Lean’s Fork In The Road

by BILL WADDELL

Way back when I was doing the research for Rebirth of American Industry I came across the Henry Ford quote; "Profit is the inevitable conclusion of work well done".  It hit the underlying principle of lean so squarely on the head that it has been the masthead on my web site and the driving tenet of all of my writing and consulting ever since. Guys like Tom Johnson have explored and explained the concept very well under the label of MBM – Management By Means – in direct contrast to the well worn management principle of MBO – Management By Objectives.

MBM, and the Ford quote, are all about focusing on processes – how work is done.  They are driven by the idea that the future is unknown, but if you continually improve the processes for getting work done you will be in good shape, no matter what the future holds.  Do the work well in terms of minimal waste, excellent quality, driving yourself to take the best care of customers, and things will turn out all right.  Better than all right, in fact.

The alternative – MBO - is to be results oriented: Here is the objective – hit it by any legal means.  Wall Street loves MBO because it is a promise on the part of management to hit certain goals in certain time frames for profits, market share cost reductions or sales.  The fact that changing circumstances may make those goals impractical, or may drive management to do things harmful in the long term in order to achieve them, is not part of the thinking.  Those problems will be addressed in the next round of setting objectives, and some other managers and investors can deal with them.  In the mean time, knowing management has committed to near term objectives takes much of the risk out of an investment.

Toyota's long run of success was driven completely by their commitment to MBM – Management By Means, worrying only about making sure work was well done and, as Ford promised, profits were inevitable.  Sales, profits and market share all took care of themselves as a result, and took care of themselves handsomely.  Toyota stumbled badly when they strayed over to the dark side – MBO thinking.  Their 2010 vision set in place in 2002 called for very specific market share goals – 15% of the global market to be precise.  In pursuit of those goals, processes were compromised when necessary to overcome short term obstacles.

A fight is brewing at Toyota between the MBO gang, and the new president who wants to return to MBM thinking.  A new strategic vision is being hatched by the MBM leadership and " …company officials say the coming statement will be short on specific numerical targets and results-oriented commitments by senior management. That is likely to disappoint investors and other Toyota watchers, who say the auto maker needs a detailed plan to instill faith in management and restore lost luster to its brands."  In Toyota's heyday, they could not have cared less whether "investors and other Toyota watchers" were disappointed. They cared only about customers, knowing that "investors and other Toyota watchers" would come out just fine as a result.

It doesn't really matter who wins the boardroom battle at Toyota.  Lean thinking and lean principles have taken on a broadly proven validity of their own and lean no longer needs Toyota to be successful for validation.  What is important is the lesson to be taken from Toyota's rise, fall, and what may be a glorious recovery or a continuing slip.  That lesson is that the culture, leadership and management determine the outcome, not shop floor tools.  The tools at Toyota have been the same all along.  They used kanbans, 5S and heijunka on their way up, and they were still using them as they slid backwards.  I am sure they will continue to use them as they go forward no matter the outcome of the boardroom battle.

Toyota is proving that it is how you manage the company that tells the tale – and shop floor tools only take you where management leads.  Every company's lean journey begins with tools, but sooner or later every company gets to that fork in the road: Management By Objectives or Management By Means?  Focus on profits, or focus on "work well done"? The old standard cost, inventory is an asset, ERP push, top down management approach or the lean business model? Which is it going to be?