The title of this post does not adequately convey my frustration, and outright anger, at the idiots that give lean a bad name. Our friend Dan Markovitz sent me a Wichita Eagle news story from a couple days ago unfortunately titled Efficiency Leads to 20 Jobs Cut at Global. After reading it I had to take a drive to cool off and clear the steam from in front of my eyes so I could write a somewhat intelligible rant.
The president of Global Engineering and Technology, Finley Nevin, is eliminating 20 out of 265 positions at his company, while the company is growing, and claiming he had to because of lean.
Nevin said the job cuts come from implementation of lean manufacturing practices at the 16-year-old company, which designs, builds and installs interior components for aircraft. "Right now, our aircraft order backlog is excellent," he said.
"It’s sort of a Jack Welch approach to try to make us a better business," Nevin said Tuesday, referring to the former General Electric chief executive. "We’ve gone through, looked through everything, and there are some areas we don’t need."
And of course he waited until Christmas to do it, and then bragged about the accomplishment to the paper. Where do I begin? There is so much wrong here that it is tough to get my thoughts around it.
First and foremost, Mr. Nevin doesn’t have a clue what real lean is all about. I’m sure he believes it simply a set of tools that remove waste, which is an unfortunately common interpretation. And similarly he has a very narrow understanding of manufacturing accounting and believes he must remove labor to achieve savings, so he fires people at the first glimpse of a "savings" opportunity… without even thinking about the off-balance sheet value of those people. What could that knowledge have contributed, and what was lost? What new ideas, new products, process improvements, and new market opportunities has the company forfeited in order to save a few bucks an hour?
One of the primary pillars of lean is "respect for people." Unfortunately this is often forgotten and we sometimes need a course correction to remember how important it is. There’s a reason why Toyota, and many other "real lean" companies, have never laid off. They leverage the value of employees freed up by lean improvements to further improve and grow the business. One characteristic of companies that truly attempt lean is that they make a formal commitment to their employees that no one will lose their job due to lean improvements. Implementing lean is hard. Basically you are asking employees to remove waste and improve efficiency, which puts their jobs, and thereby their family’s income, at direct risk. That’s scary. Think about that for a moment and you’ll realize how important the commitment from the company is.
Secondly, Jack Welch is not exactly someone to be admired or emulated, especially in an organization that embraces true lean manufacturing. He is pretty much the antithesis of "respect for people." His management philosophy calls for force-ranking and then culling the bottom 10% of any organization, each year. Regardless of the fact that there’s still value in those employees, perhaps their lack of contribution is due to poor management or being pidgeon-holed into the wrong position, or maybe the entire organization is high-performing. For this reason many of us believe Jack Welch is a turkey.
Thirdly, there’s the backlog. Traditional companies believe this is a good thing, and panic when the backlog disappears. But almost by definition a backlog is a customer service issue and is contrary to lean. From the perception of the customer, which is how true lean companies look at all activities, the company has consciously made a decision to delay a delivery to the customer by not providing sufficient resources. The lead time is unnecessarily long, creating unnecessary supply chain risk, requiring unnecessary intermediate or transition inventory. Laying off "excess" employees when there’s a backlog just further reduces the value to the customer, not to mention basically being a contradiction in terms to begin with.
All around the Wichita area many other companies are trying to implement lean, and now have to deal with employees that read the paper and will wonder if they should support the concept. Mr. Nevin’s ignorance may have singlehandedly hurt the competitiveness of the entire central Kansas industrial sector.