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8. Determine Whether Lean

Is A Process Or A Project

             Let’s be honest. If you were asked to identify your progress toward Lean, would you say it’s formalized? Have you ever included any lean initiatives in the formal business plan or budget? Are you enabling and doing lean activities across the enterprise? Is lean a sustaining activity in the enterprise? Or, is lean gasping for survival? Have you done the product value stream reorganization, trained some “experts” and held some kaizen events? Be brutally honest. Is lean “the latest failure”?

        Unless Toyota was just an anomaly, or Honda, or Hyundai, or Boeing, or.…….Lean Production is going to replace Mass Production in the Global Supply Chain(s), and sooner rather than later. Why? Lean will win because Lean delivers better quality (Q), at a lower cost (C), in a shorter time (D). The better idea that produces better ROI wins, in free market competition. Remember, if Lean Production works for others, and it doesn’t work for you – it’s you.

       Lean Transformation is a process worthy of formalization. Make it formal. Budget it. Make it enterprise – wide. Make it sustaining by starting a Lean Performance Project Office. Staff it with your best and brightest “leanies.” Pick a “volunteer” to be the Lean Transformation Project Manager. Take all other assignments away. Create the HR mechanisms that will allow for transfers of capable personnel to staff lean initiatives as resource people.

       By the way, the best and brightest are already competing to join the lean firms and those firms that are getting lean. They can see where this is going, from a career perspective. And, of course, that just makes the leans firms stronger, and the remaining mass firms weaker.

7. Decide If Your Lean

    Enterprise Needs ERP

       This is another trick question. The best way to determine if your Lean Enterprise will need an ERP system is to examine the processes that are performed in your enterprise to see if they include any of these Key Processes that are best (QCD) enabled by ERP:

•Buy / Pay process. This provides the ability to create purchase orders, receive material, record lot     numbers, hold product, and pay suppliers while charging specific cost centers.

•Order / Ship process, which enables pull support for shipment trigger, shipping, inventory updates, and     accounts receivable.

•Financial / reporting process, which enables balance sheet and income statement reconciliation and     product-focused cost roll up.

•Forecast / Sales and Operations Planning / Master Scheduling / Material Requirements Planning /     Capacity Planning / Vendor Plans and Pulls, all of which support and enable the “forward” view     of capacity and material plans.

      If you need to support these processes, at a minimum, you can benefit from an ERP system. I am not stating or implying that it should be implemented from a “mass production” perspective, however. A “Lean Performance ERP” implementation has fewer transactions and fewer exceptions. There is no transaction support for exceptions, just like a lean factory has no returned goods storage rooms for product returns. We do not issue a MRP schedule, but we do use the MRP Plan to advise our work centers and vendors what will “probably” be pulled in the next planning and production periods. This allows for capacity planning as well as evaluation of buffer and seasonal requirements. Lean Performance ERP eliminates kitting, WIP reporting, shop order creation, order firming, reconciliation, spot purchase orders, and continuous MRP regeneration while converting to bin and pull system kanban, with no system transactions needed. In a lean operation, the only transactions of value to the shop floor are raw material issue (backflush), to allow for cost center and product roll up, and finished good creation to allow inventory updates to support order processing and shipping.

      In a Lean Performance ERP environment, teams always scrutinize proposed upgrades and decide applicability based on fit to Process Standards, and have those for ALL processes, including management decision and information / support, using only those features needed to support lean processes. Of course, as batch sizes are reduced, operations balanced, pull systems implemented and supplier kanbans in place, all the MRP based shop floor control can be eliminated. The motto in Lean Performance ERP is “It’s not okay to fix (or improve) my process by breaking your process. No additional work that might be waste for anyone without QCD measurements first.”

Organize Lean Enterprise

By Product / Family

         I have to admit that this is a trick question. You have already done this, if it is readily apparent. If it isn’t obvious, from a (QCD) standpoint, what makes you think it is a necessary step to take - now or later? Where process operations primarily build “Cats and Dogs” or are true “Job Shops”, never or rarely working the same item twice, other steps must be taken. It is becoming apparent that not all organizations – in fact, perhaps the majority of organizations – do not fit the “simple case” of Product / Process Stream Management. Why? Complex combinations of finished products do not lend themselves to a “Product Stream” approach. There is simply not enough volume by Product or Product Family to staff to that structure.

     The Job Shop is an example of a true Process Stream. I recently had a participant in a seminar come up to me and say “Thanks for not ramming that ‘organize by product or family’ idea back down my throat again. I run a true job shop, and that doesn’t work for me.” He went on to clarify that his product flow was all “cats and dogs” – that he almost never worked on the same product more than once. A better suggestion for him is to view the “Process Stream” that a typical product flows – like cut to turn to notch to knurl etc. He went away happy.

     Take this organizational step when it is the next obvious and right thing to do - like when lean has taken hold and the obvious new organizational structure is emerging. A Lean Transformation Project / Process can be organized initially by Process area, as long as the Process Areas identified do not mirror the current organization chart, and Lean Transformation Teams are cross-functional. Or, follow our job shop example, and organize by process stream.

Determine What Loyalty

To People Means For You

    The “Loyalty Principle” is without doubt the single most difficult principle to interpret and implement in the American Lean workplace. An Operations Manager at a major defense contractor put it "American companies pick the right words for their mission statement but typically fall short on backing it up – ‘we value people’ which is found in so many Mission Statements, is cryptic in application - people are valued as long as (profit) is double digit and the stock is up - otherwise, ‘see ya later’”.

    In the American workplace there is a widespread attitude that the worker is disposable, and that doesn't work for lean. What will? Even recognizing and exposing the “disposable worker attitude” raises American managers’ eyebrows. The Lean Human Resource management practices emerging in the American Lean workplace include staffing permanent positions at 80% of expected down period volume, with “temp” pools used to cover higher market demand. In these companies, the first preference for a permanent opening is given to temps, who are recommended for permanent positions by the process teams that have worked with them. Another Lean Human Resource Practice is job sharing, with 2 employees splitting time, often when they are experiencing a life situation (pregnancy, illness in family etc.) that might otherwise result in a good employee leaving, and taking their lean training and team attitude with them.

    Lean companies are providing access to benefits even when full-time hours have gone below 37 per week. Flexible start and finish times, overlapping shift where the workers "manage" the coverage - all these options are being tried to manage demand fluctuations. Two widely adopted lean human resource practices are the payment of increased hourly rates for cross – training and team based performance incentives. The key is that people are assets that are managed without layoff and with human kindness and consideration. Is there a payoff? One Process Control Manager (in an award winning lean facility) says “I do not want my trained people laid off for a period of time and going to work across the street at my competitor. I have an investment in them, and I consider them to be valuable. I treat them as the asset that they are, and they reward me with their effort.” Lean Human Resource Practices are the new frontier of Lean Performance Management.

    A beginning can be made in your transforming enterprise by conducting a management policy deployment exercise that asks for suggestions from the process owners and operators on the question “What step or steps should we take as an enterprise to value our employees during the coming Lean Transformation project?” Utilize the ideas gathered to develop Lean Business Policy that addresses company headcount concerns. These concerns will require decisions and commitments on issues such as:

•    No layoffs during Lean Transformation.

•    Layoffs only when market volume declines, not when efficiencies improve.

•    One “re-structuring” layoff, followed by a commitment to market volume layoffs only.

    Expand the Policy Deployment initiatives to present and discuss opportunities to leverage lean benefits at the operator level. Process owners and operators will respond to questions that ask them how the enterprise should go about developing and distributing benefits in the area of ergonomics, education, bonus, gain sharing and profit sharing. Two widely adopted lean human resource practices are the payment of increased hourly rates for cross – training and team based performance incentives
Different policies of HRM may be equally successful in managing the people of each company. It’s a matter of culture. What appears to be critical to lean transformation success is a cultural belief that views every individual process owner or operator as a person capable of making a positive contribution to the improvement of the process. Process owners and operators will respond to questions that ask them how the enterprise should go about developing and distributing benefits in the area of ergonomics, education, bonus, gain sharing and profit sharing.

    The real opportunity from going lean is to be able to do considerably more work with the same resources at almost no additional cost. What will it take to generate this extra work, either in extra orders and / or in taking some outsourced activities back in house? Or how are you going to handle the need to reduce headcount without bringing your lean efforts to a halt?

The Challenge and Promise of

Social Media in Business

           Every owner faces the issue: to facebook or not to facebook, or bigger yet, do I let my employees spend time on social media like Twitter, Facebook, or Blogs, even when it is ostensibly connected to some business function?  Actually, even the presumption of stopping people at work from spending time on social media is academic.  The question should be: how can I encourage people to spend time using social media technology to help us communicate, market, sell, and eventually, everything else we currently do short of actually producing our widget.  Faced with this opportunity or threat if we are not able to adapt and adopt the new medium of communication, I have found that business owners often exhibit a kind of knee jerk but understandable resistance to this much change this fast. 

       In our program, the Certificate in Business Administration at UIC, we expose owners and managers to the technologies and how they are currently being used successfully and profitably in businesses.  But still, there is no choice on this one but to 'get in the water' with everyone else.  Unlike other management programs, or tools in the past related to technology (CRM, MRP/ERP, hardware and software decisions), owners and managers can't simply leave that up to the IT people, those strange people that wander our offices without really knowing or even caring about our widget, or our customers, in their own world.  With this technology revolution- which it is- we will need to become users ourselves.  Everything will change now, and the business environment that we knew, the way we communicated with customers, and with each other inside the organization, is about to change forever.  How long before we don't even have meetings, or business trips, or trade shows, or any of the familiar face to face Willy Loman encounters we hold so dear?  After all, everything is still all about relationship building, right?  True, but the definition of how those are built and maintained has changed.  Ask anyone, anywhere, just go to their facebook, or tweet them...

4. Figure Out What A Process Is

And Work On It

    While suggestion systems or kaizen activities can also generate improvement ideas, it is always necessary to drill down to the process owner level in order to improve an organization level process, and to drill down to the process operator level in order to improve an activity level process. Material and Information Flow Analysis (MIFA) is a lean diagnostic tool developed by Toyota over 60 years ago to analyze material and information flow.  “Value Stream Mapping”, a lean diagnostic tool in widespread use in the emerging lean industrial community, is not always the same as MIFA. A MIFA is an overall flow of a Process Stream, whether that particular stream of processes is of a product, a product family, or a complex product group or Job Shop flow of processes. The MIFA is utilized to illustrate the entire flow and to provide insight into how multiple process streams belonging to multiple Process Areas of the enterprise, such as manufacturing and logistics, are going to flow together. MIFA was not developed to replace process kaizen, however, rather it evolved out of the desire to link process improvements across departments and work locations that were not easy to “see” together. There are also many flavors of value stream mapping in use, and they are not all the same. MIFA is not meant to be a process identification tool, and it is certainly not a perfect tool for identifying a process at the level at which an operator performs it. MIFA is best utilized to generate process improvement ideas, when Process Standards have already been produced that illustrate the process as all participants in improvement activity agree it is performed. When process owners are conducting MIFA activities across departmental or geographic boundaries, care must be taken to ensure that the improvement effort does not lose focus and revert to reengineering or process redesign / innovation practices, with the “experts” making process activity decisions, not the owners and operators.
 
    A Process Standard is a visual representation of the process activities required to transform a data or material input into an output needed or desired by a customer. It is the result of the SDCA (Standardize, Do, Check, Act) cycle, a lean improvement tool we referred to earlier. The S task of SDCA is the documentation step that produces the Standard (S), which is then Done, or Demonstrated (D), Checked (C), and implemented or Acted upon (A). A lean process transforms the input (material, data) into an output product or service without wasteful work steps or material and time consumption. It’s as simple as that. In the PDCA cycle, a Plan (P) for improvement is determined and documented on the Process Standard. The proposed change is then Done or Demonstrated (D), Checked (C), and implemented or Acted upon (A).

    A Process is best identified as such by the operator or team that performs it. This includes the Business Planning Process, and other management decision and information / support processes. Most management decision processes are not managed as processes. When managers solve organizational problems such as morale issues or metrics that aren't acceptable, it is common for them to just informally start generating responses/solutions without using any of the formal, structured problem solving tools such as root-cause analysis. For example, a meeting is not a process unless it has an input, transformation of material or data, and an output that a customer would buy. In order to provide customer value, that output must meet the Value - Added criteria desired by the customer.

    In the Lean Enterprise, all activities are measured in terms of how they support or improve the QCD metrics of a single process, a group of processes in a process area, or the entire set of processes in the process stream. The Lean Champion should ask every manager in the enterprise to identify one of his / her own processes and produce a Process Standard for it. Each process owner should, singly or in a team construct, name the process, state the process purpose, and write down all the process tasks, with all process inputs and outputs. They should then provide an estimate or actual QCD Baseline Measurement. Utilizing the Process Standard, and any of the relevant lean tools, they should then identify value added tasks vs. non value added tasks. Next, they eliminate the tasks that do not provide value, considering the overall needs of the customer as well as the downstream processes. Then report the improved QCD. The stage is then set to “Repeat” the activity, thereby initiating the SDCA / PDCA continuous improvement cycle. This provides the buy-in tone that the other process operators in the enterprise need, and sets an example that they can follow.

3. Empower The Process Owners

And Operators

    Management domination and command and control administration of the workplace does not nurture and sustain Lean Transformation. It defeats the very people who are the foundation of lean, and leaves management wondering why people are skeptical, or aren’t contributing, or both.

    This author has had the unfortunate experience of being the facilitator in a Process Stream Mapping exercise when a middle manager made this denigrating remark about those present: “We will present our Process, but I don’t think the “shop folks” will understand it.” I then asked “Will you be able to understand the processes being presented by the other (shop) teams?” Her reply was “of course.”

    I responded “So, I am to take it that you can understand what they do, but they can’t understand what you do?” Her answer was “Yes.” It never dawned on her that all were shaking their heads at her ignorance and elitism. Not surprisingly, her process presentation was not very enlightening. Taichi Ohno (of Toyota) had a phrase for managers (and others) who believed their work was above scrutiny, but the process operators work was not: He called them Cement Heads. Be on the lookout for them. They will sabotage your lean transformation. One lean facilitator told me that when he encounters a “cement head” he recommends that said “cement head” be given an opportunity, at the earliest possible time, to seek employment in a Mass Production Environment. Why? Because in a Mass Production Environment their views will fit the management paradigm and they will be happier. They are not going to be happy in a lean empowered workplace. And we won’t be happy with them. 

    Even though it has become common to ask who knows more about a task than the ones performing it, it is seldom taken to heart by management. If your people believe that the traditional managers who want to run things the way they always have are the ones who decide what lean events will happen, what improvements will be made, and how the enterprise will execute those improvements – then you are most emphatically NOT getting lean. This anecdote describes another view that prevails among the cement heads. Ask a group of managers / supervisors this question: “Do you know your job better than your boss knows your job?” Asked this question, even in a workshop or class session, virtually every manager or supervisor would agree, that, yes, they do know their own jobs better than their boss understands that job. However, when asked whether or not their direct reports know their own jobs better than they - the managers and supervisors – know them, the response from the cement heads among them is that, no – the direct reports do not know their own jobs better than those managers and supervisors know those jobs – even though the process operators perform those very jobs day after day!

    Empowerment is incorporated into lean enterprise systems as an inherent element of the work process. Lean processes are built on the belief that the people who do the work are best qualified to improve it and that people who are empowered to turn their ideas into improvements are best motivated to continuously improve the work processes.

    When the enterprise endorses the Lean Cultural Principle “The Process Owners And Operators Are The Process Experts”, each at their Organizational or Activity Level of Process – then the enterprise is truly empowered! Of course your direct reports know their jobs better than you do. If not, you have failed to teach them and are responsible for the poor output quality, cost and delivery. If you want to be lean you must involve all employees in the improvement process to make it work and the most powerful way to involve employees is through their own creative ideas. That’s not to say that the Process Operators are always immediately enthusiastic about lean. There can be numerous points of resistance. Perhaps they don't agree there's a problem, or they don’t agree that the cause is batch (mass) processing. Often, process owners and operators inexperienced at lean don’t agree that lean (or use of smaller batch sizes, or one piece flow) is the solution. They think more problems will be created, or perhaps it means they weren't doing a good job before hand, or some other “fear of” factor.

    A simple solution to the problems generated by too much management direction of lean improvement project selection is to develop an employee suggestion system to use as an input to drive future projects.  The use of suggestion systems has been derided as a management “flavor of the month” in many companies. This is a failure on the part of management to organize and sustain the effort. In order to sustain the suggestion box, or suggestion mechanism of whatever sort, all suggestions must be evaluated for potential positive impact on Quality, Cost and Delivery, and implemented if warranted.  A suggestion not implemented for a good reason must be presented before being discarded. A working suggestion system is often the missing ingredient in a Lean Transformation.

    When suggestion systems fail, they become a sort of “black hole” which does not produce any results. An Employee Suggestion System is part of the overall effort to include everyone in the enterprise Lean Transformation process. Seeking input and leading the process owners and operators to consensus requires the inclusion of representatives from the office staff and the production floor from the beginning. There are three elements to consider when implementing a successful Employee Suggestion System:

1) Line management is responsible to track and measure employee suggestions and improvements as a     regular task, and to coordinate QCD process lean performance measurements.

2) Do not implement any “parallel” structures. Report results only once – to combined management /     process owner / process operator groups. Remember that everyone has to work with common data in     order to find lean process improvements.

3) Working the simple improvements first is important to early harvest of benefits as well as development     of lean improvement approaches in your enterprise.

    To improve your Employee Suggestion System, provide the support staff to assist the employees to record and implement the viable ideas that are suggested each month, as well as to calculate the costs and savings realized. Human Resources and the Lean Office can provide these support staff from the process owners and operators released from newly lean processes. Use Quality, Cost and Delivery savings measured in the suggestion. Emphasize how the suggestion makes the work easier while improving QCD measurements. Take advantage of a good suggestion that may apply to another work process by publicizing the suggestion to other team members. Also, address each and every suggestion, as long as the suggestion addresses a process and demonstrates improved measurements in QCD. Ideas that do not address QCD may be viable for the company, but do not belong in the QCD Suggestion forum.

    W. Edwards Deming proposed that rewarding employees for good suggestions was counter-productive to continuous improvement, as continuous improvement is the job of everyone already. Some enterprises do reward suggestions, however. One word of caution here is to award all suggestions implemented, or none – and on the same scale. Determine whether the same improvement to each of 20 similar machines, parts or processes counts as 1 or 20 suggestions – before a suggestion of that type is received. Set a target for monthly improvement ideas from each work team. Enable the employee that comes up with the idea to either do the implementation or lead it with the help of their team members. It is a wonderful thing to witness process operators who formerly had been expected to keep their heads down and their mouths shut emerge as key contributors to lean performance improvements.

2. Educate – Educate – Educate

    A Lean Transformation should begin with a Lean Skills Assessment in order to demonstrate who needs education, and on what. It is becoming more and more obvious that the transition from Mass Business Administration (MBA) to Lean Business Administration (LBA) will require a transition in our business educational processes. Many educational institutions are offering education on elements of the lean catalog. Lean Champions depend on the Human Resource team to determine who in the enterprise could benefit from education on Lean Principles, education on diagnostic and problem solving tools, as well as education on applicable Lean Practices. Lean Tools include 5S, Material / Information Flow Analysis, SMED, etc. Lean Practices include work cell layout, design for one piece flow, kanban etc.
The Steering Committee must make a commitment to educate every process owner and operator in lean principles and tools. The Steering Committee can ensure that all employees are educated on Lean Cultural Principles at the inception of the Lean Performance project by providing the education necessary on Lean Cultural Principles along with the issuance of Lean Performance Vision, Mission and Scope statements.

    It is not necessary to educate all Process Owners and Operators on all Lean Practices. Educate on Lean Practices where appropriate to the process characteristics for each process owner and process operator. Just as we take physical inventory to establish our benchmarks, an inventory of the skill sets in the organization must be undertaken.

    Often too few team members are expert in the lean skills when the initial process lean improvement activities begin. The timing for education for team members is solely dependent on the sequence of the Lean Performance Project plan and its focus of improvement from one phase to the next. The Human Resources Lean Team is responsible to establish a perpetual skills inventory to ensure skills and knowledge are kept current. They must ensure that the enterprise matches your people up from a need-to-know basis. Count the parts and the skills - don’t assume they are already there. Be sure skills and knowledge are current and up to date.

    A project task that completes a skills inventory of what the organization already knows in the way of lean principles, tools, and practices must avoid the mistake of assuming that a given skill already exists in the operator base. The possession of a Lean Education Certificate by a given process owner and process operator does not ensure current or relevant skills. Especially when education completion was completed several years ago (say, 3-5), it will probably be beneficial to refresh the skills learned.
It is even more beneficial if the person who has the skill can teach others. As the Lean Skills Assessment goes forward, match internal “lean educators” to the teams that will need education. Be sure to align the education offered to the project plan. Simply educating the process owners and operators on lean tools and practices can result in shallow “show” results rather than viable process results that are both measurable as well as aligned to the organizations’ lean implementation plan.
The Human Resource Team must also examine the need to provide foundational skills such as team building, team management, and managing meetings. These are relatively easy skills to develop with a modicum of investment for formal education.

    Lean Education should pay for itself. When most production organizations look at implementing a lean enterprise, the focus is heavily slanted toward the financial impact of line items such as lowered inventory that will be turned into cash flow. It is a very good idea to establish a “Pay As You Go” approach to using lean savings from inventory reductions and throughput improvements to pay for education expenses. Some organizations establish strategic targets based on a conservative estimate of how much inventory will be reduced and the dollars generated.

    The final critical component of the Lean Skills Assessment is the translation of the skill GAPs into an Education Plan that ensures that the skills needed to be successful in implementing lean processes are available in the right teams at the right time. If there are not enough process owners and operators with the right lean tools and practices skill sets for the process being implemented, the implementation will stall. Early stall outs and failures reflect poorly on the Steering Committee and may discourage further lean activities.
   
    Establishing a budget for education as part of the lean transformation project can ensure that the skill sets required to support lean transformation are in place. If your lean implementation is going slowly, or your enterprise doesn’t seem to have enough skilled people to implement lean practices, revisit the Lean Skills Assessment and Lean Education Plan. If it isn’t in place – or is inadequate to the task – fix it.

1. Commit To Lean Cultural Principles

    We all have heard that in order to get lean, companies must re-imagine their processes, working back from the point of product or service delivery to the customer. In a lean enterprise, processes are “pulled” in response to the actual customer requirement instead of products and services being “pushed” into delivery or inventory. The five Lean Operations Principles that we stated above are employed: value, value stream, flow, pull, and pursue perfection. These are principles we believe in, they permeate everything we do. But, they aren’t enough to get the Lean Transformation accomplished. It has become evident that lean enterprise has not (yet) emerged in many of the American workplaces that have attempted lean initiatives. Lack of Lean Culture is the reason. So, just exactly what is “lean culture”? Culture consists of the collected ideas, customs, skills, arts, etc. of a given people in a given period or civilization, beliefs that are right and appropriate for the purpose of that group and time, beliefs that are suitable, fit and proper to accomplishing that purpose. So, it follows that a Cultural Principle is a belief that permeates the ideas, customs, skills and practices of all of the people in an enterprise. Lean Cultural Principles are beliefs suited to the tasks in the process of Lean Transformation and the sustaining Lean Enterprise. They are not widely adopted in the American workplace.

    Lean Transformation discussions often drift toward a Japanese cultural discussion – as in “Japanese Managers benefit from a culture of social cooperation that extends to the workplace.” Fair enough. One needs to remember, however, that Japanese Culture was the driver behind the advances in Lean Thinking during the rise of Toyota and other lean producers. “The Toyota Production System (TPS) never was meant to be a plant-level cost-cutting tool in the way U.S. companies have used it. It is an internal value system that…..got no respect from……capital markets because analysts could not make a direct connection to it and the top or bottom lines each quarter.”

    The cultural beliefs in the American workplace are also the rules of success in the American workplace. It might be said that these cultural beliefs are almost impossible to change because current leadership has achieved its success using them. It is becoming obvious that American competitive business culture does not encourage, develop or sustain lean, and is incompatible with the needs of the lean workplace. American managers often miss inputs from others in the conversation who are not as insistent or "Type A." American managers are prone to over use their authority, and we often miss out on ideas from subordinates and others in the workplace because we are more "competitive" than “cooperative." It is clear that one of the critical changes that will be required in the American Lean workplace is for American managers to change their competitive management style. In order for American Lean to be widely successful, we will need to develop and adopt a set of American-style Lean Cultural Principles.

    Belief in Lean Cultural Principles is the causative element in the ability of Toyota, Honda and others to continue to "invent" new Lean Tools and new Lean Practices, further perfecting their processes year after year. It is clear from their example that once your enterprise possesses lean culture, application and evolution of lean tools and practices is natural. Is culture important? It is first. Lean Culture is an organization infrastructure that forwards and sustains lean transformation through job roles, reward and recognition systems, commercial agreements, customer contracts, and product and service offerings.

    Often, the process toward Lean Transformation is sabotaged by traditional mass production cultural beliefs that permeate practices in the Human Resource processes, most especially job displacement, outsourcing, down-sizing and layoff. We have made a start, as demonstrated in the team dynamics employed in the operations physical processes in many companies. Now we need to extend that thinking into the office, along with the use of lean tools and practices, to get the management decision and information / support processes lean as well.

    “Lean Performance ERP Project Management” is a book written by a project director who was empowered by a lean management team and lean culture. When I was developing and applying the Lean Transformation project methodology presented in the book, I thought every company had or was trying to build a lean culture. Certainly the companies where I worked and consulted were doing just that. I had been presented with ideas and challenges for practices including J-I-T and Zero Inventory since the beginning of my career in manufacturing. When the lean label was coined by Womack, Jones et al, in The Machine That Changed The World (4), I was working as a MRP II Project Director for an automotive component supplier, one of the underwriters of the MIT Automotive study that resulted in Machine. My book can help if you have a lean culture, and are on the lean journey. It works from the foundation of lean physical process success to extend the Lean Transformation into management decision and information / support processes, resulting in the “Virtual Lean Enterprise.” When I exited the lean cultural cocoon of the (then) very lean company at the center of my mid-career experience, I found myself consulting with companies that, while desiring to “get lean”, were not prepared organizationally to nurture and sustain a successful Lean Transformation effort.


In “Lean Performance ERP Project Management” I state that the following Lean Cultural Principles were present in the lean workplaces I had observed. They had been adopted by these successful lean companies, in this approximate order:

1.    Process Oriented Thinking: What Before How

2.    Product Quality Results From Process Quality

3.    Every Process Needs A Process Standard

4.    The Process Owners And Operators Are The Process Experts

5.    The Next Process Is Your Customer

6.    Loyalty To People Enables Continuous  Improvement

7.    Process Data and Measurements Drive Process Continuous Improvement

    I have received some feedback on this section of the book, and most of it has been along the lines of “show me” - as in, show me a lean management practice that deploys or supports one of these Lean Cultural Principles. So, here’s one example: In order to deploy the Lean Cultural Principle “Process Oriented Thinking Means What Before How” a top management lean practice is “Manage The Process and The Result Will Follow.” I need to warn you, however. The lean management practice of “Manage The Process And The Result Will Follow” at first glance seems to violate a cultural belief in the American workplace, that being that management can drive results by forecasting the result desired and then expecting (demanding) the enterprise to deliver. This management practice can only be employed if you can “lead lean”.

    The American Lean Champion will need to formalize a method of Policy Deployment for his or her enterprise in order to “lead lean.” Policy Deployment is a lean management tool, also known as Hoshin Kanri or Hoshin Planning. It is based in the Management by Objectives system developed by the American management guru Peter Drucker. Policy Deployment also incorporates the Plan, Do, Check, Act (PDCA) improvement cycle, a lean continuous improvement tool developed by the American quality control guru, W. Edwards Deming. The PDCA (Plan, Do, Check, Act) cycle is utilized to improve the Process Standard that results from the SDCA (Standardize, Do, Check, Act) cycle, which we will discuss below. In the PDCA cycle, a Plan (P) for improvement is determined and documented on the Process Standard. The proposed change is then Done or Demonstrated (D), Checked (C), and implemented or Acted upon (A). What Hoshin Kanri provides is the planning, implementation and review process for managed change, aligning management policy with daily operations, and the improvement activities that are ongoing in a lean enterprise. The Lean Performance Analysis described in “Lean Performance ERP Project Management” is the method of Policy Deployment I have developed and utilized in Lean Transformation efforts with clients both domestic and foreign.

    Earlier we stated that the Lean Operational Principles permeate everything we attempt to do in Lean Transformation at the operational level. Lean Cultural Principles work in much the same manner, in that they permeate everything we do in Lean Transformation at the cultural level. I am going to return to the most important Lean Cultural Principle, “Loyalty To People Enables Continuous Improvement” below, to amplify it further. In the overall sequence of Lean Cultural Policy adoption, this policy is not often the starting point; rather it becomes obvious and critical as the enterprise attempts to implement the preceding Lean Cultural Principles. We will also discuss some lean human resource practices that are being developed and employed to deploy this Lean Cultural Principle in some of the more successful American Lean workplaces.  

10 Things A Lean Champion Can Do To

Lead The Lean Transformation

Management Summary

“10 Things A Lean Champion Can Do To Lead The Lean Transformation” is a paper that presents a concise discussion of activities that can be undertaken by the American executive or manager interested in starting, extending, or restarting the Lean Transformation in their enterprise.  The paper presents, in logical deployment sequence, practical low-cost or no-cost activities that can be begun immediately by the American executive or manager, in virtually any company - large or small, whether product manufacturer or service provider. The paper makes a case for the proposition that one of the critical changes that will be required in the American Lean workplace is for American managers to transform from the current competitive management style to a cooperative management style. Originally published in early 2005, the paper has been distributed globally, collected in archives and web sites extensively, and included in the anthology “Lean Transformation Perspectives And Experiences”, published by Icfai University Press, Hyderabad, India, in 2008.

 
Over the next few weeks, the suggestions contained in this paper will be presented for blog discussion in segments.  This week, we present the introduction and next week we will present the 1st of the 10 Things, “Commit To Lean Cultural Principles”.

Each week we will present one more of the “10 Things”, and on the final week we will present the conclusions.

Introduction 

A question that I have been asked lately in my conversations with executives and managers of American companies who are attempting Lean Transformation is this: “How do I lead the Lean Transformation?” Executives and managers often find themselves following behind lean operations initiatives, rather than determining a “Future Lean Enterprise” vision, and then leading the way. The lack of Lean Business Policy and deployment of that policy is often the reason for the disconnection between top management and the ad hoc Lean Transformation.  “Lean Business Policies define the lean business mission and are the drivers for development of lean project strategies. Executive management often expresses Lean Business Policies in business plans and strategic planning documents, including the lean vision statement.” (1) Lean Business Policy can be as straightforward as the endorsement of lean expressed as one of the Lean Business Policies of the Big Global Enterprise:
“Big Global Enterprise is committed to being the leanest, highest quality, lowest cost and fastest to market provider of sprockets, grommets and widgets in the world.”

To commit to a Lean Transformation requires that management really understand the principles, tools, and practices that deliver the power of lean, commit to those principles, and then invest in the education that the process operators and process owners need in order to learn the tools and practices that deliver the “Future Lean Enterprise.” Often we have trouble identifying Principles. We think Tools and Practices are the same thing as Principles. But they are not. A Principle is something you believe in. For example, Lean Operational Principles are those presented by Womack and Jones in their book, Lean Thinking (2),: value, value stream, flow, pull, and pursue perfection. A Tool is something you apply that helps you to identify, understand, diagnose and fix. For example, lean diagnostic, problem solving, and continuous improvement tools include 5S, Material and Information Flow Analysis (MIFA), 3 MUs’, 5 Ws’ & 1 H, 4Ms’, and the SDCA - PDCA cycles. A Practice, on the other hand, is something you do once - or over and over again- in a work process. For example, lean practices include Single Minute Exchange Of Die (SMED), cellular layout and flow, and kanban.

A Lean Champion builds a business case that wins your management's support - and their willingness to learn some profound knowledge - otherwise, forget it. Lean Champions begin with his or her own knowledge first. Lean Champions become competent at presenting and implementing that knowledge within the organization - on the shop floor and in the office. Lean Champions start small and “build out.” Lean Champions implement control charting techniques for a work cell, measure results by documenting Process Standards and establishing baseline data at a few control points. Lean Champions post graphs, and use QCD (Quality, Cost, Delivery) Visual Reporting. Lean Champions answer the “Where Is The Money” question. Finally, Lean Champions communicate Upstream as well as Downstream as problems / opportunities are uncovered.

Anyone attempting to succeed at Lean Transformation has to be aware of the recent crisis at Toyota. It can’t be ignored that the premier Lean Enterprise in the world delivered millions of cars with Quality Defects. It is clear that something “broke.” Lean Champions will have to address the Toyota “Downfall” in order to develop management and organizational confidence in Lean Transformation. Here are a few points to ponder that might assist in that effort.
Over the decade 2000 – 2009, Toyota enjoyed an increase of both market share and profits in the world-wide automobile market. In the 2003 fiscal year, Toyota reported profits of about $10 billion on about $125 billion in sales. Toyota was then the 2nd most profitable car company in the world, with a return on sales of nearly 8%. Interestingly, Porsche reported a 17% ROS in 2003. Porsche is 1/25th of the size of Toyota – and another lean enterprise that employs the Toyota Production System (TPS).
In 1995 Toyota established a goal to capture a 10% share in the global automobile market by 2000. In 2000 Toyota’s share was 10.01%. Then, in 2003 Toyota established a goal to capture a 15% share in the global automobile market. If accomplished, this would establish Toyota as the global market share leader, past GM and Ford. Their target was 2010. But, in 2009 Toyota fell into disrepute, as facts were revealed about Quality Defects. Turns out Toyota became decidedly “UnLean” in several Key Processes. In my opinion, their primary mistake was to de-emphasize 3 Cultural Values:

1. Respect For People, which enabled Toyota and its’ employees to strive together to build and sustain a cooperative workplace, where business process management drove results.

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2. Customer Value, where every question that arose in the process of managing business processes was answered by first asking “What’s best for the customer?” and managing the process accordingly.

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3. Continual Improvement For The Better (kaizen), which developed, improved, and maintained superior business processes.

It seems most apparent that the Cultural Values of Respect For People and Customer Value have been replaced by the adoption of values including market volume dominance and short term profits. The Respect For People value seems to have especially ignored in the relationships between Japan-based managers and regional employees. These conflicts underlie the loss of Customer Value focus, especially in the use of honest root cause analysis of quality defects. Toyota also seems to have violated the cultural value Continual Improvement For The Better (kaizen), especially in the Feedback Process from Customer Quality to Product Innovation.

Perhaps the overarching lesson to be learned from the downfall of Toyota is that as difficult as it is to rise to dominance in any human endeavor it is more difficult to stay on top – that any successful human endeavor can be reduced to failure through the degradation and loss of the Cultural Values and people that created it. Download the white paper “Toyota – Downfall 2000 – 2010” from the Center For Enterprise Development website for a complete presentation.

1. Commit To Lean Cultural Principles
2. Educate – Educate – Educate
3. Empower The Process Owners And Operators
4. Figure Out What A Process Is And Work On It
5. Determine What Loyalty To People Means For You
6. Organize Lean Enterprise By Product / Family
7. Decide If Your Lean Enterprise Needs ERP
8. Determine Whether Lean Is A Process Or A Project
9. Form A Lean Steering Committee
10. Conduct A Lean Assessment Before Project Begins

An age old academic question perhaps, but of what value to you is it to answer this question? And even if you do, is there a right answer, or is this one of those trick questions dull academics are apt to pose to amuse themselves if no one else, which is usually the case? Already, several more questions, so what was the original question?

After 25 years running the Certificate in Business Administration program and working with about 1,500 business owners/entrepreneurs in the course of it, I can make an educated guess, perhaps. Somehow, without turning this into a lengthy treatise instead of the blog it is intended to be, something that collects a lot of ideas, and opinions, rather than posing one dogmatic conclusion, this question also is a part of another old academic dilemma: Leaders vs. Managers: Which is Better? (See how easy it is to lose the way with this kind of inquiry?)

This paper describes the reasons for the downfall of Toyota from the most respected  automobile corporation of the late 20^th Century to the much maligned and suspect corporation it is today. It has been quite a downfall for the company once termed “The successor to General Motors and Ford.” Toyota began the new millennium determined to be both the dominant volume car assembler on earth (intending to overtake GM) as well as the successor to the (Henry) Ford “synchronous flow” workplace. It is the thesis of this paper that several very definite and traceable elements drove the downfall during the transition of Toyota from the “re-founding” generation of leaders that re-built Toyota from the ashes of Imperial Japan and the company labor unrest of the late 1940s’, to the “new” generation of leaders that expanded Toyota into the multi-nation giant now in disrepute. The “re-founding” generation of Toyota Motors included founding family member Eiji Toyoda and the workplace engineering genius Taichii Ohno. Together they shaped the Toyota Culture through commitment to three (3) Cultural Values:

1)    Respect For People, which enabled Toyota and its’ employees to strive together to build and sustain a cooperative workplace, where business process management drove results.

2)    Customer Value, where every question that arose in the process of managing business processes was answered by first asking “What’s best for the customer?” and managing the process accordingly.

3)    Continual Improvement For The Better (kaizen), which developed, improved, and maintained superior business processes.

These Cultural Values were the foundation of the Toyota Production System (TPS), the business management system innovated by Toyota and now emerging throughout the world in forward thinking business enterprises. Mostly unrecognized in western Mass Business Administration (MBA) circles, the TPS, sometimes termed “Lean Production”, is significantly different from the GM – originated MBA systems. The TPS is based in both the WWII Ford “synchronous flow” production systems, as well as the WWII workplace management tools of “Training Within Industry” (TWI). It was Continually Improved by the “re-founding” generation of Toyota post WWII leaders, and is the direct cause for the Cost, Quality, and Delivery superiority that Toyota demonstrated, until the downfall. The TPS requires specific and detailed knowledge and application of advanced business principles, tools and practices, often referred to as “Lean Principles, Tools, and Practices.” These system elements are mostly unknown outside of Toyota and other “Lean Producers”, mostly Asian car assemblers (Honda, Nissan).

Significant differences between the generation of business visionaries that built the TPS and the business bureaucrats who have so badly damaged it can be found in the dissonant values that emerged in the Toyota culture during the drive for volume sales and expansion espoused by the “new” generation of Toyota executives. The degradation of Cultural Values was accompanied and amplified by historical events that occurred at Toyota. It is the position of this paper that these altered Cultural Values and accompanying historical events are the causative elements of the downfall that Toyota has recently experienced. They include the following:

·       The Sensei Leave:

o      Many of the “re-founding” generation sensei (teachers) retired or left Toyota and became consultants to the emerging lean production (Lean Business Administration, or LBA) movement that emerged in the 1990s’ in western businesses attempting to emulate the success of Toyota. These western businesses were striving to achieve superior “Toyota-like” Lean Performance measurements in Product and Service Cost, Quality, and Delivery. The sensei took their knowledge of the TPS with them, and tried to impart the TPS ideas to western Mass Business Administration (MBA) managers. They have been mostly unsuccessful in converting western executives, with the notable exception of cadres of manufacturing operations managers.

·       Drive For Growth:

o      In the years following the retirements of the Toyota knowledge-base of TPS sensei, the drive for volume growth engendered a rapid proliferation of New Products, New Factories, and New Suppliers. A corresponding wave of rapid recruitment and hiring of New Employees to staff the new positions and factories followed. This rapid growth required more knowledge of the TPS than could be developed and imparted by Toyota in the short time-frames required to ramp up production. At Toyota, the lack of enough sensei knowledgeable in the TPS principles, tools, and practices led directly to the absence of the Cultural Values necessary to develop and sustain the cooperative workplace in new markets, especially Customer Value driven process management. This resulted in cadres of employees, many in regional outposts, who had not been properly educated in the Toyota Cultural Values and the TPS principles, tools, and practices.

·       A Cultural Divide:

o      Under the pressure of rapid growth, a “cultural divide” between Japan – based managers and their foreign counterparts emerged, due primarily to a diminishment of the Respect For People value exhibited by “old time” Toyota employees toward their regional reports, many of whom had not been thoroughly immersed in the TPS. This directly led to the loss of Customer Value driven processes in the overall Product Innovation Process, most especially the quality feedback loops. Instead of Product Innovation processes based in Customer Value, or what was best for the customer, processes emerged that serviced the desire to “control” product innovation processes from and in Japan. Japanese managers controlled development of critical accelerator and braking system software, while, in many cases, foreign managers controlled and conducted line and customer testing in local markets. These factions exhibited low cooperation and trust, decidedly not Respect For People in the cooperative workplace. Adversarial relationships between headquarters teams in Japan and their regional management teams emerged.

·       Insufficient concern, and perhaps corporate neglect, for rising Product Defects:

o      Product Defects began to rise significantly beginning in 2000, and recognition within Toyota and response, including solutions, were slow to develop or in some cases not developed. Floor mats were blamed, or problems denied. American and other foreign managers may not have reported all of the defects, fearful for their jobs, or Japanese managers may not have acknowledged software problems, preferring to blame line and customer testing errors. Management, more concerned with sales growth than Customer Value and safety, exacerbated the problems and encouraged stifling of regulatory reporting and conformance.

·       Gas Crisis Blows Up The Problem:

o      The gas crisis of 2008 led to a very high (for Toyota) level of finished inventories, especially in foreign markets where inventory / sales levels were planned and staffed according to “expansionist” MBA – style forecasts rather than the customer order “pull” mechanisms of the TPS. Toyota began to replace foreign managers with Japanese managers more grounded in the TPS, with a backlash of fear in the organization replacing the Cultural Value of Respect For People and the cooperative workplace.

·       Toyota is # 1!!

o      Denying that growth to be #1 in sales volume was the driving Cultural Value in the corporation, Toyota arrives in the #1 sales volume position in global car sales just as the inventory and quality defect problems rise to a crescendo. It is a hollow achievement.

·       Western Media Attack:

o      Beginning in early 2009, Toyota is indicted in the western media for covering up quality defects, including the revelation that Toyota North America presented a management team from Japan, including new CEO Toyoda, with a claim that they had saved $100 Million by delaying recognition and action on the very product defects that have been causing car drivers and passengers to be killed in braking and accelerator defect accidents. The Cultural Values of Respect For People and Customer Value have most definitely been replaced by the adoption of values including market volume dominance and short term profits.

·       Toyota Stops The Line, Too Late:

o      The line was stopped, in some cases, as much as five (5) years too late. Key to rectifying the crisis is for Toyota to improve the Product Innovation process and re-introduce the values of the “re-founding” generation of Toyota leaders:

§       Respect For People, especially between Japan-based managers and regional employees.

§       Customer Value, especially in the use of honest root cause analysis of quality defects.

§       Continual Improvement For The Better (kaizen), especially in the Feedback Process from Customer Quality to Product Innovation.

Perhaps the overarching lesson to be learned from the downfall of Toyota is that as difficult as it is to rise to dominance in any human endeavor it is more difficult to stay on top – that any successful human endeavor can be reduced to failure through the degradation and loss of the Cultural Values and people that created it. Developing, maintaining and improving a lean enterprise isn’t easy. Clearly, even the best can flounder. The question is whether or not Toyota can regain their Cultural Values and re-assert their dominance in the global car business. I wouldn’t count Toyota out.

Copyright© 2010 Performance Improvement Consulting, Inc. All rights reserved. No part of this article may be used or reproduced in any manner whatsoever without prior written permission.

About the author and article sponsors:

Brian J. Carroll is a Principal of Performance Improvement Consulting, Inc. (PIC), a management consulting firm specializing in Lean Performance services located in Chicago, Illinois. He is the author of Lean Performance ERP Project Management: Implementing The Virtual Lean Enterprise, 2^nd edition published in 2007, and available on Productivity Press. Mr. Carroll is an instructor in the Lean Performance Certificate series offered by the Center For Enterprise Development and The Center For Supply Chain and Logistics Management of The University of Illinois At Chicago (UIC).

The Center For Supply Chain Management and Logistics of The University Of Illinois At Chicago (UIC) seeks to develop cutting edge solutions to emerging problems associated with global supply chains. Uniquely positioned in the city of Chicago, the third largest freight hub in the world, the Center specifically addresses manufacturing, transportation, and logistics management issues in an effort to reduce cost and improve the efficiency of supply chains.

Center For Enterprise Development, Inc. (CED) facilitates organizational change through management education and training engagements targeted to small to mid-sized, closely-held businesses in the Chicago-land area. CED understands how business education can impact success and translates that knowledge through a step-by-step business management process, Management Through Applied Planning®. MAPP enables companies to look forward and grow while retaining a critical focus on day-to-day issues.

CED offers a comprehensive program of Lean Performance Certificates that are the standard for quality, cost and delivery in the lean education marketplace. Whether your enterprise is small or large, we can help to start, plan and manage the Lean Transformation with you, from Lean Business Policy Development to Lean Transformation success. We would be happy to discuss with you the time and resource commitments needed for Lean Transformation. We will be happy to discuss the obstacles to Lean Transformation that may be present in your enterprise, and help develop plans and solutions to remove them.

Lean Performance Series Certificate classes are forming now. To sign-up, or get more information on all of our offerings, visit us at www.ced-uic.com/leancertificate  

In an attempt to stay with current technological trends, we will be utilizing online tools and resources to re-connect with past alumni and provide information and support for current classes.  In time we hope to have everyone following us on twitter, looking at past alumni photos on facebook, and having their companies connected to us through linked in.  This blog will be the first step we take in order to better utilize our communication and networking tools and sometime next week we should have an article to post online.  Thanks for the patience and support!