Does lean change how you think about business?
Dear Gemba Coach,
I can see that lean changes how one thinks about business, but can’t quite put my finger on it. If you had to sum up the main changes in thinking, what would they be?
Thank you for a fascinating question – it really gave me pause. I recently had the opportunity to do a gemba walk with an experienced lean COO starting in a new business unit and having to explain lean all over again. On the gemba, then, what does he see that the local managers don’t? I’ve been thinking hard about it and I think I can spot six very large differences in the way he handles situations.
1. Quality before Cost
Local managers assume that poor quality is a matter of bad luck – out of their hands - and that their main mission is to control costs at all costs. Their first knee-jerk mental reaction is: how much would that cost (either in additional expense or unit cost)? The lean COO thinks immediately (1) how many lost sales does a quality problem at customers cost and (2) how much extra capacity is necessary to cover for poor operational quality. Here you can spot a stark difference in reasoning about the business and what “costs” really mean.
The lean COO’s business reasoning is all about covering fixed costs. He needs first, more sales to cover for his existing investments, and second, to use existing capital expenditure better through higher first pass yield and greater flexibility (greater variety on the same equipment). In his experience, decisions made to improve fixed cost management have a mechanical influence on lower costs overall but also require a more relaxed attitude to immediate expense.
Concretely, for instance, this means not hesitating to pay for special transport to deliver to customers on time if operations have had delays. This is an immediate additional expense the COO finds obviously worthwhile. On the other hand, he also asks logistics the team to visually track special transports on a daily/weekly/monthly basis and requires local managers’ kaizen efforts to reduce the causes of special transports.
2. Engagement before Optimization
This particular COO hates seeing things stored in corridors. He asks his managers to remove shelves and storages areas from corridors and use them for – in his terms – “corridoring” (i.e. moving things from one place to the other). Most managers find this absurd and arbitrary – they need space, they want to reduce unnecessary movement of boxes, so corridors are often seen as the most efficient place to have shelves, or photocopiers, or whatever. We can understand their way of thinking.
The lean COO sees it differently: he thinks in terms of employee engagement. If a corridor does only one thing: allow the movement of people and stuff from one place to another, all people can engage more easily in keeping alleys free of clutter, clean and painted and so on. Each person sees the effort required intuitively and will happily lend a hand in the right way.
Corridors are the most basic example, but the COO thinks about engagement first in every management decision. With visual management, obviously, as a more intuitive workplace is not only a better place to work but also increases trust in the environment. Beyond visual management, whenever managers present an action plan he asks them: “How does this plan engage your people; do they see their contribution in the plan; should they feel like making an additional effort; is it obvious where they should apply themselves?”
Making things simpler to engage employees as opposed to optimizing plans in order to achieve several results in one go is counter-intuitive to many managers who pride themselves on their cleverness in devising action plans. Putting engagement first is definitely a clearly different way of thinking.
3. Fit-To-Fact before “Simplexity”
On a similar front, whenever this COO is presented with a plan to tackle this or that situation, he first asks to visit one instance on the gemba. This doesn’t mean he doesn’t take reports and data into account, but that he understands that information means data in context.
It’s precisely because no two instances are exactly the same that gemba walks are so important. Looking into specific instances allows one to see how managers have simplified the complexity of the real situation in order to formulate a response. It turns out this is really tricky because many managers have been promoted by past bosses for their ability to put complicated situations “in a nutshell” and suggest simple, blanket decisions that will do away with the complexity of the situation.
Such bold action may sound good in management meetings, but usually both ignore how people feel about it in the field and miss critical context elements and lead to indifferent effects at best or disastrous outcomes at worse.
Typically, as we did gemba walks, the COO asked to visit equipment he had been asked to replace. In front of the machine, he asked about its operational utilization, main problems, and maintenance plan, to the embarrassed silence of the local manager who had taken the output numbers at face value and not gone and seen. On the gemba, the area was clearly sloppy, the operators hiding away as the management team approached and the sophisticated machines were not given much loving care. There was indeed a problem here, but probably not one that could be solved by reinvestment.
4. Time-Wise Rather Than Stock-Wise
Managers think in terms of stock: have I got enough components here to supply the next process. A clear difference of lean thinkers is that they think in terms of time-lag: when will the next component (or container) be delivered.
This applies very generally. For instance, during the gemba walk, the site manager took his boss to a clean room – not so clean as it turned out. The manager explained the room was clean as all procedures were followed. The COO asked “when was the room cleaned last? When was the last cleanliness measurement done?”
Thinking in terms of lead-times and takt times (tempo) make everything look quite different, and is a mental discipline that can only be acquired through years of lean practice. The fundamental question a pull system asks (a materialization of takt time) is: has the team everything it needs to achieve 100% of its schedule every hour?
This is a very demanding question to managers and radically turns on its head the usual attitude of “’they’” don’t work harder into “do we work harder at creating easier working conditions?” and hence the 4 Ms at the heart of basic stability:
- Manpower: are there stable teams of well-trained people?
- Machine: is all equipment working well?
- Materials: are all materials and information available and correct when needed?
- Method: are the working methods effective or wasting people’s time?
5. Potential Before Actual
A radical shift in thinking brought from practicing lean thinking is how you look at people. With traditional management, people are easily turned into instruments – tools to be used for specific tasks and then discarded when no longer useful. “Before you make products, first you must make people” has to be the foundational principle of lean.
As John Shook kindly clarified, this is much deeper than meets the eye: “English words capture the sentiment to a degree but give a decided implication of sequential cause and effect that doesn’t accurately represent the real thinking. The real thinking is better reflected in work Toyota put into articulating its people development philosophies and practices that they eventually decided to call “OJD” – on the job development. When I was there, we just borrowed the traditional English language reference to OJT – On the Job Training. When Toyota eventually realized the limited way western business people considered OJT, they expanded it to OJD and described it as “development THROUGH the job.”
In other words, it’s easier to act your way to desired ways of thinking than to think your way to desired ways of acting, though the relationship between the two is more symbiotic than directly causal.”
This lean COO has completely changed how he makes personnel decisions – turning away from fire-fighters towards deeper thinkers and quieter managers. Learning to look at people through this developmental framework has a deep and lasting impact as you start to think of individuals in terms of their potential and how to bring it out. Clearly, this is not always easy, particularly when you feel they’re being obtuse, resistant, or plain slow, but as you practice it, looking at the potential underlying the actual fundamentally changes how you think about people.
Which equally fundamentally changes how you think about organization, as you start seeing any company as a team of people, an addition of individualities with each having their personal contribution. Trying to turn people into robots by squeezing them with roles, rules, and functions simply stops making sense. Instead, organizing becomes creating clear orientation and reference points for people to put their initiative and ingenuity in the service of the larger mission – and for supporting them in developing their abilities to do so.
6. Problems Are the Base Material of Progress
The starting point of lean thinking is reversing your thinking and not seeing progress as a sum of solutions that add to each other, but as seeing problems that individuals strive to solve as the base material of human dynamism.
People are fundamentally and deeply curious. We all love books or films as long as the mystery that enfolds is kept alive. No matter how society tries to pigeonhole us, we dream ourselves as explorers and adventurers – and through imagination, our inner world is just as vast as the outer.
Whether large or small, problems are the mystery units that make up our days. Psychologically, we tend to see ourselves in two modes: either “performance” in which we just want to get the job done, or “learning” in which we want to explore and experiment (great talk on the topic: https://www.ted.com/talks/eduardo_briceno_how_to_get_better_at_the_things_you_care_about.
Traditional management is obsessed with keeping people in the performance zone. The theory is that you hire people fully “learned” and you get your money’s worth out of them by making them perform, and perform. This is just plain silly. Lean thinking is all about constantly embedding learning into performing, to keep looking for dynamic gains (as opposed to the diminishing returns of static optimization).
Every problem is an opportunity to embed learning into a day-to-day job. Problems enable us to concentrate on what we haven’t mastered yet, and to make mistakes, try new things, and, well, learn.
Thinking differently about problems also has a profound impact on relationships at work, because as a manager you learn to welcome unfavorable information as opposed to shooting the messenger and dismissing people as “either part of the solution or part of the problem.” This deep, deep attitude change in management completely changes the atmosphere at work and the quality of the teamwork.
I’m not advocating tolerating incompetence as part of being too understanding of “problems.” Lean thinking is about winning – learning to be more competitive in turbulent environments. Clearly, the potential and “can do” attitude of each person matters tremendously. Some people will grapple with the problem whilst others will continue to avoid it (or pass the buck to someone else) – this is a simple fact of management. The big change in thinking is that problems themselves become the fabric of daily management.
These six changes in your thinking will, over time, radically change how you think about business. Revenue is seen as the outcome of positive relationships with customers built on greater reactivity and faster offers of new products. Profitability is seen as better management of the fixed costs of running a business in terms of higher quality and greater flexibility to get more out of the total cost base (including capital expenditure) as opposed to chasing costs line by line. And people are indeed the main source of success as their inner potential can express itself through greater vitality if they’re allowed the simple dignity of doing their job as best they can and the recognition of their efforts, whatever their rank or position in the company. This is, I believe, a radically new way to look at business.
Lead With Respect Shares Tangible Practices That Develop Others, Says Author Michael Balle
Michael and Freddy Balle's book Lead With Respect portrays on-the-job behaviors of lean leaders which can be learned through practice. Michael explains how these can help fulfill the promise of lean by aligning the company’s success to individual fulfillment.
How Can Lean Affect Shareholder Value?
Lean can help challenge assumptions and surface opinions that ultimately improve shareholder value, argues Michael Balle.
Why Lean Is the Strategy We Need For Today's World
At all times, and especially in uncertain conditions such as today, lean is a learning framework, argue Michael Balle and Dan Jones.