A hat tip to fellow blogger Pete Abilla at shmula for pointing me to a post by Carl Icahn on waste in organizations. Heck, Pete analyzed it very well, so I’m going to quote his piece as well.
Carl describes how he once took over a company that included a Manhattan office building with 12 floors of people… doing basically nothing. No one could figure out what they did, including a $500,000 consultant that Icahn hired. So Icahn shut it down and no one knew the difference.
Yes, there was lots of waste, but was it attacked properly? Pete doesn’t think so, and neither do I.
Icahn highlights several types of wastes here:
- First, companies that are excessive and over-hire is wasteful.
- Second, the people that were hired and do work that is unimportant to the firm — that highlights a type of waste that is harmful to the human spirit — these are humans that can add value, but not in their current situation. As a result, they collect a paycheck, but do no valuable work.
- Third, Carl — $500,000 USD to a consultant who couldn’t give you any insight is waste. Without tooting my own horn too loudly, I could have helped you much better and I would’ve charged you less. Call me next time. [Pete – I left that part of you post in just for you. You’re welcome!]
- Fourth, the short-term solution was to terminate many people, the processes and activities that they engaged in, and also the complexity that they added. I have no argument here. But, Carl Icahn did not attempt to arrive at the root causes (ask why five times) for why those people were there in the first place. The long-term countermeasure is to put-in-place preventative measures and avoid this situation again in the future.
- Fifth, waste limits growth. It must reduced or eliminated. This can only be done via rigorous root cause analysis and surgical countermeasures that eliminate or reduce the root causes for the waste.
Pete goes on to describe his concept of "hidden factories" and the identification of waste. He concludes with how lean organizations act differently to these types of situations.
Back to what I said in the beginning — some firms will choose one of the following:
- Add more value with more people
- Add less value with less people
- Add more value with less people
- Add less value with more people
Lean thinkers will often follow (3), whereas most companies are often guilty of (4) and (2). We often are the creators of the complexity and waste that repulses us and that we complain about. What would the customer have us do? I guarantee customers — in the most generic sense of the word — will probably answer (1) or (3). Yet, companies often commit (2) and (4).
Let the customer appropriately drive our behavior — it’s the only sure way to add value.
Value from the perspective of the customer. Respect for people. The two pillars of lean.