The Radial Bearing Team

January 2006 Resubmission-- Radial Bearing Team -- 1 RR

THE RADIAL BEARING TEAM

George, the machine shop manager at Baker Hughes INTEQ (BHI), Houston, Texas, starred at the memo he had just received and couldn't believe his eyes. As his blood pressure rose slightly, he began to curse under his breath about the assignment he had just received. In late 1995, George became interested in the efforts of other firms (and some competitors) to institute self-directed work teams (SDWTs). He read the trade publications and some management books on the concept, and consulted with other managers within his network both inside and outside the company on the value of the approach. He was convinced it could produce major profit gains for his unit, as well as enhance productivity and quality. After more than a year of investigating the processes for implementing such an initiative and convincing management of the power of the idea, George got the green light from the top management at Baker Hughes INTEQ to be one of the first units to experiment with the SDWT concept. The SDWT project was launched in February 1997 using the nine teams in George’s unit. Shane, an internal consultant at BHI, assisted George in this effort and had oversight responsibility for three of the teams in the SDWT project. Shane had continually advanced through ten years of work in manufacturing and was now assigned to the production machine shop serving as an internal organizational development specialist to the machining operations group. After 15 months of implementation, George and Shane considered the project a resounding success (see Figure 1 for a timeline of the project's events). Following some initial organizational issues as the team learned self-responsibility, the team delivered exceptional performance and surpassed every anticipated goal. Now, in the memo George had just received, George and Shane were being asked by upper management to conduct a thorough after-action review of the initiative and produce solid evidence that the deployment of SDWTs had been a positive investment. The decision to be made by management whether to expand the project or cancel it was clear--and ominous. What evidence could George and Shane produce that would justify a continuation of the self-directed work team initiative?

Baker Hughes--Background and Prologue

Baker Hughes, a leader in oilfield services (2001 revenues, $5.38 billion), created value for oil and gas producers by providing advanced technology to find, develop, produce, and manage petroleum reservoirs, provides a broad range of products and services through its operating divisions. Each division specialized in a few segments of the industry to deploy and develop “best-in-class” products and services for drilling, formation evaluation, completion, and production. The firm’s emphasis was on practical, dependable solutions within the well bore that create value for its customers through reliability, performance, and data quality. Baker Hughes’s strategic plan for manufacturing was to outsource simple and mature parts to suppliers, while keeping complex new technology internal to the company. The firm’s reasons for this strategic decision were to manufacture better quality parts due to close process review and engineering support, design control, cost review, and overall flexibility to meet customers’ requirements. The strategic challenge presented to the INTEQ unit was to transform

Review copy for use of the Case Research Journal. Not for reproduction or distribution. January 2006. January 2006 Resubmission-- Radial Bearing Team -- 2

Figure 1 Timeline of Events Development of the Radial Bearing Team

Rewards announced George/ Shane Team 6 quantity re-elections debate

George SDWT Team finds Charles develops project Case all errors is interest in launched decision before QC fired team point approach

1995 July1996 Feb.1997 Mar May1997 Jun.1997 Jul.1997 Sept.1997 Dec. Feb. March1998 1996 1997 1997 1997 1997 1997 1997 1997 1998 1998

Begin Investigate SDWT inspection of Error-Free Customer team idea planning own parts & manufacturing breakfast period increase work Develop order management quantities support

Team 6 Machines first meeting repositioned; & elections measuring team meeting Meeting to discuss shop floor layout January 2006 Resubmission -- Radial Bearing Team -- 3

operations to meet an increasingly demanding operating environment where cost, quality, and delivery would be paramount. In migrating to SDWTs the focus of management was placed on how to meet these strategic objectives within the established corporate operating structure. They were permitted to change policy and procedures, but only within their area of operations. In preparation for the initiative, George and his team had involved selected members from the work groups in defining the overall scope of the project and its requirements. He also worked with upper management to secure their buy-in and endorsement for the project. For greater detail on the industry, firm, and machine shop structure, see Appendix 1. Figures 6 and 7 in Appendix 1 show the bearings that were manufactured and how they are placed in a down-hole mud motor. Appendix 3 is a Glossary for those unfamiliar with key terms in this case.

The Kick Off Meeting for the Self Directed Work Team—February 1997

“Are you ready?” George asked, looking at Shane. It was February 1997 and, after eight months of planning, the production machine shop unit of Baker Hughes INTEQ was about to launch an initiative to introduce self-directed work teams to the machine shop floor. “Let’s make this happen,” Shane responded, as he walked with George to the front of the break room in the manufacturing building at BHI’s Houston, Texas facility. George began the meeting by greeting the machinists. I’d like to welcome you all to the beginning of a journey. What we begin today will have a dramatic impact on how we conduct our business in the future. Recently, we conducted a market survey with our customers regarding our performance and their upcoming needs. The results of the customer survey told us that on-time delivery, quality, and the right quantity of our tools would be the difference for the future. We can’t work any harder than we are now. We will have to be efficient and work smarter. We are going to split up certain departments and be process- oriented. This starts with the machine shop and its support areas, especially Planning, Customer Service, and Engineering Support. Effective today, all thirty-four of you have been assigned to Self-Directed Work Teams (SDWTs), numbered 1 through 9. Each team has a certain product or process they will be responsible for. The Customer Service Department, Planning Department, Purchasing Department, and Manufacturing Engineering Departments have also been split up into Client Focus Teams (CFT) that will support and directly interface with the customer and SDWTs. In the past, these units have focused primarily on their own functions within a hierarchical structure. Now, they will be directly focused on providing support either to clients or to manufacturing groups. That’s us. They will begin to function much more as client- focused teams. This will improve communication, ownership, and give the machine shop the support we need.” [See Figure 2 for a depiction of the differences in the organizational structures.] January 2006 Resubmission-- Radial Bearing Team -- 4

Figure 2 – Traditional Hierarchical Structure vs. Client Focus Teams

Client Services Client Focus Team Department

Client Services Rep.

Planner Planning Manufacturing Manufacturing Engineer Department Engineering Dept.

Shop Foreman Radial Bearing Team ( 8 team members ) 30+ Machine Shop Personnel Machinist, Sr Machinist III Machinist II Machinist I

There were some general murmurs from the crowd as George continued. Let me use the radial bearing group as an example. In each SDWT, you will have five monitor positions: team coordinator, flow monitor, maintenance monitor, quality monitor, and safety monitor. These positions will be elected by your team and have a one-year term. Each monitor will have specific responsibilities that pertain to and affect your team. The team coordinator will receive a $0.25 per hour increase because of the human resource responsibilities that are associated with that position. The reason for having these positions is so decisions can and will be made at the source. In addition, all team monitors will receive training regarding their positions. Shane will be the facilitator for the radial bearing team and will help you go through the decision process. Bob will still be the shop foreman and assist with the training responsibilities. George then detailed the responsibilities for each of the monitor positions (see Appendix 2). There were some snickers of skepticism from the crowd. After all, management had talked about major changes before, but little happened. George continued, “As we go forward each team will identify tooling and measuring equipment that will be needed. Each team will generate and present a list of tooling needs to me. I want to inform you that all of the measuring equipment will have to be metric.” The crowd started to talk excitedly among themselves about the forthcoming change to metric measurement and how it would affect job performance. Raising his voice, George said,

Hold on! This makes sense because our sister facility in Germany makes the same parts that we do. Right now it is very inefficient, as Manufacturing Engineering has to continually switch drawings back and forth between English January 2006 Resubmission -- Radial Bearing Team -- 5

and Metric. By standardizing, we will be better off in the future. I know that all of these changes will take some time to digest and work through, but I am asking for your patience, cooperation, and expertise. In addition, each team will have to layout its work area and reconfigure the flow of work between machines. Some of the machines will be replaced because of age and the fact that they can’t be converted to the metric system. Are there any questions? One of the machinists asked, “Are you really going to spend the money to convert the machines and measuring equipment to metric? It seems like a waste of money.” George responded, For the past six months, some of you have been part of the sub-team that helped us identify what was needed. This change is a cost-effective improvement. By standardizing on the machine and measurement tooling, our cost will go down. In addition, the cost to reposition a machine on the shop floor is about $3,000; the payback is substantial, as the material movement of parts will be reduced by 40% for our monthly workload of 300 orders. Yes, we will spend the money and make the initial investment. “Are we really going to be allowed to make decisions pertaining to our area?” a machinist asked, glaring at Bob, the foreman. “Yes,” George responded. “It will be simple decisions in the beginning, and then as the teams mature, so will the responsibilities and rewards.” “What if this doesn’t work?” someone shouted from the back of the room. George raised his voice and very clearly said, “There is no going back - we must make this work - and failure is not an option. If you don’t want to be a part of the team concept, then I suggest you find somewhere else to work. Meeting dismissed!” There was a lot of grumbling and discussion from the machinists as they left the room. Some were excited about the changes; others thought things were just fine as they were; still others mulled over the question of “What’s in it for me?” while the skeptics grumbled about “why are we doing this anyway?”

ESTABLISHING THE RADIAL BEARING TEAM

Team Identity and Elections—February 1997

It was the radial bearing group’s first team meeting and emotions were running a little high. Shane surveyed the room -- eight machinists, all dressed in their work overalls, and very vocal. “This team thing is stupid,” said Bill, a machinist, as Shane walked through the door. “No, it’s not,” responded Charles, another machinist, “I’m going to be the new boss, and you’ll take orders from me.” “Okay, you guys, settle down,” instructed Shane. “First”, said Shane, “I believe it’s important that everyone introduce themselves since some of you have worked together before and others have not. In addition, I’m new to the machine shop and don’t know anyone.” [See Exhibit 1 for an overview of each team member]. As they went around the room introducing themselves, Shane got the feeling that this was a high-spirited group, and, if they could focus their energy positively, the team would be very successful. If not, disaster was almost certain. January 2006 Resubmission-- Radial Bearing Team -- 6

Charles, an induction welder with five years of experience, ran the bearing cast machine, a very specialized piece of equipment. Only he and Bob, the foreman, knew how to run it. Barry, a machinist, was new to the company and had only two years of experience. George hired him to run the Mazak Integrex 50, a complex turning and milling machine designed to use multiple cutting tools. He was slowly learning the controls but, overall, had the process down. Frank, machinist, with over 15 years in the company, could operate many pieces of equipment. He was a technical expert and a true craftsman on the Mazak Integrex 50, and hadn’t scrapped a part or received a DMR (Discrepant Material Report) in three years. Nigel, machinist, had over 10 years with the company and ran the highly sophisticated Mazak 60 on second shift in another area of the machine shop. His aging machine was one of the units being replaced. Having never made bearing parts before, he was looking forward to learning how to produce the new parts. A Mazak Integrex 50 was a step down, but he was excited about the change in pace. Within the machine shop there were two shifts, with a separate, two-person group on the second shift to run the Mazak M-5 and the hones and grinders. Arthur and Larry, machinists, both ran the Mazak M-5, a small, but versatile, turning lathe. Arthur had been running this type of machine for more than seven years and operated it on the day shift. Larry was new to the company and ran the machine on the night shift because there was a large demand for small-sized bearings and mud motors. Bob had counseled Larry twice in the last six months for scrapping parts and quality problems. Joe, machinist, with five years experience, and Bill, machinist on the night shift, with three years experience, worked a group of machines known as the Hones and Grinders. Both were skilled at their work. The two men could easily run four machines simultaneously on each shift. Lastly, Shane introduced himself. I have 10 years with the company in various training positions around the world and started with the company as an electronic technician. I have worked with groups and problem solving, but never before in a machine shop. Now, what this means to you is I won’t be telling you how to run your machines or questioning your daily business. However, you need to be honest with me regarding some of the process problems and occasionally help me out with the machine shop terms. He paused for a moment to let this sink in. “Per George’s instructions, we have a couple of things to decide in the next two hours regarding team name, team color, and the monitor positions. I’m going to help guide you through the process.” “Oh, let’s just get to the good stuff, like the twenty-five cents an hour,” piped Arthur. Shane ignored the comment and went on. “Let’s brainstorm possible team names first,” Shane said. The machinists responded with a wide variety of names from “The Best and Only,” “Excluders,” “Chip Cutters,” and the “Bearing Bears.” After some discussion among themselves, and because a fair amount of the team were hunters, they agreed on “Bearing Bears.”

Exhibit 1 Radial Bearing Team Machine Shop Supervisors & Members January 2006 Resubmission -- Radial Bearing Team -- 7

Name Title Years at BHI Core Job Functions 1 George2 Manager 27 Monitors safety, quality, delivery, and cost as it relates to personnel and parts. Bob Shop Foreman 18 Coordinates day-to-day activities, provides training. Shane Facilitator 10 Works with teams to improve processes. Charles Induction Welder 5 Operates Bearing Cast Machine (very specialized) Barry Machinist 2 Operates Mazak Integrex 50. Frank Machinist 15 Operates Mazak Integrex 50 and other complex machines. Arthur Machinist 7 Operates Mazak M-5, Mazak 60 Joe Machinist 6 Operates Hones & Grinders Nigel Machinist 10 Operates Mazak 60, Mazak Integrex 50

Night Shift Larry Machinist <1 Operates Mazak M-5, Mazak 60 Bill Machinist 3 Operates Hones & Grinders

1 All personnel work the day shift except Larry and Bill. 2 George and Shane have 4-year undergraduate business degrees from a local university. All machinists have 2- year technical degrees from a trade school or community college.

“What’s going to happen with this team color?” asked Barry. “I’ve worked at other places where they painted the machines different colors, including white, so anything that’s not clean will show up,” said Larry. The other machinists looked at each other to see if anyone had a preference. Shane went through the colors that the other teams had chosen, which were mostly the basic colors of red, blue, and black. Orange was off limits because it was used for safety purposes. They decided on tan because it was the favorite color of two team members, and some of the machines were already painted that color. Next, the team turned its attention to selecting people to fill the monitor positions. “Do you guys even remember what responsibilities each monitor position has from George’s presentation?” Shane inquired. They looked around at each other, mostly with blank stares. “Okay,” Shane continued, “let’s go through the team handbook and review each monitor position and its responsibilities.” (See Appendix 2 for these job description summaries). Once the positions were reviewed, Shane moved to the next step. “How do you guys want to go about this?” Shane asked. “Do you want open ballot, a show of hands, closed ballot, or have each member state why he wants that position?” It took the machinists a while to decide this. Shane figured the reason was because they had never been given this many choices at one time before. The team decided that each member would state why he wanted that position, and then a closed ballot would settle the vote. They started with the team coordinator position first. Charles stated that he wanted that position and thought that he could be a better leader than Bob because he had the years of seniority and experience. January 2006 Resubmission-- Radial Bearing Team -- 8

“Well, if that’s the criteria, then Frank should be the team coordinator,” said Nigel. “He has more years than any of us and is a true machinist. I nominate Frank.” Frank said that he had no problem with this and would run for the position. “I want to run for team coordinator also,” said Barry. “I want to learn so someday I can be a foreman.” No one else was nominated for the position, so the team voted. There were a couple of tie votes and the team was slowly getting frustrated as intra-team lines were being drawn. Finally, Frank spoke up. “Look, I’ll take the quality monitor position if everyone agrees that’s where my expertise lies anyway. This team coordinator position is going to be a hassle, and I don’t want to deal with it.” The team agreed and, citing Barry’s inexperience, they cast the majority of their votes for Charles. “If Barry wants to learn, let’s give him the flow monitor position so he can learn about the other machines and more about bearings,” suggested Nigel. The team agreed and then divided out the remaining positions for those who wanted them. Shane had slowly stepped out of the conversation as the machinists were discussing the advantages and disadvantages of each position and coming to an overall agreement. At the end of the meeting, the machinists seemed happy because they had been given input to the decision. Shane informed the bearing team that he would let George and Bob know what they had decided. Bob walked in as Shane was telling George about the team meeting. “How could you let that happen?” growled Bob at Shane. “Charles is lazy and knows nothing about running a team. It will be the end of this company.” As might be anticipated, Bob was not pleased with the move to SDWTs. As the shop foreman, Bob was losing significant authority over the team. In the future, the team would decide on overtime, order of production, and scheduling, among other significant tasks. Bob would retain hire/fire authority and disciplinary responsibility. “Patience, Bob,” responded George. “They made a decision and we need to honor it. We need to give them some time.” “Well, let’s see the other bad decisions they made,” snorted Bob. Shane reviewed the other team decisions: Team Name – Bearing Bears; Team Color – Tan; Team Coordinator – Charles; Flow Monitor – Barry; Quality Monitor – Frank; Maintenance Monitor – Nigel; Safety Monitor – Arthur. Not all members of the team received formal roles and additional job responsibilities under the structure of the SDWT. January 2006 Resubmission -- Radial Bearing Team -- 9

Layout of the Shop Floor—February 1997

Two weeks had gone by since the initial meeting, and the machine shop was slowly getting the message that George was really serious about the changes. Every time he was questioned about the SDWT initiative and whether management was really committed to the changes, his response was always the same, “there is no going back.” Now, the team had convened to discuss the arrangement of machines in the shop. Before discussing the layout of the shop floor, Frank, as the quality monitor, took the opportunity to introduce the team to the output and quality measurements for bearing parts. He put the overhead in Figure 3 on the projector and began.

Figure 3 – Base-Line Data Number of DMRs / Parts per Day

SPT '96 OCT '96 NOV '96 DEC '96 JAN '97 QC 11 12 8 3 13 CC 0 0 0 0 0 TOTAL 11 12 8 3 13

Parts Made per Day 7 6 9 9 5 No. of Working Days 21 23 21 22 23

s 10 R M D

e 6 b m u

0 SPT '96 OCT '96 NOV '96 DEC '96 JAN '97 Total per Month

QC is the number of defects found by the Quality Control QC CC Department. CC is the number of customer complaints. DMR (Discrepant Material Report) is a report that highlights the dimension(s) of a machined part that is not per print and, consequently, will not perform to specification. One DMR is written for each discrepant part.

“Prior to forming the radial bearing team, the machine shop produced an average of 5 parts per day in January and received 13 Discrepant Material Reports (DMRs) from the plant’s Quality Control Department," stated Frank, citing the report. January 2006 Resubmission-- Radial Bearing Team -- 10

“Wait a second,” said Barry. “I’ll admit two of those were mine. But, I found them, QC shouldn’t get credit for that.” Prior to May 1997 the machine shop had no formal responsibility to inspect their own parts before sending them to Quality Control. Subsequently, under the new process, they did assume these inspection responsibilities. Frank agreed. “We need to distinguish who finds what error.” Shane said that he would take the matter up with George and the Quality Control Department, but today’s discussion really needed to focus on floor layout. Later, the format of the report was modified to show those errors identified by the SDWT and those identified by QC (see Figure 4). Shane then led a discussion of how the floor layout should be designed to be most efficient. Although they tried, the team members could not describe the overall process for machining and assembling radial bearings. On short notice Shane invited Jim, one of the manufacturing engineers from the Client-Focused Team, to join the group. As Jim, assisted by the team, described how work flowed through the shop, Shane charted the process, marking down who operated which machine, as shown in Figure 4. “What is that for?” asked Barry, gesturing toward Shane’s sketch of the flowchart. “Well, if you’re going to be the Flow Monitor you need to know the overall process and who can run what machines,” responded Shane. “If you don’t know, then how are you going to manage the flow of parts? Is there anything that I’m missing?” Shane asked the group. “I can run the Hones,” responded Charles. Shane added his name on the chart. “Well, I don’t like to admit this, but I can run the Mazak M-5,” responded Barry. Some of the other machinists looked at him, surprised by the revelation. “I ran that type of machine at a previous company. I never told Bob because I don’t like to do it. But . . . if it makes the team successful, then I’ll run it.” Frank also acknowledged that the control systems were similar to his machine and that he could run the Mazak M-5 with no problem. The rest of the meeting focused on the most efficient use of space and the minimal amount of part movement as the group decided how the machines were going to be placed in the radial bearing team area. It was determined that three machines (2 Mazak Integrex 50s and the Titan Grinder) needed to be moved in order to achieve the desired layout. As a result of these discussions regarding shop floor layout, several areas for process improvements were identified. Over the next several months, the team initiated numerous technical changes on machine set ups, began cross training team members to assure continuous machine coverage, and reworked the manufacturing schedule for better part flow.

Measuring Equipment—February 1997

It was the end of February and the machines were being repositioned as Shane moved on to the next step with the bearing team. “Ok, I know you guys aren’t crazy about this metric conversion, but it is part of the deal. I need everyone to list the needed measuring equipment for each machine, and remember – all personal measuring equipment will need to go home in two weeks,” Shane warned. Some machine shops provided measuring equipment for their January 2006 Resubmission -- Radial Bearing Team -- 11

Figure 4 – Bearing Product Work Flows

Process Flow – Female Bearing (Upper & Lower) Process Flow – Male Bearing (Upper & Lower)

PROCESS MACHINE(S) OPERATORS PROCESS MACHINE(S) OPERATORS

Bar Stock Pulled Saw WAREHOUSE CUT & DRILL TEAM from Steel Yard (Parts Cut)

MAZAK INTEGREX 50 SMALL BEARINGS LARGE BEARINGS MAZAK INTEGREX 50 - Franklin Saw - Barry PTA (PTA Team) Machine ID - Nigel (Parts Cut) OD Rough Grind OD - Some Parts (Some Deep CUT & DRILL TEAM MAZAK 60 Final Machine Final Machine MAZAK 60 Holed) Note: Possibility of - Arthur Mazak M-5 to Perform - Larry Function

MAZAK M-5 Inspect Part QUALITY CONTROL Core Blanking - Franklin (Blanking ID) MAZAK M-5 - Barry - Arthur - Larry

Phosphate PHOSPHATE AREA Casting BEARING CAST (Carbides & BEARING CAST Fusion) - Charles

Warehouse HONES Hones - Joe HONES - Charles (Hone ID) - Bill Process Flow – Combined Assembly (Male & Female)

MAZAK 60 Final Machine MAZAK 60 - Arthur PROCESS MACHINE(S) OPERATORS (Turn OD) - Larry (Threading) (Slots, Holes) MAZAK INTEGREX 50 Male & Female (Grooves) MAZAK INTEGREX 50 - Franklin WAREHOUSE - Barry Bearings Pulled - Nigel From Stock

Milling Operations MILL TEAM (Some Parts) Grind TITAN GRINDER - Joe Male Bearing TITAN GRINDER to Fit Female - Bill - Charles

Phosphate PHOSPHATE AREA

Inspect Part QUALITY CONTROL

Final Inspection QUALITY CONTROL & WAREHOUSE Warehouse

Warehouse January 2006 Resubmission-- Radial Bearing Team -- 12 machinists; others required the machinist to supply it. Historically, at BHI, the machinists supplied their own measuring tools. It took a while, but a list of over 70 required measuring pieces was created. It included outside diameter (O.D.) micrometer sets, blade micrometer sets, multiple bore gauges, and a dial indicator for each machine. Frank estimated the cost to be around $22,000. “How are we going to identify our stuff so the other teams don’t take it?” asked Nigel. “I have an idea,” murmured Frank, “but you have to promise not to laugh.” He had the team’s complete attention and continued. “When you guys don’t return my measuring equipment, the way that I find it is each piece has a small red band. That red band is from one of my wife’s old finger nail polish bottles.” There were some giggles, but everyone respected the idea. “If we could get some high-quality paint from the maintenance department, all of our equipment could be painted tan. That way none of the other teams could remove it and we could very easily spot it in the shop.” Shane stated that he would check with the maintenance department. If this painting idea were possible, he would get George to approve the funding to hire a special painting crew. Later that week, as the measuring equipment started to arrive from the supplier, Shane informed the bearing team that Sherwin Williams made a Polane B-Polyurethane Enamel Paint and that a local painting shop was skilled enough to do the job. The bearing team also identified the thread and ring gauges from the tool supply room that were used in their area. Bob purchased a special toolbox for the ring and thread gauges so they could be placed in the Bearing Team’s area. He also told the team not to lose the gauges, as the tool supply room had never done so in the past.

In May, George agreed that the radial bearing team could begin inspecting their own parts, with a sampling done by the Quality Control Department to ensure process control. He liked the idea of the team inspecting their parts as this promoted ownership and reduced inspection queue time.

RADIAL BEARING TEAM PROBLEMS

The Re-Election—June 1997

Once the Bearing Bears were launched, Shane had turned his attention to ramping up the other two teams for which he was responsible. It was early June and had been two months since Shane’s last contact with the Bearing Bears. As he walked on to the shop floor that morning, Frank approached. “Shane, we have problems,” said Frank. “Our team is ready to revolt.” “Well, last thing I knew, things were heading in the right direction,” responded Shane. “All the machines are in place, and all the measuring equipment is in, painted, and being used by the team. The last measurement chart I saw, which was May, your team was finding 50% of any errors and the parts per day had increased to around 23 or so. What’s going on?” As Frank explained it to Shane, Charles wasn’t doing any work; all he did was walk around with a clipboard and tell the rest of the team what to do. In this regard he was emulating Bob’s supervisory style, but he wasn’t getting any of his own work done. He didn’t even know how the machines worked. The rest of the team wanted to vote him out as team coordinator. In addition, Charles made a part wrong, missed his error, and Quality Control missed it as well. The customer got a bad part and wrote a complaint letter to the client focus team, which was the January 2006 Resubmission -- Radial Bearing Team -- 13 group responsible for managing relationships with customers and assuring their satisfaction. In fact, George was on the phone with the customer as Shane entered the work area. “Well, schedule a meeting for tomorrow and we’ll discuss what to do next,” instructed Shane. “I’ll get the details from George.” The next day the team met. “You are an idiot and don’t have a clue!” bellowed Nigel at Charles. “I’m tired of you giving orders and threatening to write me up for being 30 seconds late!” Joe added loudly. Shane couldn’t believe what was going on as he walked into the room and stopped the arguing. Shane tried to start with something positive. “I know that what we’re doing isn’t easy, but your Radial Bearing Team has done a lot of positive things in the last couple of months. Would you guys list a couple?” The machinists listed the measuring equipment, machinery placement, improved quality, and increased quantity. They even listed a couple of smaller improvements that the team had done on its own. Shane then started to tackle the issue at hand. “It’s my understanding that your team has tried out the monitor positions with the existing people and now you want to make some changes?” “Yes, Charles is an idiot,” piped Arthur. Shane shot him an unappreciative glare. Everyone in the team nodded ‘yes’ to Shane’s question. Frank spoke up, “We have been discussing for the last couple of weeks that we elected a person for a job, but not necessarily the best person for each monitor job.” “Ok, with that said, how do we want to proceed?” inquired Shane. The team responded that they wanted to re-nominate and re-vote on each monitor position. Shane conducted the voting per their wishes. He did notice that only one person was nominated for each position and the voting results for each position were unanimous. The new roster of assignments was: Team Coordinator – Barry; Flow Monitor – Frank; Quality Monitor – Joe; Maintenance Monitor – Nigel; Safety Monitor – Arthur. Arthur pulled Shane aside later in the day and explained that since Frank had the most experience and technical expertise, the team decided that he should be the flow monitor and direct how the work orders went through the team. Barry was chosen as team coordinator because he was very knowledgeable, capable, and easy-going; Charles really wanted the team coordinator position, and lobbied for it, but the team elected Barry. Frank, the most experienced member of the team, did not want the coordinator position. The team wanted their most experienced person to handle scheduling, and that would be Frank’s job as flow monitor. Finally, Joe wanted to learn something new and saw the quality monitor position as his chance to do so.

The Quantity Debate—June 1997

After the radial bearing team had its big re-election fight, Shane started checking in at least once every two weeks with the three teams for which he had responsibility. He hoped that with more frequent monitoring some of these problems could be headed off early before they exploded. Three weeks after the second election, Shane had a message to deliver. George wanted the teams to know that if any of the SDWTs found all their errors for three straight months, he January 2006 Resubmission-- Radial Bearing Team -- 14 would reward that team with some special team shirts and hats. As Shane walked through the radial bearing team area during break-time, he noticed Barry at Arthur’s Mazak M-5 machine. Barry explained that the bearing team had decided to rotate their breaks; that way the work could continue and the machines wouldn’t stop running. “George told us the demand for radial bearings was still increasing, and if we hit 42 parts per day he would serve us a customer breakfast,” Barry reported to Shane. A customer breakfast was a company tradition. Usually, when a customer came in for the whole day, they were served a catered meal with all the finery of a first-class restaurant -- white linens, candles, and china. This format had also been used for other special occasions, but was perceived by the shop floor as a “management-only” ritual. Later that week, Shane was summoned to George’s office. George was irate. “When they make major changes like that, you have to let me know,” he shouted. “What change in particular are you talking about?” Shane asked calmly. “The work order quantity of the radial bearing team. I had that set at five pieces per order for the last year. We are behind. By keeping the quantity around five, each customer gets some of what they need. In addition, we earn a 10% profit for each radial bearing and they sell for $2,800 each. If we don’t maintain $40,000 profit each month, we’ll all lose our jobs!” On its own decision, the team had changed the work order quantity from five to fifteen to increase production efficiencies. Shane remembered that the bearing team had discussed the quantity issue in some detail at a previous team meeting. The issue was that the team was spending more time setting up the machine to run the parts than actually running them. Often, it would take three to four hours to fully set up a machine to handle a parts production run that might only take an hour. By changing the work order quantity the team was able to make longer production runs and recover some of the machine set up time. George continued, “I want you to go out there and have them change that back, today!” Shane picked his words carefully, “George, I can’t do that.” “Then I will,” yelled George. Shane matched the tone so George was certain to understand this was serious. “Look, you go out there and change that quantity back and you’ll have destroyed everything that we’ve done in the last six months. You wanted improvements, and they’re doing what you requested of them. Do you really want to stop what you have started?” George countered, “They weren’t supposed to go this far; that wasn’t in their job descriptions.” “True,” Shane replied, “but we never highlighted work order quantity as a boundary. Let them try this for two weeks, and if it doesn’t work, then I’ll talk to them about changing the quantity back.” George grumbled, “We’ll see where this goes. Two weeks.” As a result of the change in the work order quantity, over the next six months the team was able to move from being several hundred parts behind to being six weeks ahead in its production schedule. This resulted in customer orders being filled completely, rather than shipping partially filled orders, as had been the case under they previous work order quantity. George never commented about the team's decision again. January 2006 Resubmission -- Radial Bearing Team -- 15

The Team Succeeds—November 1997

“We did it. We did it!” Barry and Arthur hollered excitedly. Shane had just entered the machine shop. “Did what?” Shane asked. “We found all our errors for three months straight, and we did it before any of the other teams,” Barry replied, proudly. It was November 1997, six months after the work order quantity issue arose. Production volumes had increased dramatically in June, the month after the order quantity was changed, and the new level of production had been sustained. “Well, let’s take a look at that chart,” said Shane. [The chart is displayed as Figure 5 and reflects that the SDWT found all of their errors in the months September to November 1997 (see the lined bars)].

Figure 5 – Number of DMRs / Parts per Day – Bearing Team DEC '96 JAN '97 FEB '97 MAR '97 APR '97 MAY '97 JUN '97 JUL '97 AUG '97 SPT '97 OCT '97 NOV '97 SDWT 0 0 0 0 0 4 5 5 9 12 16 16 QC 3 13 13 20 17 4 4 1 3 0 0 0 CC 0 0 0 0 0 1 0 0 0 0 0 0 TOTAL 3 13 13 20 17 9 9 6 12 12 16 16

Parts Made per Day 9 5 19 20 16 23 30 24 31 29 30 31

No. of Days Worked 22 23 20 21 22 22 21 23 21 22 23 20

25 Self-Directed Work Self-Inspection Teams Formed Begins 20 s R

M 15 D

r 10 e b m

u 5 N 0 DEC '96 JAN '97 FEB '97 MAR '97 APR '97 MAY '97 JUN '97 JUL '97 AUG '97 SPT '97 OCT '97 NOV '97 Total per Month

SDWT is the number of defects found by the team. QC is the number of defects found by the Quality SDWT QC CC Control Department. CC is the number of customer complaints.

DMR (Discrepant Material Report) is a report that highlights the dimension(s) of a machined part that is not per print and, consequently, will not perform to specification. One DMR is written for each discrepant part.

“Well, congratulations. It looks like significant cost savings and efficiency have been gained as you have identified problems and resolved them. I have also noticed that you have increased your daily production of bearings,” responded Shane. “Yes, this is true. We met on our own and made some more tooling changes to reduce the setup time. We are able to produce at least five parts more per day using the new process,” Barry said, gleaming. At the team’s next meeting, in December, George thanked the team for their increased production, and handed out tan shirts and hats to recognize their accomplishment in finding all of January 2006 Resubmission-- Radial Bearing Team -- 16 their errors for three straight months. They read “The Bearing Bears” and displayed the company logo. The hats even had military-style gold trim on their brims. “These will be the envy of the machine shop,” one of the machinists predicted. “Wear them proudly,” George encouraged.

Charles is Dismissed—December 1997

A couple of days after the December meeting, Shane was on the shop floor. Having heard from George that Charles was dismissed, Shane asked Barry what happened, seeking to learn the perspective of the team on this latest development. “Well, Bob was walking through the shop and caught Charles with an English Dial Indicator. It wasn’t calibrated and wasn’t part of the system, so Bob wrote him up and got rid of him,” Barry explained. “What is the big deal regarding these indicators?” Shane asked. “I know they’re the cheapest piece of equipment in this shop at $40.” “The deal is, it’s the most basic piece of measuring equipment we use, but it serves as the main reference for the whole part while it’s on the machine. If the operator can’t read or understand the indicator and the part is setup even one millimeter off, the part is scrap,” answered Frank as he walked up to Shane and Barry. “The metric indicators operate and read completely different. I’ve had to re-train myself and most of the bearing team members. As shop foreman, Bob had written up Charles multiple times for lateness and the use of non-metric measuring devices. Bob made him the example.” The cost of failure due to poor measurement went far beyond the cost of the scrapped part. Once a poorly machined part was released to the customer in the field, the consequences escalated substantially. In this small, tightly knit industry, bad parts had a direct impact on company reputation and competitiveness. It also resulted in very expensive rebates to the customer to cover the cost of lost production time in drilling operations. “Bob did tell me that he would get us another individual and train him for our team,” Barry said, trying to sound hopeful. “In the meantime, Bob said that he would run the Bearing Cast Machine to help us out. Bob also said his audit with Nigel went well, as the Bearing Team hasn’t lost or damaged any of its measuring equipment or gauges since the team was formed ten months ago. Bob commented to Nigel that he thought he would never see the day. We really surprised him,” Barry said, smiling.

The Customer Breakfast—February 1998

Five a.m. was a little early in the day for Shane. “The machine shop shift starts at 6 a.m.,” he grumbled, but he had received an invitation and felt it was important to attend. It was two months after Charles’ dismissal, and the team had continued to perform superbly. In fact, the breakfast celebrating the team’s success came almost one year after the team was formed. During that period, their production had increased from five parts per day under the old hierarchical form of organization and job design to 42 parts per day under the restructured SDWTs. Additionally, quality had increased and the team had essentially eradicated scrapped parts. Shane reviewed the notes he had collected about the team's performance in preparation for making some comments following the breakfast. Before the project was launched, the January 2006 Resubmission -- Radial Bearing Team -- 17 average monthly profit of the machine shop in the fourth quarter 1996 had been $46,853. For the first ten months of the project, monthly profit had grown from $106,400 in February 1997 to $173,600 in November 1997, an average of $152,292 per month. And all of this was achieved for a direct investment of $22,000 for the new metric measuring tools and $9,000 for reorganizing the location of machines on the floor of the shop. "Wow," thought Shane. "The ROI on this must be blowing the socks off of management!" The cafe was all decked out for a traditional customer breakfast. The tables were covered with white linens, the china was out, and the candles were lit. Seated at the tables were both shifts of the radial bearing team, all dressed in shop overalls; everyone was happy and talking excitedly. “This is quite the sight,” Shane thought to himself. The Bearing Bears had finally hit the 42 parts per day and things were going well. “There must be something to this self-directed work team idea after all.”

The Next Challenge – March 1998

George was clearly anxious and irritated as he entered Shane’s office and stated, “I’ve received a memo from management that they are initiating a full-scale cost and performance review of all processes that influence production quality and customer satisfaction, and they want to begin with a thorough review of the radial bearing team. We have spent a lot of money recently on equipment and reorganizing the shop floor, and they want to make sure the investments in self-directed work teams are paying off. We have until the end of the month to conduct an after-action review and provide full justification for the project. Shane, what can we pull together to show these 'bean counters' that the SDWT project has really improved the performance of the radial bearing team?" January 2006 Resubmission-- Radial Bearing Team -- 18

APPENDIX 1

BACKGROUND ON INDUSTRY, FIRM, AND MACHINE SHOP STRUCTURE

The Oilfield Service Industry

The oil industry is a cyclical and very unpredictable market to operate in as the Organization of Oil Exporting Countries (OPEC), non-cartel countries (Russia, Venezuela), political events, environmental factors, and the weather influence the forces of supply and demand. This leads to “boom or bust” cycles as the industry expands or contracts based on the pricing of oil and natural gas. Oilfield service companies operate in this market and provide down-hole guidance systems and specialized equipment to large multinational oil companies such as Shell Oil, ExxonMobil, and ChevronTexaco.

Baker Hughes INTEQ

Baker Hughes INTEQ is the division that manufactures and operates advanced drilling technologies and systems that deliver efficient and precise well placement. The drilling systems must operate in well profiles that can be 4 miles deep underground and can extend 2 miles horizontally. The environment for these systems is very harsh; tools must operate under extreme temperatures (up to 180º Celsius), endure harsh vibration and stresses (up to 20G RMS), and intense pressure (exceeding 20,000 PSI). Only a select group of other industries, such as aerospace and automobile production, must also deal with extreme conditions that can crush, melt, rupture, or tear apart electronic or mechanical assemblies, thus causing catastrophic failure. Baker Hughes INTEQ is part of the Oilfield Operations Group that typically exceeds $1 Billion in revenue per quarter; revenues for Baker Hughes, Inc. were $5.38 Billion in 2001. Drilling Motors have average day rental rates of $17,000, but final pricing depends on application, type of motor, and contractual factors. The average cost to operate a land drilling rig is $50,000 per day, while some offshore rigs can exceed $250,000 per day.

Down-Hole Mud Motor

When drilling, bits are exposed to extreme temperatures that can harm the bit. Drilling mud is used to cool the bit and remove the cuttings from the borehole. Drilling mud is a clay and water mixture that circulates down through the tool, exits out the drill bit at high velocity, and flows up to the surface. At the surface the drilling mud is screened, thus removing the cuttings, and re-pumped back into the tool. The basic function of drilling mud is to carry formation cuttings to the surface and to prevent the formation wall from collapsing. Companies also use drilling mud because as the mud flows through the drill bit, it cleans the teeth, the drilling mud cools the drill bit and tool from the heat generated by the drilling friction, and the drilling mud also helps to control down-hole pressures which can cause an explosion of the rig (blowout). A down-hole mud motor (Figure 6) is one of many pieces of equipment an oilfield services company can use to drill a well bore. It is used to convert energy from the mud column to torque at the drill bit. By adjusting the mud pressure, flow, and weight on bit, a directional driller can control the location of the hole while increasing the penetration rate. January 2006 Resubmission -- Radial Bearing Team -- 19

Figure 6 – Down-Hole Mud Motor

Drill Bit Bearing Housing Titanium Flex Shaft Rotor Catching Device

Rotor Stator

A down-hole mud motor is comprised of three main components (Drive Sub, Flex Shaft, and Bearing Assembly) as shown in Figure 7. The Radial Bearing Team makes the Male and Female Bearings (each has an Upper and Lower Section) that then are assembled to make up the Bearing Assembly. Dimensional quality and precision machining is important due to the harsh operating environment. The assembly has multiple parts and manufacturing tolerances of .001" in some areas. A piece of paper has the thickness of .003".

Figure 7 – Components of a Mud Motor

Male / Female Bearing

Machine Shops

A traditional machine shop operates within a hierarchical framework. The shop foreman supervises the overall manufacturing process, ensuring performance standards are maintained and delivery requirements of the customers are met. This position has many duties:

 Exercises authority to make decisions on hiring and terminating employees  Creates and maintains the vacation schedules of the machinists  Approves all tooling and equipment purchases  Approves daily timesheets, approves overtime, and monitors break/lunch schedules January 2006 Resubmission-- Radial Bearing Team -- 20

 Assigns the priority of work orders based on input from the Planning Department  Assigns machinists and machines to work orders with input from the Manufacturing Engineering Department  Oversees the safety and quality performance of the machine shop with input from the Safety and Quality Control Department  Counsels and disciplines machinists regarding their performance.

This position is very important to the overall work flow and day-to-day coordination of people, resources, and material. The function of the machinist is to safely operate and monitor the machine, cut the part to the print, inspect the parts, and perform some basic maintenance to the machine such as cleaning. The machinist is ultimately responsible for the quality of the part and quantity of output. Machinists that continually get Discrepant Material Reports (DMRs) from the Quality Control Department or can’t keep to the labor standards are counseled, trained, and if the situation doesn’t improve, terminated. All machine shops have two different types of tooling: 1) machine tooling (fixtures, boring bars, cutting inserts) which are used by the machine to cut the parts, and 2) inspection tooling (calipers, micrometers, pin gauges) which are used by the machinist or inspector to measure the part within the needed tolerances. In traditional machine shops, the machinists are required to purchase their own toolbox and inspection equipment. Measuring equipment is not cheap – the most basic pieces (0-6" digital caliper and 0-6" O.D. micrometer set) is priced around $1,200. Thread Gauges and Ring Gauges are special fixtures usually kept in a central tool supply room to be checked out by the machinist or issued with the job. After a certain number of uses or a 6-month time period (whichever comes first), thread gauges and ring gauges are given to the Quality Control Department so they can be cleaned and accuracy verified. As a part of the team transition, the firm decided that all personal equipment would be removed because of different models and level of precision. The teams were responsible for identifying needed equipment that would be purchased and calibrated by the company. January 2006 Resubmission -- Radial Bearing Team -- 21

APPENDIX 2

RADIAL BEARING TEAM JOB DESCRIPTION SUMMARIES

Team Coordinator The principal function is to coordinate the team’s resources to maximize team output. Schedules vacations, breaks, and lunch. Manages absences. Calls and leads team meetings. Recommends training, and reviews team productivity measures. Monitors team adherence to policies and procedures. Locates expertise and resources, when required, on behalf on the team. Flow Monitor The principal function is to monitor the team’s performance related to cycle time and on- time delivery. Informs team members of needed improvements. Schedules daily work, expedites rush orders, and reviews work order completion. Interface with the related Manufacturing Focus Team for priorities in scheduling, and conduct shortage reviews and part expediting. Quality Monitor The principal function is to monitor the team’s adherence to quality requirements. Performs monthly audits, and reviews team members’ quality measurements performance. Maintains master list of calibrated equipment. Responsible to ensure all team equipment is calibrated on time and is in working order. Maintenance Monitor The principal function is to monitor and schedule the equipment maintenance activities. Ensures team members perform the required list of operations and duties that apply to the equipment in their area, and arrange for preventive maintenance or repair of machines with Maintenance Department. Responsible for requisitioning and maintaining stock levels in team cabinets for all floor stock, consumable suppliers, and office supplies, and handles purchases up to $500. Performs a quarterly inventory of calibrated equipment. Safety Monitor The principal function is to promote safety and housekeeping awareness within the team by monitoring for unsafe acts and conditions. Ensures team members attend required safety training courses. Leads monthly team safety meeting, and performs all monthly safety and housekeeping audits. Resolves deficiencies to prevent re-occurrence on unsafe acts and conditions. Serves as the team’s liaison with Health, Safety, and Environment Department. January 2006 Resubmission-- Radial Bearing Team -- 22

APPENDIX 3

GLOSSARY

CC – customer complaint received when the piece of equipment or service provided does not meet customer expectations.

Digital Caliper – a piece of measuring equipment used for measuring the diameter of parts to a specific tolerance. This is a general use piece of measuring equipment that is useful for inspecting parts and for the setup of machines.

DMR (Discrepant Material Report) – a report that highlights the dimension(s) of a machined part that is not per print and, consequently, will not perform to specification. One DMR is written for each discrepant part.

Micrometer Set – precision pieces of measuring equipment used for measuring the outside diameter of parts in 1-inch increments, and are capable of measuring to the .001".

Mud Motor – a piece of directional drilling equipment that is used to convert energy from the mud column to torque at the drill bit.

Pin Gauges – precision pieces of measuring equipment used for measuring hole size. QC – Quality Control: a group of individuals that are trained and certified to inspect mechanical parts.

Ring Gauges – an inspection instrument used to determine if threads external to the part are machined correctly.

SDWT (Self-Direct Work Team) – a group of individuals that makes daily decisions regarding work assignments, training, equipment, and certain expenditures as it relates to their work area.

Thread Gauges – an inspection instrument used to determine if threads internal to the part are machined correctly.

Mazak Slant Turn 60 – a super heavy-duty two-axis cutting lathe used for high cutting accuracy and large parts (6.5 feet long by 29 inches diameter).

Mazak Integrex 50 – a high-speed, high-accuracy turning and milling machine used to complete complex work pieces with a single setup.

Mazak M-5 – A flatbed lathe used for precision cutting applications on small to mid-size parts.

Meeting to Team 6 Discuss Machines First Meeting Shop Floor Repositioned & Elections Layout