Last week’s column shared a story from Gary Convis and Jeff Liker’s new book The Toyota Way to Lean Leadership, in which Gary learned the value of A3 thinking firsthand. He recently replied to a follow-up question, sharing his thoughts on the link between A3 thinking and lean leadership, and the way that this tool can be applied in a wide range of settings.
Q) How does A3 thinking tie into lean leadership?
A) First of all the excerpt in the book talks about Ito’s (then NUMMI president) request to me to bring in our engineers to explain each 30-minute breakdown that took place. At our plant we had a lot of older equipment, and maintenance was difficult. The Japanese engineers set it up with no buffers, so one-piece-flow was what you had to achieve. And you can imagine in this connected plant that if one piece of equipment shut down then the next one shut down and so on throughout the plant. That’s the way the system works—the production system provides all the motivation you need because there are no crutches. JIT means just in time: everything has to work the way it should work because if it doesn’t you feel it immediately.
And I was struck by the ability of the guy who was not close to the floor, who had this uncanny skill to ask fairly logical questions that got to the core of what was in the engineer’s mind, or revealed a flaw in their thinking. I found it very interesting that you had a finance guy who could see the logic—see through a void in the logic—and ask a question based on the story being told in the A3. The A3 really forced the individual writing it to think very deeply and be able to express themselves clearly with few words following the context of what he did, what he intended to do, how he analyzed it. The power of it was dramatic.
And it wasn’t just at Toyota. This experience sold me on the value of A3 as a tool—a flexible tool that could apply to almost anything. I went on to use it at Dana, which was a totally different situation in scope and usage of the A3. But the power of it has infinite capabilities.
At Dana, which was emerging from chapter 11 at the time the global recession hit, we had 30,000 people working in 26 different countries with 113 plants and 5 different presidents. And when I got there as CEO in 2008, the operations guys and I developed 12 core key performance indicators (KPIs). We formed a team to implement them on a trial of two businesses in each region for a month to see if folks could buy into them. We wanted to check because we planned that these measures would become important drivers of performance. Eventually we made a few adjustments and these became the standard that we rolled out across the world. Next we added a standard meeting area with KPIs being on big boards—a big Obeya across the plant. Compared to what we had had before from a cultural point of view this was very different. Previously there were no standard KPIs, and if they did exist they were kept in a plastic folder that had yellowed, small font, and which no one ever looked at it. So we had a very clear goal of making the KPIs meaningful and visible to motivate the whole work force. (Later we rolled down the metrics boards to each supervisor’s area.)
This allowed us to establish a baseline of performance in 2008 for the next year. To support this for 2009, in late 2008 I asked each of our 113 plants around the world to develop an A3 that focused on two things: improvement on conversion costs, and reducing inventory. I kept it narrowly focused—didn’t ignore safety or quality—but we were in the throes of the worldwide recession and needed to survive as a company. We needed to keep the focus narrow at the highest level. We needed to keep jobs and the business had to reduce costs as revenues were dropping. We needed cash to operate. In this early cultural stage we at the top set their targets—that was not negotiable.
I used the A3 format as a way of seeing inside the minds of the 113 plant managers. One of the main things I learned at Toyota was hoshin kanri, which means aligning with the company goals and how am I going to achieve my goals. And I learned that Toyota really values the word kanri–HOW I am going to achieve my goals. Most Americans value the hoshin. And I didn’t want to go that way. I learned that the means and the process are just as important as the target. So at Dana I said that I want you guys to tell me how you are going to meet the conversion costs and inventory reduction target line by line. Who do you need, what resources are needed, and what is the schedule that will get you there? I wanted to force them to realize what it was going to take to actually reach the aggressive reduction of costs and expenditures set as a target.
So, in mid-December we set aside three days, and contacted every plant manager, setting up webcasts to communicate together. They sent their A3s to us and we reviewed them one by one, plant by plant, in different languages. We listened to them (group of five) from 7 in the morning to 11 at night for three days straight. We would make comments line by line as the review took place and send them to them electronically and grade them. Some were acceptable, some prompted questions, and about half, in the first round, were unacceptable. We shared feedback about why they were unacceptable, and said by January 4 they had to have the revisions to us, and we would do another call. After that I had someone who made weekly calls every Thursday from 7 in the morning to 11 at night to all plant managers to review their progress for the week and plans for the next week—asking the 5 whys and getting them to think deeply about what they were doing. This was critical or the actions would have been pushed out until near the deadline and there would not be ongoing learning. We also had local continuous improvement specialists as coaches.
That process is how I used the A3 to drive our goals and to follow up and get the plants to focus on realistic attainable initiatives that would achieve the goals. Many of those A3s were rough the first year but we got through it. We achieved our targets of $200 million in conversion costs and $200 million in inventory reductions. That convinced people that this was a great process for learning and achieving goals and much more than a simple piece of paper. I believe that consistency is important with operations. Every year, even since I retired from Dana, they continue to do the same thing. Sometimes they start earlier. And now they have gotten the department heads to use the same A3 format. They use it for cost, quality, productivity, safety. It has become a commonly understood communications tool that is used throughout Dana now. For example, our Vice President of engineering had picked up in its power early on and used it to drive a lot of improvement in R&D.
I tell my managers that they should be able to take this paper home and explain it to their ten-year-old child. The words on the paper and the story have to follow some sort of reasoning that the person sees. They should see the background, see the things that they need to analyze. Above all the A3 should tell a story. That is the key point. The A3 with Mr. Ito was used to tell a story about a breakdown. The one I used at Dana was about goal achievement. I used it for just about every other phase of major business in our business. It’s a flexible lean tool.