Deming's Influence on Lean

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There are numerous books and papers available today that, in one way or another, touch on the subject of lean. I am amazed, however, at the number of these publications that fail to make the connection between lean leadership and W. Edwards Deming’s theory of management.  Besides the fact that Deming had a huge impact on Toyota over the years, I don’t think it is possible to truly appreciate the impact of lean on the overall organization without a basic understanding of his philosophy on leadership and transformation.

I am not discounting the effect that people like Taiichi Ohno, Eiji Toyoda, Shigeo Shingo, and others have had on the development of lean thinking, but Deming’s influence, especially in the area of leadership, is so critical that I wonder how anyone can truly lead a transformation without developing an understanding of his System of Profound Knowledge (SoPK).

The System of Profound Knowledge

Deming developed his system of profound knowledge as a “framework of thought and action for any leader wishing to transform and create a thriving organization, with the aim for everybody to win.”  The SoPK has four elements that work together as a system to enable transformation toward what we now refer to as lean thinking.  If leaders ignore any of these elements, the chances of unlocking the “big gains” available to organizations or sustaining improvements over the long-term are extremely small.

The four areas within the SoPK are as follows:

1.     Appreciation for a System  Leaders need to understand that the organization is a system comprised of a complex interaction of people, processes, and the environment that work together to achieve an aim.  Failing to identify and continually drive toward the aim will lead to behaviors and actions that are destructive to the organization.  Conflicting objectives, short-term thinking, and poor supplier relationships are some of the results of failing to understand and apply systems thinking.

Within lean thinking, helping people understand how the work they do aligns with the organization’s long-term objectives is a critical responsibility of leadership.  Without an understanding that the organization is a system, however, it is virtually impossible to do this on a continuing basis.

2.     Knowledge of Variation  Assuring the right measures are collected and understanding what the measures are saying about performance is critical to assuring an organization continually improves.  When performance is not as expected, whether above or below expectations, we need to understand the reasons for the gap and the type of action to take.  Knowledge of variation will help leaders understand whether problems are built into the system requiring management action, or caused by something outside of the system and can be addressed locally.

Also, having an understanding of variation will drive the organization toward the creation and use of standardized work to help stabilize performance.

3.     Theory of Knowledge  For a team to continually improve performance, it must be able to learn effectively, and learning effectively requires continual testing of opinions, ideas, and hypotheses, which is the basis of the Plan-Do-Study-Act (PDSA) cycle.  Although Deming was not the first to apply the cycle to process improvement, he is credited with identifying it as a critical element of leadership.  In organizations that have successfully adopted lean thinking, the PDSA cycle is applied at all levels, from the shop floor to the board room.  The cycle is the basis for changing the way people think and approach work.

4.     Psychology  Organizations are made up of people and, without an understanding of what motivates people and how they learn, interact, and develop, the ability to develop an organization that continually performs at a high level will be severely hampered.  Too often, organizations promote people who are technically good at their jobs and leave their development to chance.  As a result, the organization suffers from varying leadership styles and confusion among team members.  On the other hand, when the organization standardizes its approach to developing leaders and teaches them how to

Although one of the objectives of lean is simplicity, the methodology can be very complex, requiring a level of understanding of organizational behavior that many people do not appreciate.  Success requires a continuing commitment to learn about the theories upon which lean was built in order to understand and deal with the specific situations, relationships, and interactions that make up an organization.  The more you understand the what and why of lean, the more effective you will be with the how during the deployment.

I would never refer to myself as an expert of Dr. Deming’s philosophy.  Like much of lean thinking, though, the more I apply the SoPK, the more I learn about it.  I believe a big part of what Deming was trying to teach, though, was the idea that transformation is a journey, and the only way to keep progressing along the journey is to continue to learn.

Using Lessons Learned to Drive Improvement

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It is fairly common for companies to hold a lessons learned session after a major project or an incident to understand the things that did not go well and could be done better next time.  Unfortunately many of these types of sessions I have seen over the years do not really accomplish much in the way of sustainable improvement for the company.

Learning is not necessarily an easy thing for individuals, much less teams and organizations, and it often takes a cultural shift to create the type of environment where deep learning takes place and truly sustainable change occurs.

THE ELEMENTS OF LEARNING

There are several elements that need to exist for a team to learn from past events and use the learning to drive improvement.  In no particular order, these elements consist of the following:

• A Process for Learning: People on the team need to understand how to learn, in particular the PLAN-DO-STUDY-ACT (PDSA) cycle.  The PDSA cycle is based on the concept that learning is driven by continual stating and testing of hypotheses.  If a project experienced problems, for example, the team needs to consciously understand what it expected to happen, including the processes, systems, etc. that were supposed to drive the expected results.  In the end, it is these things that need to be adjusted to change the result next time.
  Sustainable change is not driven by the memory of an individual or the team in place at the time.  People move on and teams change, and if the processes and systems used for the next project are not adjusted to apply the learning, results will very likely not change.

• Appreciation for Standardization: The organization needs to understand and believe in the benefits of standardized work.  If individuals are allowed to stray from standards – something that is much more common than people like to admit – there is nothing to assure that changes made will be followed in the future.  Standardization also provides an anchor for learning because it describes the process that is expected to be followed and drive results that meet expectations.  A standard that cannot be followed or results that do not meet expectations identifies a problem that, through the PDSA cycle, will drive learning and improvement.

• Confidence to Learn: In many organizations, learning from others can be seen as a weakness.  Especially in organizations where internal competition is strong, learning from a peer can affect a person’s career progression.  This feeling can drive people to discard improvements made in other areas of the company to the point where learning is completely stifled.

• Effective Problem-Solving: Improvements made in one area are often expected to be immediately adopted in one or more other areas that perform similar work.  Implementing a change without clearly understanding the problem being addressed can negatively affect performance.  People should actually be discouraged from applying an improvement from another area without first doing some level of problem-solving to assure that the change benefits performance.

I’ve attended many lessons learned sessions that, although the people involved did an excellent job of understanding the problems experienced with past events, resulted in little change.  Understanding and addressing the above elements can greatly improve the benefits associated with these efforts and drive a culture of learning and continual improvements.

The Price of Fear

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"Drive out fear so that everyone may work effectively for the company." - W. Edwards Deming

What does fear cost businesses each year?  Thousands? Millions? Billions?  It’s something that obviously can't be measured accurately, but when I think about some of the organizations I have worked with in the past, I'm guessing the figure is extremely high.

Although the type and extent of fear differs for every organization, it affects virtually all companies in one way or another.  Since much of the cost related to fear is indirect and difficult to measure, though, most companies don't think about it or put forth the effort to reduce its existence.

The Effects

Okay, fear is not necessarily a bad thing for the human race.  It is an emotion designed to lead us to take action when we sense danger.  As a fundamental instinct, fear is a short-term behavior that motivates us to avoid or escape from dangerous situations.  In this sense, fear can lead to bursts of energy and creativity to assure safety and survival.

Within the workplace, however, fear tends to be a chronic condition that wears people down over time.  Although chronic fear affects different people in different ways, most psychologists agree that it is destructive.  Any positive effects on motivation and action are short-term.

The fears that commonly exist within organizations include fear of layoffs, disagreeing with decisions and opinions, asking questions, and taking risks.  In business, the areas that are negatively affected by these fears include the following:

• Creativity & Innovation: When people are stressed, the conscious mind blocks creativity and innovation.  Fear prevents people from relaxing to the point where they can access the right brain and develop creative solutions to problems;
• Goals & Objectives:  People will avoid committing to stretch goals and objectives when they feel there will be repercussions if the goals are not met.  Fear also leads people to do whatever is necessary to meet a goal, whether or not it actually helps the organization meet its objectives;
• Customer Focus: A culture of fear and blame causes people to focus on meeting the needs of their boss rather than the customer;
• Learning: Effective learning requires the freedom to study the facts and test ideas in real situations.  Some ideas will fail, which is okay because of the learning that results.  Fear of failure blocks people from taking the time to clearly understand problems and test ideas;
• Health Issues: There have been numerous studies on the negative effects of stress and fear on personal health.  Chronic stress suppresses the immune system, leading to an increase in colds and flu, in addition to a host of potentially more serious conditions.  At best, fear can drain energy and lead to indifference and mediocrity.

Taking Action

So what should business leaders do to address the problem of fear?  I have talked with senior leaders in the past who don’t see fear as a big problem because they don’t see it.  Company leaders unfortunately don’t commonly have the perspective to accurately judge the level of fear within the organization.

Since fear can greatly impede transformation, however, organizations pursuing lean thinking need to understand the level of fear that exists and begin to address it immediately.  I’ve seen this done with focus groups and surveys, but the most effective method is to increase visits to gemba.  Although go-and-see visits to the workplace can initially increase the level of fear and suspicion among team members when done well, the level of trust that results can significantly improve the situation.

Developing plans from the highest levels of the organization to reduce fear greatly improves the chances of success with lean.  Developing an army of problem-solvers throughout the organization requires that people feel comfortable enough to work toward what’s best for the company and its customers rather than what they think is important to the boss.  As the situation improves, the release of human potential to improve the organization can be staggering.

Beware the Next Management Fad

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“It does not happen all at once.  There is no instant pudding.” – W. Edwards Deming

I recently read an article in the February issue of Fortune magazine entitled, The Algorithmic CEO that starts out with, “Get ready for the most sweeping business change since the Industrial Revolution.” The article goes on to tout mathematical algorithms as the most important instrument of change in business today, and credits the success of companies like Google, Amazon, and Apple to mathematics.

I am not arguing with the importance of math to the success of business, but as I read the article, I couldn’t stop thinking “here we go again.”  Another fad representing itself as the one piece of the puzzle that will lead us to the promise land.

We are constantly looking for the quick answer to success and can’t – or don’t – want to understand that it is the result of learning, improving, and pretty much doing a lot of things well.  There is no quick answer to make it happen – it requires hard work and requires a lot of focus, humility, a method to continually improve, and a whole lot of patience.

Management Fads

The article made me remember all the management fads I’ve run into during my career, and how they did little more than distract organizations and make a lot of money for consultants and authors.  It also reminded me of the words of W. Edwards Deming and how we will jump on anything that promises a quick fix to business problems.

As I thought about the numerous management fads through the ages, a few stood out as particularly annoying.

• Six Sigma (yes, six sigma): I had to put this one first because it’s the most recent distraction from working on true improvement.  In a 2013 article in Inc. magazine, Geoffrey James wrote that six sigma results in, “a hierarchy of ‘belted’ experts who run around the company pretending that they know how to do other people's work better than the people who actually do the work. Endless meetings ensue, with little or no effect,” and I can’t agree more.  A 2007 Bloomberg article on the problems Home Depot was experiencing at the time wrote that store workers complained that the constant data measurement “sapped time given to customers.”  Those who have read my posts in the past already know my thoughts on six sigma, so I’ll stop here.
• Business Process Reengineering (BPR): BPR consists of a “blank sheet” approach to designing an organizations critical processes. At the time, it was touted as a way to achieve dramatic improvements in quality and productivity.  Besides the obvious problems of starting from scratch rather than understanding the existing process - including the current problems it’s experiencing - and changing it one element at-a-time to enable it to continue to operate and assure it’s actually improving, BPR somehow turned into a vehicle for layoffs.  I remember people telling me at the time that they were “engineered out of a job.” 
• Management by Objectives (MBO): I don’t have a problem with the philosophy of MBO as Peter Drucker created it.  Determining the organization’s high-level objectives and aligning the objectives of teams and individuals to achieve them sounds logical, and a whole lot like policy deployment.  Once the business world got ahold of it, however, it morphed into something destructive.  Objectives were often disconnected –almost random – and resulted in destroying teamwork by putting people to work on meeting personal objectives whether or not they actually helped the organization as a whole.  Drucker wrote that MBO requires a lot of effort to clarify and align objectives, but many who used it decided to shortcut the process, making it highly ineffective.
• MRP, MRP II, ERP, etc.: I remember reading a report from the 1980s by a team of American manufacturing experts who traveled to Japan to study Japanese production techniques. The report touted the work of quality circles and focus on continually improving processes throughout the plants.  One of the conclusions of the study, however, was related to that Japanese automakers would be even more successful if they replaced their kanban systems with MRP.  Companies were certified for applying MRP (offered, by the way, by a company that provided MRP consulting services), and built staffs to manage the system as inventories grew, costs rose, and on-time delivery of products fell.

I know that the author of the Fortune article is just trying to get the attention of business leaders by comparing math algorithms to the Industrial Revolution, but it’s frustrating to think we could be facing another distraction to instituting strong leadership in organizations.  To credit the success of companies like Apple and Amazon to their use of math is a stretch.  These companies have strong and focused leadership that is on providing products and services that continually make life easier for their customers and team members.  Although they use math as a tool to help the business, it is but one part of the equation that won’t work without engaged leaders who understand and improve their ability to manage the overall system.

Want Lean to Succeed? Stop Focusing on Waste!

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Although one of the most significant benefits of lean is the reduction of waste, it is not enough to say that lean is about reducing waste.  This may sound confusing, but those organizations that focus too heavily on waste as they go into lean tend to be the ones that become disappointed with the effort and end up dropping it altogether. 

Avoiding Tool Infatuation

Thinking that lean is all about reducing waste often leads to an infatuation with the tools and completely misses the idea that, without transformation, the tools will do little to drive sustained improvements.  Lean is about transforming leadership, planning, learning, and thinking.  Reductions in waste will happen, but they will be impossible to sustain without transformation.

Our obsession with quick results has somehow led to the mistaken idea that lean is a toolbox for waste reduction.  We call in a lean “expert” who knows which tool to apply to a particular problem, and expect it to be solved while we go about business as usual.  The problem may even appear to be solved – but it eventually creeps back into the process without warning – often much larger than before.  In the end, we conclude that lean doesn’t work and abandon it altogether.

So What is Transformation?

Just saying that lean is about transformation isn’t enough to make it happen.  People need to know what transformation is, what their roles will be in the effort, and what they can realistically expect as a result.  A big part of the effort will be to assure leaders stay engaged and make a sincere effort to learn a different way to lead.

Although there is no magic formula for deploying lean within an organization, there are some basic elements of transformation that need to be included in the effort.  These elements include the following:

• Clear Vision: The organization needs to have a clear and common vision of the future.  The vision pulls people and teams together and aligns efforts toward common objectives.  Without a vision, improvement efforts will become disjointed and random, resulting in little or no sustainable success.
• Team Learning: Long-term sustainable improvement requires a method to assure continual team learning.  The Plan-Do-Study-Act (PDSA) cycle is a method for learning that, when applied consistently, can lead to effective team learning.  Based on scientific method, the PDSA cycle reprograms the way people think and approach the work they do, and leads to the development of a true learning organization.
• Focused Annual Planning: Making the vision a reality requires that the organization continually adjust its efforts based on a number of internal and external factors that affect performance. Instituting a clear and focused annual planning process helps maintain focus on the vision while assuring that yearly targets are achieved.  When approached effectively, the plan drives an effective balance between the daily work (the annual targets) and improvement efforts (the vision).
• Line-of-Sight Between Work & Long-Term: The benefits of aligning the work people do with the long-term objectives of the organization are huge.  Strong and focused leadership, along with effective dashboards can help people understand how the work they do connects to long-term objectives.
• Enlightened Leadership: Achieving any level of sustained improvement is not possible without a leadership team that is focused, aligned, and continually learning how to become better leaders.  The role of leaders shifts dramatically toward being a coach with the objective of developing the problem-solving skills of team members and creating future leaders.

These elements comprise a system of improvement and, as with any system, requires development of the whole to be effective.  Although there are times where you may put more effort in one of the elements than the others, ignoring any one will result in a breakdown of the system.  The key, however, is to understand how each is connected to the vision, and that they work together to make the vision a reality.

Waste will be significantly reduced as the organization is transformed, but it is the result of a constant and obsessive focus on achieving the vision.  Targeting waste at the outset misses the point by attempting to skip the learning that is absolutely necessary for sustainable improvement.