Posted by: knightbird | December 6, 2016

Human Resources Treatment of Lean Employee Hiring

I read quite a few job descriptions developed by HR departments advertising for a Lean trained employee. I am not impressed. They string together a list of qualifications and certifications they desire. But do they truly understand the world of Lean. Or do they just want to jump in to the latest craze and have to figure out a way. I envision the conversation that leads to the decision to authorize a new employee do “do” Lean at the company. The boss says “our competitor is starting to do Lean. I read a couple of articles on it and we need to give it a try for our manufacturing operations. Assign this position to the COO and lets get it done.” So the COO tells HR I want an employee who can do Lean for us in manufacturing. Go find one. The HR manager looks for other ads for Lean Manufacturing employees and cobbles together a list of qualifications. They usually include having a six sigma belt, being certified in Lean Manufacturing from a training entity and X years of experience at another company. Team player is usually in there. Ability to teach, mentor and coach others. Develop training materials. Establish performance measures. And don’t forget catering to the bosses. Develop strong working relationship with the leadership is one I see often.By the time I an finished reading the PD, I realize I am not qualified for the job. That is, according to their terms.

What is the company looking for? I am not sure they have any idea.

Without a top leader committed to Lean, the results are not going to be as good as they could be. You can still get results, but nowhere as outstanding as they could be. Think of a football team that has a great offense, but sucks on defense. They can still be a losing team. I like the concept that Sir David Brailsford, coach of the British cycling team uses as his foundation: the aggregation of marginal gains. He seeks improvement everywhere, using every means possible. And they have a great performance measurement system—they have to win and place in races. The have done that with 80% of the gold medals won in Olympic Cycling during his first 2 Olympics. What a CEO who focuses on manufacturing does is already a loss, no matter what improvements are made there. Now why do I say that?

The COO decides they want to do a Kaizen to improve the manufacturing process. So they do a Kaizen, and eliminate some waste and increase flow. Gosh, this is good. Let’s do another part of the manufacturing line. For a couple of years they struggle along with Lean and finally say enough. The results aren’t good enough, and oh, by the way, the Lean guy is costing us $100,000 a year with benefits. We can save $100,000 by letting him go. Another failed effort. Why has it failed. The bottom line for improvements in manufacturing cannot statistically add that much to a company without considering the whole. A true Lean system will start with the customer, work through flow and move into pull systems all the while finding every bit of waste that can be eliminated. Let’s take a look at a strategic view of implementing Lean.

Start with getting a committed CEO. You know what? That CEO doesn’t need to know a thing about Lean. But they do need to be willing to learn while they are giving total support to their implementation. Then you find a Lean Executive coach to guide the CEO and his staff, starting with an introduction to the culture of Lean. And don’t just sit in the conference room looking at a powerpoint. A Lean Coach will introduce the context for Lean, then take the management team on a Gemba walk. We start at the earliest place in the facility where we can identify the customer. That might be the loading dock, or the patient waiting area, or the cashier’s counter. Doesn’t matter. That’s where you start. then your work your way back. Look at flow, check for inventory, WIP, workplace organization, safety issues—it’s all there waiting for a seasoned eye to evaluate. It doesn’t matter if your workplace is manufacturing, service, medical, social service, distribution, repair—it’s all evaluated and improved the same way. Do you need a coach that is versed in every functional area of your workplace? No. Those people are your employees. A coach is there to draw the best out of what you have. We use a specific process for improving the workplace. Let’s look at an example for a position I actually applied for, the manufacture of hot tubs. It starts with the molding process. Support is added through fiberglassing and framing. Then it moves to drilling holes for jets and installing tubes for water and air flow. You install a motor and controls. It’s finished and packaged for shipment. How can a Lean Coach without specific experience in the manufacture of hot tubs add value to the enterprise. That’s actually very easy.

We start with determining Takt Time. How many units are needed every day to meet demand. It a hundred units are needed, on average, and one shift is worked, then we need to produce one hot tub every 4.8 minutes. That doesn’t mean we need to make them in that amount of time. It’s just a measure for one finished every 4.8 minutes. Divide the number of minutes in a work day (480) by the number of units needed (100) and you have a target to aim for.

The next goal is to understand cycle time for building a hot tub. Cycle time starts when you receive an order from a customer and. It goes through when the molding starts, framing and glassing, drilling, installation of components, finishing, packing and shipment. Let’s say that process takes 45 days. When we map the Value Stream, or a part of it, we will separate Cycle Time into Lead Time and Value Adding Time. That’s easy to do. We take a stopwatch and time whenever an employee is touching the product for making it. Filling the mold is value adding time. Waiting for the mold to accomplish its work is waiting. Drilling is Value Adding. Installing Jets, tubing, motors, controls, speakers and anything else is value adding. By taking about 10 measurements, then separating them into ranges, leaves you with a median VAT. Subtract that from total Cycle Time (Called Lead Time) gives you the amount of waste in the process.

So if our process (Cycle Time) takes 45 days (1,080 hours), and actual hands on time is 43.2 hours, then 94% of your Cycle Time is waste. (43.2/1080) Can you reduce that? Absolutely. Creating flow can immediately eliminate a substantial percentage of the waste. When the order is received, it can be put in a que for starting its manufacture (FIFO). The appropriate molding machine gets the order, setting up a pull system for materials. The mold is loaded and the cycle started. Then it’s pulled and moved to framing and fiberglassing, with as little time between the work as possible. The tub is moved to each next station in a continuous flow, and when that station is done, the next product moves in and is worked on. For models that are daily similar and might have different options installed, those options are programmed in the Kanban system and a foreman, or shop floor manager,  makes sure that what is needed will be delivered when needed. The process of assembling the hot tub is very simple. When you have the process mapped, your experienced assembly and supervisory team, along with some administrative staff, will find the improvements that are available. A coach will guide them with instruction about what waste is and how to eliminate it. The team will identify the waste. It’s a teaching exercise with a good outcome. Creating flow helps reduce the wastes of transportation and waiting. Looking at how the work is done and the ready access to tools helps eliminate the waste of motion. Inserting a kitting cart can function as a Kanban with different kits for each option. This will help by eliminating motion, inventory and transportation. Defects will start to reduce immediately, and rework should become a part of the past. Quality will improve, and because crisis mode is a part of the past, employees will become less stressed and start being able to use their creative side to identify problems and develop counter measures and permanent fixes in the future. After the future state is identified, the Next Current State is laid out, standard work is developed, and the new NCS system tested. It will be put in place as soon as feasible.

Oh. We have probably created a treasure chest of next scheduled Kaizen’s. Whenever employees do their problem identification, they always identify problems in other parts of the process. Trust me, always.

I have left a lot out of the description. We are not trying to achieve perfection. We are training by doing. By the end of the week, we have a flow identified and established. There will be problems in getting it working. So what? We are training a team on how to identify problems, implement countermeasures if needed and establish a permanent improvement. Our pull systems will be defective to start with. We might need to add a Water Spider and purchase/create the kitting cars. The Kanban system will need to be worked on. If a certain tubing pattern is used on a Hot Tub model, all of the components need to be ordered, cut and perhaps partially assembled. Perhaps a Quick Change Over for cutting tubes may need designing and implementing. So many small improvements are possible, and can have a significant effect. And when you start eliminating inventory, with implementation of a just in time supplier and supermarket system, the savings start to accumulate.

Performance measurement is very simple. By putting a White Board at the end of the assembly line, you list Takt Time in 30 minute increments as a target to shoot for. Actual Production (AP) is recorded at the end of every time period in a second column together with variance in a 3rd column. A final column records comments about defects and fixes. If Takt and AP are always the same, the system is not working. We don’t care about perfection. We care about identifying defects, problems and fixing them.

The Lean Implementation should move very quickly to non manufacturing functions. This is where a manufacturing Lean Employee will not generally create greater value. Yes, they can help with improving small processes. But generally, they will not see the whole. And in my experience, a six sigma belt isn’t very helpful. Their credential makes them the go to guy. In essence, management has elevated them to a fix it person with a very small improvement load. A colleague of mine explained a workplace (government run) with a 2 project annual goal for their belts. A Lean Coach is always on the clock, responding to and scheduling improvement requests. My Lean Sensei at my last CEO posting conducted 11 Kaikaku in 12 weeks. Why? Because we very early on identified a “hunger” for improvement. After years of a CEO who lived with the status quo and tried a variety of one off consultant fixes that always failed, the hungered for real fixes. And quite frankly, most of the fixes were not difficult ones initially. We identified them very quickly and strategically began addressing the most critical ones with the resources we had, and began scheduling for the ones that required a bit more set up.

But, you say, isn’t this going to cost me a lot? NO, NO, NO. When you learn to think differently you will realize that improving your processes will free up huge resources. With less time required to meet demand, and fewer defects, demand should increase and income improve. The Value Created by flow and elimination of waste will be significant. If you plan your inventory reduction and achieve it, you release a lot of cash tied up in inventory. You require less space for storage and can actually utilize it for increased manufacture and assembly. Your administrative processes achieve greater savings as you have less need to account for inventory and your procurement starts becoming served by a few, lean suppliers.

So when I see an HR recruitment for a Lean Manufacturing employee, I rarely see the commitment to a transformation of the culture. A first lean employee should be hired to work with a Lean Coach to start a Kaizen Promotion Office (whatever you call it) in the office of the CEO and available to everyone. The teaching, coaching and mentoring role should be very prominent. Performance measurement should be a function of the KPO, and the tone of the the advertisement is to identify problems, lead a team to fix them and implement standard work and training.

You are probably thinking that I have wandered off into Lean Speak. That’s true. The language of lean is foreign to most CEO’s and their staff. They think you can do Lean like you did TQM. They only want to budget and pay for a small amount because they don’t realize the huge benefit of Lean done right. A Value Adding HR department could engage a Lean Coach to talk with the leadership asking for the employee before recruiting in order to have a common understanding of what they are trying to achieve.  That’s real Value Creation.

Happy employee searching.

Posted by: knightbird | December 2, 2016

Cost Cutting is Not a Strategy

 

A company I was with for some time considers cutting general and administrative costs to be a strategy. After spending countless cumulative staff hours to develop a budget, the major strategy will be to cut employees and expenses. They want to be cost conscious. Oversight focuses on the budget.

Jack Welch wrote: “The budget is the bane of corporate America. It never should have existed.” He also wrote “… the budgeting process at most companies has to be the most ineffective practice in management. It sucks the energy, time, fun and big dreams out of an organization. (…) And yet (….) companies sink countless hours into writing budgets. What a waste!”

The company’s turnaround strategy as articulated in 2012 was to sell unprofitable existing businesses, buy more profitable businesses and reduce general and administrative expenses. I thought this was a poor strategy, having argued since 2004 for a change to a Lean Management system, achieved with a true cultural change. It was like spitting into the wind—it just came back to bite me.

Management Guru Gary Hamel wrote “A turnaround is transformation tragically delayed.” In 2004, I argued for a change that should have made us profitable if properly implemented. That was in plenty of time to avoid a lot of negative results. I try to follow this millennia old advice:

Act before there is a problem.

Bring order before there is disorder.

Tao Te Ching

Cutting costs is difficult. You have no idea what the relationship of the costs you cut are to the results you want to achieve. If you are, and want to remain the low cost leader, then this is your strategy. But there has to be a method to make a profit in this low cost arena. Southwest Airlines, Dell and Walmart have figured this out. But guess what? The have profitable competitors.

Another organization I knew cut a records management function. Because we don’t measure the impact of lost documents, filing and recovering by higher paid staff, multiple copies and myriad other costs, the lost caused by this cut cannot truly be calculated by ordinary budget means. As a result of cutting costs, you might be sending the organization on a death spiral, especially when you cut operation costs with understanding your customers. CFO’s for example, have no other goal that to achieve the numbers (and get their bonus) for the short term. This is what Jack Welch said about cutting: “Any jerk can have short-term earnings. You squeeze, squeeze, squeeze, and the company sinks five years later.” By then, the marketplace values the managers that did the cost cutting and he/she is gone from the problems they created.

In my Lean career, I have found substantial value within existing budgets. When I talk about value, I am describing the ability to do the same amount of work with substantially less spending. And the quality increases. When I analyze budgets, I am wary of what is promised because I know it’s overpriced (in the absence of a Lean Culture). I have not encountered a single board member in Alaska who understands this. Instead, they order that costs be cut without understanding the impact on their customers.

The state of Alaska is currently undergoing a budget cutting process. The cuts are unrelated to a long term strategy.

Cost cutting is not a strategy in government. You just shift the costs to ordinary citizens. A road not maintained might require a new tire, as happened to me once. Gravel left on a highway has cost me a new windshield on a frequent basis.

In a cost cutting environment, there is no original thinking. Too many vested interests are fighting to retain they already have.

So when your organization is thinking about cutting costs, do some research and see what you will be giving up. Instead of reacting, move ahead of the curve, like Mr. Hamel suggests. Build a culture that is forward seeking, managed through a Lean culture, and regularly breaking from the past to recognize what is available in the future. Don’t be a bureaucrat protecting your turf, Be an innovator that recognizes new opportunity and seeks it out.

Posted by: knightbird | December 2, 2016

Using a Demand/Capacity Curve in Lean Thinking

In a medical center I had responsibility for, daily productivity for five family practice medical providers had a daily average of 52 visits from 55 patient appointment slots of 30 minutes each. The Capacity Curve was 55. Demand was 52. So we were OK, correct? Actually not. Collecting actual data indicated that there was a huge patient bypass traffic number. This facility was the only one in a community with 3,100 residents. With an average per patient visit number of 4.2, our actual demand should have been 218 patients per day (4.2 x 3,100/250). Some of the patients sought services in the emergency room, which actually compensated the organization at a rate $200 less than regular appointments.

Many patients could not get appointments, so they bypassed our facility in favor of service providers in Anchorage, where many of them flew as part of their jobs on a very regular basis. Without improving our Capacity Curve, we would be unable to capture the lost demand. What kind of options are available to us?

The obvious tactic tried before was to exhort the providers to see more patients. Were they lazy by limiting their daily patient access to 11? I didn’t think so. The providers worked long, hard hours on a 7 day basis. With a limited number of providers and an obligation to maintain an emergency room 24 hours a day year around, this ate up a lot of capacity.

They literally could not see more patients. So we had to find out the reason and fix it. One obvious solution is that there is actually the potential for 16 patients’ slots of 30 minutes each in an 8-hour day. Conversations with provides quickly pinpointed 2 problems. Accessing an Electronic Health Record that wasn’t updated regularly and had links to other records that took considerable time to navigate meant that 20 minutes of an appointment was spent on the EHR. The other major problem was that administrative and clerical tasks had to be assumed by the provider. So when they were in their appointments and afterwards, they were following up on deferred tasks.

As a Lean Executive, I also saw a lot of other problems in additional to the obvious ones. Pull systems for labs, pharmacy, patient records and billing/coding records were dysfunctional, adding time to appointments. And as any Lean Practitioner with considerable experience knows, fixing the obvious problems will bring other problems to sight. It’s a given.

A simple Demand/Capacity curve used improperly led to the dismissal of a medical director. Throughput could not be improved because of the capacity constraints.

The solutions were obvious. With providers in rural Alaska earning a substantial salary, one solution was easy. Provide a medical assistant for each provider. That simple fix frees up the other 6 slots and improves annual capacity by 7,500 patient slots. If each patient brings in $500 in revenue (not a real number), the annual revenue increase is $3,750,000. Value is created without expense because revenue increases. We do have 5 new employees, but they have created daily value of $15,000, which is far less than their cost.

A second solution lay in improving the IT system and the Electronic Health Record Functioning. Some of the work might be given to the MA, but that is just shifting a problem. You really want to fix the problems and reduce the access time. How did I know there were problems? I went and looked. Going to the Gemba is a crucial requirement for being a Lean Executive. I watched as one Community Health Aide in a Village Clinic tried to explain a problem to the EHR Manager. He insisted the problem could not exist. I saw it on the screen and despite the denial, it did exist.

Fixing this issue could advance another huge increase in productivity. The average family practice appointment is 20 minutes in length. Average provider facetime with a patient varies, but 13 minutes of uninterrupted access gets to answers quickly, if set up properly. More complex issues might take more time, but then there are very simple issues that are finished in a shorter period of time. With an MA taking vitals, arranging for records access and screening phone calls/mail/messages for critical ones, an experienced practitioner can finish as many as 26 appointments in a day and still go home within 15 minutes of the clinic closing.

Sustaining a 20-minute appointment with up to 26 patients a day will be able to see 11,250 additional patients, or $5,625,000 in additional revenue at $500 per visit. Through addressing 2 issues and increasing the Capacity Curve, we have brought in additional Demand and increased revenue by $9,375,000.

I actually didn’t need any more money when I presented this proposed solution to the board of directors. One of my recommendations for the EHR was purchase of a new one. A company executive who was not on board and had a relationship with the board chair challenged the statement and said that the company could not afford the projected $3 million expense for a new EHR. Remember, once the 2 issues are addressed, the revenue increase is an annual one. In 5 years, the return on the two investments is almost $50 million.

To me, it was sad that the board could not see the huge potential. I had already identified the source for funding the EHR without any additional appropriation, and proposed a solution for ensuring that the regular updates required for the ICD-10, a statement of medical provider codes for medical services provided, were done when received. The Value created with huge, with a minimal increase in staff, and payment coming from existing inefficiencies.

Posted by: knightbird | August 29, 2016

Lean Law Firms

With my son attending college and living in Oregon, I was curious about whether Oregon was engaged in Lean implementation. Much to my surprise, a law firm that started in Seattle, is present here in Alaska, and is also present in Portland, OR, was advertising for a Lean Management staff person. From what I can see, an attorney at DWT with experience in process management legal services learned Lean and was eventually moved to a position described as a Legal Process Strategist. So this effort has been in place for almost 2 and a half years. I decided to see where other firms might be in terms of implementation, and found an early adopter in the Seyfarth Shaw law firm in Chicago. Through their Seyfarth Consulting, they provide lean consulting services to the legal industry. Seyfarth Shaw claims that they have cut as much as 50% off of their fees to at least one client. [http://www.abajournal.com/news/article/seyfarth_shaw_says_six_sigma_has_cut_client_fees_by_up_to_50_percent/] Imagine that. Productivity levels similar to that seen in other applications of lean in other industries.

I now expect Lean to start forging inroads to the Judiciary, District Attorney, Attorney’s General and other public legal entities. What a wonderful development. But what it says to me is, why are others still waiting to implement the system?

Posted by: knightbird | August 10, 2016

Giant Bicycles and Lean Management

My son in law builds mountain bike trains and rides them on Giant Bicycles. So this curious mind wanted to know a bit more about the company, specifically whether they used the principles of Lean Manufacturing.

Giant bicycles are made in Taiwan, a tiny island country with a population of 23 million in an area of less than 14,000 square miles. That makes is just larger than the state of Maryland, and Taiwan pales in comparison to Alaska’s 266,000 square miles. Started in 1972, Giant is the world’s largest manufacturer of bicycles. A former largest bicycle manufacturer and the bicycle of my youth, Schwinn, declared bankruptcy in 1992. Bicycle design went through incredible periods of innovation, sport adaptation and market differentiation. Schwinn did not adapt.

The low end of a market is always susceptible to cheap knockoffs from emerging economies. However, as my son in law, an avid mountain biker told me, quality and reliability are very important to mountain bikers, and there is a market for people willing to pay for high end bicycles. I wasn’t aware that high end mountain bicycles can cost more than $10,000. Giant participates in this market.

Taiwanese bicycle manufacturers recognized in the late 1990’s and early 2000’s that they faced intense competition from low cost manufacturers like China. Their industry formed an alliance referred to as the A Team and in 2003, the A Team brought the Toyota Production System to Taiwan. At the time this article was written in 2008 [LINK HERE], one alliance member had effectively “lowered our parts inventory by 15 percent, reduced lead time by 60 percent and raised productivity by 25 percent since our implementation of TPS/TQM/TPM in 2003,…”

Today, Giant has about $2 billion in sales annually. [LINK HERE] 2002 revenue was approximately $445 million. Revenue increased by 350% for Giant since implementation of lean management systems. And it is still being used at Giant, but I could find nothing to indicate that they had transferred their lean culture to other non manufacturing areas such as finance, human resources, document management or other administrative and development areas.

Posted by: knightbird | March 7, 2016

Denial: It’s The Human Brain’s Normal Condition

As many of you who read my posts know, I have been advocating for Lean Management in Alaska, in its many iterations, since 2005. At my first CEO position, I learned about and started to implement the system in 2004, and had great results. Because I had already learned how our brain resists negative information, I was skeptical about even our reported results and implemented a system of factual reporting. We fostered a culture of “Problems are Treasures” and created a “Treasure Chest” for parking improvement projects. And there were a lot of them, as I have reported on extensively through the years.

After 8 years of Lean implementation, I was still learning about measuring improvements but left the organization before having a chance to fully experiment with true lean workplace management.  By then, we had an extensive portfolio of successes. I have subsequently had plenty of time to think about resistance to Lean as I have successively pitched the system to private businesses, Native Corporations, Health Care, School Districts, Municipalities and the State of Alaska. It’s a very hard sell, and for personal solace and comfort (I wanted to know why I was such a poor salesperson), I followed a path of research into the workings of the human brain.

Lean was not the sole reason for this research. My other passion is health care, and in health care there is also heavy resistance to change.

Here is what I believe we are so resistant to change. There are 2 primary prongs of resistance. The first is by those who have successfully “gamed” the existing system. This includes most executives. I am not using gaming in a negative sense, but as a category of individuals who figure out the existing system and become proficient at using it. In the Virginia Mason culture, they used to call these individuals “Capes.” You know, “Here I come to save the day.” (from the Mighty Mouse cartoons) The other category are the preservationists. They like the status quo. Change upsets them, and they resist it covertly while attempting to appear to comply with change efforts. An they have become good at it. They know that all they need to do is outlast their boss and the bosses above for enough time and they can go back to what they used to do. I had one executive like this who cooperated externally but resisted internally. After terminating this executive, I discovered extensive research on their computer looking for dirt to throw at me, things like Alaska Bar Association discipline proceedings, Alaska Court System filings—whatever could be used for political ammunition. The same process was followed by a local group at my second position as a CEO.

Our whole lives are spent accumulating knowledge, most of the time the wrong kind. There is a lot of “Conventional Wisdom” in the workplace. But as my pitching Sensei told me of Conventional Wisdom over a decade ago, it is neither “conventional” nor is it “wisdom.” They are stories, tales and fabrications that support our world view of personal competence. A lot of what we know is what we have been told or taught by people we trust. If we accept what they are telling us, we don’t need to spend a lot of time researching and learning. And the human condition, being about survival, tends to act cautiously by only listening to those we trust, and to pass survival information down from generation to generation through this mechanism of trust. Many of our institutions put people in positions of trust regardless of their abilities. They are called Politicians—individuals without solid business management skills, but great political survival skills. I often hear this referred to as

The brain itself has many mechanisms designed to facilitate our survival. Those mechanisms permeate workplaces both as habit and organizational routine. We do things because that’s the way they have always been done. And bad leaders perpetuate the culture of no change or slow change.

After researching the ability of our brain to reject truthful information in order to realize the meaning that we have given to our circumstances (something I often refer to as “Culture”), I see the wisdom for spending time with all of our staff, observing behaviors, discussing how work is accomplished, coaching, teaching and mentoring. It’s our job as a CEO to overcome the denial, and the first step is the dissemination of factual knowledge about Lean Management.

But in order to serve them effectively, I now believe we need to do 2 things: (1) overcome their denial, scientifically; and (2) allow them to put together a management pathway with hope as a major driver. It appears that the absence of hope is one reason we enter into denial. What I am researching is the potential for substituting a healing hope for the type of hope that leads to denial. I refer to it as “Change Management.”

Introducing new knowledge the right way can have a powerful impact on your brain and its ability to accept a path to changing. Denial is the enemy. Why do we so forcefully deny data and newly accepted knowledge, like Dr. Deming 14 Points and the Toyota Production System? There are a variety of reasons that I will discuss today.

Denial has been researched extensively. For example, the Dunning Kruger Effect (DKE) is a “Cognitive Bias” through “which relatively unskilled persons suffer illusory superiority, mistakenly assessing their ability to be much higher than it really is.” [WIKIPEDIA LINK] Dunning and Kruger wrote “The miscalibration of the incompetent stems from an error about the self, whereas the miscalibration of the highly competent stems from an error about others.” [LINK HERE] In a nutshell, we believe we are better than we really are. That’s why, when you go through a performance evaluation at work, you are oftentimes shocked. You believe you are above average. Some who are in fact highly competent underestimate their abilities because they overestimate the ability of others. They incorrectly assume that everyone else they compete with have the same or better competencies that they do.

Once we have a confirmation bias, we tend to seek out information and people that support our bias. We dismiss non conforming information because it is inconsistent with our illusion. In other cases, we believe we are the part of normal that doesn’t suffer problems. So if 40% of marriages end in divorce, we are going to be part of the 60% that doesn’t. We err on the side of the hopeful part of whatever behaviors we are considering. We continue to deny any suggestion that our performance as an organization is less than the best. It’s DKE in action, and it makes us resistant to any suggestion that we might need a new management system. Our brains select the most hopeful path for us. One memorable comment from a woman who had listened to one of my presentations on Lean Management in 2007 was both humorous and sad. She complimented my presentation, then said that it could sure benefit a sister organization located near them, but that her organization was doing just fine. True story, and one I have heard many times.

And once our brain selects a hopeful path, we see support for that position everywhere. It’s called the “Frequency Illusion,” scientifically referred to as the Baader Meinhof Complex. [LINK HERE] It describes how a concept you were just made aware of starts to appear everywhere. Dr. Arnold Zwicky identifies a number of Baader Meinhof Complexes: Recency Illusion; Antiquity Illusion; and Frequency Illusion. [LINK HERE] Our mind convinces us that certain patterns we see are true. And with frequency comes comfort and a resistance to change.

I see this within organizations. We have always done it this way, so it must be the best way. Nelson and Winter coined a phrase to describe this: “Organizational Routine.” A general description is “the relatively mindless repetition of actions that have been well-established via evolution or voluntary design of an individual that is not a participant to it.” {LINK HERE} We use habits because the effort required to think uses a lot of our brains limited capacity and huge even requirements. After all, that 3 pound brain is about 2% of total average body weight but uses between 20 and 25% of your bodies consumption of glucose and oxygen. Once routines have been habituated, they are difficult to change.

So how do we incorporate a willingness to change in the minds and habits of trauma burdened adults? Taki Sharot shares some advice in this TED TALK. We basically share knowledge about the impact of change through creating hope (preservation of jobs, fewer crises, more security)  and move the participant to their own pathway for change. This concept is used in the realm of Psychology as “Motivational Interviewing” [LINK HERE] and in business as “Humble Inquiry.” [LINK HERE] For Motivational Interviewing, the concept for Motivational interviewing is “a directive, client-centered counseling style for eliciting behavior change by helping clients to explore and resolve ambivalence. “ For business, Humble Inquiry is: “the fine art of drawing someone out, of asking questions to which you do not already know the answer, of building a relationship based on curiosity and interest in the other person.”

For this reason, Change Management tis a priority requirement for any Lean Management initiative. And as I have written about before, in general terms you will have 20% of your employees open and willing to change, 20% heavily resistant and 60 percent waiting to see which side wins. Next time I will share a strategy for winning over that 60%. And as always, I would like to hear your thoughts.

Posted by: knightbird | February 28, 2016

The Politics of Lean Change

When implementing Lean, there is a consistent piece of advice that is given: Get the CEO fully on board. When I was new to Lean, my Sensei, Dr. Tom Jackson, spoke to me frequently about the level of my involvement. As a result, I became immersed in Lean. Our results were amazing and I was hooked. I cannot walk into a business without noticing its many deficits. Yet I hear all the time about how well the business is doing. I know otherwise, and have been looking for gentle ways to inform CEO’s about the benefits of adopting Lean. But the resistance remains heavy.

As a Movie buff, I hear dialogue that intrigues me. I google  the quote and read it for helpful content. This phrase was particularly intriguing. The speaker is the owner of the Boston Red Sox and he is talking about the use of Sabermetrics, of the changed use of statistics to focus baseball play in a different direction from pure talent acquisition. In 2002, the Oakland A’s used this new model to take a poorly funded team to the AL West championship. At the end of that season, Mr. Henry invited Billy Beane, the A’s GM, to become their GM for $19.5 million. He turned it down. But Mr. Henry bought into Sabermetrics and 2 years later, won the World Series with the Red Sox after 6 decades of losing. Their major competitor was the New York Yankees, who spent huge sums without necessarily winning.

So we have owners with huge sums of money for reasons they don’t control, like playing in a huge market. And we have owners with lesser amounts because they play in a smaller market. You know, that kind of sounds like Toyota after World War II compare to Ford, GM or Chrysler. In response, Toyota developed the Toyota Production System (TPS). In 1984, TPS was introduced to the U.S. through their NUMMI joint venture with GM.

Here’s what John Henry said about “…the first guy through the wall.”

“For forty-one million, you (Billy Beane) built a playoff team. You lost Damon, Giambi, Isringhausen, Pena and you won more games without them than you did with them. You won the exact same number of games that the Yankees won, but the Yankees spent one point four million per win and you paid two hundred and sixty thousand. I know you’ve taken it in the teeth out there, but the first guy through the wall. It always gets bloody, always. It’s the threat of not just the way of doing business, but in their minds it’s threatening the game. But really what it’s threatening is their livelihoods, it’s threatening their jobs, it’s threatening the way that they do things. And every time that happens, whether it’s the government or a way of doing business or whatever it is, the people are holding the reins, have their hands on the switch. They go bat shit crazy. I mean, anybody who’s not building a team right and rebuilding it using your model, they’re dinosaurs. They’ll be sitting on their ass on the sofa in October, watching the Boston Red Sox win the World Series.”

The politics of change is that you are threatening a way of life, business or income. Because you may have beens successful doing things your way, according to your standards, you are not open to new thinking. The future isn’t important to you. You will probably not be around to accept the consequences of your lack of innovation. But others will.

In 2005, a business I was associated with had a chance to adopt Lean. Resistance was heavy. Nothing worked to turn their CEO around. Despite some good results from a few Kaizen, the CEO was unable to see the huge potential benefit. I have pointed the benefits out in my writings. With Value Capture from existing sales, profits on both existing revenue and new revenue increase. With greater quality, you are able to capture more business from existing customers and give them lower cost. Customer service improves because of your philosophy. And employees become happier and you have fewer problems in the workplace.

Instead, we continue to look for a superstar to bring us out of our issues. As a study done at Coca Cola states, only about 20% of improvements in an organization can be derived from management. And I have yet to find the management that is capable of capturing the full 20%.

Taking a risk (and it’s a very small one if you are truly committed) has huge potential rewards. For Mr. Henry, it was a World Series Championship. Oh, and he proved his commitment by offering his GM position to Mr. Beane and putting the founder of Sabermetrics on contact, Bill James. He wanted to hire people with the new set of knowledge and skills because it didn’t exist anywhere else.

Lean has a unique skill set requirement. It’s a completely different method of working. And the first requirement is a deep buy in by the CEO. Mr. Henry did that, hired the right people and won. That’s a good lesson.

Posted by: knightbird | February 14, 2016

More Sales or Lean Improvements

The benefits of Lean are proven. You can capture considerable value (Value Capture) from your existing revenue. By focusing on G&A, Cost of Goods Sold and Profit there is a lean way to capture considerable value. Instead, most companies focus on increasing revenue. I generally ask why. If you produce a quality product at the least cost, revenue will increase. But if you focus on just increasing revenue, the results are generally mediocre.

I looked at past results from an Alaska corporation. With $400 million in revenue, net revenue was 3.5%. So annual profit was about $14 million. If the same company increases revenue by $100 million, that’s another $3.5 million in profit. That’s not necessarily bad because it’s better than a loss. But it’s still only $17.5 million in revenue.

Let’s look at an alternative approach—creating a lean culture. Let’’s target a rather modest level of Value Capture and say that we can do the same $400 million worth of work we did for $386 million for 3.5% less. Without any additional revenue, you have increased your profit by $14 million., or $10.5 million greater profitability than a strategic initiative to capture $100 million in more revenue. Is it feasible? Absolutely. Some lean implementations reduce costs by as much as 55%.

So which path would you choose? A profit increase of $3.5 million or $14 million. Well, you actually don’t have to worry about it. The right choice is to choose the latter strategy and it’s almost a certainty that you will also achieve the former. That’s right. Your quality and cost advantage will attract more business, and you should end up with $35 million of profit instead of $17.5 million. Shouldn’t be a tough decision, but it always is.

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.

Older Posts »

Categories