Posted by: knightbird | January 26, 2016

Observations About Inventory

It was an interesting workplace with inventory problems. Managing inventory had been ignored because of the expense. Some inventory is required, when you consider that computers, desks, phone systems, copiers and other equipment, fixtures and furnishings need to be accounted for. That wasn’t happening because of the lack of available resources. That happens at a non Lean Company.

But there was another interesting inventory phenomena. Ordinary products were bought in quantity when they were on sale, and then the savings were touted because of the reduced price. But was it really savings? Did we account for the human involvement in the acquisition of the products.

The cost of inventory includes what it takes to acquire the asset, storage, movement and accounting for it. And in some cases, the shrinkage that occurs because someone helps themselves to part of it. In one example, I saw 4 different storage areas for janitorial and maintenance supplies. It was pretty obvious that the needs list hadn’t been thought out in a realistic way. When there was a sale at a local store, lots of product was purchased and stored. We didn’t think to calculate how much cash we had in inventory, nor how much of it disappeared. I did have to be stored and that took away space that might have been used for other purposes. When we did a 5S and put together a use and utilization analysis, we ended up with a more organized inventory and knowledge about what products were needed, and how often they needed to be replenished. By putting together a standard checklist and a standard ordering time, you can reduce the effort required and ensure that there are the required products available. And you can assign the responsibility to a staff member with time and at a lower rate of compensation.

This same phenomenon was true everywhere in the organization. Certain products were not available and others were rarely, if ever, used but took up space.

A good Kansan system (just in time inventory system) can help a lot. When you know what you order and how frequently, you are able to find a supplier to meet your needs, and perhaps work out a discount arrangement with them. If they know you are giving them business regularly, it’s easier for them to discount your purchases. After all, with Amazon and other suppliers shipping free and selling the same product, you do have options. I always liked to keep purchases local because that’s where our customers lived and worked. But you do have options.

You can also work out a billing process like an open PO that is billed on a regular basis. This eases the burden on your accounting function.

And you don’t have to worry about product expiration dates. During our 5S in one location, we found product that had actually expired decades earlier. It had just never been cleared out.

I realize this post is boring. But Lean is not always exciting. I just learned that about 80% of savings in a Lean implementation accrue from front line ideas, and this is a perfect one for those actually doing the work.

Posted by: knightbird | January 25, 2016

Thinking Like A Kid

This is the title of a radio talk program that will air on a local Anchorage station soon. I had a number of immediate thoughts in the context of Lean Thinking. Here they are.

In our business lives, we learn the organizational routines for the business we belong to. It reminds me of a bumper sticker that made the rounds in Alaska years ago: “We don’t care how they do it outside.” We believe we have a culture that is better than everyone else, and in business that culture is expressed through organizational routine (Nelson and Winter) and another phrase that means something similar, habit. (Duhigg, The Power of Habit). In brain science, they divide the brain into conscious, subconscious and unconscious. There are far more thoughts being processed in the sub and un conscious brains, especially those related to routines we have learned. So many of our actions take place without conscious thought. We struggle to learn routines, but once learned, they are so incredibly enduring.

Protective factors in businesses circle around the existing culture. You will hear things like “That’s not the way we do things around here.” Or “Why change a good thing.” And so many routines in an organization just happen because of the person we hire. The new hire either adds new routines, or learns what exists and takes advantage of them. What do I mean by this?

In every organization that is not learning Lean, severe bottlenecks exist. A process is dysfunctional and takes a long time for work to clear each step. A crisis is noted, which means someone wants something and they are either not getting what they wanted or it’s taking too long to get. Enter a “Cape.” You know, “Here I am so save the day” kind of person. The understand the organizational routine and have devised a workaround. You don’t know how they get things done, but they do and you don’t care because they eliminate problems for you. The Cape uses their thinking power to learn “fixes” that aren’t really fixes, but workarounds. They don’t care about the impact of their workaround on the system because they get a lot of praise and possible promotions and pay raises because they are “Problem Solvers.”

Kids haven’t developed many routines or habits. In fact, we spend a lot of time to teach them routine and good habits. We put them on a “Schedule” as babies. We teach them how to tie their shoes, cross the street properly and how to play games. We introduce a kid to our culture of how to live, and they take to it quickly, for the most part. And they are stuck with that culture for the rest of their lives, or until they expend the energy and learn how to change it. Our brain is an amazing instrument, with myelin sheaths that channel learned behaviors, at a certain point, without thinking. You can see this in athletes who have spend thousands and thousands of hours on one act. Take a jump shot in basketball. Why does it go in the basket? Because our brain has learned how to judge direction and distance then directs our body to perform a learned action quickly. When you are teaching a kid to shoot a jump shot, their first attempts are uncoordinated and awkward. Through practice, it improves. If they reach the pros, they perform that act unconsciously and with great skill. In the face of considerable opposition.

So thinking like a kid in lean is to clear your minds as best you can and start to look at what you do by dismissing the routines and habits you already have. Lean does this in a scientific method. First you have to understand what you do by using process maps, 5S, spaghetti diagrams and the other tools of lean. This is the role played by parents who are teaching you their culture, and it may or may not be a good culture to learn. But it’s the only one you have. When you understand what you do through habit and routine, then you can start to change it, and that takes thinking like a kid. You basically need to reprogram your subconscious and unconscious brains with the one tool you do have, your conscious brain. If you are going to take the time to learn new habits, you should learn the ones that help you achieve more of what you want.

Thinking like a kid means so many things to so many people. But to me, it’s a period of time where we learn to see the world so we can survive in it. We have lots of help interpreting that world, including learning language, recognition of threats and building skills. Gosh, that should like Lean Thinking. We learn a new language, develop a new culture for survival and accomplishment and build skills to compete and secure the things we need to for survival.

And there is, as well, the wonder of a whole new world to kids that captivates us. They are seeing the world through a new lens with wonder and amazement, but they don’t’ know it. They haven’t formed the judgments that color their perception yet. So we can think like kids by removing our judgments and focus on what helps us best survive, and perhaps thrive.

Posted by: knightbird | January 23, 2016

Learning to See the Importance of Change Management

A Lean Leader will encounter resistance in their transformation. No ifs, ands or buts. You will. It may be direct and confrontational. It may be indirect and hidden from you. The nature of leaders and employees is to resist change, unless it is initiated by them. And for change that has already been initiated by them, they will be very protective. An important skill for a leader is to recognize the difficulty of change and to have a plan for introducing it. I have advocated for a strategic initiative for implementation Lean Management, in whatever form. What I see instead follows a predictable pattern. Someone hears a lean presentation. The are impressed. They hire a consultant. They conduct Kaizen. The get enough improvement to get by. And they slow down.

I almost fit this pattern. I am one of a handful of executives who achieved a Lean Cultural transformation. That is, except for board comprehension. That’s another story. Among employees, improvement events began to be self started. An employee would talk to a Lean Champion and their supervisor. An improvement event would be scheduled, and carried out. The improvements would be reported in a way that I had access to. When I started, I discussed the implementation of Lean with our Executive staff. For the most part, they agreed. But 2 were closet oppositional. They wouldn’t discuss their concerns with me directly, and both eventually left the organization, one out of frustration, and the second because of oppositional behavior. I also asked the board to adopt a strategic initiative. We planned to become the best managed Native non-profit in the state of Alaska. I believe we achieved that within the 8+ years I was the CEO.

What is Change Management? It’s actually becoming an academic study area today. I hear a lot about team management. I agree with the concept of teams, but it’s more than teams. Change Management requires moving approximately 80% of your employees to actively practice Lean Management. About 20% of employees will be active resisters. 60% will sit on the fence and adopt a wait and see attitude. If you are successful, the active resisters will gradually leave the company, or you may have to ask them to leave. For the most part, they are not happy in a Lean Culture. It doesn’t feed their individual need of achievement. They will see plenty of team achievement, bit for some reason that is not fulfilling enough. Here is how I started.

Once you understand what Lean Management is about, and have a rudimentary understanding and are committed to a proper implementation, talk about it with your leadership. Then train them. It is a completely different method of management than they have ever been exposed to. It they are not convinced by the many success stories out there to try it, attempt to include them in Kaizen. If you have your 80% at least willing to try it, start with a problematic process and bring in an experienced Lean Champion. You can start training your own at this time, but use an outsider with strategic experience. By strategic experience, I mean able not only to see the breadth of the organization, but project improvements into the future. Discuss what you are doing with your employees, and make sure you include some active resisters in the event. It will either drive them out of the organization or change their status to at least non resistant.

Learn how to measure improvement. When you schedule a process improvement event, make it a 5 day event. After all, you are pursuing change management. YOU WILL GET IMPROVEMENT. Guaranteed. Your future state will probably yield from 50 to 300 % improvement. And I have seen higher levels of improvement. But you will get improvement. And here is where an experienced facilitator will help you achieve as much of that as you can in the one week time frame. And you will leave with a fully vetted A-3 that tells you how to proceed with capturing more of the improvements you have envisioned.

And it is important to make the improvements visible. Your employees are all competitive, and they will want to achieve their own improvement. And ultimately, you will want to see if your Executives have truly embraced Lean Management. Results will speak for them, not words. If you have true performance measures, and a very Visual Management System, the 60% will start to be drawn on board. Most of all, as the CEO, do your job. I have written before about Leader Standard Work. It requires going to the Gemba, either participating inn or visiting Kaizen, and a weekly stand up session for all leaders and regular visits to division process control boards. Performance measures should include historical. Show how your process improved initially, and how it continues to improve.

I also recommend taking your most interested and accomplished participants and starting to train them as Lean Champions. Eventually, you want them to conduct Kaizen. Our process for training included accepting volunteers and training them using Training Within Industry. (TWI) We had a Training Matrix and showed as they Champions progressed through five levels of training results in about 10 different skills. We would train Champions how to do a process map, a swim lane, spaghetti diagram and other skills exactly the same way. Then we would have a Champion plan and co-facilitate an improvement event.

And as you proceed with your implementation, Learn and Adjust. Plan, Do, Check and Adjust. Never assume you have all the knowledge you need to continue to lead the implementation. Talk to more experienced executives. Get rid of you arrogance, if you have any. Lean to stop blaming employees for problems. Take training in the areas where you feel you have a need. One training experience you should seek is “Humble Inquiry (HI).” If you understand HI, you are on your way to becoming a respected, charismatic leader who will achieve outstanding results.

You leadership style should evolve as you evolve. If you have access to an experienced coach, seek them out and pay them for their time. Or try to have one put on your board. Perhaps they can help move the board to a greater understanding of the Lean Management process.

Good luck. More on the topics included in this post will come.

Posted by: knightbird | January 18, 2016

United Airlines Traditional Management Performance

United Airlines made money last year, despite it’s own poor Executive efforts. But they made money so they will get huge bonuses. And they butchered a merger, but got it done. Completing the merger was probably a performance measure and they will get a big bonus for that. Oftentimes, despite our worst efforts, we find ways to make money in business. We may have a fairly decent share of the market, or may be the only provider in the market or we have a competitive advantage that allows us to be incompetent as an Executive. United Airlines fulfills that role well. In my search for articles, I discovered that they have been in trouble for well over a decade. The merger with

Passengers don’t like UA very much. [LINK HERE]. On time performance, baggage handling and amenities have all suffered. Stories like a handicapped man having to crawl off a plane because the didn’t have an aisle wheelchair and a lost girl in Chicago because no one met an unaccompanied minor are making the rounds. UA chose to merge both merged company IT in one day, and passenger and employees suffered for months while they worked out the kinks.

But in the meantime, they have had 3 CEO’s in one year, discovered corruption and screwed up so much. [LINK HERE] Why were they profitable then? Fuel prices went down. But they even manage so screw that up. The hedged their position, which means they paid more for fuel than they had to. And they still made money.

What do I believe happened?

Most businesses are run poorly when compared to the industry leaders. And then they try to discover what the leader is doing that makes them so successful and copy it. Stephen Speare wrote an outstanding book about this practice: “Chasing the Rabbit.” In it [and the rewrite titled “The High Velocity Edge”] he describes how leading companies use Lean Management derived from the Toyota Production System to achieve “outstanding” results. And apparently Rocket Scientists aren’t capable of avoiding chasing the rabbit, a point Speare makes when he discusses the Space Shuttle disasters.

Pun aside, good management is not rocket science. But it must be learned. There is no quick fix to any business. Here is my prescription. First, Commit to learning everything you can about Lean. Understand who Dr. Deming is. Know that Sakichi Toyoda was a Loom inventor and discovered Jidoka, or autonomation. Know why he implemented the 5 Why’s? Then put in countermeasures to assure the problems you find never happen again. When he asked his son Kiichiro to start Toyota Motor Works, it was with a foundation of scientific thinking. Then bring in Taiichi Ohno and Shigeo Shingo together with a lot of scientific experiments, and you get a high performing company. It’s a management system without peer in the United States today. And United Airlines doesn’t get it.

That’s why I say immerse yourself in Lean management. Participate in Kaizen. Go on Gemba walks. Talk to experienced Sensei and watch how they perform.

Then put it into your strategic plan. Explain it to your board and hire the right consultants to set up performance measures with a solid baseline. I have gone through most of my career as a board member listening to only the good. Make sure your culture understands that there is bad, and look for it. Not to punish employees connected with the bad, but to empower them to ask Why and implement countermeasures. Shades of Sakiichi Toyoda. Your strategic plan should say that you plan to be the leader in your market using the principles of Lean Management. Then require every new hire to commit to learning and using lean in their daily activities. Build the culture into your workplace and commit to making as many mistakes as happen, but with a commitment to allowing your employees the knowledge and resources to fix them.

Is it simple? Absolutely not. I was listening to an extremely knowledgeable football veteran explain how to neutralize a best of a defensive tackle and clear a lane for the quarterback to run for a first down. It was brilliant, and beyond my analytical capacity. We have to make mistakes and learn our skill set over a considerable period of time. Too often, I run into individuals who have slightly more knowledge than others in their organization. They become the expert, despite failing to earn that label through thousands of hours of effort. We are currently experiencing that in a lot of places in Alaska. We have no experienced Sensei’s, and those who claim to be know only the tools. So in my football example, they understand how the ball is hiked and where the linemen are placed. But they don’t know how to figure out how to identify a defective play and develop an effective countermeasure. The do what everyone else does, and run away from the beast of a tackle, instead of neutralizing him. That’s what UA does.

So have a strategic initiative to implement Lean, then learn, learn and learn. And bring in someone who can teach, from a systemic and not a tools perspective. The results will come faster. I have also said this to potential clients, and have written about it as well. You will not pay a single dime for implementing Lean the correct way. You will save so much money without focusing on the bottom line that it will blow your mind (to use a phrase from my youth.) I am still waiting for that creative executive in Alaska to ask me to help them with their implementation.

Posted by: knightbird | January 15, 2016

The Con Men and Who to Trust

I know this is a strange title for a blog on Lean Management, but I was motivated to write it after listening to author Maria Konnikova, author of “The Confidence Game: Why We Fall for It,” on National Public Radio [LINK HERE]. My reasons might become clear, but I am still working to put it into context. Part of my reason for vacillating is that many people have become so good at rationalizing their beliefs and although they might perpetrate a con on an individual, the actually believe in what they are doing. So I believe we have con men who know that’s what they are doing, and we have con men (and women) who believe that what they are doing is right. But I believe the result are just the same. By writing this, I am not pointing out any specific acts, but a pattern of behaviors that I believe exist that support poor performance in an organization. I have certainly heard my share of “stabbed in the back” stories. My only purpose is to make us aware of how important an ethical workplace and how Lean Management promotes it. This is not to say that ethical workplaces don’t exist without Lean.

A “Chaotic” work place is a complex environment, and it does work to some extent. We hire Executives to manage companies based on their credentials, experience and results. Every Executive tells stories that put themselves in a good light. I am reminded of “Chainsaw Al” Dunlap, who had a reputation of budget cutting extreme. He was hired by Sunbeam and proceeded to drive them into bankruptcy. Most executives just fail to perform. And because of the culture of criticism avoidance, we don’t say too much that’s negative about executives. After all, they do have to get another job after they do nothing for an organization. Of course, there are executives who do a good job. But how much of that good job is due to fortunate circumstance, and how much to great management? As Ms. Konnikova points out in her interview, con artists are just really nice people and they make you want to like them. They do a background check on you. They are complimentary about your past work. The engage you on your own turf and make you like them. While I don’t believe most con men are intentionally perpetrating a con, they do manage to use an organization for their own benefit, predominantly through salary and benefits. Given what Lean has taught me about companies that do not know what good management is, it is relative easy for some people to use that for their own gain.

Virginia Mason describes what they refer to as Capes, people who have mastered the Chaos, know what management wants, and are able to deliver results through elaborate workarounds. The know who to go to, who to avoid and how to get a result even if it means stretching ethical boundaries.

Others manage by shifting blame and proving they can manage by isolating and eliminating who the identify as problem employees. This type of organization has spies, multitudes of reports and rampant finger pointing. If a poor result is reached, the executive is fired. Fear is used to maintain results and force employees to work harder. But the hard work is not team based. It becomes an effort to shield yourself from punitive executives. But when I say punitive, it is always with an explanation. And for many reasons, that is all that is needed. When you let an employee go, you lay some blame on the reason for letting them go, but never really examine the true root cause of the problem(s) they are blamed for allowing to happen.

But I believe more prevalent is how a relationship develops between a board member (politician) and an executive. Most CEO’s become very aware of board member statements and make sure they respond to them, even if they are not good ideas. We have a term in Alaska for professional board members—“per diem Indians.” Many for profit corporations pay their board members for serving. Sometimes its a lot. And publicly traded companies often provide their board members with stock or stock options for payment, in anticipation that if the advice they give helps the corporation become more profitable, their stock will rise and they will benefit.

A true Lean Organization minimizes issues of this type. First of all, a Lean Executive will achieve outstanding results if they truly understand Lean, or make a commitment to understand it. A Lean Executive will be able to explain performance using statistical performance measures. A new style of reporting will need to be learned by any board employing a Lean Executive, and they will have to start thinking systemically while they eliminate their blame and shame culture. After all, Dr. Deming stated as one of his 14 points the goal of eliminating performance reviews. After all, a Lean employee and the team they work in are reviewed every day, by themselves. By understanding Takt Time, Cycle Time, Pull Systems, Elimination of Waste and Standard Work, they are already working at much higher level than their competitors.

Now I think this is a much tougher sell to an individual board member who has become accustomed to special treatment. A prime measurement tool for Lean processes is the control chart. When a Chaotic workplace experiences a defect that comes to the attention of a politician, the reaction is typical. They approach the CEO and complain. The CEO wants to get to the bottom of the complaint and approaches the manager, who approaches the employee closest to the problem and complains. Fix it or else. So the employee will do whatever it takes to resolve the problem. But they won’t fix the problem. And by addressing this one defect, they might create more work by establishing a regular report to make sure it doesn’t happen again. And the report eventually fades into memory, but is still made. So one report doesn’t really hurt us, does it? Wrong. My Lean Champion at one workplace asked a finance staffer about a report being done on a weekly basis. They didn’t know why the report was done, they just did it. When the Manager of the department was asked how the report was used, they said it wasn’t. It got filed. It was most likely a safety valve that could be pulled out by an executive to avoid blame by a board. See, I am managing my department. In fact, this report took 2 hours a week to compile and prepare, so after 52 weeks, it cost the company 104 hours of time, or essential 2.75 work weeks. That is one plus paychecks for a report that will likely never be used.

If a board and CEO can effectively transition to a Lean Culture, with Respect for People and Continuous Improvement applied to the entire organization, we begin to eliminate opportunity for con men, both intentional and non-intentional. A Lean System is so much more difficult to game. That’s not to say it can’t be done, but it becomes more difficult.

Oh, and a lot of consultants game organizations. They come in promising great results, but don’t really deliver any. I have seen lots of flavor of the day projects delivered by consultants with almost no benefit, and often considerable detriment. There are good consultants out there, but many will sell an off the shelf product without changing the culture. As a Lean Expert, I can make change without changing the culture. But it’s not sustainable.

Posted by: knightbird | January 14, 2016

Lean Government Social Services

Lean Management Principles can be effective implemented in a social service organization, and there are many examples finding their way into stories on the Internet. Data driven improvements using Lean can have a huge impact on the health and welfare of our client base in Alaska. The principles are the same as the principles applied in business: let customers pull the service, understand your Takt Time, Cycle time and created flow through the elimination of waste, and develop standard work in support of your professional employees application of their knowledge and skills. Isn’t that a mouthful? Well, nobody said it was easy. That’s why we no longer have a successful Lean Management organization in Alaska. We have some that are struggling to find the path, but I am still waiting to see the right kind of results.

Let’s look at some examples of successful stories. The Wisconsin Bureau of Childhood Support has improved its intergovernmental case processing, working with other states to collect child support, by 60% according to an article in an ACF newsletter [LINK HERE]. By mapping the existing value stream, considering the complexity added by governmental regulations and extra jurisdictional laws and procedures, they established a plan to achieve the 60% improvement. So for the same cost as before, they can achieve much more with the elimination of waste. Success story and they want to do more, like tackle the instate child support process.

Ventura County, CA [LINK HERE] has been improving social services for over 5 years and accumulated reported savings annually of more than $535,000. For the past 5 years they have not spent over $2.5 million on the services they provided and suffered no reduction in the quality of those services. Sometimes we fail to understand that once the savings are achieved with Lean, they are recurring and the new base isn’t used to recognize how much additional benefit accrues to the residents in the Local Government Service Area. Registration for benefits, appeals process and health/dental exams for foster children benefitted from the application of Lean Management principles. Remember, this improves Value for customers, but saves costs as well.

Here is an interesting one from Results Washington. [LINK HERE] We have to remember that employees are also customers for Lean purposes. The Department of Health and Social Services improved processes for employee related processes and freed up 25,200 hours of employee time annually. That equates to 12 FTE’s and although the department only calculated $10,000 in savings, the number is actually equivalent to the salary and benefits of 12 employees. The savings are more in the range of $750,000 if each employee considered has a base salary of $50,000 and benefits of 30%. Think of it this way: you can either free up 12 employees to perform other necessary work, or if there is no other necessary work to do, you can move 12 employees to an area where there is work to do, without adding more funding.

Solihull is a local government in the UK. One of its projects involved patient discharge delays caused by a local government. Through the application of Lean, they achieved a quicker discharge of patients and avoided the penalty imposed by the British Government. Avoiding penalties is another benefit that Lean can give to a Local Government.

Now a final example for now. The state of Maine targeted a number of Long Term Home and Community Benefits for elders. [LINK HERE] While the summary of benefits is not at this Link, there are substantial benefits accruing. That’s what Lean does. Process are improved, quality is increased, services are delivered more quickly at a lower cost and customers needs are met more efficiently.

So lets encourage our social service providers to learn about how Lean can benefit their organization. We all benefit as a result because of the societal impacts being reduced, along with the cost.

Posted by: knightbird | January 12, 2016

Are our Priorities Misplaced When the Focus is on Cost Savings

I have been fortunate to lead a Lean Management transformation in a non manufacturing environment. And while I was interested in cost savings initially, I cam to learn that saving costs is so easy if you implement Lean the proper way, and focus on what my friend Mark Graban reminded me of in a recent post, Shigeo Shingo’s priorities: “…easier, better, faster, cheaper…” To that, I would add necessary.

As I approached our state of Alaska, currently in the throes of a fiscal crisis caused by a huge decline in oil revenue, I spoke to people about maintaining service levels. I reviewed an RFP for a lean consultant put out by the Alaska Division of Public Assistance and found that despite using consultants, after 6 or so years they had 150,000 clients with a backlog of 10,000 applicants and a computer system implementation that was almost 2 years behind their implementation schedule. Their RFP looked as if they were pinning their hopes on a consultant.

But I take the question of misplaced priorities even further than just funding and budget issues. A major point of Mark’s post had to do with health care executive focus on cost cutting. But when I apply systems thinking to health care, I come up with a different answer than cost cutting. I focus on healing as the goal. Then I look at Root Causes, of which there are many.

My first focus is on the dysfunction of the entity they want to cut costs for. In his book, Chasing the Rabbit, Stephen Spear describes how an experienced Toyota Executive analyzed each new factory he visited. He always asked to visit the loading dock first. According to Dr. Spear, this executive wanted to get as close to the customer was he could. He asked questions about delivery, loading and wait times. Then he worked his way back through the processes that made the product.

I agree with that approach. Our first step is to look at the customer and how services are delivered. Scientifically. Let me explain why. I have sat through countless “constituent” and “stakeholder” meetings. People affected by the services come to a meeting and talk about the problems. The leadership acknowledges the problems, imply that they are not as bad as they seem and that they are doing everything they can to make improvements. They go back and tell employees to do better, implement more reports and return to fighting fires. I just reviewed, for example, an RFP for conversion of a group foster home into a transition home in California. They are moving from indefinite stays to 10 day stays. A significant part of the RFP requires the consultant hired to visit constituent and partners. That’s not a bad request, it just doesn’t usually lead to much other than a restatement of the complaints. The consultant is then supposed to make recommendations on a conversion process.

How would I approach the RFP in a Lean fashion? I would start with the real customer, the foster kids. Where do they come from? How are they referred? What are there needs? What intake process is followed to bring them into the system? How does the organization get to know the customer needs at intake? Are there records that follow the customer and how are they transmitted and assessed? Every question would be identified by a team that includes partners of the organization and copies of all laws, regulations and documents collected as we identify the “Current State” the organization uses for bringing customers into the home. We would build a profile of the customer so we can best learn about their needs.

The rest is plain Lean Kaizen. (Surprise, its been Lean Kaizen for the last 2 paragraphs.) We would calculate Takt Time, calculate Current Stat Cycle Time, identify any pull systems serving the main process and see if there is any current standard work in place. Then we go to work on creating flow. We eliminate waste and enhance Value.

Two of the Priorities this organization has in it’s RFP is strategic. One is mandated by law—conversion from a long term group home to a transitional home. The second is a recognition that children who enter the foster care system are far more likely to come from Trauma burdened families. in the late 1990’s, the Adverse Childhood Experience Study identified experiences that occur during childhood have an impact of both health and behaviors. As that knowledge has spread, organizations are seeking ways to recognize which children have trauma and how it affects their behavior. Because the level of knowledge about ACE’s and the issues of identification, this could be the most difficult part of the RFP and would benefit from Kaikaku. This organization is seeking radical change, and at this point in the improvement process, the participants need to have guidance because they are reaching past traditional boundaries and radically changing what they are doing. Kaikaku is change management on steroids. It’s difficult to achieve because of the barriers that participants throw into the discussion. We can’t do it. It’s impossible. We don’t have the resources. We are not a manufacturing company. I have always done it this way. Radical transformation is always scary to a majority of people. A good leader has to show a pathway to success, which means reorienting negative thought patterns.

Kaikaku can be accomplished in a week. Isn’t that better than waiting 6 months for a consultant to talk to people and come back with a report that still needs to be implemented? After we understand the framework of laws, regulations and relationships, we build the service from the ground up. By addressing the concept of childhood trauma burden, with Kaikaku rules applied, we arrive at a completely redesigned system ready for implementation, and a dialogue already conducted with questions answered. It is likely that initial standard work can be drafted in the Kaikaku week and with a new flow process mapped, implemented with test cases the following week.

Now let me try to bring this back around to the question I asked in the title: are improvement priorities misplaced when they focus on cost savings? Yes, I believe it is. The purpose for introducing Lean Thinking in an organization is to serve our customers. When we are in a service generally provided by government or a non profit, there is a huge bureaucracy built by non business leaders who want to do good. The example I cite about DPA is designed to eliminate a backlog and get existing services to customers quicker. That’s not bad. But their original continuous improvement training has not taken hold and they backslid to a considerable backlog. The transition RFP is designed to accomplish change in a traditional manner, have a consultant do it. Cost is apparently not a consideration because it is not discussed in the RFP. However, because Kaikaku takes just one week to conduct, and a couple of months of oversight to implement, it already saves cost because of the reduced cost of a consultant. And the Kaikaku itself, because it will consider Takt, Flow, Pull Systems, Waste Elimination and Standard Work, will increase Value Capture, which always reduces cost. It’s a simple equation. Increased Value Capture = Reduced Cost.

So the answer is yes. A focus on cost reduction is misplaced. Implementing Lean will lead to cost reduction.

Governor Bill Walker has implemented a hiring and travel freeze in Alaska. Instead of focusing on service improvement, freezes often hurt them. When I spoke to the Governor over a year ago, a little bit of time invested in learning about Lean and developing a strategy would now be reaping benefits, one of which is the gradual elimination of vacant positions and the transfer of other positions to places that need them.

Posted by: knightbird | January 10, 2016

Ethics and Lean Thinking

A dysfunctional workplace is not always an ethical workplace. We are seeing some ethical drama unfold in Alaska with recent news stories about the North Slope Borough Mayor and with the Association of Village Council Presidents. Other tribal entities have actually had officials who were convicted of theft. The Native Village of Tatitlek President plead guilty to stealing funds and is currently serving a prison sentence. Two officials of the Alaska Inter Tribal Council plead guilty to theft and falsifying time records. The ex Director of the International Whaling Commission is also serving a prison sentence for theft. With billions of dollars coming into a community with a very small population, it’s not surprising to see some ethical lapses.

Board oversight, financial controls, audits and reporting standards are supposed to ferret out any corruption or self dealing. But if a board is not competent in finance or management, the oversight is often insignificant. Experienced managers have explanations for everything. That’s what they do. They claim credit for all that is good and lay blame off for all that is bad. The blame game can extend widely, and occasionally there is a scape goat who is sacrificed. Many boards play this game.

What is the solution? Again, I am going to argue for a more open management culture of Lean Thinking. Not many Alaskans have been inside a Lean Culture, and if they have, they have almost no understanding of the financial performance nor the quality improvements that are happening. As a result, they are sacrificing huge amounts of Value Capture and Value Creation. If they don’t understand a word and what it is describing, they can’t understand what they are missing.

A Lean workplace has “Respect for People” as a guiding principle. Respect for People means that you are going to provide them the greatest amount of Value for the resources available. In order to do that, you are going to work with your employees, customer and suppliers to earn that Value. Your organization needs to become ever more visible and expose the dysfunction and chaos. To do that, you first have to lower your defensiveness and accept that you are not very good. Lowering your defensiveness is hard to do. Our brains are not wired for it. The Dunning Kruger Effect defines our ignorance when we try to assess how we are doing. As a result change is difficult to lead. People resist because they both fear the unknown, or they have it so good in the present that a Lean future would take away from what they have.

A Lean Workplace is open and non blaming. Systems are improved by the workers in a system. Production and quality are measured for the purpose of assisting improvement. Problems and defects are acknowledged, without blaming or shaming. Very few managers know how to measure either. But most know how to blame or shame. And most who are in positions of privilege know how to protect that privilege. It’s not a pretty sight to see. The antidote is to base decisions on facts, and to communicate the facts everywhere. Lean does that. Process Control Boards (PCB) exist everywhere in a real Lean Organization. A Strategic PCB is accessed by leadership regularly, and leadership will monitor other PCBs regularly. In any operations, making performance data visible on a PCB allows for problems to be identified early and improvement made quickly. Productivity is maintained because everyone knows what good productivity is and what it consists of.

For financial management, facts are critical, but the final outcome sought after is a “Clean Audit.” We seem to stop our improvement when we achieve a Clean Audit. But the purpose of a an Audit is to look for errors, mistakes or defects. Finding them means that you don’t get a Clean Audit. Having been the CEO responsible for 9 audits and a board member responsible for over 40 audits, I have an understanding of the super efforts that go into making sure your audit is clean. You spend a lot of time at the end of a fiscal year going through everything and assuring that the right answer will be given to an auditor looking at the transaction. Lots of problems are overlooked in an audit because an audit is what Dr. Deming referred to in his 14 Points as number 3.

3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.

An Audit is an end of year inspection intended to achieve quality in financial management. I have yet to find a financial management system in Alaska that has achieved a Lean Cultural transformation. Almost every organization required to have an audit passes it.

How can you build quality into a financial management system? I believe you have to make all transactions transparent and fulfill the goal of the system. You need to verify that every expenditure and action was approved and pursued for advancing the goals of the business. It starts with the openness of a PCB and populating it with proof of continuous improvement activity. Here’s what I think it should look like.

Value Streams need to be improved using A3’s. Production targets based on Takt and Cycle Time should be observed. We need data on how many transactions are processed by finance staff annually. Then we break the numbers down as we improve to smaller and smaller increments. If we have 100,000 transactions in a 250 day work year, we know we have weekly takt of 3,846 and daily takt of 770. When we measure average cycle time for arriving at current staffing. Process steps in a cycle are pretty standard. Start the Process, Get Approval, Execute, Secure supporting documents, submit to finance, process the documents, enter into the system and file. This is true for every type of transaction. When every transaction is analyzed, it can be processed with as much quality as possible. And with transparency, you minimize any opportunities for theft. At the end of each year, Audit’s are less expensive because you no longer have to examine every transaction to assure that it will survive audit. You don’t have to go back and secure supporting documents. You have built quality in at the source, and an audit will be less expensive, as will staff time correcting a years worth of defects.

Lean Leadership will provide the required cultural surround of Respect for People. If you respect your customers, you will not steal from them. And stealing might be a harsh word, but if you aren’t capturing the value you are capable of capturing, you are stealing something from your customers and employees. If you only deliver 11 items a day when you could deliver 24 for the same price, you have taken something of value away from your customers. You are charging your customer 120% more than they should be paying for the item. If you are a non profit and don’t charge for the item, you are taking value away from whoever is funding you. Once you have improved to providing 24 items, then you work to improve quality and capture even more value.

An open and transparent workplace with PCB’s and performance standards everywhere reduces opportunity for theft and unethical behavior. Having measured goals and an improvement mindset requires every employee to participate in creating value. In my decades of business involvement, I have seen employees who work very hard and put in great effort for very little return. And I have seen many employees who have almost no work, but are pulling down a good income. Guess who resents who?

Lean can help reduce theft, fraud and value draining positions. But it’s the culture of Lean that does that.

Posted by: knightbird | January 6, 2016

Lean Thinking and Fear in the Workplace

I have been reading Joseph LeDoux’s recent book titled “Anxious: Using the Brain to Understand and Treat Fear and Anxiety.” His 1996 book titled “The Emotional Brain” introduced the role of the Amygdala in perceptions of fear. One concept he introduced was the amygdala’s role in the “nonconscious detection of threats.” When presented with a threat, the amygdala goes into action without the intervention or knowledge of the Prefrontal Cortex (PFC). In our evolutionary history, threat response had to be immediate or survival was at risk. When a threat is detected, the Amygdala presented an immediate response. Part of that response led to reducing the flow of oxygen and glucose to the PFC. In other words, your thinking brain is cut off in favor of survival. Your Amygdala prepares your body to react with 3 options: fight, flee or freeze.

This knowledge is important in social settings where fear might be present, such as schools or workplaces. In schools, students with a heightened fear response react to perceived threats in predictable ways. They fight (physically or verbally), flee (leave the scene, leave the school or drop out of school) or freeze (stand or sit and take the threat without visible reaction). Because oxygen and glucose flow to the PFC is reduced, expecting to reason with a student is not a rational expectation. Letting the student calm down in a non threatening place and by removing external threat potential is important. After removing the threat, discussion can take place. Unfortunately, most of the discussion is one way and involve additional threats such as calling and involving parents, suspension or expulsion. Finding a way to modify student behavior to reduce the threat response is important and should involve recognition of responsibility for their actions (appropriate to their age) and responsibility for those actions (without excessive threat).

I believe the same is true in the workplace.

A major difference in the workplace involves the need employees have for the income they are earning. Fear might keep them working, but it does not ordinarily lead to productivity. Employees quickly learn how to please their bosses. If initiative is punished, employees will not display initiative. If managers have a “git er done” attitude, it will get done, but the workplace will probably suffer as a consequence. Some employees learn quickly what gets rewarded, and will begin to display the behaviors that get rewarded, even if they are destructive to the business. That’s probably the main reason Dr. Deming said to eliminate reliance on quotas. If a quota is set, employees will meet the quota, defects ignored. If a particular behavior is rewarded, you will see more of it. In another example, Virginia Mason Medical Center refers to individuals who step in and fix a particular problem because they know how to achieve workarounds as “Capes.” You know, “here I come to save the day.” (Mighty Mouse) There is also a freeze response in the work place. It’s called keep your head down and don’t make waves. The fight response is usually horizontal (among peers) and not vertical (up to managers). And the flight response is to keep your mouth shut, avoid any sign of disagreement and hope to escape as soon as possible.

Deming’s 8th Principle of 14 states “Drive out fear.” He encourages effective two way communication and “other means” as ways to achieve this Principle.

I would like managers and executives to become familiar with the findings from the Adverse Childhood Experience Study, conducted in the 1990’s at Kaiser Permanente Medical Center in San Diego, CA. What the study found is that, as I interpret it, an individuals threat response is enhanced during childhood when exposed to negative parental and authority figure behaviors. Adults with multiple negative experiences (Adverse Childhood Experiences or ACE’s) will have an activated threat response more frequently than one who does not. Managers need to understand this and have a standard workplace response to an escalating employee. A standard response can be the one introduced as a part of the Training Within Industry method. Their Job Relations (JR) program outlines and teaches how to handle a problem by (1) getting the facts; (2) weigh and decide; (3) take action; and (4) check results. JR also sets out a foundation for good relations that include: (1) let each employee know he he is getting along; (2) give credit when due; (3) tell an employee in advance about changes that will affect them; and (4) make best use of each person’s ability. Still relevant advice 80 years after it was developed.

What the ACE research adds is to be aware of each employees enhanced threat response and find a way to deal with it. I will discuss that more in a later post

Posted by: knightbird | January 5, 2016

Developing a Value Capture Culture

The tools of Lean Thinking are easy to learn. But learning how to deal with people is so much more difficult. Abut 20 years ago, McKinsey & Co. came up with the concept of “Talent.” HR departments became divided into Talent Acquisition and Talent Management. Of course businesses started adopting the new buzz word and Human Resource departments, itself a poor descriptor of what we do, became Talent Management. I used this argument when the concept of “Talent Acquisition” was brought into an organization I am associated with. With a new focus on Talent Acquisition, what do you think existing employees think? Are they disturbed because new employees are “Talent” and they are just resources. I have been through a number of employee recruitments, and I can tell you that those selected based on perceived “Talent” are not necessarily a good fit for a Value Capture Culture.

Fujio Choi, former chair of Toyota, said this:

“Brilliant process management is our strategy. We get brilliant results from average people managing brilliant processes. We observe that our competition often gets average (or worse) results from brilliant people managing broken processes.”

I believe that focusing on “Talent” isn’t the right strategy. Let me explain why.

First, people who believe they have Talent often do not. They fall victim to the “Dunning-Kruger Effect.” The first effect is “Illusory Superiority.” They believe they are better than they actually are because they don’t have the cognitive ability to understand their limitations. The second effect is “Underestimating Relative Competence.” Highly skilled individuals often overestimate the competence of their peers and underestimate their own competence. They mistakenly believe that others have the same ability as they do to perform the same task. This is, I believe, one reason performance evaluations are usually a total disaster. In job interviews, applicants often severely over estimate their impact in prior jobs.

Second, “Talent” often believes they know how to get things done. They learn the workarounds in an organization and become “Capes,” a term used at Virginia Mason Medical Center to describe employees who you can go to to “save the day.” Because they know people, and can work around a problem, they get great credit for being problem solvers. But as one nurse said after learning about Lean and Standard Work, she spend the last 17 years solving the same problems over and over again. That is what a Cape does, and gets credit for.

Third, “Talent” often cannot work cooperatively and can be overbearing at times. You know them. They have the answer, and won’t hear of any other possible answers. They are quick to implement potential solutions and if the solution fails, they will not admit it because it is their solution and to admit failure diminishes their perception of being a problem solver.

Finally, “Talent” doesn’t always communicate well, wither they have Illusory Superiority or Competence Underestimation.

A Lean Thinking Culture needs to transform all employees into valued partners, fully invested in the success of the organization and its partners. They need to live the Toyota Value of “Respect for People” and learn to work in a structured process that maximizes the contribution of all employees, regardless of their level of experience and qualification.

Time for an anecdote. I have revealed that I was certified as a pitching coach by the National Pitching Association, multiple times. My youngest son is a pitcher in college. When I went through my first certification, I asked an older and incredibly experienced coach how could I expect to be a good pitching coach when I had not been a pitcher beyond little league, and I barely pitched even then. His reply stayed with me for the past 12 years. “Patrick, you haven’t learned all the bad habits of pitchers who become coaches.” It made sense. I was a fresh slate, educated and curious. They could teach me the right way to coach pitchers. I say the same is true for all employees. As my Pitching Sensei, Tom House, says constantly: “Conventional wisdom is neither conventional nor wisdom.” When we learn a habit, it’s hard to break. And “Talent” has habits that are hard to break, if they can be. Yesterday, we watched a 28 year old pitcher, one I saw as a 17 year old hotshot. After a lackluster college career and a short professional career, this athlete worked with my Sensei, and saw an increase in velocity to 100 miles per hour. This pitcher and his adviser coaches dismissed my coaching methodology many years ago, and suffered as a consequence. Today, with a health and velocity charged arm, he cannot get a tryout because of his age. He and his coaches believed in the conventional wisdom, and finally discovered it was not conventional and it was not wisdom, perhaps too late.

Instead of Talent, you want hard working, collaborative people who can communicate with each other and overlook their biases or habits in favor of a new Culture of working together to capture value existing in their workplace.

With Respect for People, we value all our employees, regardless of their achievement, education or experience levels. I am heartened by results I hear from Starbucks, which as a 50 hour mentoring program for new employees. Starbucks employees learn their culture, which for the most part includes respect for their employees.

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