Updating the Standards


How does a company update their standards and estimates? Common sense says that we assign work order charge numbers to each of the work packages in the breakdown structure. As each work package is completed, we compare the final results against the original plan and see if the standards should be updated. But what if the standard was initially created based upon the work ethic for lazy workers? What if the workers were reluctant to work harder or better? What if the workers belong to a union that discouraged increases in worker performance?

Alpha Company (a disguised name) had a reputation for low cost technical products. The engineering division had several engineers with four-year college degrees, but the greater part of the engineering division was made up of two-year community college graduates with majors in some technical discipline. Alpha Company would provide these workers with the necessary training to do their job effectively.

The company was essentially a non-project-based one that was more manufacturing-driven than project management driven. As long as there was a need for most of their standard products they saw no need for project management. All of that was about to change.

As the marketplace altered and customers began demanding specialized products, the need for project management appeared. The first challenge was the need to drastically upgrade the performance of the engineering division. The decision was made to hire more engineers from four-year colleges and universities. The vice president for engineering wanted engineers that had a minimum grade point average of 3.6 out of a 4.0 scale.

The real challenge came from manufacturing. These estimates had not been updated for the past five years. The manufacturing personnel insisted that their estimates and standards were correct and updates were not needed. Whenever new employees were hired into manufacturing, the union pressured the newly-hired, eager workers to slow down their performance for fear of making their colleagues look bad. All of the managers and executives knew this was happening but nobody wanted to pressure changes to occur.

As the capabilities of the engineering division began to increase, it became obvious that product pricing would require updates to the manufacturing standards and estimates. The manufacturing personnel fought against the idea of updating the standards stating that they could not be improved.

Management insisted that the standards be reassessed. The union held to their conviction and threatened to go on strike if management tried to change the standards. Management was not swayed by the threat and began reassessing the standards and estimates. In June, the union went on strike.

The union believed that project management was evil and continuous improvement activities were not in the union’s best interest. Furthermore, the union believed that management would “buckle at the knees” and concede to all of the union’s demands before the strike would end.

Management, however, had developed contingency plans. By the end of the 3rd month, Alpha Company was turning out 70% of the work using 30% of the labor force, mostly white collar workers. The training manager was running a drill press while the Vice President for Human Resources was running a lathe. Management now realized that the standards and estimates previously used in manufacturing were grossly outdated and incorrect, and was in no hurry to end the strike.

As Thanksgiving came and went, the union realized that Christmas was right around the corner and that the workers were cash-starved. They returned to the bargaining table. Management had done their homework and stated that the workers could return to work but 168 people would not be hired back. The remaining workers would have to do the same amount of work as before but with 168 fewer workers. The workers also had to do so under training in project management and be willing to accept continuous improvement activities. Reluctantly, the union agreed.


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