Why people don’t learn Lean management

Nicolas Stampf, from BNP Paribas, posted the following question on LinkedIn: “How come that despite being showed and coached into doing continuous improvement the Lean way, people don’t learn. I mean that when you stop coaching them and come back some months later, although they’re doing performance management and problem solving, improvements are absent? When you re-show them, they say they forgot having done that previously.”

Following is my response:

  1. You might as well ask why people keep behaving in self-destructive ways when they know better, for example overeating and not exercising. The rewards of changing behavior are obvious and they know them, yet they don’t do it until a significant event happens. Getting seriously ill will do it, but so will running for president.
  2. In  your question, you also treat the adoption of Lean as an personal choice. It’s not. Organizations choose to implement Lean, not individuals. It is a decision made by top managers, and they must communicate to all levels why they are doing it and that they are dead serious, which means that participation in the effort is a condition for continued membership in the organization.
  3. Also, as Tom Berghan put it “Lean isn’t Feng Shui on the business, it is the business.” In other words, if you want to be successful in implementing Lean, you cannot cherry-pick elements of it. Your question is centered on continuous improvement, performance management, and problem-solving, , which won’t make much of a difference if they are all you do. In manufacturing, the core of Lean includes specific approaches to production line design, operator job design, production control and logistics, quality assurance, maintenance, human resources, accounting, strategy deployment, etc.  I understand your work in Banking, where many of these approaches are not directly relevant, which means that you have to invent their equivalent for banking operations.

More Flak on Lean Based on the Same Survey

Managing Automation published another response to the same study that claims to show that Lean does not work: Lean Manufacturing and Operation Excellence: Not Worth Their Weight? 

As described in the press and their own press release, the AlixPartners study commingles Lean with “Six Sigma and other productivity programs,” which raises the following issues:

  1. Lean Manufacturing is based on the Toyota Production System, which includes neither Six Sigma nor Operation Excellence nor  “other productivity programs,” whatever those may be.
  2. Lean Manufacturing is not a “productivity program,” but the pursuit of concurrent improvement in quality, productivity, delivery, safety, and morale. I  know I am repeating myself, but it needs to be said until the leaders of manufacturing companies hear it.

If these press accounts are correct, the survey confuses Lean with other approaches in an open-ended list, misstates its purpose, and considers exclusively metrics of cost reduction.

The effectiveness of Lean is not an easy subject to study. Should we survey all the companies that claim to be Lean, have a Lean program in place, have been certified Lean by some external authority, or are top performers in their industry? Once we agree on this, we still need yardsticks to quantify both  the effort they put into Lean and the rewards from it.

I took a stab at it a few years ago, and did my own analysis, the results of which were published as a Viewpoint in Manufacturing Engineering in 2006. I chose 40 winners of the Shingo Prize and searched Hoovers Online, for comparative performance data with their 400 top competitors. On the average, the data did not show that the Shingo Prize predicted any advantage in profitability, market share or employment growth. The AlixPartner press release says roughly the same thing, but I see it as reflecting on the Shingo Prize itself, not Lean.

The Shingo Prize is supposed to be the “Nobel Prize for Manufacturing,” but what are the criteria used to award it? You can download the Shingo Prize Guidelines and see for yourself. A team of Shingo Prize auditors visits the plants and awards points  to measure “the degree to which the behaviors in an organization are aligned with the principles of operational excellence.” In other words, the plants are measured on process compliance. They score points for practices they have in place. It is like measuring chess players on the number of pawns they move, and is correlated to victory like the Shingo Prize to business performance.

Toyota did not grow based on a compliance checklist. When I visit a plant, based on what I see and what people tell me, I can form an opinion as to whether they are among the few that have the spirit of Lean or the many that are going through the motions. But I don’t know how to generate a checklist that could be systematically applied to arrive at such a conclusion, and, desirable though it may be, I don’t believe a real survey is feasible.

Jamie Flinchbaugh doesn’t like sports metaphors, but I can’t resist one here. Usain Bolt  is the fastest man alive. Let us assume somebody publishes a book entitled “The Running Secrets of Usain Bolt.” How Usain Bolt actually trains is probably not trivial and certainly involves sustained effort and ferocious discipline. The author of the book, however, is concerned that a stern, eat-your-vegetables message would hurt sales, and focuses instead on easier topics, like shoes. As a result, kids flock to shoe stores thinking that wearing these shoes will make them fast, but the real ones are too expensive, so they buy cheap imitations instead. Six months later, based on their responses, a survey concludes that Usain Bolt’s methods don’t work.

Most Lean programs today are to serious implementations as cheap imitation shoes are to the training of Usain Bolt. Where they may succeed is in ruining the reputation of Lean. It is bound to happen sooner or later. As a brand, Lean has had a 22-year run so far, already longer than I expected.

Should a lean transformation program ever end?

On LinkedIn, Patrick Courtney asked the following question: “In your experience, with a Lean transformation program when can the program become a waste? Is there a tipping point? Please share your experiences and wins.”

Let us assume we are talking about a successful Lean transformation with a program office, headed by a lean champion and including a small group of project facilitators. The question then is whether there is a point beyond which this organization is unnecessary.

That a Lean transformation is successful means that practices from daily operations on  the shop floor to strategic planning in the board room are more effective and efficient as a result of Lean, as evidence in business performance. At that point, people in the organization no longer refer to “Lean tools,” but simply to “the way we do things.” What was a change requiring adaptation is the new normal.

In principle, once Lean practices are assimilated into the company’s standard mode of operations, a program office is no longer necessary. In reality, there are some functions for which continued, organized support is necessary, such as the following:

  1. Continuous improvement. If continuous improvement is carried out through a system of circles or individual suggestions, then a structure will be needed to manage it and organize periodic conferences and award ceremonies.
  2. External certification. If the company is a part supplier, it may need to maintain its status as a “certified Lean” with some OEMs, and resources are needed to host audits and make sure that actions are taken as needed to ensure compliance.
  3. Supplier support. Companies that are successful at Lean commonly endeavor to pass their skills on to suppliers in exchange for price breaks, which requires a team of engineers.

Some people will remain involved with Lean, but in other roles than during the initial implementation, and often elsewhere on the organization chart. More generally, a successful change program should eventually fade away. For example, the pursuit of Total Quality Control (TQC) was a program in major Japanese manufacturing companies until the mid 1970’s, when all of them had received a Deming Prize. Then it  gradually lost visibility, as everything they had learned from this program was integrated in normal operations and its principles had become part of the culture.

Management Whack-a-Mole and the Value of Lean

On 5/24/2011, NWLEAN moderator Bill Kluck launched the richest, most vigorous debate in the 13-year history of that forum by asking members whether they were cost cutters or capacity enhancers. Over the following three weeks, 29 authors posted 68 spirited, yet courteous messages accessible from NWLEAN to anyone with Yahoo! ID.  The contributors included several well-known authors and some of my favorite sparring partners. In alphabetical order, they were  Dan Barch, William Bowman, Robert Byrd, Abhijit Deshpande, Mark Graban, Jim Harrington, Jonathan Harrison, Rob Herhold, Blair Hogg, Gangadhar Joshi, Bill Kluck, Joachim Knuf, Ed Larmore, Paul Layton, Ted Mayeshiba, Jim McKechnie, Larry Miller, Joe Murli, John Nelson, Stephen P. O’Brien, Anthony Reardon, Tom Robinson, Sunita Sangra, Dale Savage, Patrick D. Smith, Tom Stogsdill, Mike Thelen, Chuck Woods, plus a few others who did not use their real names.

The message that started the thread was as follows:

“It seems more and more (especially in this recession!) that lean professionals fall into 2 camps:
– Cost cutters
– Capacity enhancers
There are some out there that are saying that you HAVE to cut costs, or you’re not getting lean.
There are others that say lean is about improving capacity, so you can enhance the customer experience.
Which are you, and why? Is this driven by the top of your organization, people who may not understand what lean is? Do we risk becoming cost cutters, or smoke-and-mirror guys?
Just askin’!

Bill”

Although I didn’t participate initially, it was clear to me that the effect of a successful Lean implementation was limited neither to cost cutting nor to capacity enhancement. Instead, I see Lean as the pursuit of concurrent improvement in all dimensions of manufacturing performance, but I had already shared my thoughts on this matter in Lean as the End of Management Whack-a-Mole. Management Whack-a-Mole is the game illustrated in Figure 1, in which managers  boost performance in one dimension at the expense of the others, shifting focus every few months without ever achieving a genuine overall improvement.

Figure 1. Management Whack-a-Mole

Several of the early posts, however, prompted me to  jump into the fray and respond on a variety of topics, initially as follows:

  1. People trained in Finance and Management Accounting have had their shot at running US Manufacturing from the 1950s to the 1970s, with outcomes that should make them modest about the value of their approaches.
  2. Companies that have grown through Lean include Toyota since 1950, Wiremold from 1991 to 2000, and many others that are not publicized. A successful Lean effort helps Sales in specific ways, as, for example, when more flexibility enables Manufacturing to accept a sample order for a new component by a customer, who then designs it into his own products and becomes a major OEM.
  3. Cost reductions are a by-product of Lean but not its primary purpose. Manufacturing is a competitive sport, and Lean a strategy that makes you a stronger player, and not just right now but in the long run as well. When you hire a top coach for a sports team it’s not to cut costs but to win games.
  4. ROI is just one ratio, invented at DuPont 100 years ago to report in a common form the activities of multiple business units. There is nothing magic about it, and, by itself, it certainly does not give a complete picture of the health of a business, as even finance people recognize.

This caused further exchanges with Robert Byrd, who wrote: “…The most basic concept is Profit = Price – Cost. The market dictates price, so we have the best leverage for maximizing profit through controlling our cost structure…”  My response:

Is this always true? What about situations in which time to market is of the essence? I remember a client that was introducing a new frozen food product. On one of our visits they had us taste the R&D prototype, which was delicious. Three months later, they had a jury-rigged production line making 900 units/minute. The line left much to be desired, but we could not argue with their focus on getting the product to market. During all that time, their focus was not on getting it done cheaply but on getting it done at all. Then they could go back and improve the line.

He also wrote: “…Which is best accomplished through the elimination of waste and problem solving…”  My response:

This is the key point. We have yet to encounter a manufacturing or service organization in which the details of how work is being done contains no improvement opportunity, and this is what most managers simply do not believe. They are trained to think in terms of “big pictures,” and look for cost cutting opportunities like eliminating entire departments or reducing every department’s budget by 5%.

And finally: “If the aim is only to increase profit by reducing cost, without focus to grow the business, then the culture will never take root and only a short-term improvement will be realized. Or the company will never achieve it’s true potential.”

Your point does not fit in a 30-sec sound-bite or tag line. Good managers are able to monitor all aspects of performance at the same time, from growth to costs. But communication is tricky. For example, if you showcase ” Profit = Price – Cost,” what behaviors do you expect to stimulate, other than cost cutting?

In his second response, he added: “However, what was their business objective once they focused on improvement? I would venture to guess that it was focused on cost reduction.” My response:

I don’t recall them mentioning cost reduction explicitly. When the line first started, about 20% of the units were defective, and that was a focus of concern. Of course, quality improvements reduce costs as a side effect, but they also have other effects: quality problems have an impact on customer perceptions of the product because of variability among the units that are not defective.

In their other production lines, improvement was driven by marketing concerns. This was in Europe, and, in spite of the existence of the EU, frozen food packages had a different sizes by country, in addition to having labels in different languages. Based in Italy, they pursued quick changeovers in package sizes in order to be able to export to Germany, France, the UK, etc.

Their Lean program fit within their business strategy, but it is a stretch to say that this strategy was centered on cost reduction.