Leadership and the Lean Transformation

Published in Manufacturing Engineering
November 2005 Vol. 135 No. 5

It's the most important job facing today's managers

 Leading the Lean Enterprise TransformationGeorge Koenigsaecker, Leading the Lean Enterprise Transformation

As most of you know, there's a lot of "lean talk" out there, but you may get the feeling that there's a lot more talk than action. Well, some time ago the Association for Manufacturing Excellence (AME; Arlington Heights, IL) surveyed senior leaders in North American manufacturing companies. Their results tend to reinforce the impression that many manufacturing managers are all hat and no cattle when it comes to lean.

Of the respondents, 41% said they did not really know what lean was--not too surprising. The second largest category, at 34%, indicated that they were familiar with the idea of lean, but did not know how to go about achieving it. The third category, 22% of respondents, indicated that their firm was on the lean path--but that they were not getting the results expected, and were unsure if they were doing the things necessary to succeed. And the last category, 3% of the group, indicated that they were on the lean enterprise transformation journey, and were achieving great results.

I've been on the Board of the Shingo Prize for Excellence in Manufacturing since its founding. This position allows me to review applications and do site visits to firms that believe they may be "best in class." Twenty years of such visits, and a good deal of lean benchmarking, have convinced me that the AME survey is roughly correct. Very few companies have figured out how to achieve a lean transformation.
The Toyota Group Companies in North America recently conducted a "hansei" (deep reflection) that looked at their own TPS (Toyota Production System; lean) level, and also at what was being achieved in organizations outside the Toyota Group. The conclusion reached about their own organizations was that they were not at the level of TPS culture they thought appropriate--after 20 years of effort in North America! Their conclusions also noted that the most common roadblock to application of TPS in North America--inside Toyota Group Companies and outside--was lack of senior-leadership involvement.

One of the common failures of leadership in the lean transformation is a lack of understanding of what's really achievable with lean.                                                      
When I first did benchmarking in TPS organizations in Japan in the late 1970s and early 1980s, I found that our expectations of how much we could improve were usually off by an order of magnitude! We thought a transformation could generate enterprise productivity gains of, say, 40%. But we found firms that had lower unit volume than ours--in similar products--that were running at 400 - 500% of the output per person at benchmark US operations. More important, these productivity gaps existed on a total enterprise level. They showed up in purchasing, finance, customer service, distribution, production control, and sales and marketing.

It's much easier to believe that big productivity/quality/lead-time gains can come if you start with a personal picture of how much waste exists in your work processes. Thus a first step for senior leadership is to participate in a Value Stream Analysis (VSA), an effort that usually requires a multiday commitment. When you build a value stream map and analyze the data, you always find that the time when nothing is happening to the product (or, in the case of administrative processes, to the data) is in the high 90% range. Often the value-adding time is less than 1% of the time the material or data/information spends in your organization.

This is often the first time senior leaders realize how much waste is built into the way work is organized today. In addition to productivity gains, typical gains achieved in the 3% of firms with successful lean transformations noted in the survey above would include:
  • A reduction in lead times of 95%,
  • A reduction in accident rates of 95%,
  • A reduction in customer complaint/reject rates of 95%, and
  • A reduction in floor space of 80+%.
It's true that you will begin to see improvements quickly when you initiate the lean transformation (typically there's a 90-day payback on your full investment in transformation efforts), but the real power of lean emerges from the decade-long effort needed to build a true lean-learning culture.

On the balance sheet, a lean company has much higher inventory turnover, often lower receivables, and better fixed-capital efficiency. Capital efficiency rises because early lean work tends to double output per capital dollar by using equipment better, and advanced lean work redesigns processes so that they fit lean requirements. All of which begs the question: Why are there not more lean successes?

There are a couple of ways to answer this question. The first deals with the fact that key principles of lean are very simple to understand, but very difficult to integrate into daily managerial behavior. My Toyota sensei used to tell me: "I can show you how to do this--but you can't do it." He was saying that I could get the idea intellectually, but to actually do it I would have to do a number of key things opposite to the way I had done them for years. My instinct, my "gut feel," would make it very hard for me to do the lean thing.

For instance, the idea of one-piece flow sounds straightforward. But do you have any administrative processes that actually operate in a one-piece-flow fashion? It's easy to say "continuous improvement," but we think of making a step improvement--we don't actually believe that improvement can be continuous. We don't actually believe that the whole point of a lean transformation should be to build a lean-learning culture, where continuous improvement is what we expect every day--forever.

A second reason for the relative lack of true lean successes is that there are very few real sensei (master teachers) out there. I was fortunate to have a retired Toyota sensei who had been part of Taiichi Ohno's Autonomous Study Group (the folks who designed the TPS/lean system), as my sensei for 15 years. But most of my leadership lessons came from attempting to start lean transformations as a company president or a group president for 11 different corporations during those 15 years.

Here's one of those leadership lessons: Lean tools take a long time to learn at a fundamental level. We think of going to class to learn; Toyota thinks of organized experiments in the workplace as how one learns. The basic learning element for TPS is the week-long Jishukin or Voluntary Study event--what we usually call a kaizen event or rapid continuous improvement (RCI) event. (Of course, the "voluntary" part often is a misnomer.) It's only from participation in these week-long improvement teams that a manager or manufacturing engineer can learn how to apply lean tools and concepts. And it's only from a great deal of this kind of experience that you actually come to believe the core principles of TPS.

Based upon personal experience, I don't expect someone to be a good sensei at the tools-level of knowledge without at least 100 of these experiences under his/her belt--ideally with many of them in administrative or product-development processes, as well as production processes. As students of lean, we always want to short-cut this experience, and doing so never works. Because, at any point on the journey, "we don't know what we don't know." We won't come to learn something--to believe something--until we get there through personal experience.

As part of the North American Toyota Group Companies' hansei noted above, organizations like the GM-Toyota joint venture NUMMI (see "Lean at NUMMI," Manufacturing Engineering, September 2005) reinstated the requirement for all managers to get personal experience each year as members of week-long improvement teams. Some very deep thinking and observation went into the format of what Toyota old-timers call the "5 Days and 1 Night" kaizen/RCI event format. This approach is still the primary lean learning method. If your real goal is to build a long-term learning culture, you should keep in mind the learning value of every Jishukin/RCI event for the members of your organization. It's the growing hidden asset on your balance sheet.

A third way to answer the question of "why is there not more lean success?" comes down to leadership. In business schools and other places we are really trained to manage, rather than to lead. We are taught, for instance, that delegation is a skill you must use as a successful manager. And this statement is true in many ways--you can't do everything and expect to manage a large organization.

But it can be false in the lean setting--if you are undertaking something that involves new levels of learning, and no one in your organization has ever been there before.
As a senior leader, you need to get some "learning," or you won't have the minimal knowledge necessary to manage the lean transformation. In addition, something that is transformational by definition involves a lot of change management. You cannot delegate change management to someone who has not been there before, is lower in the hierarchy, and has less of the clout needed to manage the politics of change. Given the magnitude of change, the team wants to know that the leader is also going there.

A true lean enterprise transformation has learning and change taking place in four different areas--somewhat overlapping, but also somewhat chronological.

The 1st  step in lean is usually Jishukin/RCI activity in your own workplace, starting to learn some of the basic lean tools and struggling to apply new lean principles at the same time, under the tutelage of a sensei.

A 2nd  level of lean learning is to learn leadership or management practices that support the process. These include learning how to handle new management tasks such as: organizing significant internal member redeployment as your productivity grows, how to get disciplined followup to Jishukin events so that the results stick, and a host of other issues that come up with the process. This is where a sensei who has actually led a brownfield lean transformation as a business unit general manager becomes an important addition to your team.

A 3rd  level of learning, which typically takes about a half-dozen years of personal experience with implementation, is to actually come to believe the key principles of lean. Because these principles are deceptively easy to understand--but are also just the opposite of what we usually do--it takes a lot of personal experience to create the new gut feel that says these principles are the only way to organize work.

The 4th  level of lean learning--the one that takes the longest, is hardest to do, and is most essential to building a true lean-learning organization--involves key changes in leadership behavior. Again, they are deceptively simple to talk about, but extremely difficult to adopt, because they are the opposite of what we all believe is the right way to manage.

Let me try to give a couple of examples:  

Many of us know of Taiichi Ohno's mantra to "ask why five times." It's deceptively simple. If you go to the work team, take any problem that has occurred, and diligently ask why five times--to seek out the root cause--two things happen:
  • The solution tends to be obvious, once the real root cause is discovered, and

  • The solution will resolve that problem so that it's a permanent improvement, and you will not have to address it again--tomorrow, next week, next month.
I have tried to get large organizations to use this lean tool as the first step when any problem occurs. The very best level of conformity I ever achieved was probably only 10%. It's the most efficient problem-solving tool that exists. But to use it we must build a new culture that values root-cause solutions, and that builds new behaviors through repetition.

How about redeployment? When you grow productivity very rapidly, you move individuals to new work to use the time you've freed up. We have all been trained to believe that if we have kaizened our work, and our six-person team can do the work with five people, we will now improve our team-by getting rid of the lowest performer. We've all done it, and thought we were doing the right thing.

Toyota would have you do just the opposite. Whenever you improve processes so that you can free up a person, you always free up the best, most flexible person to the rest of the organization. There are many reasons why this is better: the low performer is going to go through a nightmare on a personal level when redeployed. Their fellow team members, who knew the person dismissed was a low performer but who worked with him/her for the last 10 years, will be depressed about what will happen to that person. And if you build a pool of low performers, what are you going to do with them?

Or, you can always redeploy the best person. This person is much more likely to see redeployment as a chance to try something new and get some variety in their work. This person will be pulled by managers from other areas who want him/her on their team. That seems straightforward. But how long will it take before every supervisor and manager--always--gives up their best person to the rest of the firm anytime they can free up a team member?
You can begin to understand why leadership behavior development takes consistent focus and time.

What should senior leadership do to create lean success?
  • Push up your personal learning curve. Invest time in visiting a benchmark organization, read a few key books, and then start to get your own kaizen event experiences.

  • Do the normal change management stuff. The model developed by Harvard's John Kotter, including building the rationale for the need to change, dramatically increasing the amount of communication, etc., is a good one.

  • Find a master teacher who has the necessary decade or more of personal experience with the tools, practices, principles, and leadership behaviours that can guide you and your team.

  • Develop a strategy-deployment plan. This is a lean tool that organizes your efforts, and gives leadership a venue and format for regular reviews of the continuous-improvement process.

  • Start the process. Be on the first VSA team. This VSA will give you a guide for the initial lean work to be done in your first chosen value stream (typically a product family). More important, it will be your first experience of walking the value stream. You will develop a personal understanding of how much waste exists, and an idea of how much you might remove on the first improvement pass.
Shortly thereafter, go on a full-time, week-long kaizen event. This kaizen will show you--at a smaller, more micro level--specific waste in a process. You will be amazed at what you learn, and amazed at how much waste can be removed in a single week

You will discover how excited your team members are when they can improve their own workplace and, probably shortly thereafter, at how much new work is needed to make the gains stay in place and avoid drifting back to the old methods. This last step is not optional. There are no successful instances of true, sustained, enterprise transformation where the CEO-level did not get personal experience on teams. None! It is that important. You cannot skip this step. It's perhaps the core leadership practice that determines success or failure in the lean transformation.

Finally, you must address resistance. There are always late adopters who will resist anything new. They cannot be left alone. If you leave them alone, they will become a cancer and, like any cancer, they will metastasize throughout the organization unless they are eradicated. Dealing with them can be tough stuff, and if the process of addressing resistance is not understood and led from the top, it won't get done. And neither will the lean transformation.

For those of you who are not CEOs, and are now thoroughly depressed about your organizations' lean prospects, there are a couple of things worth focusing on. Toyota has always taught the idea of building a "model line" as the first step to any transformation. The model line is an area where you put lean ideas to work and show that lean can be successful. It can be your own area. And if you take a "first pass" through the area with lean tools, don't stop. Take a second pass through every process and work step, and then a third pass, etc. The goal is to create an area that performs to such a high standard that it creates pull from other areas that wish to apply the process. 
Also, for each Jishukin that you organize, try to persuade a senior leader who seems interested in lean to join the team. That leader's personal experiences will eventually convert him/her to the lean way of thinking. Meanwhile, your personal lean learning curve will be growing continually.