Sunday, July 28, 2013

Escaping Mediocrity

Wisdom is born from the ideas of novices. The veterans will spout off about what's possible and what's not possible on the basis of their experience and a tiny bit of knowledge . . . So kaizen can't even get started.” -- Taiichi Ohno (as told by Michikazu Tanaka)*

Why do so many companies seem to be happy with mediocre performance? People generally consider the idea of having it all – perfect safety, high quality, short cycle times, low costs – as an unattainable fantasy. As a result, the bar is set low and everyone feels good when mediocrity is achieved.

So often, it is our experience that interferes with moving to the next level of performance. We don't set aggressive targets because we know they are impossible to achieve and, in the end, we don't want to be disappointed or suffer the consequences of missing a target. As a result, we trudge along with average results and view problems as inevitable or out of our control. If we're lucky, our competitors operate in the same mode. If not, we remain in the middle of the pack and the gap between us and one or more key competitors widens.

Energy Can Be Created
A group wide vision of problems as inevitable is what causes people to lose their energy and inspiration. When one views significant improvement as impossible, intrinsic motivation wanes and extrinsic motivation – e.g., compensation – dominates. And the longer this type of “it happens” mentality continues within a company and the more deeply engrained it becomes in the culture, the more difficult it becomes to change course.

Leaders can stop or prevent operational by first realizing that their own behaviors and the systems they created may at the root of the problem. It's not necessarily easy to do, but letting go of some traditional beliefs and methods of management can begin to drive the type of change that can energize improvement efforts and give people the confidence that they can have it all.

To do this first requires that leaders believe that problems are not inevitable and that the company has the ultimate control over its own future. In short, they must deeply believe that they can “have it all.”

Stretching Without Breaking
Leaders have to trust that the people in the organization possess the ability to successfully tackle the difficult problems facing the company. Developing this ability, though, often requires stretching people by encouraging them to accept challenging projects and targets, and supporting their efforts to succeed. They won't always be successful in achieving the target (if they are, they're probably not being stretched enough), but they will grow and develop with each project.

A stretch target refers to a target that is difficult, but not impossible to achieve and, although you can't stretch people all the time, you've got to make sure there is enough tension within the organization to keep people developing and the company's performance improving.

Getting people to accept stretch objectives assumes that they will not be penalized for missing a target. Reward systems need to support development and participation in stretching the organization, rather than merely meeting a target. If you encourage people to stretch but continue with a reward system based on meeting targets, nothing will change. People will continue to pursue safe targets and push back on any attempt to stretch. In other words, mediocrity will reign.

Organizations tend to cause their own problems. The effects of problems caused outside of the organization tend to pale in comparison to those created on the inside. Understanding and accepting this, however, often requires a shift in thinking toward the idea that mediocrity is unacceptable and that the organization can, in fact, have it all.

*From The Birth of Lean (Lean Enterprise Institute, 2009)

Sunday, July 14, 2013

Unilever: Transformation & The Environment

I love reading about organizations that exhibit lean behaviors without actually labeling them “lean.”  Although using a term like lean helps provide a common way to describe an organization’s approach and practices, and connects them to a wider community for learning and development, there is something to be said for companies that tailor the system to make it their own.  Such is the case with Unilever.

A recent issue of Fortune Magazine included an interesting article about Unilever CEO Paul Polman and the success he’s having in transforming the organization toward a more environmentally sustainable business model.  The company issued a Sustainable Living Plan, which outlines its principles and approach for its model, including aggressive targets to be achieved by 2020.

Making the Transformation

Through the Sustainable Living Plan and Polman’s drive for change, Unilever appears to have done the right things to begin a transformation that, by all indications, appears to be on track to achieving some pretty aggressive objectives.  Although the transformation process never ends, getting to the point where it truly begins to take hold requires some fundamental elements that, without which, make a vision nothing more than a hope or prayer in the future.

Not in any particular order, these elements, that fall within the responsibilities of the organization’s leaders, include:

Clarifying the Vision  Creating a clever term or buzzwords to describe the vision are not enough.  People need clarity in order to connect their activities and efforts to a transformation.  Clarity also provides a lens with which to understand whether current systems and processes support or conflict with the future direction.

Deeply Believing in the Direction  The leader must fundamentally believe in the direction and need for change, and be obsessed with making it happen.  Without this level of belief and engagement, the message will lack the energy and confidence that people need to accept and buy into the effort.

Establishing a Worthwhile Cause  In spite of what many leaders believe, the vision must go beyond profits and share price.  Getting people to buy into a vision requires connecting it to something deeper than financial gain.  This can be done through a clear connection to the fundamental need the company serves through its mission, or through an ancillary aim like Unilever’s sustainability plan.

Stretching Targets  Lean thinking requires the desire and confidence that you can have it all.  Shifting thinking toward the idea that absolute perfection is the only objective helps drive creativity in ideas for improvement.  Polman’s belief that Unilever can double its sales while cutting its carbon footprint in half is an example of stretching the organization to unleash innovation.

Removing Barriers  Talking about achieving the impossible while continuing to operate in the same way will lead to frustration and a loss of trust in leadership.  Successful transformation requires breaking down barriers and questioning the company’s systems, processes, policies, and culture to discover what is interfering with the future.  The responsibility for doing this lies entirely with the organization’s leadership team.

Having Patience . . . but Not Too Much  Transformation takes time and, the further the organization currently is from where it wants to be, the longer the process will take.  Leaders must have the patience to let people internalize the new direction, and the impatience to know when the effort has stalled and requires direct action.

Two years into the plan, Unilever has begin to show remarkable results.  In 2012, revenues increased by 10.5% and the company’s stock price, up 75% since 2009, has reached an all-time high.  On the sustainability front, the company has significantly reduced packaging in some of its largest selling products, and 10 of it U.S. factories have completely eliminated the waste to landfills.

I used to live in Rotterdam and drove by the Unilever building every day on my way to work.  Other than thinking that it was interesting how the building hangs out over the river, I never thought about the important role the company was to play in global environmental and economical sustainability.  I sincerely hope that Polman is able to keep the transformation going and prevent the natural forces from pulling the company back to traditional thinking.

Sunday, July 7, 2013

Accidental Success Is No Reason To Celebrate

Lean Rule #18: If you can’t explain it, you can’t take credit for it.

It is not unusual to expect people to be able to explain the causes of a decline in performance.  Those leading an area experiencing a decline are expected to know their processes well enough to explain what happened, as well any countermeasures planned to get the process back on track.

For a variety of reasons, though, we don’t expect the same level of understanding for an unexplained improvement in performance.  The improvement is often gladly accepted with the hope it will continue, or it is credited to something subjective like increased focus.  In some cases, the improvement is celebrated even though there is no indication that result was anything other than random.

As with a decline, an improvement in performance results from one or more causes. The inability to explain the reasons for a sudden improvement shows a lack of understanding of the process.  And without an understanding of the causes of the an improvement, it will be impossible to standardize them and assure that the improvement can be sustained.

One of the objectives of standardized work is to control a process to the point where absolutely nothing is left to chance.  Although in reality, it’s not possible to ever get to this point, it is important to keep trying.  This means continually studying the process to understand why it performs as it does.

When work is approached as an ongoing experiment, results will continually drive learning which in turn, will feed improvements in standard work.  Changes in performance - good and bad - will be easier to analyze because people will always be looking for situations where their hypothesis has failed - i.e, standard work did not result in perfect quality.

Although more commonly used than people would like to admit, hope is not an effective way to run a business.  For many organizations, transformation in thinking will be needed to create the type of environment where people become obsessed with achieving perfection – and getting there requires never stopping even after a change in behavior becomes evident.  You will know the transformation is beginning to happen when the desire and energy to study the causes of accidental success is approached with the same urgency as a sudden decline in performance.