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.

What is Lean Six Sigma And Why Is It Necessary?

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Several years ago, the term Lean Six Sigma (LSS) appeared on the scene and since then, countless books, seminars, and conferences have popped up referencing the term.  I’ve read books and articles on the subject but continue to have trouble understanding the distinction between LSS and just plain lean.

I've had people tell me that lean is about attacking waste; six sigma is about reducing variation; and LSS combines the two into a complete approach that is more effective than either by itself.  Sorry, but this explanation still does not convince me that LSS adds anything besides confusion.

I have never seen an effective lean deployment – before or after the advent of LSS – that did not include a focus on reducing variation.  Variation causes waste and interferes with flow and, because of this, must be addressed as a critical element to improvement efforts.

W. Edwards Deming wrote extensively about the importance of reducing variation, and Genichi Taguchi based his methods on minimizing variability.  Both Deming and Taguchi heavily influenced Toyota and were integral to the development of TPS and lean.

If we want people to take lean seriously and truly buy into the approach, we have got to be consistent with the message.  Rebranding lean and presenting it as something different risks turning it into just another business fad – which, for the sake of Western business, is something we cannot afford to let happen.

Why The Obsession With Speed?

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Many years ago, I remember W. Edwards Deming questioning the obsession businesses had with speed.  I thought it was strange coming from the man who worked so closely with Toyota - the company that invented lean.  Wasn’t one of the main objectives of the Toyota Production System to reduce cycle times and make processes run faster?

I’ve thought about Deming’s question for many years and, after working with a variety of production and improvement systems, I finally came to the conclusion that Deming may have been referring to the idea that rhythm between processes is more critical than the speed of individual processes.

Rhythm vs. Speed

Companies put a lot of effort and focus on the speed and efficiency of processes.  People are measured and rewarded on their ability to speed up the processes with which they work.  As a result of this focus, we often end up with a completely unsynchronized production or service system, thereby increasing inventory and costs, and in most cases, slowing down the company, as a whole.

I have seen many instances where people pushed as much output as possible to the next step in the process in order to meet goals – even when the next step was not ready or able to handle the extra work.  As a result, teamwork breaks down, finger-pointing increases, WIP inventory increases, and quality decreases. A common response to the buildup of WIP in the system includes measures to attack the symptoms (e.g., the increased inventory), rather than the causes (lack of synchronization and poorly focused goals).

There is an optimal speed at which a process should operate in order to meet objectives (i.e., its takt time).  Achieving and sustaining takt time requires that every step in the process operate in rhythm with each other.  Any individual step in the process that produces in excess of takt time has a negative effect on the overall system, which is often as destructive as producing too slowly.  Whether the operation provides a product or service, the key is synchronization at the optimal pace.  Even ignoring the internal cost and cultural problems associated with a lack of synchronization, one has to question the practice of producing faster than customers want.

Although I'll never know, it could be that Deming was referring to the idea that synchronization of processes – and meeting takt time – is far better than increasing the speed of any individual process.  He may have been trying to teach the concept that, without a focus on rhythm, speed means nothing.

Lean: It's More than Kaizen

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I have noticed recently that there is a common misconception about the true meaning of lean.  Even among some improvement consultants, what is often referred to as lean is really nothing more than kaizen.  This is unfortunate because many organizations are missing out on the benefits associated with a true lean deployment.

Lean = Kaizen Plus Production Control

Too often, people learn about value stream mapping or the categories of waste and think they understand lean.  Although true that lean includes identifying and reducing waste, this type of activity is only one component of lean.  Changes to improve a process or system – whether through value stream mapping to reduce waste or an independent project to address a quality issue, is kaizen.

What many people do not seem to understand is that a focus on production control is what differentiates lean from a kaizen or 6-sigma process.  Without an emphasis on production control, companies miss an important component to align improvement efforts with business objectives and, more importantly, transform the organization and gain buy-in at all levels.  In the most basic sense, lean is about production control and kaizen is one way to help gain control over the production process.

Aligning Improvement With Business Results

The purpose of a business is to continually improve the value it provides its customers.  A company’s processes are critical to achieving this purpose.  Whether providing a product, service, or both, there is an optimal pace at which processes need to operate in order to meet objectives and, therefore, the needs of customers.  Lean thinking requires clearly understanding this pace (referred to as takt time) and focusing efforts on eliminating or reducing the effects of anything that interferes with synchronizing the overall system to operate at this pace.

Whenever I visit an operation that claims to be lean (a problem in itself because an operation is never truly lean), I ask questions about takt time.  All to often, I get blank looks or comments that takt time does not apply because the company does not have manufacturing operations or that they produce a highly customized product.  By ignoring takt time, however, these companies are focusing their efforts on general process improvement (e.g., 6-sigma or kaizen) rather than lean.  The problem with deploying a kaizen – rather than a lean – approach is that it becomes more difficult to directly tie improvement to business results, making it tougher to gain (and sustain) buy-in throughout the organization.

Takt Time:  Not Limited to Manufacturing

As written in a previous post, takt time can be calculated for virtually any process.  Whether the process produces invoices, maintenance services, gas wells, or sandwiches, there is an optimal pace at which it must operate to meet objectives.  Understanding and striving to consistently operate at this pace is a vital part of running the business. Note:  it should be inherently obvious that success also requires that the process must provide - and continually improve - its product or service at a level of quality that customers expect.

Although a kaizen or 6-sigma process is commendable (and a valuable component of lean thinking), a company that stops there is missing out on a critical improvement opportunity.  Focusing on takt time makes the connection between improvement and business objectives much clearer.  As a result, it becomes much easier to get people throughout the company to buy into the process.  In fact, once people understand – and are held accountable for – takt time, they will begin to look for ways to reduce the waste that interferes with the throughput of their process.  Improvement efforts become seen as part of, rather than interfering with, meeting objectives.  And when this happens, transformation can truly begin to take place.

Determining Takt Time

Takt time can be determined for virtually any type of process.  Examples include:

• Number of invoices processed within a given timeframe to keep up with demand;
• Number of gas wells to be drilled over a period of time to meet production objectives;
• Number of bags handled at an airport to keep airplanes and passengers moving;
• The pace of filling prescriptions at a hospital to keep staff from waiting, and assuring patients don’t experience medication delays;
• Making coffee and specialty drinks in order to meet customer preferences while keeping waiting lines relatively short.

With this in mind, a basic process for implementing lean should include:

1. Clarifying business objectives (including clearly understanding the customer’s needs);
2. Determining the optimal pace (takt time) for critical (and eventually, all) processes to meet objectives;
3. Implementing visual measures for throughput (to enable process leaders to understand how well they are keeping up with takt time);
4. Standardizing processes and systems (i.e., the value stream);
5. Continually identifying those things that are preventing the value stream from meeting takt time (which can involve shortening or reducing variation in cycle times).

Improving processes in order to meet takt time is where kaizen or 6-sigma enters the picture.  These approaches provide a framework for improving the throughput of processes in order to meet objectives.  Without creating energy around takt time, however, a 6-sigma implementation can easily lose focus and miss an opportunity to gain full buy-in of the improvement process by leaders.

Introducing takt time gives perspective to people to help them better understand why the organization is pursuing lean.  It provides the business context that is so critical for successful transformation and commitment, and helps reduce debate regarding the importance of spending time on improvement projects.

PDCA Explained One More Time

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Although it’s been around for decades, the PDCA (or Shewhart) Cycle continues to be one of the simplest – and most misunderstood – concepts in business. Introduced to the masses by W. Edwards Deming, many people don’t initially see the cycle as significantly different from the way they already work. After working with the cycle for many years, however, I have found that most organizations do not even come close to truly understanding or applying a PDCA mindset.

THE PDCA CYCLE

THE PDCA CYCLE

Americans generally follow a solutions thinking, rather than a PDCA approach that attempts to find the perfect solution and a “permanent" fix to a problem. The high level of complexity among interactions within processes and systems, however, along with the fact that the world is in constant change, makes it unrealistic to think that permanent solutions to problems can be developed. The best that one can expect when facing an issue is to address it under current conditions and, once addressed, continue to look for recurrence and further improvements.

Besides the time it takes to seek the perfect solution to a problem, solutions thinking can give a false sense of security that a situation is permanently resolved. As circumstances change, a "resolved" problem can reappear without warning and cause significant damage if the team has moved on and stopped looking for the condition to recur.

By contrast, the PDCA approach addresses problems as a potentially never-ending cycle. Instead of seeking the perfect solution, one or more countermeasures are developed and implemented quickly to stop the condition from continuing to cause damage. Since it is recognized that the countermeasure may not be a permanent fix or completely solve the problem, the team continues to monitor the process to determine the effectiveness of the change. Adjustments are often made to the countermeasures – and new ones developed – to assure the situation continues to improve.

As the process stabilizes, the team looks for ways to further reduce the likelihood of the problem recurring (by addressing other potential causes) or tackles another problem plaguing the process. Each adjustment leads to another fairly quick trip around the PDCA cycle that results in a more robust process and additional learning.

SO WHAT'S THE DIFFERENCE?

The major differences between PDCA and traditional thinking include:

Scientific Approach: A conscious effort to apply a scientific approach to improvement involves developing a hypothesis, testing the premise, formally evaluating whether or not the hypothesis was correct, and acting on the results. Although the traditional approach relies on some level of hypothesis testing, the check step makes it a more conscious effort within PDCA thinking that, when applied over-and-over again, results in developing a scientific thinking mindset throughout the organization;

Countermeasures: Within PDCA thinking, there is clear understanding that, although an action is an improvement, it is not necessarily a permanent solution;

Speed: Since the effort is not directed toward the perfect solution, improvements are made much more often and at a much quicker pace. PDCA is oriented toward a just do it mindset, where ideas are tested and implemented fairly quickly, even if the resulting improvement may be fairly small.

The quickest way to determine a group’s collective mindset is to observe how it addresses problems. If discussions tend to bog down as the team searches for permanent solutions, it is a safe bet that PDCA is not the norm. Also, ideas regularly “tested” and rejected in conference rooms rather than real situations is another sign of a solutions thinking mindset.


PDCA vs Solutions Thinking

The exhibit shows another difference between PDCA and solutions thinking. Ideas and improvements occur much more quickly with PDCA than with solutions thinking. Although each improvement is generally much smaller in scope than with solutions thinking, the rapid pace of improvements when applying PDCA results in far greater improvement of the process over time.

PDCA vs Solutions Thinking

Since processes tend to naturally deteriorate between improvement efforts, the longer the improvement cycle, the more deterioration that occurs. Because of this, the fewer number of improvement cycles, the slower overall pace of improvement that will occur over time.

THE LEARNING ORGANIZATION

Another advantage of PDCA thinking is the amount of learning that takes place about the process during each cycle. Because solutions thinking deploys fewer improvement cycles and focuses attention specifically on the problem at hand, less learning takes place about the overall process. The increased learning resulting from deploying PDCA throughout the organization further adds to the overall pace of improvement cycles.

Those who fail to recognize the true significance of PDCA often require a good deal of coaching, reflection, and experience with the cycle to truly understand why it is different and how it can benefit the organization. Without a certain level of transformation toward PDCA, however, the implementation of improvement methods like lean thinking or 6-sigma will be difficult, if not possible.

Gaining Involvement in Improvement Activities

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One of the most common frustrations expressed by those involved in a 6-sigma journey is the inability to get others to participate in improvement activities.  In some cases, energy levels may be high during initial projects only to have a production focus return fairly quickly.  Often there is less accountability for process improvement than meeting production targets, and it becomes a battle to get managers to commit time and resources to improvement projects.

The Wrong Focus

A common reason for a lack of managerial engagement in improvement activities stems from the lack of a natural alignment between improvement objectives and a manager’s normal  work – i.e., meeting production targets (production referring to any type of output for which a team is responsible).  As long as improvement objectives are considered separate from production objectives, there will always be tension between the two; and when this happens, production will virtually always win.

Production is how a company makes its money, and managers are typically measured on their ability to produce.  No matter how logical it may seem so some that focusing on improvement will make meeting production targets easier, others will see it as a distraction and interference to meeting production objectives.

By design, a 6-sigma process is project focused, where people identify improvement opportunities, develop objectives, and form teams to address the issues.  This approach can make the job of creating and sustaining alignment between improvement and production a challenge.

Although some companies have been successful implementing and sustaining project-focused improvement, many have not.  In my experience, the life of a typical 6-sigma deployment is 6 months to one year.  Beyond the initial success, a lot of time and energy is required to keep the process going against the inertia of a production focus.

A Better Approach

A much better way to create a strong and natural alignment between improvement and production is to focus the effort on lean rather than 6-sigma.  Companies that ignore lean and attempt to implement an isolated 6-sigma process are missing out on a perfect opportunity to connect and closely align production control and the improvement process.  With lean, it is takt time that makes the need for continual improvement clear and logical.

Takt time, which can be calculated for virtually any process in any industry, defines the pace at which a process needs to operate in order to meet objectives.  Once the output objectives and resource constraints are understood, the takt time of the process can be calculated with little effort.

Understanding the takt time for a process makes it clear that, in order to meet production targets effectively, improvement efforts must occur.  This approach places the responsibility for initiating improvement projects with the supervisor of a process since he or she is the one accountable for consistently meeting production - or takt time - targets.  In effect, takt time creates pull from those directly involved in the operation.

The PDCA diagram below identifies a basic approach for implementing and sustaining improvement-based on lean thinking.  Once business objectives are understood and processes are standardized, process leaders become responsible for meeting production objectives on a continual basis.  Unless the person responsible for leading a particular process drives improvement within his or her area of responsibility, the odds of meeting takt time consistently become severely hampered.  Continually comparing throughput to takt time naturally drives the identification of improvement projects that enables objectives to be met.

The Improvement Process

To be successful in a lean thinking environment, very little pressure is placed on people for the current performance of the process(es) they lead.  There is significant pressure, however, on leaders to demonstrate how they are reacting to current performance, and the steps they are taking to drive improvement.

Every leader must be held accountable for assuring that the overall system (i.e., production line, location, business unit, etc.) meets its takt time.  Otherwise, improvement efforts may consist of pushing work or inventory to a downstream process, and when this occurs, there is little chance for the organization to meet its objectives.