Posted by: Knightbird | January 24, 2012

Lean Advice for Board Members

I serve on a number of boards, and have trained boards for decades. Very few board members in Alaska have significant business experience, that is, having managed multi million dollar revenue businesses. Yet they have responsibility for organizations with substantial revenue. They rarely have the information from management necessary to provide appropriate oversight and policy.

My first piece of advice is that budgets are a terrible tool for managing an organization, whatever kind of organization it is: profit, non-profit, government, school district, cooperative or other. Other more accomplished executives like Jack Welch, former CEO for General Electric, share my opinion. The reason is that all non-Lean managed businesses have substantial amounts of waste. I write about waste frequently in this blog. Your business has too many employees, too much inventory and spends far too much on non-value added activity. Your board needs, of course, to monitor spending and assure good fiscal control. But that responsibility doesn’t mean you deliver value to your customers.

Second, I advise you to stop meddling or interfering with the role of management. When you listen to customers or employee who complain about your services, refer them to the proper management official. When you advocate on behalf of a customer or employee, you contribute to poor management by increasing variation. By interfering, you are interrupting a process. Although this point is technical, any interference with customer or employee management, except when following an improved process, increases variation and poor management.

Third, most of you are just as resistant to change as employees are. You need to embrace change, encourage it. Understand the Community Readiness Model of change. It works for business just as it does for communities. Let your Executive team travel to and meet with individuals who are on the leading edge of change. If you can, do the same. Read about new information regularly and voraciously. According to Dr. K, Anders Ericcson, it takes 10,000 hours of purposeful effort to become world class in any discipline. If you don’t spend time meeting the challenge of becoming a great board member, your organization will not change to become great.

Finally, hire a Lean CEO. While an extremely hostile command and control Executive might secure short term gains, it will not insure the long-term viability of the business. A Lean CEO who has the support of the board can accomplish enduring transformation. For a $100 million business, a Lean CEO can achieve up to $20 million in value from existing operations within a five-year period of time. It’s not easy, but it can be done. Think of it this way. If 20% of this value can be achieved incrementally in each of the first five years the CEO works on the transformation that Executive is worth $60 million to the business net of any increase in business volume. With the quality and productivity increases that follow, business will increase.

Think Differently.

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