Maxine Fu, an engagement manager (EM) in Shanghai and member of McKinsey’s Operations Practice, contributes to the firm in two areas key to our future growth: China and the Global Energy and Materials practice. Read on to find out how she helped transform a Chinese state-owned enterprise into a model for the many others in the country, as well as her advice to other EMs interested in helping change the firm.
1. Tell us about your role.
For the past 20 months, I’ve been leading teams on an operations transformation project for the Guangxi branch of a major basic materials producer. We’ve conducted ten similar projects at the client’s sites across China, and I’ve worked on four of them.
2. What’s the nature of the work you’re doing?
We created a transformation process focusing on improving their business systems and instilling operations excellence, which was tested at several plants and is now being put to work throughout all of the client’s operations. We are currently in the process of building capabilities for more than 7,300 employees at the shop floor level through various capability-building programs.
We also helped the client build a model factory to help train its staff on topics like visual management, energy efficiency and equipment reliability, so all of its plants can benefit from emerging best practices.
3. What excites you about the Global Energy and Materials practice in China?
For me, the most excitement comes from potential impact we could have. We usually deal with production costs in units of a billion RMB ($200 million USD), so even a 1 percent improvement would mean a lot. And it’s likely that for most organizations, there is a double-digit potential for cost savings from energy efficiency, material consumption, and other operation lift, without much capex.
4. What are the biggest challenges of working in this area?
In addition, you can observe positive changes directly from your daily work, and people enjoy getting your help and respect you as an expert teacher and coach. It’s very fulfilling.
The biggest challenge is getting each staff member to buy in and be a positive part of the change. In order to do that, each person must have a relevant goal which serves as the motivation to change the way they work. For example, the CEO was supportive from the beginning, but what made him become our biggest advocate and a daily participant was linking the transformation goals and activities directly to his challenging business targets.
It’s also difficult to change the status quo at a middle management level, especially when people don’t readily see room for further improvement. In the pilot, we implemented several aspects of the transformation, and highlighted the successes. Then we invited other plants to review and learn from the pilot.
Eventually, a group of 400 leaders at all levels began sharing best practices on a monthly basis, and the CEO and his staff began to do monthly Gemba walks with plant managers (drawing on a lean principle which involves management visiting the shop floor to understand how value is created and where waste can be eliminated). These regular events demonstrated the many possibilities for improvement, and became a catalyst for other plants to follow suit.
Another challenging aspect was getting every employee to actively participate in the change improvement activities. We used the full influence model on this: increasing motivation by aligning incentives; encouraging leaders to role model by advocating at all opportunities; encouraging autonomous kaizens (based on the Japanese operations philosophy of continuous improvement) by recognizing best practice; and launching KPI campaign programs and a poster competition about “finding lost energy at work” and seeking improvement at the level of individual shifts, as well as creating an annual “star award” for best-performing shop floor.
All of these activities are concrete ways of driving change at each working level, and as they were carried out, more and more employees participated. One of our top goals was to make autonomous improvement part of the culture.
5. How did you choose energy efficiency and resource productivity as your area of functional focus?
At the time, I was looking for sustainable ways to reduce costs for our client. We were designing a comprehensive operating system for them, and energy management is one part of this. In the diagnostic, we found that the client lacked integrated thinking or a professional approach to managing energy; they paid attention to production efficiency, but simply treated energy as a cost. But energy cost is generally 30 to 50 percent of total production cost for Chinese GEM companies, and setting up a system to professionally manage for energy efficiency usually leads to a reduction in energy spending of 5 to 15 percent, leading to a significant profit margin improvement.
Therefore, through this client work, we have shown that energy efficiency is a function that urgently needs to be improved, both because of the great savings potential and to fulfill the government’s strict regulations. At the client, we started from the heating process, and eventually touched all energy media, including steam, electricity in motor and smelting, energy-efficient material manufacture, and energy-efficient organization design.
Then I decided to make it more professional as an offering, and promote it to other GEM sectors beyond Basic Materials. In addition to the great potential for client impact, the topic also satisfies my personal passion for creating both financial and social value in the Green sector.
6. Broadly speaking, what kind of impact and opportunity are you seeing as a result of your work?
The data speaks for itself. In the past 20 months at the client, we launched four phases of operation transformation engagements, a strategy project, Centered Leadership forums and capability-building programs, with more than 30 teams on site to support this effort. We have turned a shop floor into a model visual factory, and totally changed the way they do daily management and problem solving. We’ve established a permanent organization with 15 full-time value stream managers and change leaders, and 65 internal trainers to deliver 30 courses to the full company. And, with the Guangxi client teams, we have developed a client-specific business system, which will be the main driver for change across all of the client’s operations for the next 2-3 years.
All of this has led to potential impact with a run rate of at least 290 million RMB ($46 million USD), with at least 150 million RMB ($23.8 million USD) realized and captured in 2012. Going forward, we will continue to support them in a variety of ways; for example, next year we will train 40 managers in how to become world-class change agents, with much of that work taking place at our CCOE (China Center for Operational Excellence / Chinese Model Factory).
In addition, we were very pleased that McKinsey’s support for the clientwas the primary ‘success story’ showcased at a recent semi-annual leadership meeting of the State-owned Assets Supervision and Administration Commission (SASAC), which is attended by all CEOs of China’s SOEs. The CEO, the Guangxi CEO, and a shift manager from Guangxi presented the story of how the transformation positively changed their business. This has led to our work becoming the role model for the SASAC’s three-year initiative on “operations excellence in basic management” among all of China’s SOEs.
7. What was it like to have the government recognize your work by making Guangxi a model for basic management operation excellence of all SOEs in China?
For me personally, I am thrilled to have such recognition. I do have a dream to help Chinese companies build better internal capabilities to become more competitive on the global stage, and now I can see this starting to come true in a more concrete way. The demonstration of the Chalco Guangxi site can help answer the “how” and “why” questions that can hold people and companies back from making changes; the financial impact and beautiful shop floor can set an example for others. I am looking forward to influencing more SOEs by showing them a result they can see and feel.
9. What do you like to do on your time off?
I love to spend time with my 5-year-old son, Julius, and my dog, a 12-year-old American Eskimo. They all inspired me to make more time for my private life.
Traveling alone with my sketch book is another way to refresh myself and get in touch with my spiritual side. Recently, I’ve sketched my way through Egypt, Kyoto and parts of Europe. I also enjoy taking long bike rides across provinces, and writing poetry and posting my poems to my blog. I kind of believe that I might have been a painter and poet in my previous lives.
10. What would you say to another EM thinking about spending time working in GEM?
It is very important that you find your work interesting and enjoy what you do in any role. If you work in GEM, you may not find yourself in a luxury hotel or a fancy office, but you will work directly and regularly with senior leadership and see impact firsthand. At our client, we had weekly sessions with the CEO and senior staff members to problem solve, quickly break barriers, overcome challenges and push solutions forward. Then, we went back to the shop floor to make it all happen. For me, helping to completely transform a site to enhance a company’s performance is very exciting and personally fulfilling.
There are so many things can be done in GEM – from daily operations and beyond. A “Nothing is impossible” attitude is important. Throw yourself in and set yourself as a role model and advocate of change. Try to always inspire your clients, and you will make your mark in this area.