-guiding-principles-of-continuous-improvement#:~:text=%20The%20Seven%20Guiding%20Principles%20of%20Continuous%20Improvement,delivered%20in%20small%20amounts%20on%20a...%20More%20. <3> Lunn, P. D., Belton, C. A., Lavin, C., McGowan, F. P., Timmons, S., & Robertson, D. A. (2020). Using Behavioral Science to help fight the Coronavirus. Journal of Behavioral Public Administration, 3(1). <4> Hammer. “Reengineering Work: Don’t Automate, Obliterate.” Harvard Business Review. Last modified July 1, 1990. https://hbr.org/1990/07/reengineering-work-dont-automate-obliterate.