A manufacturing business is under pressure. Prices in its market are falling, a larger competitor is undercutting it, rework and scrap are eating the margin, deliveries are late and overtime is high. The board or the owner wants costs down quickly. The most visible lever is headcount: wages are the biggest controllable cost, and a reduction shows up in next month’s accounts.
Cutting people can be necessary, and sometimes it is the only responsible choice. But as a first response to an operation in trouble, it often makes things worse. The people who leave take knowledge with them. Those who stay become cautious, protect their jobs and stop suggesting improvements that might eliminate their own roles. The underlying waste, defects, delays and instability remain, now spread across fewer people. Within a year the business may be smaller without being healthier.
The alternative is an operational turnaround that improves the way work is done, removes waste and defects, and redeploys the freed capacity into growth, insourcing or natural attrition rather than redundancy. This article sets out a practical sequence: stabilise and protect customers, measure honestly, find the vital few problems, build a structure for improvement, prioritise ruthlessly, improve in the right order and decide in advance what happens to the capacity you free. It is general information. Where workforce changes are considered, employment obligations under the Fair Work Act and applicable awards and agreements apply, and advice is recommended.
Why a no-redundancy commitment can pay for itself
Improvement depends on the people who do the work. They know where time is lost, which steps are pointless and which problems recur. If improvement is likely to cost them their jobs, they have every reason to keep that knowledge to themselves.
A clear commitment that nobody will lose their job as a result of improvement changes that. It does not promise that the business will never reduce staff for other reasons, such as a collapse in demand. It promises that people who help improve the process will not be made redundant because of what they found. Businesses that make and keep this commitment usually find that participation rises sharply.
The commitment must be matched by a plan for the freed capacity. Options include absorbing growth without hiring, bringing outsourced work back in-house, staffing improvement teams, cross-training, reducing overtime and temporary labour first, and allowing natural attrition to reduce numbers over time.
Step 1: Name the problem in terms everyone understands
People commit to change when they understand why it is necessary. Explain the economic situation honestly: what is happening in the market, what it means for prices and margins, and what improvement is needed to secure the business. A specific target, such as reducing the cost of each product by a set percentage over a year, is more motivating than a general call to improve.
Break the target down. Map the cost of the product by category, such as materials, labour, overhead, consumables and freight, and set different targets for each according to what is realistically controllable. The largest cost category is not always the biggest opportunity; smaller categories often hide more waste.
Step 2: Stabilise and protect customers first
When an operation is in trouble, customers are usually already feeling it. Before any long improvement programme:
- Contain current quality problems so defective product stops reaching customers.
- Find the cause of urgent, one-off failures rather than repeatedly patching them.
- Communicate honestly with key customers about what is being done.
- Stop the most expensive leaks, such as premium freight caused by lateness, or rework on a single recurring defect.
Customer issues come ahead of internal process issues. A business that improves its internal flow while customers continue to receive defects can lose the customers before the improvements arrive.
Step 3: Ask everyone what is broken
Bring together operators, team leaders, maintenance, engineering, planning, quality and administration, and ask a simple question: what gets in the way of doing good work here? Record everything without filtering or defending. In a struggling operation, this usually produces dozens of issues within an hour.
Group the issues to make sense of them. Common groups are:
- Measurement: nobody can see yields, defects or output in time to act.
- Improvement system: ideas exist but there is no way to capture, test and implement them.
- Process: specific technical problems in equipment, methods, materials and flow.
- People: training, team leadership, clarity of roles and support.
The exercise has two benefits. It surfaces problems management could not see, and it signals that this turnaround will be done with people rather than to them.
Step 4: Measure honestly and quickly
Many struggling operations have plenty of reports and little useful information. Start simple:
- Collect data where the work happens: defects by type and station, output against plan, downtime and its causes.
- Use the same data for daily problem solving and for management reporting, so there is one version of the truth.
- Trend the key measures against targets, weekly at least.
- Show them where people work, on boards or screens.
A handful of measures is enough to start: quality (such as defect or rework rate), delivery (such as on-time performance), cost (such as labour hours per unit or scrap cost) and safety.
Step 5: Find the vital few
When problems seem to be everywhere, the data usually show that a small number cause most of the loss. Pareto analysis, ranking defect types or loss categories from largest to smallest with a cumulative total, reveals them. It is common to find that a few defect types account for most rework, or that one process step causes most downtime.
Focus the first improvement effort on these vital few. Fixing three problems that cause most of the loss does more than chipping away at forty.
Step 6: Build a structure before launching projects
Enthusiasm without structure fades. Before launching improvement projects, set up a simple governance model:
- A leader who owns the turnaround, sets direction, supports teams and reviews progress.
- A steering group that sets priorities, allocates resources, removes obstacles and meets regularly.
- Improvement teams of people who do the work, each focused on a specific problem.
- Support from engineering, maintenance, quality and finance, available to the teams.
- A facilitator or coach, internal or external, who trains teams in methods and keeps them moving.
Every improvement team needs a clear objective, a way to measure progress, protected time rather than work squeezed in around normal duties, a timescale, the right tools and training, access to support functions, recognition for success and clarity about whether capital is available.
Step 7: Prioritise by impact and difficulty
With more ideas than capacity, a simple impact and difficulty matrix helps. Plot each improvement idea by its expected impact on the main measures and by how difficult it is to implement.
| Low difficulty | High difficulty | |
|---|---|---|
| High impact | Do now: quick wins that build momentum | Plan carefully: major projects with resources and sponsors |
| Low impact | Do if easy, or delegate to local teams | Defer or drop |
The matrix turns arguments into a shared conversation. Early quick wins matter: they free capacity, build credibility and show that suggestions lead to action.
Step 8: Improve in the right order
A useful sequence for improving an operation, from foundation to last resort:
- Reduce defects and waste continually. Root-cause analysis of significant defects, containment for anything not yet fixed and correction based on data. Everything else rests on a stable process.
- Standardise and replicate what works. Once a process performs well, document it, train people in it and apply it to similar lines and products.
- Remove activities that add no value: steps the customer would not pay for, such as duplicated checks, unnecessary handling and waiting.
- Automate stable, low-risk steps. Automation applied to a stable, understood process multiplies its benefit; applied to an unstable one, it produces defects faster.
- Invest in new process technology only after the existing process has been improved.
The order matters because capital spent on new equipment cannot fix instability, defects or waste in the surrounding process, and it is the hardest step to reverse.
Map the flow, then fix the waiting
In most operations, a product spends far more time waiting than being worked on. Mapping the flow of one product family from order to dispatch, and recording the time spent waiting between steps, usually shows that the biggest gains come from removing queues, batch delays and handoffs rather than speeding up individual machines. The when pressure makes performance worse article explains why pushing harder on a congested system often reduces output.
Lead visibly
In a turnaround, leadership behaviour carries much of the message. Practical habits:
- Be on the floor regularly, asking questions and listening.
- Share honest news, good and bad, briefly and often.
- Recognise effort and contributions publicly, especially from people who raise problems.
- Protect improvement teams from constant interruptions and demands for instant results.
- Keep the promise about jobs, and explain how freed capacity is being used.
Keep cash and customers in view
An operational turnaround takes months. Meanwhile, the business must survive. Manage cash closely, protect key customers and decide which products and customers to prioritise. The steering a small business through a downturn article covers cash runway, scenarios and cost review.
A worked example
This is an illustrative example. A 90-person manufacturer of steel storage products faces aggressive price competition. Rework and scrap cost about $40,000 a month, on-time delivery is about 70%, overtime costs about $25,000 a month and a significant amount of folding work is subcontracted. The owner needs to reduce costs and is considering redundancies.
The commitment. Instead, the owner announces that the business must cut product cost by about 10% within a year, explains why, and commits that nobody will be made redundant because of improvements they help make. Freed capacity will reduce overtime first, then bring folding work back in-house.
Stabilise. Containment checks are added for the two defect types causing most customer complaints, and a cross-functional team investigates their causes.
Listen and measure. A workshop with staff from every area produces over 40 issues, grouped under measurement, improvement system, process and people. Simple tally sheets at each station record defects by type and downtime by cause, and a board in each area shows daily results.
Vital few. After a month of data, Pareto analysis shows that three problems account for about 70% of rework: weld spatter on visible surfaces, hole misalignment from a worn press tool and coating damage during handling.
Structure. A steering group of the owner, operations manager, quality lead and two team leaders meets fortnightly. Four improvement teams are formed, each with four hours of protected time a week, a measurable objective and access to maintenance and engineering.
Prioritise and improve. From 26 ideas on the impact and difficulty matrix, six quick wins are implemented in the first two months, including a press tool refurbishment, welding parameter standards and padded handling racks. Two larger projects follow: a welding fixture redesign and a reorganised flow between folding and welding.
Result after nine months. Rework and scrap fall to about $16,000 a month, on-time delivery reaches about 92% and overtime is roughly halved. The capacity freed is used to bring folding work back in-house, removing the subcontract cost. Two employees who retire are not replaced, reducing headcount through attrition. Participation in improvement ideas, almost nil at the start, becomes part of each team’s weekly routine.
Applying this in an Australian business
- Explain the economic reality and set specific, differentiated targets.
- Protect customers first through containment and honest communication.
- Ask everyone what is broken, and group the answers.
- Measure simply and visibly, at the point of work.
- Focus on the vital few shown by Pareto analysis.
- Build governance and give teams protected time and support.
- Prioritise by impact and difficulty, starting with quick wins.
- Improve in order: defects, standardisation, waste, automation, then technology.
- Commit to no redundancies from improvement, with a plan for freed capacity.
- Seek advice before any workforce changes, given Fair Work, award and agreement obligations.
Where turnarounds go wrong
- Cutting people first, then finding the waste is still there.
- Launching many projects without structure, time or support.
- Improving internal flow while customers keep receiving defects.
- Buying new equipment to fix an unstable process.
- Measuring everything and acting on nothing.
- Breaking the promise about jobs, which ends participation.
- Declaring victory early before improvements are standardised.
Questions to ask at the start of a turnaround
- What exactly must improve, by how much and by when?
- Which customer problems must we stop first?
- What do the people doing the work say is broken?
- Which few problems cause most of our losses?
- Who will lead, and how much time will improvement teams have?
- What will we do with the capacity we free?
- How will we know improvements have held?
Bringing it together
When an operation is struggling, reducing the workforce is the obvious lever and often the wrong first move. A structured turnaround starts by naming the problem honestly, protecting customers, asking everyone what is broken and measuring what matters. It focuses on the vital few problems, builds a simple governance structure with protected time for improvement teams, and prioritises by impact and difficulty. It improves in a deliberate order, from defects and waste to automation and new technology, and it decides in advance how freed capacity will be used. Businesses that turn around this way often end up not just cheaper, but more capable and more resilient.
Source: KEVOS editorial notes, drawing on earlier KEVOS operational excellence handbooks on operational turnaround without workforce reduction, including improvement governance, prioritisation and defect reduction. Identifying details from the source cases have been removed. The worked example is illustrative. This article is general information and does not constitute legal or employment advice.
