Energy Companies Need to Stop Worrying About Oil Prices

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This post was published to Avoiding the Corporate Deat... at 7:22:51 AM 6/23/2018

Energy Companies Need to Stop Worrying About Oil Prices

“It is not enough to do your best. You must know what to do, and then do your best.” – W. Edwards Deming

If recent history is any indication, energy companies expecting to survive in the years ahead are going to have to adopt a new business philosophy. As is the case with any commodity producer, market price is a factor for financial success. The problem, though, is that many companies have come to rely on it as the only factor and, as a result, surrendered the ability to control their own fate. While crude prices are contributors to financial success, they do not have to be the only factor in determining whether a producer is profitable or not. What is needed is a new business model – one that enables companies to produce oil responsibly and profitably whether prices are $70 or $30. If an energy company cannot figure out how to remain profitable in a world of wide swings in oil prices, it may as well find something else to do because its future, if it has one, is going to be severely compromised.

As companies in other industries have discovered over the years, a business model guided by lean thinking can help secure a future in a world of unpredictable and widely variable market conditions. Although the acceptance of lean in the energy industry has increased over the last several years, there is still significant misunderstanding about the need for transformation in order to achieve the level of success that organizations in other industries have experienced. After several years of failed attempts to achieve improvements through tools-focused approaches like 6-sigma – where improvement methods are placed within existing systems and the responsibility for solving problems is delegated – some organizations are starting to understand the need to apply a new philosophy that integrates improvement at all levels of the business in order to achieve the big gains that are possible in safety, environmental performance, production, and cost.

The industry is still in its infancy in understanding and applying lean to the point where it will reduce its addiction to oil price. When accompanied by true and fundamental transformation, lean can help an energy company take full advantage of the periods of high prices while preparing for the inevitable drops without feeling the need to implement drastic measures that damage long-term health.

COPYING DOESN'T WORK

Applying lean to an oil and gas producer, as with any company, requires a clear understanding of the philosophy rather than attempting to copy how Toyota – or anyone else – does it. Copying drives a focus on the tools and ignores what you can’t see – the fundamental changes in the company's systems (e.g., leadership, hiring, training & development, promotions, etc.) that are necessary for success. For years, though, Toyota provided the only real example of what many now refer to as lean, and those wanting to learn approached the deployment by rolling out tools like kanban, 5S, or value stream mapping. The problem is, without a clear understanding of lean as a system that requires transformation in the way the organization operates, the best one can expect is random improvements that are difficult, if not impossible, to sustain.

When people begin to truly understand lean, including systems thinking, psychology, and the application of the Plan-Do-Study-Act (PDSA) cycle, they begin to approach work differently, and become much more focused on what's truly important to the organization. The way people think about problems shifts and the organization starts to replace the traditionally overly complex, gut-feel, boss-knows-everything approach with a simpler, more scientific way of operating.

In the most basic terms, lean is about:

• Having clear standards based on the needs of the business;
• Following standardized work that enables the standards to be met;
• Quickly identifying when a standard cannot be met (i.e., when a problem occurs);
• Identifying and addressing the causes for not meeting standards (problem-solving);
• Knowing when a standard needs to be improved and having a method for doing it.

Although it sounds simple, making the above work effectively requires transformation in many of the company's systems as well as its culture. When a company ignores the signs that its systems or culture are interfering with improvement, lean becomes a burden and is seen by many as a waste of time.

WHAT TO DO

Once people in the industry begin to understand and appreciate the various aspects of lean, including a focus on continual learning and the connection to the organization's fundamental purpose, things will start to change. The thinking that drove improvements at Toyota like reducing setup times on stamping presses from 3 hours to 3 minutes or completely eliminating wasted paint during the body painting operation while reducing color changeovers to seconds, can help contribute to greatly reducing an oil producer's cost per barrel, shortening its lead time from exploration to first oil, and significantly reducing emissions while improving safety. It won't necessarily happen in one year or even two, but the improvements along the way will show the potential of a culture that is aligned and improvement-focused throughout the organization.

Some of the keys to assuring the successful application of lean to an energy company include the following:

• Leaders must understand and actively drive, rather than delegate, the transformation. To do this, they must be taught what to do, be open to coaching, and accept the responsibility of creating a culture obsessed with improvement;
• Establishing a culture where continual learning and development is highly valued and expected of every team member from the newest hire to the CEO; and holding leaders responsible for coaching and developing those on their teams;
• Developing a clear and consistent purpose (i.e., the mission and vision) for the organization – and staying true to the mission while ensuring that all activities are oriented toward achieving the vision, including helping everyone understand how the work they do connects to the purpose;
• Designing systems that enable problems to be shown quickly and clearly, and ensuring people feel comfortable showing the problems in their areas. Any area or team that does not have problems only means that they are not being shown, which is likely caused by cultural reasons;
• Ensuring a single clear and consistent approach to lean. Do not allow alternate training or tools to come into the organization unless it is driven by, and clearly connected to, the deployment. Do not let anyone add confusion by introducing new tools or methods that do not fit within the standard approach.

When deployed correctly, lean entails a vastly different approach than most people are capable of understanding at first. Through real-world practice, effective coaching, commitment, and patience, people will start to understand and see the big gains that are possible through an effective transformation. As the organization starts to unleash the talents of its people through the combination of daily problem-solving and breakthrough thinking, the ability to create an organization that improves profitability by producing energy safely, cheaply, and responsibly regardless of the price of oil will become a reality, and rather than blank stares, eye-rolling, or resistance when concepts like perfect safety, drastically shortened lead times, or zero emissions are presented, people will become energized and focused on making them happen.

Problem-Solving & Kaizen: Are They Different?

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One of the most important – and elusive – objectives of lean is creating a culture of continual improvement throughout an organization. In most cases, this requires changing the way people think and approach their work, and although helping people transform is never easy, it becomes even more difficult when those driving lean are not clear about the different types of improvements and how to approach each. Solving a relatively small, one-time problem, for example, requires different thinking than reducing fixed costs across the operation by 20%. It is far too common, though, to attempt both by using the same process - i.e., handing someone an A3, telling them to "do a kaizen," and asking them to complete it. Besides the wasted time this can cause, it can confuse and frustrate the person being coached.

The objective of this post is to provide some clarity about the different types of improvement. Although the subject often leads to considerable debate and disagreement, I believe it is an important one, and something that lean professionals need to understand to help move an organization toward a sustainable culture of improvement.


The Different Levels

As shown in the diagram, there are 3 basic levels of improvement within an organization. The two lower levels deal with solving problems, i.e., a situation where actual performance does not meet a standard. This assumes that the process or activity is capable of meeting the standard and has done so in the past, thereby focusing the effort on analyzing what changed or what recently occurred that had not been seen before.




The third level, breakthrough, involves raising the standard to a new level to meet current or future business needs. Doing this successfully often requires the ability and willingness to question previously held assumptions, and applying creativity to drive step-changes in performance.


In practice, this means that each requires a different type of thinking. By looking for clues regarding what went wrong, problem-solving requires analytical thinking, whereas a breakthrough, by attempting to challenge the status quo and develop new ideas and approaches, requires creative or flexible thinking. Both are needed for an organization to be successful, and both often require effective and consistent coaching to prevent people from being confused.

Because of natural forces and overall effect on the organization, there tends to be significantly more activity at the bottom of the pyramid than at the top, while, although fewer in number, efforts at the top of pyramid tend to result in more effort and a larger gain.


Daily Problem-Solving


Daily Issues
The most common and basic type of problem people face are the daily issues that are often small, one-time annoyances that, although still requiring action, have less effect on the system than the more complex and repeatable issues that the organization faces. These daily issues still require countermeasures because they interfere with the ability of people to do their jobs easily. Additionally, if we ignore them, we are showing disrespect to the people affected and sending the message that waste is acceptable. Addressing them also helps people begin to develop structured problem-solving skills in a fairly simple and easy way.

Those addressing daily issues are still expected to develop a clear statement of the problem, root cause analysis based on 5-whys, and a countermeasure that proves effective in addressing the root cause, but not to the level of a more complex problem being addressed with an A3.


The daily issues are often addressed by those closest to the process who face the problems firsthand and, because of the nature of their jobs, do not necessarily have the time to step back and look for trends and connections between the problems that occur. As with all levels of the organization, the team lead or supervisor is expected to coach and develop the ability of team members to identify and address the problems they face.


Efforts to address daily issues should be documented on a card or simple electronic system to use for coaching, collection of data, and as a means to assure that problem-solving is occurring. Care should be taken, however, to ensure that documenting the effort does not become a burden or the benefits in terms of developing analytical thinking across the organization will suffer.


8-Step Problem-Solving

Whenever a one-time issue recurs or appears on a dashboard as a gap or trend, more structured problem-solving efforts are required. For these issues, an A3 is necessary to assure that the problem is effectively defined, broken down, and addressed. Although it can still be done quickly, the effort is often coached more closely and focused on developing skills more deeply. Rather than a simple 5-whys exercise to determine a root cause, for example, an A3 problem-solving effort would require additional answers for each "why" and verification with data and visiting gemba to see firsthand before moving forward. Since an A3 effort often involves addressing a problem that is fairly complex and/or large, there is also an expectation that the problem is broken down into more specific and actionable issues to be addressed one-at-a-time.


Breakthrough: Raising the Standard

Within any business, there are times when the existing standard is not acceptable. Where problem-solving requires analytical thinking to understand what has changed and how to get a process back to where it once was, breakthroughs often need creative ideas to make the type of changes that will raise performance to a level not experienced before. Doing this successfully requires challenging assumptions to separate fact from deeply held opinions.


In spite of what many people think, everyone has the ability to think creatively and develop innovative approaches to business. The key is to coach and develop people to access and hone creative powers – something that is admittedly not always easy to do. The more experience one gains in a particular field or organization, the more the person tends to stick to what he or she already knows – or at least thinks he or she knows – becoming more and more set in one way of thinking. Success with breakthroughs requires breaking down this defense to get people to begin questioning what they accept as fact to see when it is actually nothing more than a strong opinion.

Analytical thinking, although critical for problem-solving, will rarely lead to innovative breakthroughs required to keep the company moving forward. In his book, Elastic: Flexible Thinking in a Constantly Changing World, Leonard Mlodinow writes that innovation requires "bottom up" thinking driven from inside the person versus the "top down" outside-driven thinking generally required for problem-solving.

An important point about the balance of analytical and breakthrough thinking is that a company cannot use innovation to stay ahead of quality and productivity problems. There must be a solid foundation of problem-solving and stable processes upon which to build and hold the breakthroughs.

Both are Required

What makes lean powerful, the combination of analytical problem-solving and innovative thinking, is also what makes the transformation so difficult. Understanding the different dimensions of improvement is fundamental to assuring a successful journey and avoiding the confusion and frustration that many companies experience.

We Don't Make Cars: Applying Lean to Other Industries

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People don't go to Toyota to work, they go there to think" – Taiichi Ohno

Although much of what we now call lean has been practiced by Toyota and its suppliers for decades, most of the world began to learn about it in the 1990s with books like The Machine that Changed the World and Lean Thinking. It has been more than 25 years since then and, although companies in a variety of industries are well into their lean journeys and showing positive results, there are still many people who have trouble thinking beyond lean as a strategy for high-volume or automotive manufacturing.

As someone who has worked in a variety of industries, I have encountered difficulties applying lean thinking in certain situations, but it was due more to cultural reasons than industry differences. Regardless of the industry, if the organization has an aim and uses processes to achieve that aim – and they all do – lean thinking applies. Lean is about continually thinking, learning, and getting better about what you do; not about producing cars. If your processes are not perfect, you don't already know everything there is to know about your business, or change regularly occurs in your organization or industry, then lean can help.

During my early days in oil and gas, I got a lot of pushback about the suitability of lean to the industry. When I heard the "we don't make cars" argument, my response was usually if Toyota produced oil & gas and we made cars, we would say lean applies only to oil and gas. The same goes for any industry.

It's Always Easier Somewhere Else

It is common to talk to people in various industries who believe that lean applies easily to other industries but is much more difficult in their own. Even within an industry, I've met people who believe their own circumstances are so unique that, even though other organizations or areas may apply lean thinking fairly successfully, it does not fit their own situation.

Getting people past the notion that lean will not work in an organization or industry requires continual coaching, demonstration, and a lot of patience. It also requires educating people about the basis for lean and how it drives learning and improvement. The key is to get people to understand lean beyond the tools so they will start to see where they have gaps in performance, knowledge, and learning. A tools-focus in lean, something that is far too common, leads people to google things like 5S, value stream mapping, or SMED, and only find examples of application to Toyota or other high-volume manufacturing situations. Seeing examples like this tends to cement the idea that the practice is unsuited to their own situation.

The Lean System

Lean is about thinking and learning, and if a business is experiencing problems of any kind, there is room to learn. The basic steps to drive lean are shown below. The key to success is to use the steps to learn by doing, which requires clarity on the expected result of each decision, action, and process, and using the actual results to see where things did or did not provide results as expected.

Lean is a system comprised of several elements that work together to drive learning and improvement and, like any system, if you leave out one or more components, it won't work.

1. PURPOSE: Every organization must understand its purpose to have any chance of sustaining success. The purpose, consisting of why the company exists (the mission) and where it is headed (the vision) must drive everything it does. The key is to make it clear, a stretch (difficult, but not impossible), inspiring, and focused on providing value.

2. BUSINESS NEEDS: Visions tend to describe the future in general terms like industry-leading, most respected, improve society, etc. This is okay because what is considered industry-leading today is not necessarily what it will mean 5-10 years from now and you don't want a specific target to mislead the organization. This element of lean thinking includes the 3-5 year objectives that make the vision much more concrete. Although many industrial companies often identify the gaps in terms of safety, quality, delivery, cost, and people development (SQDCP), it is important to tailor the objectives to the organization's needs. Basically, the objectives define how the organization needs to perform in the next 3-5 years in order to remain on-track to the vision.

Also included in this element is the one-year plan that gets even more specific regarding what needs to happen in the current year to remain on-track to the 3-5 year objectives. The one-year plan identifies the current year SQDCP targets, which defines how the organization needs to perform this year given its current processes and systems (assuming that regular problem-solving will be required to deal with the daily problems), as well as the 2-3 areas where a step-change in performance is required to stay on track to the 3-5 year objectives (i.e., kaizen/breakthrough problem-solving). Using an oil and gas producer, a current year target could be production of 25,000 barrels of oil produced per day (possible with current processes and systems), while a breakthrough could be the need to reduce cost per barrel from $24 to $18 within 3 years (which would require a step-change in processes or systems).

3. STANDARDS: Once the gaps and performance targets are clear, it is necessary to identify the standards that need to be met in line with business needs. An example of standards within an oil and gas operation could be that meeting a production target requires an offshore platform to operate at 95% reliability, which, in turn, requires a maintenance technician to change a pump filter in 24 minutes. In another example, a coffee shop could determine that, to meet customer requirements, all customers must receive their coffee within 4 minutes of walking into the shop, requiring the person taking the order to select any product on the order screen within 2 seconds. Setting standards requires a clear understanding of the business and continual improvement.

4. STANDARD WORK: Standard work consists of the instructions that, if followed, will enable the standards to be met. In the examples above, instructions provide a step-by-step description of the work to be done to change the filter in 24 minutes or serve the customer within 4 minutes. Two key points about standard work are (1) the instructions should be created and regularly improved by the people who actually do the work; and (2) the instructions must be clear and simple to follow. It is also important that the standard work is regarded as the best known way to perform the work today, and must be followed until a better way is discovered and the instructions are changed.

5. ACTUAL PERFORMANCE: Learning requires clearly and continually measuring the actual performance to understand where the gaps between performance and the standards exist. If actual performance meets the standards – the pump filter is changed in 24 minutes – then the thinking returns to step 2 to continually assure that business has not changed and that the standards still meet the business or customer needs.

6. IDENTIFY PROBLEMS/GAPS: The real power of lean thinking occurs when actual performance does not meet standards because this is where continual improvement truly happens. For the business to improve, we need people to quickly speak up when problems occur. Whether through an andon signal (lights and music that immediately grab attention) or dashboards that are updated frequently, the key is to find ways to make all problems highlighted quickly. To assure this happens, leaders need to encourage and recognize team members for identifying problems quickly. Taking it one step further, making problems visible should be an expectation of every person in the organization.

7. RESOLVE PROBLEMS: Once problems are identified – i.e., actual performance does not meet the standard – there needs to be a consistent way to understand and resolve the gaps. Rather than calling on black belts to come in and lead the process, lean requires that everyone become problem-solvers. Those closest to the work need to be actively involved in closing the gaps and, to make this happen, leaders need to teach and coach team members how to do it. In many cases, problem-solving leads to changing standards and/or standard work to ensure that improvements stick.

8. DO IT AGAIN: The lean system requires that the process never ends, so the team needs to continue to review business needs, set and revise standards, identify gaps in performance, and solve problems.

Not as Easy as it Sounds

Although following the lean system as described above appears fairly simple and straightforward, it is anything but easy. Each step requires transformation in leadership, thinking, and culture to be effective. Two areas that generally require significant change include transforming managers into coaches and making a culture where it is safe – and even expected – to make problems visible.

The all-too-common approach of focusing on the tools will make the application of lean to other industries difficult – if not impossible. Focusing on the philosophy and transformation in the way people think and approach the business, however, will make the application to other industries far easier and significantly more successful.

Why Lean Fails

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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.

The Objective of Problem-Solving is Not Solving the Problem

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"The ability to learn faster than competitors may be the only sustainable competitive advantage" - Arie de Geus

One of the misconceptions that interferes with an organization's transformation toward lean thinking deals with the objective of problem-solving. People tend to focus problem-solving activities mostly on the business result, or solving the problem, and ignore whether or not any learning occurred while doing the exercise.  What many fail to understand is, when the focus of problem-solving is results, very little learning takes place, but when the focus is learning, more significant and sustainable results will follow.

It is strange to think that the main objective of problem-solving is not solving the problem, but the more one understands organizations and behavior, the clearer it becomes that sustainable improvement can only occur through continual team learning. When it is obvious that the only concern of leaders in a problem-solving effort is results, people will respond by showing positive results whether or not they are real or sustainable. Problem-solving will become nothing more than an exercise to get to the countermeasure as quickly as possible.

The Benefits of Learning

Some of the benefits of emphasizing learning during problem-solving include:

Improved understanding of systems and processes When done correctly, problem-solving requires looking at the issue from a number of perspectives to better understand how to approach it. It also involves understanding and proving the connections between potential causes and effects and, although it takes time to do this, it leads to increased understanding of the processes and systems that contributed to the issue. This learning leads to better problem-solving and greater improvements in the future – something that cannot occur without learning.

Improved understanding of the problem-solving process The more a team solves problems, the better everyone involved learns the process.  Rather than merely following the steps in a process, people start to learn why the steps are important, how they relate to the quality of the output, and where changes can be made to make the process better and faster.  When the focus is on getting to the countermeasure, the only learning that takes place is how to make an A3 look good. No useful learning will occur as people jump to the countermeasure and backfill the A3 to make it appear that the process was followed.

Learning stays with the team rather than with a single person The A3 (or whatever document is used in the process) from formal problem-solving is captured and maintained as a record of how the problem was defined, broken down, how the root cause was determined, the countermeasures selected, and the results.  In this way, when one or more people leave the team, the learning is maintained through the records and the countermeasures captured in standards related to the process. Also, the increased knowledge and understanding of the process throughout the team that was gained as part of the effort will not go away when one or two people leave.

Motivation increases as people learn and grow For most people, learning and contributing to improvement makes the work they do more interesting. When learning is the focus of problem-solving, the more energized people become and the more interested they are in driving improvements into the work they do.

Leaders Must Learn Also

Emphasizing learning rather than results takes patience and a belief that it will eventually lead to far greater and sustainable results.  Without this transformation, people will see that results are all that matters and respond accordingly. Rather than generate real results based on scientific analysis and concrete actions, however, they will likely be achieved quickly and be superficial and unsustainable. Problems will become hidden and not given the attention they require.

Kaizen & Changing the Way People Think

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"If you can't explain it to a six-year-old, you don't understand it yourself." - Albert Einstein

For most people, structured problem-solving is not a natural process.  After years of being rewarded for quick answers and telling people what to do, along with the fact that most of us are overloaded, the ability to approach a problem without a preconceived solution is counter to the way people work.  Many see structured problem-solving as cumbersome and requiring more time than is necessary to address a problem - especially when they think they think they know the answer.

Because of this, coaching is critical to help a person move from jumping to countermeasures to following the process and actually learn about the problem before arriving at answers.  Even using a problem-solving A3 tends to result in filling in the boxes in a way that supports what we already know needs to be done.

Coaching is critical to changing the way people think about and approach problems. The advantage of using a tool like an A3 for this is that the coach can see what the person is thinking as he or she follows the process. An effective coach can review an A3 and, even without a deep understanding of the problem or related processes, ask a series of questions to help the person understand where they went wrong and how to improve the effort.

An A3 should provide a simple and clear overview of the issue, and the story describing how it was addressed. In fact, the simpler and more clear the A3, the better handle the team has on the problem, what caused it, and what to do to address it.

THE QUESTIONS 

There are a series of questions that can help someone learn to follow the process.  There is much more to problem-solving than following the steps listed on an A3.  The key is to help a person change the way he or she thinks. It's a tall order, but it can be done if the person is open to learning and the coach is experienced and patient (it also helps if the coach is also open to learning).

The questions below, along with a good deal of practice, can help to start the change in thinking that will lead to more effective learning and better problem-solving.

1) Why should I care? 

Right up front, the A3 should objectively demonstrate context for the problem and the benefit(s) of addressing it now.  An excellent way to do this is to connect it to the vision or high-level objectives for the business.  Getting the person to do this will help others agree with the importance of the issue in case support or help is needed to implement a countermeasure, and help to keep the team from straying away from the original objective.

2) Explain the logic? 

The steps in the process are not meant to be done independently; they must connect and build on each other. Going over the A3 backwards is a good way to get the person to see where the logic breaks down. A good check on the logic is to make sure that the units of measure throughout the effort don't conflict. Although it is possible that the units may change as the problem is broken down, there must be a logical relationship between them and, once the selected problem and target are defined (step 3 in the 8-step process), it remains consistent throughout the remainder of the effort.

3) What did you learn? 

A key objective of the structured problem-solving process is to learn. Besides making the problem smaller and easier to attack, the reason for breaking it down is for the team or person to learn something that was not previously known. Looking at data from a variety of perspectives (what happened, who was involved, when did the problem occur, etc.) should lead to discovery about the issue. By asking what the person learned during this step, it becomes easy to see if they began the process with the countermeasure already in mind and backfilled the steps to justify their idea.

4) Why did you move on from one step to another? 

Another question that can help a person learn where they didn't necessarily follow the process is to ask why they moved on from one step to the next. As they broke down the problem, for example, they decided that they had enough information to select the problem to attack and move to the next step. Question where they got the data – or if they used data to effectively prioritize the issues, and why they chose not to break down the data any further. Even if the person made a good decision in moving to the next step, asking why can help him or her realize how important it is to think about it during future problem-solving efforts.  Another benefit of asking why is that it helps the coach learn about the issue and ask good questions going forward.

There are many more common questions associated with coaching problem-solving – like who did you involve in the effort and how did you test the countermeasure? Although these are important, they are more procedural and focused on improving the mechanics of following the process, whereas the above questions help to get the person to change his or her thinking. Fundamentally changing the way people think helps them become coaches and can drive lean thinking in all situations rather than only when working on an A3.

Short-Term vs Long-Term: They Both Matter

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Over the years, I have found many organizations the lack the ability to effectively balance short-term pressures with long-term improvement.  The situation causes frustration in people because, in the end, the short-term virtually always wins while the focus on the long-term suffers. 

There are a number of reasons for a tendency toward short-term thinking.  First of all, people tend to be measured and rewarded based on achieving current year targets much more than long-term improvements.  Another factor driving a short-term focus is the targets are right in front of people.  The gaps are easy to see and it's clear that, if the problems are not addressed immediately, meeting the targets may not be possible.  Long-term gaps are also more difficult to measure and it's easy to justify dealing with them later. 

Which is More Important? 

So how should people deal with this type of situation?  We can't ignore the short-term targets because they are often necessary to assure we will be around for the long-term.  On the other hand, the more we ignore the long-term, the more we jeopardize our survival.  Regarding the question of which is more important, the answer is actually they're both important.  Customers, as well as investors and fellow team members, rely on our ability to deliver what we promise. 

Assuming that annual targets were set based on current capabilities, we should be able to meet them with enough focus and daily problem-solving.  After all, we made a commitment, so we should feel compelled to meet it.  On the other hand, if the targets do not have some semblance of reality, the company has much bigger problems, and meeting them most likely won't happen with or without a heavy focus and effort. 

When a problem arises today that will affect meeting short-term targets, it is difficult for most people to ignore it.  People will naturally jump in to address the problem and get performance back on track, especially if nobody else is available or a particular type of expertise is needed. 

The real problem for the organization occurs when people get so consumed with short-term problems that the long-term becomes an afterthought.  In reality, it seems that the poorer we are at taking care of the long-term, the more short-term problems we battle year-after-year. 

Implementing the 80/20 Rule 

I have found that the best way to assure we take care of both short- and long-term objectives is to consciously split time between the two, and in the most general terms, the split to be 80/20 (80% on the short-term and 20% on the long-term).  This is a general rule because the closer one is to where direct value is created (e.g., the factory floor in manufacturing, the sales counter in retail, or the wellhead in oil and gas production), the more time is focused on short-term objectives.  For example, a team member working on an assembly line has to focus most of his or her day on performing work within takt time that meets standards.  Although problems will regularly arise that the person will need to address, they are generally related to short-term safety, production, quality, and cost targets.  For this person, the split may be 95/5. 

Long-term projects, whether new or carried over from previous periods, should be apparent at the start of year when annual plans are being developed.  Making sure that these projects make their way into the 20% is important at this point, as is assuring that they require no more than 20% of the person’s effort.  Catchball and careful planning is critical to align expectations in the split between short-term and long-term focus, as well as the specific projects that fall into the 20%. 

As with any project, whether related to the short-term or long-term, clear objectives are needed along with a detailed and measurable plan.  The better and more measurable the plan, the easier it is to ensure progress.  Implementing a rhythm for regular reviews is necessary to assure the project is progressing according to the plan, and to determine whether changes in the plan, priorities, or resources assigned are needed to get it back on track.  We all know how to measure the short-term targets – it's the longer-term projects that require serious thought to determine the right measures.  Measuring progress to a project schedule will help but measuring quality of deliverables along the way is even better. 

Applying the 80/20 rule and ensuring that short-term and long-term objectives are met requires that managers be close to team members and truly understand what is going on in the workplace.  Rather than hearing about delays when it is too late to help make adjustments, managers must have enough awareness to provide help to get the project back on track before targets need to be changed. 

Intention is Everything 

It should be noted that none of this applies to an organization where meeting short-term targets is everything and commitment to the long-term consists of nothing more than words.  If the environment is so toxic that shipping defective products or cutting corners just to meet short-term targets is the norm, it has much deeper problems and attempting to manage through an 80/20 split will do little to help.  Like most things in business, long-term success begins with an obsession around understanding and meeting the needs of customers. 

Just like short-term objectives, long-term projects need to have targets based on successfully progressing plans, and these targets must be reviewed regularly – at least monthly – to ensure they are on-track and understand if help is needed.  If the split generally follows the 80/20 rule, and long-term commitments are taken as seriously as short-term targets, the chances of success will increase.  Discipline is needed to fight the tendency to put off developing or maintaining the measures and to skip the reviews now and then.  Like much of lean thinking, the concept is simple, while making it work effectively requires a lot of focus, effort, and consistency in behavior.