Over the past few months Bill and I have written several posts on the difference between looking lean and truly being lean. Most of the discussion began after Delphi filed for bankruptcy, and we noted that they had won over 20 Shingo Prizes. Although they had pockets of excellent implementation of lean tools, they missed the bottom line requirement of lean: to make money.
Being lean begins with culture and leadership, although as Bill noted recently, it cannot end with that. Many lean consultants, in an effort to create immediate and dramatic changes to justify their sometimes enormous fees, focus on the tools. There is no doubt that some quick training and a few kaizen blitzes can yield amazing results in terms of inventory reduction, cycle time reduction, and the associated financial rewards. However this is looking lean and is not sustainable, which is one of the reasons why over 90% of lean transformations fail, and why there are very few real lean companies in the United States… and even in Japan.
A true lean transformation must begin with the people. Serious lean leaders must be identified… those that can positively drive and communicate a disgust for waste in everything they do… and empowered to make quick changes. But just as importantly the other employees have to also be brought into the fold. They need to be trained on how to recognize waste, how to use the tools to drill down to the underlying causes of waste, and how to get rid of it.
This is a risky time for the employees, and they know it. They are being asked to help make changes that improve efficiency… and therefore put their jobs at risk. As we pointed out a couple weeks ago, this is where management can begin to reinforce a lean culture by truly supporting the employees… and truly living the typical values statement that "employees are our most important asset". As Bill reiterates in his recent book, Rebirth of American Industry, this can be difficult as it flies in the face of traditional accounting methods. Direct employees are typically considered a variable cost, and the value of training and experience is not accounted for.
For a lean culture change to occur the employees must be confident that their jobs and careers are just as protected as management’s. Jon Miller at Gemba Panta Rei talked about this culture of mutual respect in a post a couple months ago. He has another good post on "first, it’s about people" where he suggests that between 67% and 99% of a lean effort is about people. His post also references a post at the Lean Failures blog where the top two causes of failure are lack of management support and lack of communication.
The best "real lean" transformation artists I know of (and a few are even consultants!), those not beholdened to immediate results, take a year or more to get a firm cultural foundation in place. They train, identify lean leaders, and execute some changes to show the promise and power of lean. They also spend quite a bit of time with the company management and owners to ensure they understand the value of that culture, and in some cases I’ve seen them walk away from assignments when they realized that executive management was not firmly behind a long-term transformation.
Some financial rewards are seen that first year. During the second or third year, after the culture is in place and energized for change, there is a serious focus on using the lean tools to reduce cycle times, which thereby reduces inventory and process complexity. The effect of reduced cycle times begins to create very significant improvements in top line sales (through competitive advantage) and bottom line profitability (through reduction of waste) in the years thereafter. If the nascent culture continues to be supported, reducing waste from the time of order through shipment… and then extended throughout the value chain to suppliers and customers… becomes an obsession. As Bill reinforces in his book, the financial rewards are measured with cash flow, not necessarily return on investment.
For a sustainable lean advantage, begin with the people side of the equation.