Lean leadership differs from traditional leadership just as starkly as a lean company differs from a conventionally run enterprise. That’s why developing leaders for your lean organization requires you to teach them to think and act differently. Lean requires teamwork, constant learning, hands-on participation, and a flat organizational structure — approaches that constantly challenge traditional notions about how everything gets done.
Your leaders will have to look beyond “point optimization” and short-term gains and think instead about the longer-term improvement of the entire system of work for every person. These mindsets require a completely different approach to leadership development. You can’t manage the transition to lean; you must lead it.
You can’t manage the transition to lean; you must lead it.
I break this leadership development challenge down into the following broad areas:
- Thinking and acting as a true team.
- Embracing team-based compensation aligned with lean goals.
- Accepting the need for hands-on learning to drive improvement.
- Creating leadership opportunities by changing the structure.
Insist on Teamwork
Your current management team got to where they are by leading the traditional way, and most will have strong beliefs of “the right way” to do almost everything.
Unfortunately, the traditional “right way” is not the lean way. As a first step to fostering teamwork throughout the organization, you’ll have to help your management team see the need for it at the senior level. The head of sales, for example, can no longer run into the CEO’s office to complain about something in manufacturing and expect the CEO to be the referee and settle the dispute. This type of interaction is not teamwork and won’t work with lean.
One of your essential first steps in developing leaders will be getting your senior team on the same page, which won’t be easy. You can start on this challenging task by getting everyone to participate in something simple, like company decisions. Encourage people like the head of human resources or finance to contribute to discussions outside their traditional sphere of influence. Reach out to them and ask, “Betty what do you think about that idea?” As people realize that their opinions are indeed heard and valued, the CEO can continue to stop playing referee and focus on more important matters.
Embrace Team-based Compensation
You can accelerate your new approach to teamwork by changing the way you compensate the senior team and the bonus-eligible. Most traditional companies base most of any bonus pay on individual objectives. This approach works against teamwork and achieving broader lean goals. If, for example, you set most of the supply chain VP’s bonus on objectives to reduce the item cost of all purchased materials, while the VP of operation’s bonus target is to lower inventory, you have just put them at cross purposes. The supply chain VP will try to reduce the price per item by purchasing large quantities that trigger volume discounts. This tactic will increase the inventory the VP of operations is trying to decrease.
So, stop doing this. Replace the individual component with a compensation system that rewards everyone as a team based on how well the company does overall. And align the bonus targets with lean goals. At Wiremold, we set our bonus targets as follows:
- 40% on earnings
- 40% on working capital turns (on a 12-month moving average to avoid doing stupid things at the end of the year)
- 20% on a handful of specific strategic objectives
These targets removed the problem of inadvertently setting one function against another while preserving the ability to determine how an individual contributed to the team. Then we used the annual review to set salary increases and the awarding of stock options and to discuss whether an individual contributed to or hindered the move to lean. On the team or not?
Develop Lean Knowledge
As I said earlier, you must lead a transition to lean. But, of course, you can’t lead something you don’t fully understand, so a big part of developing your leaders is helping them gain lean knowledge. You can start with training about lean fundamentals, clarifying the changes and results expected for the company. This training should include every employee, not just the senior leadership.
This initial training is vital, but don’t overdo it. Lean is something you can only learn by doing, so the real learning will come through kaizen activity and getting everyone on a kaizen team as soon as possible. A typical kaizen improvement activity will last one week (not a hard and fast rule) and involve a group of eight to 10 people (half salaried and half hourly) who will be on the kaizen team full-time. The lean trainer or coach will briefly explain a few lean concepts and challenge them with stretch goals to accomplish during the week. Then, the participants will be on the shop floor (or in the office if it is an office kaizen), where they’ll apply the concepts and make hands-on changes. Kaizen is a doing activity, not a planning activity, so physical changes should start on the first day.
Require your senior leadership team to be on five to six full-week kaizens per year as part of their leadership development.
Participating in kaizen should be as mandatory as jury duty. If called, you must go. Require your senior leadership team to be on five to six full-week kaizens per year as part of their leadership development. The CEO should participate in at least twelve full-week kaizens for the first two years. This pace will rapidly increase the senior team’s lean knowledge while communicating the need to switch to lean to everyone.
On many of the early kaizen teams, be sure to include your union leadership or hourly leaders. Including them will help lower resistance and is an excellent development tool for your hourly staff. Also, I suggest having your outside sales force participate in early kaizens. They will learn a lot and spread the word to their customers about your company’s remarkable improvements.
Create Lean Leadership Opportunities
As your organization becomes lean, it will shift from a traditional functional approach to one where you work in value streams. This change will create development opportunities for those you select as value-stream leaders. Typically, a value-stream leader might be in charge of a product family and get all the equipment needed to make all the products in the family. Adopting this approach creates an opportunity to put some of your most high-potential people into leadership roles and give them a crash course in lean.
For example, at Wiremold, we picked our company auditor, someone from marketing, a woman from inside sales, another from IT, a young engineer, and a couple of our prior supervisors. Then we asked them to move their desks to the shop floor and made them responsible for hitting our operational excellence goals (which were, in effect, our lean roadmap).
We also created a full-time kaizen promotion office (KPO) to organize, lead, and follow up on kaizens. We staffed it with another group of high-potential associates. After two years in the KPO, they would have enough lean knowledge for us to promote them to the next level. This strategy also applied to some of our better hourly associates — we would assign them to work in the KPO after the kaizen activity freed them up.
Using the KPO for leadership development worked well because we were buying a lot of small but strategically important companies with the cash we were freeing up with kaizen. We needed managers with lean knowledge to run them. In two cases, we promoted our better regional sales managers to be operations vice presidents of these acquisitions. Then, after a few more years of learning lean leadership, we made them presidents of one of our new subsidiaries. To be clear: You could never be the president of one of our subsidiaries unless you were a lean expert and driving lean every day.
Of course, at Wiremold, everyone participated in lean training — even the newly hired, bright young graduate engineers for our new product development department. We made them spend their first two years on the shop floor learning lean and our manufacturing capabilities before we let them start developing new products. Likewise, some of our hourly associates became good enough at lean that we promoted them to salaried jobs.
Develop Your Leaders’ Lean Thinking Capability
If you are serious about developing lean leaders, you will need to help everyone in your company see work through “lean eyes.” That’s why lean companies never hire new CEOs from the outside — they always promote someone who has become a lean expert from within. Toyota is the best example of that approach.
Remember that you are not just developing people; you are creating a whole new way for your team to think and act …
Remember that you are not just developing people; you are creating a whole new way for your team to think and act, and it will take time getting everyone to “see” the waste and take action. Your senior management team will have to work as a unit, constantly driving lean throughout the organization. They have to become leaders, not managers. You can’t have operations reducing inventory turns while the sales team is out looking for big batch orders. Everyone needs to understand why this feuding can’t happen. And any good lean leader can explain it to you.
Intro to Lean Thinking & Practice
An introduction to the essential concepts of lean thinking and practice.