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"Only the Lean Win Races"
By Jerry Feingold
(Originally published by Lighthouse Consulting Services)

If you had to stop reading this article this second and immediately begin the task of getting four new tires put on your car, filling the gas tank to the top, cleaning the windshield and then drinking seven ounce of water, how long would you guess that would take? Two hours? Three hours? Now hold onto that thought and let me ask you a second question. Which car in the

500 race wins? Most people would say that the fastest car wins. Actually it's not always the fastest car that wins. It usually is the car that spends the least amount of time in the pit. And what happens in the pit? That's where they replace all four tires, fill the gas tank, clean the windshield and give the driver seven ounces of water to drink. And how long do you think that takes? Would you believe less than nine seconds?

At this point you may have figured out that I am presenting a business metaphor, but you probably dismiss my example as irrelevant to your business. After all, your business is quite unique. Before I tell you about what winners are doing in today's rough business environment, let's talk about the losers. Losers often start sentences with one of these three phrases: If not for... When... What if...

If not for the downturn in the industry our company serves, we could be quite profitable.
When we get our new automated system installed things will be a lot better around here.
What if the economy doesn't turn around in the next six months?

OK you say, so maybe there is an attitude that typifies losers. But what are the winners doing today? Let's get back to my racetrack example. The reasons all that stuff get done in less than nine seconds is: 1) The PROCESS was continuously improved over time; 2) The team knows how to work well together (or maybe their leader knows how to get them to work well together); 3)The team practices.

Experts have come along since the start of the industrial revolution, claiming to have the one and only secret to business success. These PANACEAS have come and gone for the past 100 years. While it is reckless to embrace any one technique as the answer to all your business problems, there are elements from all of them that are excellent. The latest technique is called, "Lean." The term comes to us from

and was first described to Americans in a book published in 1990 called The Machine That Changed the World. In this book by authors James Womack, Daniel Jones and Daniel Roos, they describe Japanese management practices that enabled their stunning success in the automotive and consumer electronics businesses.

When "Lean" companies are compared to ordinary companies, we see these differences:

• Lean companies take HALF the human effort
• Lean companies have one-half the defects in the finished product (or service).
• Lean companies require 1/3 the engineering effort.
• Lean companies use half the floor space for the same output.
• Lean companies have 90% less inventory.

There are quite a few companies in the

today who are considered Lean. These people are thankful they took the effort to begin the changes that resulted in their transformation. We don't like changing and we avoid it. But there comes a point where we are so disgusted with the existing situation that we begin the road down that difficult path. One example is dieting. We tend to ignore the slowly increasing girth until that one painful day when we get a glimpse of our naked self in the mirror. "Is that really me? THAT'S IT-I'm on a diet starting right now. Or the slowly creeping credit card balance. One day we open that envelope and say, "How the hell did I accumulate so much debt-I must have been nuts. THAT'S IT--I'm on a tight budget starting right now."

The journey down the path to becoming Lean in business starts with the leader, and it takes a strong leader. This leader realizes three things: 1) There are no quick fixes (or panaceas); 2) His business probably won't survive unless it changes the way they do business; and 3) The situation requires a REVOLUTION

Effective leaders know that dramatic improvement cannot be made by "exhortation." It takes a lot more than inspirational speeches, incentives or threats. The change must begin with the "call to action." Everyone in the organization needs to know that: 1) The business cannot continue operating the way it does-it won't survive; and 2) Everyone must change the way they do their jobs. Everyone!

The problem is what to change and how to change. An effective method could be to bring in an outsider who won't miss the forest for the trees. A very useful technique for bringing about change very quickly is called Kaizen. Kaizen is a Japanese word meaning continuous improvement and is the most common technique for creating the Lean Enterprise. Application of Kaizen involves a study of the businesses processes in an effort to discover where the waste is. Then a new process is implemented after all the waste has been removed. The amazing thing about Kaizen is the speed of implementation. There are many consulting companies who pour expensive teams into the client's company and spend months gathering data. This data gathering culminates in a three-ring binder chocked full of terrific ideas. The binder often resides on the boss's desk and the terrific ideas never get implemented.

Kaizen uses a technique called, the blitz. The blitz can be conducted by an outside consultant or one of your own people trained in the techniques. The strategy is to select one process in the company to improve. A blitz takes 3-5 days. A team of 6-12 people from across the organization is formed and given one full day of training in techniques to identify and eliminate waste. The focus of the team could either be a factory or an administrative function. Then the team spends the rest of their time implementing the new, vastly improved process.

At the conclusion of the week, not only has a key business process been improved very quickly, but a team has been trained that can apply this same technique to other process in the company. Unlike other improvement methods, Kaizen:

• Provides very quick implementation
• Is low cost since it relies on your own people, not a gang of expensive young consultants.
• Implants an effective team approach to problem solving and process improvement.

Once the decision is made to use Kaizen, the next critical decision is to select a process to dramatically improve. The process selected to improve should have the following attributes:

• It should currently be dysfunctional
• Improving it should make customers happy (and competitors worry).
• It should have a high likelihood of being successfully improved.

One of the techniques employed by Kaizen practitioners is to reduce set-up times in factories.

, for example, was able to reduce the time to changeover their presses from producing one type of fender to another from twelve hours to nine minutes. Our initial example compared our method of changing four tires in three hours to that of the professional team who does it in seconds. The pros do it without all the waste. The waste was removed from their process.

Many companies are now paralyzed with uncertainty. These are the companies saying they would be successful "if not for". They would be successful "when." And they're worried about "what if." These are the guys you want to compete with. Take the waste out of your company and get Lean before they do. Being in business is being in a race-a race that has winners and losers. Picture your company with all the waste removed. Picture your company as a Lean company. Would your company in that vision win your race?

U.S. Treasury gets approval for the Emergency Economic Stabilization Act.  See the link for more information - EESA Initiatives

http://www.treasury.gov/initiatives/eesa/

See www.bd101.net  for more information and capabilities.

SEC approves one-year extension of auditor attestation requirement for nonaccelerated filers-

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On Friday, June 20th, the Securities and Exchange Commission announced  that it had approved a one-year extension of the date by which non-accelerated filers (that is, companies with an aggregate worldwide public float of less than $75 million) must begin to comply with the Section 404(b) auditor attestation requirement of the Sarbanes-Oxley Act of 2002. The SEC formally proposed the extension on February 1, 2008.

With the extension, non-accelerated filers must include in their annual reports an attestation report of their independent auditor on internal control over financial reporting beginning with fiscal years ending on or after December 15, 2009.

The SEC also received approval to proceed with data collection for its Section 404 implementation cost-benefit study. The study is intended to help with determining whether the SEC’s management guidance (Interpretive Release, Commission Guidance Regarding Management’s Report on Internal Control Over Financial Reporting Under Section 13(a) or 15(d) of the Securities Exchange Act of 1934) and the PCAOB’s Auditing Standard 5, An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements, are facilitating more cost-effective internal control evaluations.

The full text of the final amendments with respect to the extension of the auditor attestation requirement will be posted to the SEC website as soon as it is available. The amendments will take effect 60 days after their publication in the Federal Register.

SEC Approves One-Year Extension for Small Businesses From Auditor Attestation Requirement in Sarbanes-Oxley Act- Contact Verdad Systems for more information about this article.

SEC Staff Gains OMB Approval to Proceed With Data Collection for Cost-Benefit Study of SOX 404 Implementation

FOR IMMEDIATE RELEASE
2008-116

Washington, D.C., June 20, 2008— The Securities and Exchange Commission announced today that it has approved a one-year extension of the compliance date for smaller public companies to meet the Section 404(b) auditor attestation requirement of the Sarbanes-Oxley Act. The SEC also announced that it received Office of Management and Budget (OMB) approval yesterday to proceed with data collection for a study of the costs and benefits of Section 404 implementation, focusing on the consequences for smaller companies and the effects of the Section 404 auditor attestation requirements. The results of the study are expected to become available during the extension period.

With the extension, smaller companies will now be required to provide the attestation reports in their annual reports for fiscal years ending on or after Dec. 15, 2009. SEC Chairman Christopher Cox first proposed this one-year delay for small businesses during December 2007 testimony before the House Small Business Committee, and the Commission formally proposed this extension on Feb. 1, 2008.

The SEC staff's cost-benefit study, which was announced in February, is being led by the SEC's Office of Economic Analysis with assistance from the Office of the Chief Accountant and the Division of Corporation Finance. The OMB's approval on June 19 is an important milestone in the project, as the SEC staff can now begin the collection of data through interviews and other outreach. The staff submitted the study design for OMB review and approval in compliance with the Paperwork Reduction Act of 1995. With OMB approval, and the key financial data for annual reports becoming available to companies this spring, the SEC staff will be moving forward with interviews and a web-based survey as part of its effort to collect real-world data from a broad array of companies and analyzing what drives costs, particularly for smaller companies, and where companies and investors derive the benefits from Section 404.

John W. White, Director of the SEC's Division of Corporation Finance, said, "Over the past few years, the Commission and PCAOB have committed extensive resources to improving the efficiency and cost-effectiveness of the implementation of Section 404's requirements, particularly for smaller companies. I am optimistic that this study of real-world data will help further inform our efforts to improve the implementation of SOX 404."

The SEC staff's cost-benefit study will help determine whether the new management guidance on evaluating the internal controls over financial reporting issued by the Commission in June 2007 and the Public Company Accounting Oversight Board's (PCAOB) Auditing Standard No. 5 approved by the Commission in July 2007 are having the intended effect of facilitating more cost-effective internal control evaluations and audits of smaller reporting companies. The study includes gathering new data from a broad array of companies about the costs and benefits of compliance with the Section 404 requirements. The study also pays special attention

to those smaller companies that are complying for the first time with the requirements that are currently in effect.

Section 404 has two provisions: 404(a) requires company management to assess the effectiveness of the company's internal controls over financial reporting, while 404(b) requires an auditor attestation on management's assessment. Larger companies, comprising more than 95 percent of the market capitalization of U.S equity securities markets, have been subject to both provisions since 2004.

The extension of the Section 404(b) compliance date for smaller companies is the latest in a series of Commission efforts to help reduce unnecessary compliance costs for smaller companies while preserving important investor protections. In 2007, the SEC issued new guidance for management's Section 404 assessment to help companies focus their reviews on the internal control issues that matter most to investors. Companies of all sizes, including smaller companies, are filing their first 404(a) reports this year with the benefit of the new guidance. Furthermore, the SEC and the PCAOB voted unanimously to replace the standard for the 404(b) auditor attestation, which is intended to make the process more efficient. This year, larger companies are filing their first 404(b) reports under the new audit standard.

The full text of the final amendments for the extension of the auditor attestation requirement for smaller companies will be posted to the SEC Web site as soon as possible. The amendments will take effect 60 days after the release is published in the Federal Register.