Posted by: knightbird | September 9, 2015

Where do you Start with Lean?

I had the opportunity to start a lean initiative at a new company a couple of years ago, and although I am no longer there, I learned many lessons—especially in the area of how to start an initiative when you already have an experienced Sensei. It was also a company in crisis, having lost a substantial sum the previous year, and starting the year I arrived with a significant deficit. As with any organization, there were lots of employees who wanted to go a good job. And there were the usual resisters. I faced considerable opposition from the start from the resisters, and for reasons I could understand. They were overfunded and overstaffed for their productivity. I plan to write about my experience with this company over the next couple of months and share them with you.

Facing a significant deficit for the newly adopted budget, I asked the board to approve it as presented by prior management because I did not know the organization, or where cuts could be made without compromising services. I had been advised of a couple of areas where we could achieve modest savings and tackled those areas first. There were a lot of anecdotal reports that company vehicles were being used by individual employees for personal use. I asked that each vehicle have a Mileage Log placed in it, and that every employee who used a vehicle logged data about their use, including name, date, mileage in, mileage out and purpose. Within days, personal use of vehicles declined substantially. Within weeks, our gas consumption had declined by about a third, saving us some of our budget. Projected over an entire year, the decrease in vehicle use and fuel would save us a significant amount.

This was an easy place to start. Vehicles were identifiable by a logo on the outside, and members of the community had alerted me to the non-business use of vehicles when I started. From this start, you can identify the potential for lots of other savings. If vehicles are being used for personal use, you probably have too many vehicles and can reduce their numbers. That seemed to be the case here. As we dug in deeper, we also discovered a poor inventory system that did not balance. And maintenance of the number of vehicles used by the company led to a large vehicle maintenance staff, inventory and space used somewhat infrequently. Early on, we thought about advocating with the board to outsource maintenance to private businesses in the community. We didn’t have an opportunity to analyze the possibilities, but the potential was visible.

Downstream savings that most businesses don’t calculate when taking a small action like this include: (1) less fuel, oil and tire use; (2) less maintenance required; (3) fewer vehicles to purchase and support; (3) less storage space and electricity to use on engine block heaters; (4) recapture employee time used for personal errands; (5) reduced maintenance staff, inventory and space; (6) reduced accounting and staff support time for the purchases required to support the vehicles. Over the course of 5 years, it’s not inconceivable that savings could result in the millions of dollars. And that’s before application of Lean Management methods.

But one of the benefits of putting the use logs in vehicles had potential for huge savings, and that is the change in culture. It was a culture in which many employees had low expectations for production and they achieved them. Jobs were being created for the purpose of employment—not to provide value for the company’s customers. This simple act started the cultural change required to make this company achieve what it needed to for it’s customers. I had to let employees know that personal use of company assets was not acceptable. For those who live in Alaska, we hear about Tribal organization executives who have been convicted for using company assets for personal gain. One use is frequently company credit card use for personal gain. One conviction was for recording time not worked on time cards. In one case I personally worked on (as an executive, not an attorney), the tribal executive used a tribal check and account for putting a retainer down for a personal criminal charge. Because the Sarbanes-Oxley Act change accounting requirements for Profit Making Companies, to the point of authorizing criminal penalties for violations, those of use running non-profit companies were advised to consider the potential for similar charges against us if we violated provisions of Sarbanes-Oxley. I took this charge seriously. And, of course, stopping personal use of company vehicles was the first step for informing employees that our new cultural standards for using the company’s assets was starting.

You will hear this from me frequently—a culture cannot change without the leadership leading, and the standards for change made clearly. It takes time and and repetition. And it takes a clearly stated vision. Tomorrow, I will talk about how I stated my vision to the head of the Medical care service division and the problems they faced in providing the services they wanted to. And I want to make it clear that they would ultimately buy in to the vision. However, they had been victimized by prior management and took some time to warm up to Lean Thinking. Again, they have to be convinced that Leadership will lead appropriately, and not sell them out.

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