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How do I convince senior management to visit the shop floor?

11/30/2012
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Dear Gemba Coach,

How do I convince my senior management to get interested in our kaizen projects? In fact, how can I simply convince them to visit the shop floor?

Good question. Let me ask you back, how do you convince anyone of doing anything? Particularly when you can’t force them?

Senior managers are usually busy people who have achieved their rank by the force of their personality: they’re the guys who get things done, not the guys who take lessons from time wasters. In order to convince a senior executive to accompany you to the Gemba to look at kaizen efforts, you’ve first got to convince them it’s in their own interest, which means showing them: (1) that it’s relevant to getting what they want, (2) that it will get them what they want (as opposed to spending time on something else), and (3) that the experience will be satisfying.

In other words, before you consider ways to persuade them to visit your Gemba, ask yourself if your request considers their Gemba. Most lean officers I meet are intent on discussing their own issues. They want to talk about how various waste impacts the company, and complain that no one cares.  How many times have I have heard lean officers gripe about purchasing policies that systematically give the job to the lowest bidder irrespective of the resulting impact on the process—even when the supplier doesn’t deliver on time or produces poor quality? How many times have I heard that producing large number of products in advance for a product launch not only fills in entire warehouses of inventories but most often create large numbers of obsoletes? The stories of glorious waste are endless. How come senior execs are not interested in stopping such kind of wanton value destruction? Shame on them!

In doing so, the lean officers unknowingly adopt the same posture as the people they despair of convincing: it’s someone else’s fault. THEYdon’t get it.

The Transylvania Price

The kaizen way of looking at this problem is to take responsibility for it. To say that execs don’t get it because WE don’t know how to make them understand. This means that the first step in getting anyone to understand anything is seeing through their eyes and talking their language. In this case, what is a senior manager’s language? Budget.

Modern companies are built, by and large, on the model developed by General Motors under Alfred Sloan: (1) manage by numbers; (2) manage by objectives; (3) manage portfolios of activities and (4) delegate. Starting with the plant manager, a senior line exec will: have a budget to make, be incentivized on reaching certain key numbers, be asked to implement a range of activities, and be expected to delegate these activities effectively.

In this framework the purchasing manager’s stand makes perfect sense. She’s got to reduce the overall cost of purchased parts by so much every year. She’ll get a bonus only if she achieves this, and she’s got a number of higher-up initiatives to implement. A few years ago, for instance, the purchasing manager from a large OEM had a clear objective from her CEO: 30% suppliers in low-cost countries, or else. Not surprisingly, at site level, they often wondered why corporate forced them to replace their good suppliers (with whom they had a long standing relationships) with some unknown Transylvanian guy who couldn’t deliver a part on time (and for that matter couldn’t even make a good part). Well, it might not make sense for the site or the business, but it certainly does for the purchasing director’s bonus.

I suspect, from your question, that you are a lean officer. So here’s the first question you should consider: how good are you at reading a budget? Before you meet with a manager, have you studied their budget? Can you examine line-by-line cost items and think: aha! This doesn’t make much sense…why? Can you identify what hasn’t changed in the past three years and suggest an explanation? Becoming a lean virtuoso won’t help you much if you can’t talk to managers, end of story. And learning to speak means learning their language. So: how much finance training have you gone to? Are you ready to kaizen yourself before preaching to others? Learn to read a budget.

When you do, you will discover that most managers have a specific ways of hitting their budget numbers. They try to think how to manage the top line by very global reasoning. They will look at purchasing costs, for example, at a very global level and think, “Hey, if I outsource half of these parts, I’ll get a better price on them.”

Or they’ll analyze labor costs and say, “Hey, I forbid them to hire temps, I’ll reduce the labor cost by so much.” When looking at the numbers, such conclusions are reasonable in the world of finance…but not always in the nitty-gritty day-to-day grind. These products have to be delivered in order to be paid for and for the cash to come into the till. And many of the cost-based strategies have unintended consequences that create large real exceptional costs. Outsourcing parts means losing critical part knowledge and creates exceptional costs in dealing with suppliers, and related problems. Later on, when we renew the product, having outsourced the part can create engineering issues because no one knows much how this part behaves any longer, and so on.

It’s All about Performance

Management is like a kind of lottery. As a manager, you are praised for your bold actions, but never asked for the check mechanism, for the test method. At review time it has either worked, or not. You either get rewarded, or punished. You’ve bought the ticket, and hope for the lucky payout. The second survivor’s skill for a manager (after: “Sure, boss, I’ll do it”) is to explain that the numbers couldn’t be hit by circumstances beyond your control (and someone else’s fault): it snowed in the winter, so we had delivery problems, and people took their holidays in the summer so we had quality problems because of all the temps, and so on. As a lean officer, your job is to be able to show that exceptional costs are not exceptional – they are the direct results of some policies.

As Orry Fiume, the retired CFO of Wiremold (see Lean Thinking) insightfully explains, productivity is the relationship between quantity of output vs. the quantity of resources used: it’s a physical equation, not a financial one:

  • Sales $           =          Quantity x Price
  • Material $       =          Quantity x Price
  • Labor $           =          Quantity x Price
  • O/H $              =          Quantity x Price

The trick is to discuss the budget number by going back to the physical quantities that underlie them. You want to increase the top lines? Where are these sales going to come from? Are you going to sell more to existing clients? Which ones? How can you do this with 30 quality complaints a month? You want them to renew their product range? How can you do this if the new product release is six months late? And so on.

Lean is about performance. As lean guys, we often follow a set of physical performance indicators, such as:

  • Accidents
  • Customer complaints
  • On Time Delivery
  • Internal PPMs (bad parts per million)
  • PPH (parts per person per hour)
  • OEU (overall equipment utilization)
  • Suggestions per person
  • Days of Inventory

The trick is then to relate this to budget line numbers. Reducing complaints will both affect the top line and reduce the exceptional costs of dealing with complaints; Reducing PPMs will reduce material costs and labor costs, and so on.

The difficulty, of course is that there is no mechanistic relationship between our performance indicators and the budget lines, it’s mostly a matter of debate, discussion and, in the end, experience and good judgment. Still, this is a discussion we can and need to have with executives. We need to get to discuss the physical drivers of their budget lines. Which brings them to the shop floor.

Most managers are quite smart. When you’ve showed them a kaizen which impacts performance sustainably, and that you can relate to one of their budget line items, most of them will get it, and to your surprise, ask for more, quicker. Now you can work the deal by saying: “Wait a second mate, sorry, but quicker depends on your presence on the Gemba to discuss with your supervisors about why they don’t give you more quicker.” I’m not saying this is an easy conversation, but it IS a conversation. This is the starting point of the relationship. What we’re trying to build is an ongoing debate around:

Budget lines <—> performance indicators <—> kaizen activities

 

Although this graph should really be:

Budget lines <—> experience and judgment <—> performance indicators <—> experience and judgment <—> kaizen activities

Show Me the Money

I have to confess that I’ve not faced the issue of getting managers to go to the Gemba for a long time. I find that managers are actually rather quick (sometimes too quick) at figuring how what they’re doing affects their profits when you know how to point it out.

But it is also true I spend more time discussing budgets than lean with senior managers on the shop floor. We constantly try to figure out how our practices affect our performance and how this translates into our budget numbers. I’m not saying that this is an easy skill to acquire, and I’ve sweated over it (still do), but I have found that when you do that, the issue of going to the Gemba disappears: they’re hooked the moment they see how it pays.

No silver bullet here, the answer to every lean question is work, and more work. And, as ever, kaizen starts with us. So let me circle back to the key issue here: how much time are you investing in learning to speak manage-ese? Learn about budgets, and learn to show how exceptional costs in budgets can be avoided by targeted improved performance, and the chances are that bringing your senior managers to the Gemba won’t be a problem any longer – so you can discover the next level of problems!

2 Comments | Post a Comment
Upender Vaid December 11, 2012
A great insightful article from Michael. I was often  asking this question myself, how to convince management team to visit the shop floor and now I am clear what was missing & how can I make it happen.
Michael Ballé December 16, 2012
Thanks Upender! Now that we are starting to see a new generation of senior executives with a past in manufacturing and lean experience how the lean worlrdview and the finance worldview lead to very different conclusions. My experience is that the discussion in the boardroom leads to one action plan (reduce headcount, for instance), and then on the shop floor to another (improve schedule attainment) - WITH THE SAME PEOPLE! This is fascinating, and I am convinced that the biggest barrier to our furthering our vision of a lean enterprise is our own ability to understand and practice the finance worldview as well as lean thinking! Cheers, Michael
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