Leading Lean

Hype around “lean” (and related terms like “Six Sigma” and “Kaizen” and so forth) has long been part of the business literature.  That hype doesn’t male Lean a good idea – nor a bad one.

My experience around hyped business concepts is that there’s often some grain of truth under it all.  Sometimes it’s hard to find that grain – and finding it is always worthwhile.

I interviewed two experts — lean manufacturing guru Rick Pay of The R Pay Company LLC and returning guest Mitch Goozé of The Customer Manufacturing Group.

I asked Mitch, what does “lean” really mean, and how does it differ from “Kaizen” or “Six Sigma”?  I’m sure the manufacturing people who use it already understand it.

Six Sigma is a tool that was created in Motorola to reduce variation in output.  Kaizen means “good change” and is a process for creating small changes.  And Lean comes from the Toyota Production System.

Lean is about removing everything that does not add value to the system.  Lean is about removing all waste from the system.

For example, in a simple manufacturing system, rework is waste.  Rework often seems unavoidable.  However it almost always is avoidable, and avoiding it is worth doing.  And outside manufacturing, the same principle applies.

The only reason you’re re-working something is because it wasn’t correct the first time.  So, figure out how to do it right the first time every time.

Look for example at the process of getting approvals.  How many times have you seen in a grocery store where a manager has to approve something, yet the manager doesn’t even look at the thing being approved?  That’s an approval that is waste – you should either actually use the approval process to add some value such as checking quality, or eliminate the approval step.  If the approval adds no value, eliminate it.

The best and most rational person to check the value of an output is the person who takes it in as an input.

In other words, as person A performs work and passes it to person B, the best quality check is person B.  If person B is not competent to do the inspection, why?  If certain sorts of approvals or checks are frequent, we should train them so they can do it.

One tool is to “ask why five times” — it drives out the reasons why things are done, or uncovers that they are not done for good reasons.  You can drive out a stunning amount of waste with just this sort of questioning.  And what is left over is known to be good.

A huge survey of managers and workers was done to understand why workers don’t do what they should.  The top three reasons were:

  1. They don’t know what to do.
  2. They don’t know how to do it.
  3. They don’t know why it’s important.

One result of a lean examination, of “asking why five times” is to make sure everyone knows what to do, how, and why.

I had the good fortune to drop in on a Junior Achievement location in Portland, Oregon.  I got to watch hundreds of 11-year-olds who were busy and hard working.  The staff said “we never have any discipline problems.”  Never?  “They’re busy.”  Every kid there had a job description, and knew what to do, knew (mostly) how to do it, and knew why.

I asked several of these 11-year-old CEOs “what’s your job?”  And each of them looked at his or her job description, looked up at me, and said “to make sure everyone knows what his job is.”

I’ve seen grown-up businesses less productive, and grown-up CEOs who had less understanding of their role.

Waste is lost profit
Lean is valuable because it eliminates waste, and waste is lost profit.

There is a quick and cheap way to get started immediately with lean.  You create a “process map” that describes one of your key processes.  You put a big sheet of butcher paper on the wall, and use sticky notes to represent process steps, and you start to arrange and re-arrange them as you figure out what you actually do.

And at some point you’ll end up with a process step that you’ll have to label “miracle occurs here” because you don’t know how that gap gets bridged.

Don’t get too hung up on the particular mapping process.  Just get started.

Then, when you’re done with the “as-is” process you can take a digital picture of the diagram.  Next, create a “to be” process map.  You’ll eliminate a lot of wasted steps and wasted motion.  Start with a simple process so you get used to it and can build familiarity and expertise.

Sam Carpenter relates a story of documenting his Accounts Receivable process as 51 steps, delegating it, and going back years later to find that his empowered people had reduced it to 23 steps.  Mitch says that this is in fact a common level of improvement.

Mitch says, always ask “what is the outcome or output that is desired here?”  Because often the outputs are what we think the next person needs, rather than what they actually need.

When you are in a meeting or having a conversation about a task, always ask “what output or outcome are we looking for, and how will we know we have it?  How will I know I’m giving you what you want?”

The biggest danger with communication is the illusion that it has occurred when in fact it has not.

Every time work is handed off between people, we can expect them to create an agreement between them as to what the work should look like.

Simply, a lack of understanding of what is desired, creates more white collar waste than anything else Mitch has observed.

Mitch’s organization takes so-called “manufacturing process improvement” techniques and applies them to the marketing and sales process.  Mitch is able to create a process that “manufactures” loyal profitable customers.  This works because these process improvement techniques work across all business processes, even though we may be most familiar with them in the manufacturing context.

In my experience, the biggest gains that happen in an industry come when that industry learns to adopt the hard-won wisdom of other industries.

“If you only adopt best practices from your own industry, you’ll always be a follower,” says Mitch.

My second guest, Rick Pay, has enormous manufacturing as well as some non-manufacturing experience.  He’s run a manufacturing operation for seven years, followed by 20 years of consulting into many industries.

Rick agrees with Mitch that there is a lot of cross-industry potential.  There’s significant adoption right now of Lean and related techniques into health care and the construction industry, among others.

However, even in manufacturing, lean doesn’t always work the way we would like.  Rick ends up working with a lot of frustrated CEOs who try to roll out Lean or another process improvement effort, and dont’ see results.

Rick sees these major elements that are needed for success with Lean:

  1. Senior management commitment
  2. Willingness to change the culture
  3. Getting the right people in place
  4. Pick the right program

Senior management commitment

A lot of success rolls up from front line and mid level managers.  However that success becomes limited because senior managers don’t follow through – they lose interest or get distracted or discouraged.  Lean needs to be championed and followed through on.

So either the CEO or some other C-level champion needs to remain engaged in the strategy and the implementation of lean.

Willingness to change the culture
There is a real culture change when Lean is brought in.

Folks don’t expect this.  They think Lean happens because of some small changes.  Not so.  Jack Welch got his people to take it seriously by expecting them to report their progress monthly and quarterly.  That helped people see it was real and important.

Another culture change is that lean requires decision-making power to be pushed down to the shop floor and down to the front line workers and “empowered teams.”  Workers MUST feel safe in standing up for quality.

Compare something like shutting down a manufacturing line.  At an old-style firm you would never shut down the line, and you’d be looking for a new job if you did.  At a lean firm, you’re expected to shut the line down when you see a quality problem, and you might shut it down 2-3 times a day.  That’s because, in the lean firm, you don’t want to keep building things incorrectly, so as soon as you see you are, you stop.

In the lean organization, a lot of problem solving teams are formed at the front line level, and they can take decisions and implement fixes without management needing to be involved and improve things.

Technically in lean there are some small buffers, so the line can stop briefly in one area without the factory as a whole stopping.  The buffers are small, and they do exist.  If a stoppage has to be longer, that would mean the problem was larger.

There’s a certain discipline involved in saying “we are not going to continue to make flawed things – we will stop and fix it immediately.”  That raises the profile of, and the value of, finding and fixing problems quickly.

One area where Rick sees opportunity is, operational disciplines.  People need to feel safe following the rules.  Rick was working with an assembler that had implemented a “kanban” system to manage material flow.  However kanban only works when you actually move the cards every time the kanban goes empty.  The firm thought they had some serious cycle-counting problem or other that was causing them to run out of stock on key items, however it was simply that people were not moving the cards that caused new material to get moved.

When workers don’t have the power to change bad rules, they have to have the flexibility to ignore the rules that they know don’t really work.  Such workers can cause slowdowns by maliciously following every rule to the letter.  The better way is to empower those workers to fix the rules.

Getting the right people in place
Having the right front line supervisors and middle managers is also important to making Lean work.  That means they have to be willing to change the rules, willing to hold people accountable for executing on operational disciplines.  Be clear on why you’re doing it.

Rick does an evaluation, “Are you ready for Lean?” that tells you whether you’re going to succeed, or how to get prepared to succeed.

One key preparation step is to put in a scorecard.  Capture some baseline information.  And post that summary information publicly so folks can see it.  Post it in the lunch room.  Share financial information.  This establishes higher levels of trust.

Pick the Right Program
Lean is not always the right tool or program.  There’s another tool called “quick response manufacturing” out of the University of Wisconsin that’s great for job shops.  There’s a new tool called “Lean Sigma.”  So find the tool that is the best fit for your strategic need and your circumstances.
Rick calls it getting a Mayo Clinic physical – get an in-depth view of the firm and its functions and dysfunctions.  Rick invariably finds that the real problem is NEVER what they think it is.  Observe, diagnose, prescribe and only then treat.
If you have a stalled Lean program, take a breath, re-assess it, ensure it’s aligned with your strategy, and get senior management re-energized.
Rick was working with one manufacturer who had been unchanged for 20 years.  He was able in six months to move their inventory from six turns a year to 12, and to vastly improve cash flow.  They have had no layoffs during the recession of 2008-09, and no jobs were outsourced overseas.
In summary, you can’t do Lean “a little bit” — you either empower your people or you don’t.  You either trust your people or you don’t.  If you do it, do it all the way.
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