The Will ‘O The Wisp of Value Streams

There is a great article in CIO, which bills itself as "Australia’s Magazine for Information Executives" called Fie On Fiefdoms , summarizing the key points former COO of Microsoft, Robert Herbold, makes in his book The Fiefdom Syndrome: The Turf Battles That Undermine Careers and Companies – And How to Overcome Them. Herbold is apparently not much of a lean manufacturing guy, but he makes some great points about lean management.  The conclusion I took away from the article (can’t say I’ve read the book yet) is that Value Streams do not exist – they’re not real.

When you boil his whole ‘fiefdom’ theory down, it gets back to functional organizations versus processes.  Motorola preached about the ills of functional silos and Eli Godratt hammered the point that local optimization does not lead to global optimization, but call it a fiefdom, a silo or a locality, it is all the same.  By whatever name, most companies are not structured along process lines.  They are organized functionally.  Lean is based on cross functional  process optimization, but there is no formal entity in most companies called a "process".  Processes come to life when they are artificially created in a value stream map, or as the basis for a kaizen event or a six sigma project.  Whatever improvements are derived from the effort are put into place, then the ‘process’ evaporates into thin air and the company goes about its business – along its functional lines.

There are no changes made to the ‘process’ because the process does not exist.  The changes are actually made to individual operations within functional areas.  The theory goes that, because the changes were made on the basis of their impact on the process, when everyone returns to their functional areas and incorporates those changes, the theoretical process will be better.

It sounds better in theory than in practice.  The savings and improvements companies claim from kaizen and six sigma rarely show up on the bottom line because the theory has a huge, gaping hole in it – the savings generally turn out to be theoretical, rather than real, because processes are theoretical, rather than real.

It seems to me that Mr. Herbold fell into the same old trap many stumble into.  He sees breaking up the ‘fiefdoms’ as a psychological, cultural, leadership sort of an issue.  However, in the one specific case mentioned in the article – P&G causing confusion at Walmart because of multiple product groups each with their own agenda – the problem was solved not with culture and leadership but by changing the organizational structure of the company.

Wiremold and Danaher achieved lean success – optimizing process performance – in large measure because their processes are not theoretical – they are real.  Their companies are structured around processes, or value streams instead of functional departments.  The same is true at Toyota.  The same was very true at Ford when lean manufacturing came to life in Highland Park.

Value Stream Mapping exercises, kaizen events and six sigma projects almost always look their best on a conference room wall chart, but save little in terms of real dollars, because there is no one responsible for the value stream, there are no individual performance metrics for the value stream, and the accounting system does not recognize the value stream.  The managers and supervisors formally responsible for the functional areas – the fiefdoms – are generally doing a pretty good job. At least they are based on how the company has formally defined their jobs and measures what is ‘good’.  Almost by definition, when the kaizen event or six sigma project comes up with process changes that are actually a list of changes within  the ‘fiefdoms’ along the process, those supervisors are being told to do something that takes them away from ‘goodness’ as it is formally defined.  Process changes that are away from goodness in the formal management structure of the company cannot last.

I should read the book out of fairness to Mr. Herbold, but if the article is a good synopsis, he has missed a fundamental point.  I grew up in Cincinnati, where P&G is headquartered.  P&G people are very, very smart.  They are typically not petty, political, turf conscience, office politicians who can’t see or don’t care about the big picture.  If they were presenting Walmart with a cacophony of P&G chatter, that is because their jobs were defined and measured in such a way that they did the best for P&G by approaching Walmart with chaos. The problem was solved not through psychology, but by management.

Herbold also broke through the ‘fiefdom’ problems at Microsoft by restructuring the accounting systems and by making data much more accessible.  These tangible management changes – overhauling the basic management infrastructure – to create a customer focused, process oriented business, instead of an ROI focused, vertical/functional business – is critical to lean.

I’ve ranted quite a bit about the difference between looking lean and being lean and this is right at the heart of it.  All of the Toyota tools on the shop floor save very little when the management infrastructure stays the same.  Shingo Prizes for Delphi plants do not help the bottom line when the organizational structure, accounting systems, performance metrics and information flows are not radically changed to support process optimization.

I don’t care how many kaizen events you might have had, how many six sigma black belts are on the payroll, or how much value stream mapping you might have done, if I walk into your plant and cannot meet a value stream manager or see your financial reports rolling up through value streams to equal the P&L, you aren’t lean.