What is a Diagnostic Review?
Before exploring the function and content of a Diagnostic Review lets understand what we mean.
Diagnostic – Refers to something that is used to determine the cause or disorder in a function/ organization.
Review – A commentary, often with criticism or correction. Also a report providing a critical consideration of a work or activity.
A diagnostic review examines an organizations management and financial systems and practices. Diagnostic reviews are generally at a strategic level and not audits and do not track individual items of expenditure or process actions. Nor do they provide a pass or fail assessment of an organizations management system. Rather, they provide leaders and stakeholders with information to act upon.
The review process should consist of a measurable assessment of key elements of your organization. It uses proven criteria for assessment and a full report that highlights current situation, progress to date, improvement opportunities and proposed action plans.
A holistic Diagnostic Review will cover all of the PRIMO-F areas of your organization or business, including the systems and controls in each.
The Diagnostic Review process should involve four groups of people:
- Board or Owners
- Other strategic stakeholders
In addition it should include information from two external groups:
The objective being to establish a 360 view of the current status at a given point (snapshot) in time. Many diagnostic reviews fail as they neglect to capture wide enough perceptions on what is occurring withing an organization.
Know where you are before taking your first step
If you plan to go to New Zealand or Australia, your first step will be very different if starting from the UK or the US. While this analogy may seem obvious when in the context of travel, it is less so in the context of organizational change. But the situation is the same. Your route to your destination , vision or goal, will vary Dependant on your current position, from a skill and a cultural point of view.
Every organizational change intervention has improvement as it’s ambition some where along the line. We know from research that change is best perceived as something that people have already achieved, and that they have learned from their experiences. By positioning change as the norm rather than a feared future uncertainty, we can help people prepare for ‘the stability of continuous change’.
Using organizational diagnostic reviews as a tool for identifying “where are we now” can enable us to identify strengths and weaknesses that need to be addressed as part of our change journey.
One of the reasons that change and improvement initiatives fail is that the aims and objectives are either too vague or poorly communicated. Having definitions for all the elements we are looking to address is critical. These may be scores or indicators as part of a commercial organizational diagnostic review tool, or they may be KPIs or CSFs
The Business Improvement Review is a holistic diagnostic review tool which takes into account the vision/ mission, measure the culture and explores the strengths & weaknesses of the management and systems in which the business operates. the BIR is like a GPS for your organization. It will tell you where you are now, and with the right implementation strategy it can help you plot a route to your desired destination.
- The strengths and weaknesses of its People
- The strengths and weaknesses of its Resources
- The strengths and weaknesses of its Innovation
- The strengths and weaknesses of its Marketing & Sales
- The strengths and weaknesses of its Operations (Products & Processes)
- The strengths and weaknesses of its Finance systems and cash-flow
A Diagnostic Review Case Study
Case Study Ltd is based in Feltham, the company designs, manufactures and supplies XXXXXX and associated equipment. It operates in a niche, yet growing market. Clients are first-class names, principally major corporate’s and international organizations.
Business is competitive. Larger rivals are often able to compete successfully in terms of price through their associations with raw material suppliers.
The company experienced losses five years ago as a result of losing a significant contract. Sales have subsequently been rebuilt from £1.2m to £2.5m for the year ended March 19xx. T/o fye March 19xx is projected at £2.8m.
There are fifty five staff at Feltham, led by Managing Director and supported by company accountant. The remaining management team comprises the chief engineer, quality and purchasing managers, the production planner and shop-floor supervisor.
1. Business Issues arising from the Diagnostic Review
The following key business issues have been established through the process of questionnaires and interviews:
- The company overall has a sound level of knowledge of the industry. It believes it has good products, a customer focused outlook and good relations with suppliers and key existing clients.
- The three-year decline in gross profit margin (a key financial measure) has been arrested, albeit that it remains at a low level of 15%. The lack of profitability inhibits future options available to the Managing Director without the continued support of the parent company.
- Financial controls are in place and costs are controlled. Cash-flow issues dictate that there is a reliance of support from the parent company.
- There is no expressed long-term vision to guide the company – “why are we doing this……what are we in business for ?”
- The company is reactive. Business and marketing strategies are neither clear or cohesive among the management team. There needs to be detailed plans and priorities for achievement of the company’s broad aim of expansion.
- At times, communication is inconsistent, both at a management and operational level. The full team has few meetings and, as a result, lacks cohesion. There are contrasting views within the team that need to be reconciled – see the range of views presented in Chart A.
- Management’s view of their management style is not shared by staff. There are significant gaps in opinions on involvement of staff, recognition and praise, leadership of people, openness, levels of teamwork and respect for people.
- Overall, this appears to indicate that collective leadership is not as effective as perceived by the management team. Do staff really understand what is expected of them? Is this symptomatic of an overall communication issue?
- Senior management perceive a level of freedom and involvement in decision-making that is not shared by the remaining team. This is not totally surprising, given the lack of accountability evidenced by the absence of performance management i.e. employees do not appear to be set measurable goals, performance standards, or receive regular feedback of performance.
- This, in turn, makes it difficult to evaluate individual performance and identify areas where performance and efficiency can be improved. A formal appraisal process may be beneficial, with an emphasis on how their performance impacts upon, for example, bottom line, company goals, customer service.
- There is general concern that the manufacturing process needs to be improved. There appears to be consistent – and persistent – problems across the production operation. These include:
- Limited space resulting in poor production flow
- Lack of coherent planning and scheduling
- Inadequate stock planning and control
- The company struggles to turn around work quickly enough; deliveries frequently fail to meet deadlines; and there is a lack of knowledge generally about the proposed new information system. On this latter point, collective ownership of the system would be appropriate to obtain “buy-in”, rather than impose by edict.
- It is apparent that there is no one single individual within the company with direct responsibility for co-ordinating the manufacturing process.
|Communications poor.Every effort is made but it does not have the desired effect.Some weaknesses in specific management techniques.
Poor in some areas due to lack of training.
Motivation seems to mean more hours spent at work.
Fairly motivated workforce…..show commitment to the company.
Casual approach; a Monday morning works meeting.
Resistance by individuals in certain departments.
Too much fire-fighting; not enough time or co-ordination.
|Premises too small.Shortage of space, no room for expansion.The staff are good; premises, equipment, IT and funding are a problem.
More modern plant, machinery and tooling is required if production is to increase.
|Respond well to customer-led demand but are not innovating ahead of the game.The team needs training in modern company techniques.The ideas are there but resources and time stop it happening.
Ideas are translated quickly.
R&D constrained by need to monitor overheads.
Long term plans not known.
|Could be better.Efforts from MD and one other, but lacking a sales force…… only one salesman plus agents.Good relationships with key clients.
Reliant on existing contacts.
Unable to penetrate new markets.
|Slow in all areas.Need to speed up the flow of production from design to delivery.Information flow at all stages of production needs to improve.
Lead times too short; never enough time from the customer.
Deliveries are consistently late.
No planning; lack of co-ordination; fire-fighting.
Not enough stock is carried.
Too many variations on small batches.
Management info system being developed.
|Turnover growing.Cash-flow issues.Weak balance sheet.
Management accounts good.
Appears to be o.k., but no in-depth knowledge of performance.
Not aware of the finances.
Not aware unless sales target not met.
To complete a Diagnostic Review on your organization (large or small) look at https://rapidbi.com/bir/ and buy the BIR diagnostic tool or contact a certified consultant user.
Updated Feb 2015