May 2007 Vol. 138 No. 5
Nothing can replace the direct involvement of leaders
George Koenigsaeker, Leading the Lean Enterprise TransformationMany of those on the lean journey often ask the question: "How do we sustain our lean effort? What will it take to truly continue on the path?" While there are probably a number of answers to this question, I would like to suggest a few derived from my own experiences.
First, what is the predominant culture of most firms today?
I would say that it's "firefighting." We focus on delivering today's product or service, and we rush to do so. One consequence of this emphasis today is that we do not step back to take the time to "ask why five times," as Toyota would do.
So we keep working really, really hard, but our system does not get any better, because we just jump on the first solution for problems—elimination of the surface cause—as they crop up during the day. The net of all this is that we have gradually built up a system under which we run our businesses, but we do not look at improving the system on a regular basis.
And what is the culture we need to develop to survive and thrive for the long term? What we need to build is a learning culture—and I maintain that the best model of that is the culture of Toyota. What's so unique about Toyota's approach to work is that they have organized themselves to be constantly reviewing all their processes (the steps by which their work is done), and improving them.
So the key to sustaining lean is building a culture that practices process improvement as part of daily life.
How long will this take? Would it be reasonable to assume that it might take a generation of management to establish a totally different culture? After all, changing from a fire-fighting culture to a process-improvement culture requires embracing an "opposite" approach, and "opposites" are very hard for adults to learn.
While I can't really know which practices have been most important in establishing this learning culture, the thing I am most proud of is that, over 20 years, I led 11 corporations, as either President or Group President, on the lean journey. And today all 11 of them continue to practice lean-process improvement. They have managed to do this through several generations of leadership change.
A few thoughts about what has helped these firms sustain a lean culture: Toyota believes that you drive improvement of every line item in an income statement and balance sheet by simultaneously improving the four True North dimensions of improvement—at annual rates of 10–30%. The True North metrics include:
Member Development (processes are improved by people who learn how to study and improve their work);
Quality;
Lead Time; and
Cost/Productivity.
If you want to advance these four dimensions of improvement, you will need to study your work—your processes—throughout the enterprise. That means studying both office/transactional/administrative processes and manufacturing processes—at a pace that will generate the desired pace of improvement.
After all, you would expect the pace of improvement to be proportional to the number of processes that you improve. And the double-digit results that a company like Toyota would expect each year require a lot more process improvement activity than most persons would imagine. A firm of 10,000 people might require week-long kaizen events devoted to studying the work of the firm, at a pace of 1000 team-weeks per year.
Don't panic just yet. You see the point; driving fundamental improvement is a lot of work. Firms that have achieved this level of process improvement have built up to this pace over a period of 3–4 years. They have come to realize that a significant pace of improvement is driven by a significant pace of process study—so they see this work as a productive, valuable investment. The good news is that well-run process improvement typically has a payback on all the costs involved of 90–120 days from the productivity gains alone, not counting inventory cash, improved customer quality and lead times, and other metrics.
It turns out that you drive most lean results from organized kaizen events that are driven by an enterprise value stream analysis and improvement plan. It also turns out that lean is learned from personal participation in these hands-on improvement events. You don't really learn much about lean from books. It's the struggle of applying new tools, new principles, and new practices to a "chunk" of your existing work—expecting major improvements to be implemented within a week—that drives individual learning curves and begins to build a new culture.
So these kaizen events really do three things at the same time. They actually redesign processes and delivery results, but they also are the key way anyone learns to understand the practice of lean, and they accumulate into building a new culture—a learning culture.
Let's think about leadership a bit here. When an organization starts the lean journey, the odds are that almost no one will have deep knowledge of the way ahead, and almost certainly senior leadership will not know what is involved. In some respects, the first step is for leaders to learn how to see waste in their organizations. Toyota believes that the principal form of motivation for improvement is derived from learning to appreciate how much waste exists around you in all the work you and your organization do every day. A lean core-concept is the idea that only a few steps in each process truly transform material (or information, in the case of administrative work). These are the few value adding steps.
Our processes are full of other steps—other work—that does not transform the material or information. In lean terms, that work is categorized as non-value-added.
Most of us are surrounded by the work we and others in our organizations do—but we see it all equally; it is all just work. One of the key outcomes of participation in kaizen events, especially for leaders, is to begin to see how much non-value-added work exists in our processes, and also to understand that we can remove a large portion of it—within a week.
A Wisconsin healthcare group, Thedacare, has studied member survey data very carefully, and correlated scores with the number of event experiences that each person has accumulated. What the data show is that it takes two weeks of kaizen-event experience before the needle moves in terms of positive member survey scores—and that it keeps moving right through about eight events per person. This result is a good measure of the culture change that takes place. So it appears that an ideal approach would be to eventually get all leadership (and the whole organization) to gain eight weeks of kaizen-event participation. In practical terms, it takes years to get to this level, even if you are on a fast pace of improvement. But you need to get on the path.
A pair of examples may help you appreciate what's involved. Led by its CEO Stan Askren, HNI Corp. (Muscatine, IA), the big office furniture group, requires any new manager in the firm to get four full week-long kaizen event experiences in their first year of employment, generally in the first few months. And for every year after that, they must get two more week-long improvement experiences. One lesson learned was that most leaders know how to talk-the-talk and sound like they are "doing lean," but real results are only achieved by those executives who get real experience.
Danaher Corp. (Washington, DC), which is led by CEO Larry Culp, has a Lean Immersion course, where senior leaders spend 90 days doing nothing but lean-improvement work.
Danaher grows by about 20% per year from organic growth, but also benefits from a steady flow of new acquisitions paid for by the cash flow generated by lean efforts at the current organization. In fact, since the beginning of their lean work at Jacobs Vehicle Systems Inc. (Jake Brake) in 1987, the financial performance of Danaher exceeds that of Berkshire Hathaway, the organization run by the famous investor, Warren Buffet. In North America, Toyota conducted a hansei—a deep reflection—on the depth of understanding of the Toyota Way at the company. They concluded that the organization also needed to require leaders to get regular kaizen-event (jishukin in Toyota talk) experience on an ongoing basis.
You've probably realized that a very big part of sustaining lean is establishing a practice of leadership participation on kaizen events on a regular basis—forever. Every time a leader is on a team, it reinforces for that person the reality that there is still a lot of waste in the work being done, and also reinforces the fact that you can remove a lot of this waste in as little as a week. The motivation to improve that this awareness gives to leaders is essential to sustaining lean.
There's a direct link between achieving double-digit annual rates of improvement on the True North metrics (which will in turn drive all line items of the income statement and balance sheet in the right direction), and a strong pace of studying and improving processes. One of the issues for leadership is that it is hard—perhaps impossible—to really define what the organization will look like after another year of lean transformation. Frankly, you've never been there. One lesson learned, for me, has been that tasking yourself to hit your True North metric performance, year after year after year, is a significant part of finding your way on the transformation path. If you start to fall behind in one of the True North metrics areas, it's time for a "hansei" that can lead to corrective action.
This action, in turn, is usually some combination of increased kaizen-event activity directed at that performance dimension, and some addition of lean tools—or increased use of lean tools—across the full organization. So the focus on gaining True North performance each year also pulls the improvement activity needed to get there.
A rule of thumb that I use is that you will be substantially lean when you have studied every process from beginning to end, at least five times. Typically, you can remove about half of the waste in a process every time you study it, but it is impossible to see all the waste in the process at any given point in time. If you think about going through every process in your firm at least five times, you begin to understand several things: that this will perhaps take a decade to do; that you will get better at every step along the way; and that you will need to organize to support this effort over a long period of time.
The real reason to consider five passes through every process is that, as an organization, after you have done this work, you will realize that there is, in fact, no end to improvement. And you'll know that you want to continue this journey forever. It seems to me that we really do not understand the phrase "continuous improvement." We think "improvement," and we imagine it to be a one-time step. But the idea that continuous improvement could actually be continuous is not something we truly believe. After five or so passes through every process, however, you will have built a new culture that believes in continuous improvement. And once you've established this new culture, sustaining lean will be second nature.