C.J. Buck, CEO of Buck Knives
The LEI senior executive series on …
"As a leader you have to realize that people have to be free to fail. They need to learn from it and minimize it, but you can’t be running around pounding on failures."
As part of a continuing series on leading lean transformations, the Lean Enterprise Institute (LEI) will interview executives from a variety of companies to explore the challenges lean transformations present to senior managers.
What follows are perspectives from C.J. Buck, CEO of Buck Knives in Post Falls, Idaho. Buck has been manufacturing knives since 1902. It sells knives through major distributors and major retail outlets such as Wal-Mart, Cabela's, and Bass Pro Shops.
LEI: Why was lean chosen as a transformation strategy?
Buck: The business reason for launching a lean transformation was survival. Our company had a near-death experience in 1998, following the failure of a very important tool product with sales that skyrocketed and then plummeted, and it just rattled us. We lost money in 1999 and 2000. In 2001, we did some minor tweaking and were expecting marginal profits, but then 9-11 hit. In our business, any time something rattles the floor in the fourth quarter, there’s just no reaction time. The other thing was that imports were just getting better and better, and we figured out we had to cut costs by 30%. We realized we had to do something because we were not competitive. We created a five-year plan that included three key items: moving to a new location, launching lean, and buying a new ERP [enterprise resource planning] system.
LEI: Had you been exposed to lean prior to that? Were you a believer from the beginning?
Buck: Back when our inventory turns were one or two [a year], we would have consultants every once in a while tell us that they could be six, 10, 20 — whatever, with lean. I didn't believe them. I thought they were blowing smoke. Then I got a taste of the lean philosophy at a seminar a group of us attended that was part of the manufacturing extension partnership program at San Diego State University. They said we would be more efficient making one knife at a time rather than batching. It made no sense to me whatsoever. I didn't believe it until they put us through some little manufacturing simulations, I’ll call them "Lego" exercises. The leaders would do things like introduce a material defect during the simulation, and you could see that at the table where they were doing batch manufacturing, that little material defect just gave them fits for the balance of the exercise. So for me it was "seeing is believing."
We were also obviously impressed with the success that Toyota had enjoyed, plus we knew that we had to do something dramatic.
LEI: How did you show your commitment to this change?
Buck: I learned — I read books, I went on tours, I participated in classroom sessions, I worked on the simulations and the kaizens.
Also, as a leader you have to realize that people have to be free to fail. They need to learn from it and minimize it, but you can’t be running around pounding on failures. You need to realize that when people accept change, they do so at great personal risks, and that’s a tough thing to balance because you still need your corporate disciplines. That’s been one of our struggles. We have changed so many measurements that we’ve lost a lot of our benchmarks, so we are recreating those.
LEI: How has your role as a leader changed from how you used to run the business?
Buck: Lean is now my common-sense filter. For instance, one thing we realized is that excess capacity is useless unless you use it. That sounds like a bonehead-simple concept, but I missed it. And every year we would sit down and wonder where that half million dollars in cost reductions went. It went into excess and unused capacity that didn’t net us anything.
LEI: Your accounting staff is practicing "accounting for lean," which is a practice and movement that aims to change traditional accounting practices so that they reflect true performance. How has this helped you to transform the business?
Buck: My background is in marketing management. I’m not a business-finance manager, but I’m not stupid. I realized very quickly that the questions being poised by lean accounting and the systemic business approach made total sense. For instance, standard costing says that it takes so many minutes to make a product, every minute is valued at a certain cost, and if you can shave a minute out of that process time, you will have created another dollar or two per profit per product. It’s just not true. You have to take a systemic view. If someone here gets done faster than the next person, they just have to wait. You have not netted an improvement.