Why Lean Fails

Tweet

Why do so many organizations give up on lean even after experiencing initial success with the effort? There are several examples of companies in various industries that experienced sustained success with lean, but these examples seem to be few and far between when compared to the large number of companies that attempt it and fail.

To be clear, lean doesn't fail . . . it's the transformation that fails. While there are many reasons for the failure, there are a few that seem to be common across various organizations. Regardless of which one or more of these reasons apply, correcting them is possible only when leaders begin to develop a deep understanding of lean and realize that the responsibility for the transformation rests squarely on their shoulders rather than something that can be delegated to lower levels in the organization.

Although the premise of lean is simple, integrating it into an organization is highly complex, and the larger the organization the more complex it becomes. Lean thinking is a system that requires understanding how the elements come together to drive continual improvement in support of the organization’s aim. The big gains that some organizations have been able to achieve with lean are only possible after fundamentally transforming the way people think, lead, and approach problems.

The list below is far from comprehensive but is meant to stimulate thinking and reflection to understand the reasons for failure and to help move toward fundamentally changing the culture to enable it to increase and sustain the rate of improvement.

1. Fail to understand the level of transformation required: Far too often, organizations attempt to lay lean on top of a traditional leadership system and expect things the change. It is a simple fact that nothing will change unless the leadership system changes, and failing to understand this will lead to frustration and disappointment in the effort. This is often the main reason behind what appears to be a lack of commitment by the organization’s leaders. People cannot commit to something they do not understand.
2. Focus on the home runs: Far too many people read about the Toyota and its rise from virtual ashes in the 1940s to become the most successful automaker in terms of sales, profit, and market capitalization. When reading an article about it or hearing someone tell the Toyota story, however, misses the point that it was the decades of small, continual improvements that led to significant step changes in performance. Although there are many examples of large innovative improvements at Toyota and other lean thinking companies, they happen because of the collective change in thinking that occurs through a focus on small continual improvements and daily problem-solving.
3. Focusing on financial benefits only: After experiencing a few early improvements, it is very common for leaders to become focused on the financial benefits of the effort and change their focus from learning to cost savings. When this happens, lean becomes a set of tools rather than a system of continual improvement. SQDC (safety-quality-delivery-cost) is replaced by C, and understanding the true meaning of improvement is lost. As small improvements and learning is virtually ignored and the big improvements (the home runs mentioned above) are celebrated, people will do what it takes to show big gains, whether real or fabricated, and any early success with lean will break down and die.
4. Focus on the tools rather than the thinking: Without a deep understanding of lean as a system and the fundamental reasons for its success, it is not possible to think beyond the tools. The tools are easy to understand while the theory behind lean is not. Leaders, especially in the west, are much more interested in things that are concrete, practical, provide quick results, and are easy to explain than organizational theory, psychology, learning, and systems thinking.
5. Lack of systems thinking: Unless leaders understand the complexity of the organization’s system, including how the subsystems work together to drive performance, people and teams will continually compete with one other resulting in continual performance problems and increasing sub-optimization. One of the most critical responsibilities of leaders is to create and continually improve the organization’s system to enable it to achieve its purpose. This includes helping everyone understand clearly how the work they do supports the achievement of organizational objectives.
6. Lack of patience: If you are looking for quick results, lean is probably not the way to do it. As mentioned above, lean requires a shift in the way people think, lead, and perform work, and it takes time – a lot of time – to make it happen. Although results will be seen along the way, there will be gaps that make it seem like nothing is happening. W. Edwards Deming once said that transformation is discontinuous, so it is important to understand that there will be many instances of two steps forward and one step back. The key is to stick with it and remain constant in the purpose and the transformation.

When any of the above characteristics are present, people who are against lean will gain ammunition to bury the effort. It is very easy for the people who feel threatened by lean to plant seeds of doubt in those who are on-board with the change. Getting past this initial stage of the transformation requires regular reflection and continual learning by leaders to see the signs and address them as they happen.

Making the Workplace Speak

Tweet

Do your processes speak or are they too shy to bring problems to your attention?  When it comes to the workplace, you want processes to be as loud and obnoxious as possible when something isn’t running exactly as planned.

Moving toward lean thinking often requires transformation. This means a significant shift in thinking, leading, systems, and general approach to operating the business. Although there are elements that are common to most transformation efforts, organizational differences make it difficult to single out one or two that apply in all circumstances.  One of the most common but often overlooked elements involves making the workplace speak.

Processes must be designed so they sing out when problems occur enabling issues to be identified and addressed quickly.  Without the ability to speak, a process can hide problems until they become such a normal part of the operation that they are no longer recognized as problems.  When this happens, the process moves further away from the ideal state and countermeasures, when applied, consist of throwing money at symptoms.  Examples include increasing inventory, lot sizes, and inspection – all of which increase costs while giving a false sense of security that a problem is effectively addressed.

Clarifying Objectives


Clarity of objectives is the foundation for encouraging processes to speak. When objectives are clear, it becomes much easier to create signals that communicate problems immediately when something puts an objective in jeopardy.  Examples include takt time, inventory levels, and problem boards.

Takt Time
If we can identify the optimal pace for a process and focus attention on maintaining that pace, setting up a signal that identifies when a problem occurs should be fairly easy. This can consist of a takt board or dashboard that shows when a process step is unable to keep up with the rest of the process.

Inventory Levels
Setting up visual cues regarding inventory levels can make it obvious when a process is overproducing.  As an example, installing a bin system between two processes that only holds a maximum or minimum number of parts will signal when the prior process is producing faster or slower than the following process.  Whether the problem lies with one area overproducing or another failing to keep pace will not necessarily be known, but it will be clear that something is wrong.

Problem Boards
Making the process speak can be done as easily as setting up a board in the workplace where problems can be recorded as they occur.  Parts that don’t fit properly, instructions that aren’t clear, or equipment breakdowns can be easily recorded using a checksheet, free text, or both to bring problems to the attention of those who are able to address them.  Without an easy way to record these types of issues, however, they can continue to occur due to a lack of visibility.

Andon
A common signal used in assembly lines is the andon cord, which is pulled by workers whenever something interferes with doing their work as planned.  Even without an assembly line, however, the andon concept can be used by providing people with the ability to signal when a problem occurs.  Whether it's an audible alarm in the factory, a signal light that goes off in an office, or a text message that is automatically transmitted to those who need to know, the andon can be a valuable way for the process to speak.

Make the Workplace Scream

Very few of us like to work with people who are loud and obnoxious, yet these are the exact traits we should desire in our processes.  Processes should be designed in a way that they scream so loudly when a problem occurs that we never feel it is acceptable to let them go on for very long.  The workplace should be quiet only when things are running smoothly and all objectives are being met.

Sales Goals Revisited

Tweet

A few weeks ago, I posted a column about the problems with goal-setting for individuals. Although I received comments from several people who agreed that the Western system of goal-setting and rewarding employees were destructive, I also received many responses from people who vehemently disagreed and felt that the process not only worked, but was necessary for success.

I'd like to revisit the subject and limit the discussion to goal-setting and reward systems for salespeople. The Stanford Graduate School of Business recently reported on a study conducted about the effectiveness of using sales quotas to motivate and reward salespeople (http://gsb.stanford.edu/news/research/Nair_sales.html). Based on an experiment at one Fortune 500 company, the researchers concluded that removing the sales quotas resulted in a 9% increase in overall revenues.

I'll agree that conducting an experiment at one company does not necessarily prove my point that setting goals is often destructive, but since the study involved salespeople - the largest group affected by goal-setting - the results merit further discussion.

When I posted the blog, I received several confidential comments from sales professionals who wrote that they disliked the system of quotas for a variety of reasons. They stated that quotas forced them to play games with the timing of orders in order to meet a target in a given period. They knew this was not in the best interests of the organization as a whole, but felt it was necessary to keep their jobs and/or achieve their bonuses.

I've never understood why we feel it is necessary to use money to motivate salespeople but don't use the same approach with accountants, receptionists, network engineers, and other positions within the company. Are salespeople lazy? Are they untrustworthy? Do we really feel that if we don't offer them carrots that they won't produce?

Gallery Furniture

Jim McIngvale is the founder of Gallery Furniture store in Houston, Texas. Many years ago, he called on W. Edwards Deming to help him improve his business. McIngvale often tells the story about Deming telling him to change his salespeople from commission-based pay to salary. After failing to convince Deming that it wouldn't work in the retail industry, he gave in and changed his pay practices and put his salespeople on salary. In The New Economics, Deming wrote about the results of the change. " . . . steady increase in sales. Older salesmen now help beginners. Salesmen no longer try to steal business from other salesmen. they now help each other . . . sales go up month by month. Moreover, profit per square foot of floor space advances even faster." McIngvale agrees.

Like so many elements in business, it goes back to effective leadership and hiring practices.

Unfortunately, I'm betting that the Stanford study will not lead to a wholesale change in Western business practices because if people don't feel there is a problem, they won't be looking for a solution or feel there is a need for change. My hope, however, is that more studies will be conducted on the subject and more examples of companies changing their practices will be publicized and, little by little, transformation will begin to occur.