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Do CEOs Matter?

by Lean Leaper
April 22, 2014

Do CEOs Matter?

by Lean Leaper
April 22, 2014 | Comments (10)

Conventional wisdom says that without CEO buy-in, any lean initiative is doomed to failure. Jacob Stoller, a journalist who specializes in Lean, set out recently to find out if this is true. In March, he sat down with LEI’s own CEO and Chairman John Shook who offers a dissenting view. Yes, CEOs are important, Shook says, but they may not be as important as we think.

Jacob Stoller: I hear again and again that only 5% of organizations are successful with their lean initiatives, and that the chief culprit is a lack of buy-in from the CEO. What’s your take?

John Shook: Well, I’m not sure we’re looking for the right thing. Even if we accept that 5% figure, I wonder if we’re focusing too much on the CEO. The question really should be, what are the most useful things to focus on?

Organizations are ultimately collections of individuals, so we have to look at each individual, where they need to go. That applies to the CEO, and it also applies to the managers, workers, and also, indirectly, to customers and shareholders. 

Is the CEO the most influential person in an organization? Sure, but I think we tend to worry about them too much. This is, by the way, an extreme minority view among my colleagues. People like Art Byrne, George Koenigsaecker, or John Toussaint are going to argue with me on that. 

Why do you think we are so hung up on CEOs?

I think this is a disguised residue of command and control thinking on part of the observers. All of us are affected – there are underlying assumptions that we all have and that we don’t recognize. And although I know our description of what lean leaders should do is not command and control, I think we are still inviting the same fallacies when we when we look to the CEO as the savior of our lean transformation.

Part of this thinking, this underlying assumption, is that we tend to see organizations as big machines. Thomas Johnson did a very good job of challenging that notion in his book Profit Beyond Measure. He used the idea of ecosystem – more of an organic model.

How does this affect how you help organizations?

I like to use the analogy of a physician. When organizations come to us for help, I think we need to be in a position to take the patients as they come. The belief that “really we only focus on companies where the CEO is wanting to change” is the equivalent of a physician saying “I’m only going to work with patients who will do what I say.” 

Of course a physician who chooses patients that way will have a good success rate. There’s no doubt that patients who stop smoking, stop drinking too much, who get lots of exercise—they’re going to get better results from that physician’s care. It’s the same if we say, “I’m only going to work with companies whose CEO is going to change.” Of course, this is the minority.

That leads to the question of why is it that CEOs don’t change. Again, it’s a matter of the person they are today, especially when they’re in their 50s or 60s and used to working a certain way for many many years. Whether that person is the CEO, VP operations, or the union representative. 

The point is, at whatever level you start your lean transformation, you will run into problems with the other levels. If you start with the CEO, middle management is going to be the problem. If you start with middle management, it will be the CEO. The problem is when you move from making progress from one level to another.

Is the CEO the most influential person? Yes. Is the CEO more influential than a thousand middle managers? I don’t know about that at all.  Each situation in that regard is probably unique.

Another thing I think is worth mentioning is that when we say “CEO”, most people tend to think of the publicly-owned company. Of course, that’s not what all companies are by any means. So the reasons why a CEO won’t embrace lean can vary depending on whether a company is a publicly-owned multinational, a privately-owned company, or even a startup using venture capital. As you grasp the situation, these factors take you on a very different path of understanding. 

Does the CEO have to repudiate the command and control idea?

I’m not sure about that. The idea of the CEO as servant leader is the popular antithesis to command and control, and aspects of it make sense—that individual is a steward for sure. But beyond that, I’m not sure.

What I find is that when you actually break it down and ask what we need the CEO to do, often folks haven’t thought that through. And often what we need from them is not as much as we might imagine. What those things are, however, can be fundamental.  There are things they can do that destroy a lean transformation. There’s no doubt about that. And if that’s happening, then that’s one scenario. But it’s certainly not the only scenario. 

What about the situation where you need an executive push to get different silos to sit down at the table together?

Often the point where that has to happen is one level beneath the CEO. Getting people on the same page and in the same room talking honestly also requires trust, and some technical understanding of what improvement is all about. That lack of trust and technical understanding is still so broken in companies that I see, and that’s where I wind up focusing a lot of my attention.

And you could make the argument that this is something that the CEO has got to fix. I can understand that view—that this has to be part of an integrated, company-wide strategy.

Another aspect of this is the drawing the line between companies that are truly committed to lean and the pretenders who merely use the tools. How can we draw that line?

Lean change has to have to have that flow dimension, which is continuous improving towards better and better flow towards the customer. And it’s going to have an employee engagement and development component, which means individuals and the organization learning their way forward. If it doesn’t have those two things, I’m going to say someone’s grabbing some tools and using them.

However, you also see a lot of other things happening. If anything, I see just as much of the opposite problem, which is people who do a good job of kind of thinking about the learning organization components without actually doing the hard work to improve flow. I think that is just as common and just as off track. 

When I go into an organization, I don’t look for the tools much. I don’t look for the jargon. I look to see employees engaged in some type of PDCA occurring in service of the customer. Are they defining gaps, and continuously working through them, and then, especially then, there’s the focusing mechanism of the aim of achieving flow? If those things are there, then I’m happy to call that lean.

Any last thoughts?

Lean happens in a lot of different ways, and we have to be very practical. It’s easier to act your way into a way of thinking than to think your way into a way of acting. So how can we act, what can we do? What’s useful? What can we do now to make things a little bit better for the customer? Or for the worker? You do something, and through the doing, you reflect PDCA. And moving forward in that way takes us in the direction we want to go. I think that’s lean more than anything else. 

Jacob Stoller explores this topic in depth in the upcoming book, The Lean CEO, which features insights from 25 CEOs who have led lean transformations. The Lean CEO will be released in early 2015 by McGraw-Hill Education. Learn more.

The views expressed in this post do not necessarily represent the views or policies of The Lean Enterprise Institute.
Keywords:  leadership,  systems thinking
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Joel Gross April 22, 2014
1 Person AGREES with this comment
Isn't it a tad hypocritical to preach "don't blame the individual" on one hand, but then to turn around and point the finger at the CEO when the Lean initiative fails? Respect for people does not end at the C-suite.

Reply »

Mark Graban April 22, 2014

I don't think it's hypocritical.

From a Deming lens... there are stories about how he was gentle, kind, and understanding with the front-line workers. They are relatively powerless. He'd more demanding of managers. Dr. Deming could be extremely direct and critical of the C-level folks to their faces.

Why? Because the higher up you go in an organization, the more responsible you are for the system.

If you're going to "blame the system," who owns "the system?" The CEO. So they can be blamed personally, even though they work in a system that includes the Board, customers, competitiors, regulatory environments, etc. 

Reply »

Robert Camp April 24, 2014

Mark -

I couldn't agree with you more.  

Let's look at the facts:

- The CEO ultimately controls the resorces of the organization.  If they choose, they can lend or withhold their support of a transformation.  Irrespective of what John Shook says, the CEO can make or break the transformation through his/her support or lack thereof.

- Often a huge problem in transforming an organization is the breaking down of silos.  Who but the CEO has that kind of authority?

- John Shook is right, Lean has no shortage of detractors, but when the chain of command poses obstacles to a transformation, who is passively allowing that to occur?  

- If the most senior leader of the organization isn't in full and active support of a transformation, it's a matter of time before it stalls.

- You mentioned Dr. Deming.  There is folklore that when the CEO or Nashua Corporation asked him to come meet with his people, Deming told him "Come yourself or send no one."  Dr. Deming clearly understood who controls change.

In short, if CEOs don't actively and openly support Lean, the transformation is doomed.  In 30 years of practice, I've yet to see a single transformation sustain when the most senior executive wasn't on board.

Reply »

Ken Hunt April 22, 2014
More accurately, it's "Don't blame the person, blame the process". That said, if the CEO gets in the way of improving those processes, then he/she should get some of the blame. They are supposed to remove roadblocks, not create them.

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Keith Lodahl April 22, 2014
I think many Lean transformations fail because of poor change management.  I think many times we have assumed everyone knew the reason we felt change was necessary, and found out many didn't.  We just knew everyone had the desire to change and found that they didn't.  We thought we had shared enough knowledge about how to operate in the new culture and we hadn't.  And we felt that we reinforced the new behavior enough to hard wire it and we didn't.  And the change came unrapped.

The business reasons for change needs to be communicated to the organization  by the CEO.  They are the most likely to be believed.  The Whats In It For Me discussion has to happen by everyone's one up who has knowledge about their reports life and the affect change will have on them.  Resistance will occur and has to be managed.  And recognition for good work has to happen at all levels.

So, I guess it is everyone's responsibility to make change happen, and if we must level blame it happens on all levels too.    

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Nate Easterday April 23, 2014
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Has anyone ever researched the fact that in many organizations, lean initiatives require key individuals to give up a power monopoly.  There is no upside for these individuals to give up their power.  The company could do infinitely better with these lean changes, but the key individuals lose the control, influence, prestige, importance, etc that to them is most important (like a mafia boss).  

These individuals achieved these positions by being shrewd and understanding the politics of those around them.  As a result, these key power holders also know and are quite capable of undermining any initiative that threatens their foothold on power.  These people can be upper level management or mid-level management.  There are even some groups at the lower levels.  Successful companies at lean have eliminated these invisible or ghost power structures.  I have not yet experienced a company that allows these structures to remain and be successful at lean implementation.  

It seems to me to be little acknowledgment that these structures exist.  To me, the comment around the 'poor management of change' distracts and detracts from the lesson that can be learned.  It seems to me companies allow the mob structure for a reason.  The mob structure is a legitimate business strategy.  Lean is a form of governance, economics and culture as much as democracy, dictatorship, communism, and the like.  The company or key people in the company gain something by not being lean.  It could be a perceived competitive advantage or a means of the David in the market to fight the Goliath.  

Once you recognize that not being lean is a legitimate business strategy, it allows the lean practitioner to wisely choose between the truly committed to lean and the companies that are no more than a lean facade.  Just as we preach, focus your energy where true, meaningful change will have its largest impact.  That includes choosing to work with companies that are truly committed to the lean philosophy.  For the truly continuing improvement company and individual, time is on your side.

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Jacob Stoller April 23, 2014

You raise a good point Nate – lean and fiefdoms don’t go together, and command and control power structures stymie lean progress.  This is one of the main arguments for senior management involvement in a lean transformation– you need the authority to shake up the existing management structure and culture, not to mention standard cost accounting and other practices that entrench the status quo.

This isn’t just about traditional managers - some of the most dramatic examples are in lean health care, where leaders have challenged the traditional autonomy of doctors in favor of a more collaborative model.  Change on this level takes enormous resolve on the part of senior management.

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Larry E. Fast April 25, 2014
I am very strongly in agreement with Mark and Robert.  I've led two successful CI journeys, one with a non-supportive CEO and one that was fully supportive.  The latter has sustained , permeated the new culture and is now in it's 15th. year.  The first "success" delivered great improvements over a 5 year period but went into the side ditch within 5 years after I left the company.  Enough said.

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anonymous April 25, 2014
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So, if you hadn't quit, the CI would have been successful without the CEO's support.

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James Mansfield April 28, 2014

I believe that getting buy-in from the "Shop Floor" to the "Top Floor" concerning Lean Initiatives is paramount success. However, to get that same buy-in from the CEO you'd better have started there or have unwavering sponsorship from other CXO's / VP's / Directors that believe in you, your message and the value you and
"Lean" can bring to bear.

I'm currently engaged with one of 10 sites for a large industrial manufacturer.  This engagement is to begin an MES Implementation incorporating elements of "LEAN" and 4 of the 11 elements of MES / MOM. What I've found out is that while the Engineering Directors and Plant Management are all in, the VP of
Production / Operations and some of the "C" Suite are somewhat unsure of how the two are connected and the long term value that LEAN / MES will provide.

Assessing current state, mapping out future state and then tying that data to a value is a must.  It allows the consultant to thoroughly understand their customers business and the business drivers that the Plant Sees and how to present those visions to the CXO in a way they will understand, “Financially.”

So, in short, you may be able to be successful in a Plant “Lean” Journey without the CEO’s buy-in but you’ll never be successful throughout the entire organization until you have it.

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