Staying Lean Professor Peter Hines
All that counts cannotall be counted
This sentiment from Albert Einstein could be paid better heed by the instigators of many lean programmes in pressured economic times. This issue examines the difficulties of discovering true customer value and adhering to its optimisation despite cost concerns.
Customer value matters – Wendy Wilson, senior teaching fellow at WMG, puts the concept of value into context. The cost of a cost focus – Zoe Radnor, associate professor at Warwick Business School examines lean applications in UK public services and reflects on the impact of budget cuts on the focus and objectives of these projects. Thinking outside the box – Ken Rohleder, executive VP of packaging service providers, Packsize, clarifies how a new and honest perspective on customer value led to the creation of their unique on-demand business model. A lesson well learned – Responding to the lean education and training focus of LMJ issue 06, Gary Griffiths, partner at lean consultancy SA Partners, describes his vision for the development of lean expertise with meaning.
The Lean Management Journal is supported by the Lean Enterprise Research Centre, Cardiff Business School
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Issue 07 November/December 2010 www.leanmj.com
In this issue:
november / december 2010 contents
Welcome to LMJ’s first anniversary edition. Over the last year we have seen business enterprises, both public and private, around the world being forced to go back to the drawing board and rethink how they run their organisations and deliver their products. This was first a result of the heavy hand of the economic meltdown and more lately through a desire for recovery. The manner in which this rethinking is carried out seems largely to have divided into two camps. Those who see a threatening lack of predictability as a reason to batten down the hatches, cut costs and hunt for efficiency. Or alternatively, those who see market contraction coupled with increasing complexity and recognise the necessity of pursuing value creation with new energy and ingenuity. Contributors to this edition of LMJ state with absolute clarity that the latter group will be the ones to prosper. In some sectors the differentiation between those that have innovated around value and sought new ways of perceiving customer needs is already becoming clear and a recent IDC Manufacturing Insights report (July 2010) shows that the number one business initiative for the next two years among 700 surveyed manufacturers is to improve customer fulfilment. Further detail on what this involves reveals that: “Fulfilment requires a deeper understanding of customer needs, close relationships with customers, and the ability to uniquely serve each client. Serving the customer well creates the groundwork for competitive advantage.” Of course with the central but often overlooked tenet of lean thinking being to identify value from the customer’s perspective, it is methodology which ought to provide a natural structure and toolkit for tackling this fulfilment challenge. The temptation or pressure to resort to cost cutting and brutal efficiency is not, however, escaped lightly. Public sector organisations in particular will know how budget cuts and clamour for head count reduction can distort lean objectives and oppose work for continuous improvement. While a costwaste focus may appear to make some immediate savings the worth of these is dubious in the long run (see John Darlington’s indictment of traditional accounting systems on p20) and is in fact likely to be damaging to an organisation’s abilities to be agile, competitive and effective. Contributors to LMJ issue 07 from the UK public sector and associated academic community have explored the challenges and opportunities that the sector faces in sustaining an appropriate focus for lean in the wake of the Comprehensive Spending Review and I would personally welcome any responses to this thorny issue from readers with regards to how they feel budget pressures are impacting on the sustainability of initiatives and the challenges faced in leading them. These are certainly topics we will be discussing at the second iteration of LMJs Lean Director’s Seminar (more detail on p51) – I hope you can join us for the discussion and debate. In the meantime and until the New Year, enjoy the issue and the season’s festivities.
Editorial
Commissioning Editor – Jane Gray
Art Editor – Martin Mitchell
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06 Customer value matters
Wendy Wilson, WMG, introduces the focus theme for this issue.
Principles and purpose 07 Grasp growth not pennies
Dale Williams, KPMG performance and technology, explains why the origins of lean mean growth, not economy, should be our focus and why understanding customer value is key to this objective.
10 Is it all too complicated?
Jeff McGowan, Johnson and Johnson LifeScan, looks into the relationship between lean and complexity. Is mounting complexity and the emergent problems it creates making certain lean tools redundant?
14 Culture dynamics
Pauline Found, LERC, and co-author of Staying Lean examines the correlation between organisational cultures and profit. She highlights they key characteristics of constructive cultures and what they mean for leaders.
20 Accounting for lean
John Darlington, LERC, lays the foundations of an approach to lean accounting that goes beyond ‘doing lean’ in the accounts department.
Designer – Vicky Carlin studio@sayonemedia.com
In order to receive your monthly copy of the Lean Management Journal kindly email j.gray@sayonemedia.com, telephone 0207 4016033 or write to the address below. Neither the Lean Management Journal or SayOne Media can accept responsibilty for omissions or errors. Terms and Conditions Please note that points of view expressed in articles by contributing writers and in advertisements included in this journal do not necessarily represent those of the publishers. Whilst every effort is made to ensure the accuracy of the information contained in the journal, no legal responsibility will be accepted by the publishers for loss arising from use of information published. All rights reserved. No part of this publication may be reproduced or stored in a retrieval system or transmitted in any form or by any means without prior written consent of the publishers.
Sarah Lethbridge, LERC, reports on the progress of the Lean Public Sector Thinktank and reviews the progress of the lean journey being taken by Sefton Magistrates Court.
35 Logical lean
Steve Wilkinson, Cimlogic, defends the role of intelligent software support in lean decision making and end-to-end value flow.
38 Thinking outside the box
Ken Rohleder, Packsize, clarifies how a new perspective on the way customers value their packaging led to the creation of their unique business model.
40 Transparent customer care
Jan Santerre, Hillenbrand Inc. tells LMJ how customer centricity is clear to anyone who visits their sites and is at the core of day to day activity.
42 Essent delivers
Peter Stoppelenburg, Essent, speaks to Jane Gray about leadership and the need for vision.
letters and comment 46 Damascus Moment
Elaine Lewis, Cardiff and Vale University Health Board, shares her realisations around good data use and seeing opportunities for improvement.
25 Leadership credibility
47 A lesson well learned
28 The cost of a cost focus
50 Book Review
David Bamford, Manchester Business School, maps leadership challenges for lean implementation against management thought leadership and academic literature over the last decade and more.
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Design
Jane Gray Commissioning Editor Email: j.gray@sayonemedia.com Tel: 0207 202 4890
05 News
Case studies and implementation 32 Courting lean
Zoe Radnor, Warwick Business School examines the practicalities of applying lean to public services and reflects on the impact budget cuts are having on the focus and objectives of lean in the public sector.
Responding to the lean education and training focus of LMJ issue 06, Gary Griffiths, SA Partners, describes his vision for the development of lean expertise with meaning.
John Bicheno, LERC’s Lean Operations MSc, reviews the second edition of Creating a Lean Culture by David Mann
51 Events
Britannia House, 45-53 Prince of Wales Road, Norwich, NR1 1BL T +44 (0)1603 671300 F + 44 (0)1603 618758 www.sayonemedia.com. Lean management journal: ISSN 2040-493X. Copyright © SayOne Media 2010.
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Dear reader,
04 Introducing the editors
Introducing your editors Articles for LMJ are reviewed and audited by our experienced editorial board. They collaborate on comment against articles and guide the coverage of subject matter.
Jacob Austad
LeanTeam, Denmark
Bill Bellows
Pratt & Whitney Rocketdyne
John Bicheno Lean Enterprise Research Centre, Cardiff Business School
Dr Zoe Radnor Warwick Business School
Ebly Sanchez Volvo Group
Peter Watkins GKN
Seddon speaks out
Agile and lean
Professor John Seddon, made a characteristically forthright attempt to further understanding of systems thinking in the minds of politicians and policy drivers for public sector reform at a Labour Party Conference Fringe event on September 27.
On October 5-6 LMJ media partnered the Agile Business Conference 2010. Despite the fact that both Agile IT and lean thinking share objectives of value creation, efficiency and effectiveness the two methodologies have, in the past, had something of a religious war. Overcoming past tensions however, the message at this event was clear; Agile IT adherents are increasingly recognising common ground it with lean. Given the pervasive nature of technology in our private and professional lives and its escalating role in enabling lean culture-building it can only be positive that harmony is being sought between the way technology systems are developed and deployed and the way we are now managing our business processes and services.
Seddon scrutinised proposed plans to compare the performance of different public services based on unit cost. He was highly sceptical about the approach stating: “The true costs of service are in flow, the total cost of the end-to-end service delivered to customers. If the Whitehall guidance steps into any territory associated with activity costs (scale thinking), working to those measures will drive costs up. “My advice to the mandarins is: if you really have to benchmark on cost, ensure one measure is the total cost of flow, with no allocated overheads, and the other is a reliable measure of capacity.” It remains to be seen what impact Seddon’s words have had on labour party policy-formers however chief executive of Localis, Alex Thomson, is reported to have thought the leading systems thinker “controversial and informed”.
David Norton, conference chair and Gartner analyst, went further than most at the London based event to say that: “While you can have enterprise-lean without necessarily using Agile IT techniques it is impossible to have enterprise-wide Agile without lean principles. You need lean for complex systems dynamics.” Norton went on to say that a new area for exploration, now that lean and Agile are aligning, will be the relationship between lean and ITIL. ITIL is the most broadly accepted framework for managing IT services, the importance of its relationship with lean thinking will only grow as business IT becomes increasingly service based with outsourced hosting and application management.
Ethics guide for business and management
Wendy Wilson
Warwick Manufacturing Group, University of Warwick
Brenton Harder
November 1 saw the launch of the Association for Business School’s Ethics Guide. Addressed to business school students, teachers, and managers – the guide sets out work standards and clarifies the part to be played by business schools in inculcating ethical business behaviours.
Dr Keivan Zokaei
Building lean and green expertise
PCS Press
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Credit Suisse
SA Partners
More information on our editorial board, their experience, and views on lean is available on the LMJ website: www.leanmj.com 4
Jonathan Slack, chief executive of the ABS says: “This Guide is intended to provide advice and guidance about the ethical questions and issues that may need to be taken into account when considering a range of … enterprise issues. This guide is not intended to be a strict code. It is intended instead to be a point of reference”.
Dr Keivan Zokaei has stepped down from his role as director of the Lean Operations MSc at Cardiff University’s LERC in order to join lean consultancy, SA Partners. SA Partners has recruited Dr Zokaei’s expertise in order to build their knowledge base around lean and green issues. Dr Zokaei has advised food manufacturers, FMCG companies and others on how
As issues of corporate responsibility, employee development and environment continue to bear greater influence on lean implementations having this kind of reference guide will be of great benefit to lean leaders and strategic directors.
to improve their business performance by focusing on effectiveness rather than simple efficiency and this has included investigation of the synergies between lean thinking and environmental excellence. SA Partners’ appointment of Dr Zokaei speaks for the growing importance of these environmental issues in holistic business improvement initiatives.
If you have any news that you think would interest and benefit the lean community please let us know. Send submissions to the commissioning editor Jane Gray: j.gray@sayonemedia.com
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Norman Bodek
grasp growth not pennies dale williams
Customer value matters
“U
nderstand value through the eyes of the customer” is arguably the most important lean principle. Do we pay sufficient attention to this challenging requirement? In my opinion we are too ready to start leaning out our processes with the aim of reducing defects, lead times and costs. Admirable no doubt, but will this create value in the eyes of the customer? Probably not. Will this approach lead to attractive and imaginative value propositions which work towards the achievement of organisational goals like the creation of wealth? Almost definitely not.
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not pennies Efficient growth Over the last decade, lean thinking has become well established as a tried and tested method for improving business performance through the reduction of waste. This is, of course, great for the businesses who have increased their efficiency, but as Dale Williams, director at KPMG performance and technology explains, the emphasis on cost reduction captures only a small part of the Toyota vision for efficient growth based on value creation.
Lean thinking, especially in the West has become pigeon-holed as a cost reduction methodology, a view accentuated by the economic turmoil of the last three years. There is no doubt that increased efficiency is one of the many benefits to be gained by organisations adopting a lean approach. However, most practitioners seem to have forgotten the set of circumstances that spawned the concept in the first place and, in the process, its core purpose – to enable efficient growth. Lean thinking developed as a consequence of the economic impact of World War II on Japan. After the war, the Japanese economy and industry lay in ruins and the country was faced with extremely difficult macro-economic conditions and very scarce resources. In that environment, however, there existed a group of people with a burning desire to rebuild and grow, and it was out of this ambitious, expansionist drive that lean thinking was born. Somehow that dynamism has been lost from lean as it transferred to western culture but we now face an economic climate in which recapturing it has become more important than ever.
Principles and
Creating a lean enterprise in this way can transform an organisation’s competitiveness. Moreover, this lean capability can be exploited to enable the organisation to move into new market spaces, generating perhaps new streams of revenue and even rendering long standing products and services obsolete through the introduction of disruptive propositions (Ellins, 2007).
According to Saliba and Fisher (2000), value is judged by customers in terms of a hypothetical ratio of the perceived benefits to be gained from a product or service to the perceived sacrifices (eg time, money, effort, risk) to acquire those benefits. Moreover, (Woodall 2003), these perceptions of value will be made from before the point of acquisition through to the end of the offering’s useful life, as different benefits and sacrifices are realised along the way. For example, a Christmas tree seller may both deliver and collect the ‘used’ tree from the customer’s home, minimising the sacrifice associated with how to dispose of it. Finally, according to Vandenbosch and Dawar (2002) these perceptions will be made when any kind of interaction occurs between the customer and the product (or aspects relating to the product eg brand image). For example the ease of returning a product purchased online or the service given by staff when you have a problem. As these interactions can often be influenced by the provider of the offering, it is imperative that the end to end value stream design should seek to ensure that perceived benefits are maximised and sacrifices minimised to ensure that value is realised for the customer. E N D
Grasp growth
purpose
To achieve such a goal the starting point has to be with the marketplace and NOT the current value streams. A rich understanding of customer needs is essential to enable discrete market segments to be defined, each characterised by a unique set of values. Innovative value propositions can then be created by the organisation for the market segments it chooses to serve, before designing value streams to deliver those value propositions efficiently through the appropriate use of lean tools.
None of this, however, can be achieved without understanding what customers actually value. Defining this can be a problematic and complex challenge (not least because customers often don’t know what they value until they encounter it), but I would like to offer some concepts which have helped my own understanding of value.
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This issue explores the difficulty of clearly defining and perusing customer value for more effective organisations. Wendy Wilson, senior teaching fellow at Warwick University’s WMG and member of LMJ’s editorial board, puts the theme in context.
grasp growth not pennies dale williams
Almost all attempts at lean thinking I have come across have little or no recourse to customer value. There is an inherent risk with this approach: cost is taken out of the business but at the expense of customer value. While this approach may deliver bottom line benefits in the short-term, the ability to grow over the long-term is compromised. When it is accepted that the core purpose of lean thinking is to enable efficient growth, it is no surprise that understanding customer value is Womack and Jones’ very first principle. After all, the final arbiters of whether a business grows or not are its customers. When a business has an offering that meets or exceeds all of the criteria that customers value, growth can be achieved.
Customer satisfaction vs customer value
Factor
Customer Satisfaction Conversation
Customer Value Conversation
When was the last time anyone in your business spent time with your customers with the sole intent of trying to understand them better? Ironically, the people who spend most time in front of customers – the sales team – are trained to convince them to come around to the company way of thinking. This is not an effective means of gaining customer insight. Indeed, it can be directly obstructive.
Time horizon
Looks backwards in time over a short-term time horizon at what has happened over that period
Looks forwards in time, over a longterm time horizon at what could, and should, happen going forward
One of the key tests of insight is to ask yourself (or your key account managers) the question: “Could I present the strategy of my key customers to my colleagues?” If you don’t know where they are heading, how can you know what will be important to them going forward? Without that knowledge, a business cannot be in a position to help.
Level of conversation
Low-level, operational / tactical, focused upon process or departmental issues
High-level, strategic, focused on business level issues
Lean thinking – driving recovery
Frequency of conversation
High frequency – typically monthly
Low frequency – typically annual or even biennially
As we move from a mindset of ‘ride the recession’ to one of ‘get ready for recovery’, it is an ideal time for organisations to take a fresh look at the real benefits lean thinking can bring. Even in today’s marketplace, there is potential for growth to be achieved for those organisations that truly understand their customers’ needs, and organise themselves to serve them efficiently and effectively. In other words, for those who are lean. E N D
Principles and
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Even in today’s marketplace, there is potential for growth to be achieved for those organisations that truly understand their customers’ needs.
purpose
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It is a common misconception that systems for measuring customer satisfaction can act as surrogates for understanding customer value. While firms should stay vigilant about keeping their customers satisfied, they should not presume they know what customers do and will value. A customer satisfaction conversation is very different to a customer value conversation. The table below sets out where those differences lie.
In essence, a customer satisfaction conversation reveals how well a business is performing today but it does not establish if what it is doing is right. As a wise man once said: “There is nothing more wasteful than doing the wrong things really well!” When gaining customer insight to grow in a competitive market, it is crucial that companies have a deep insight into what customers truly value. This requires a significant investment on the part of any business, as the only way to gain true insight (as opposed to information) is to spend time with customers, observing them and listening to what they have to say.
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Understanding customer value
Many business leaders will be familiar with the five lean principles espoused in Womack and Jones’ 1997 book, Lean Thinking. As experience in the application of these has grown, numerous attempts have been made to revise, refresh and add to them. Most lean practitioners, though, have failed to properly understand and apply the first, and most important lean tenet – to truly and deeply understand what customers value, and will value.
is it all too complicated? jeff mcgowan
“Tops are burdened by what feels like unmanageable complexity; Bottoms are oppressed by what they see as distant and uncaring Tops; Middles are torn and confused between the conflicting demands and priorities coming at them from Tops and Bottoms;Customers feel done-to by nonresponsive delivery systems” Seeing Systems (Oshry 2007)
M
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Much of this is the result of a recognised system phenomenon known as emergence where emergent outcomes from a system interaction cannot be separated into constituent parts — they exist only because of specific interactions between different elements within a system. A basic metaphor for emergence might be found in the makeup of water and the destructive and life-giving qualities it supports. If we reduce water into its parts we have hydrogen and oxygen. On their own these do not have the life-sustaining properties which support the manifold eco-systems of our planet; these properties only exist because of the interaction between the two elements. In a broader context this can be both positive and negative. We see great advances in technology interactions which are enabling the creation of incredible new products. Equally, however, technology’s increasing interactions are encouraging emergent problems and which are extremely difficult to solve. It seems likely that the predictability of simple systems, where cause and effect are easily tracked, will become a thing of the past.
Lean has many counterintuitive concepts and ‘keeping it simple’ is just one of them. There is a cost associated with keeping things simple. Take the principle of dedicated flows within manufacturing. This often means spending more on equipment that may not be fully utilised which in the current economic situation seems a less than prudent move. One of the alternative options here is to have more complex routings for products, resulting in higher utilisations and better local financials. This adds complexity which multiplies as layers of demand variability, material supply, quality, product complexity and other sources of variation increase. The whole starts to become a system that generates emergent problems; a complex system. This concept is amplified when we consider an end to end supply chain with many sub tier suppliers, distribution systems, and warehouses. The resulting system becomes much larger and even less linear. There is clearly a link then between complexity and waste. Indeed waste can be viewed as an emergent outcome of complexity. The lean pursuit of waste reduction is valid and many lean methods will help to reduce complexity, however in the past there has not been a specific focus on the reduction and management of complexity and I have found that many of the traditional lean tools cannot fully cope with the dynamics of complex systems. If we take mapping as an example. We have used the popular approach of value stream mapping (VSM) to help us create lean strategies and implementation plans. While VSM is a very useful tool it does have drawbacks. Look at any map and you will see that it probably follows a linear flow and more than likely doesn’t capture many of the complexities in the overall system. There are perhaps more suitable alternatives to VSM which are more appropriate in helping us to understand the system. Causal loop diagrams, for example, have been around for many years and have proved very popular in the systems dynamics field as have big picture financial mapping (popularised by John Darlington of the Lean Enterprise Research Centre)and systems mapping tools developed by systems thinkers such as Russell Ackoff and Peter Checkland. These methods are not widely used within the lean fraternity however the development and use of these methods may form the basis for the deeper analysis that is necessary to understand complex systems. Another area worth exploring is around the methods that lean practitioners use in attempting to reach root cause. Often we default to 5 Why’s or fishbone diagrams. These tools work very effectively in simple systems due to cause and effect being a direct relationship, however if we overlay these tools in a complex system where problems may be emergent then there is no simple cause and effect. Fig 1 illustrates the simple linearity of 5 Why, where the potential root cause is investigated through asking why 5 times; this should lead to an understanding of deeper causes.In a similar vein Fig 2 illustrates the non-relational nature of fishbone, where causes are grouped instead of understanding causal relationships.
Principles and
The term “unmanageable complexity” captures the essence of what most organisations are facing in today’s changing world. Having carried out some research into complexity and lean, I hope to share in this article some ideas that may help in our pursuit of lean and improved customer value (still sadly a poorly understood symbiosis).
So what does the relationship between lean and complexity look like? We can characterise complexity by its symptoms. Complex systems are unpredictable, problems are hard to understand and solve and they often reoccur over time even though efforts are made to eliminate them.
Adapt and advance
Unfortunately, it is this predictability that is the very outcome we are looking for within lean systems. Are we pursuing an ideal that is no longer a realistic objective in today’s business world? Can we adapt lean to cope with our altered circumstances?
purpose
any readers will identify with the above sentiment. Either by being on the receiving end as a customer or from being at one of the identified levels within an organisation. At face value it should be straight forward to identify a solid value proposition that meets business objectives and customer needs and to align the organisation to deliver to that proposition consistently. As many of us have experienced however, the reality is somewhat different. Our business improvement activities realise some benefits but not to the levels we anticipated. A large part of this underperformance is due to misconceptions about the value we are trying to create and the complexity of the systems with which we are working.
Jeff McGowan, sourcing manager at Johnson and Johnson LifeScan, explains why complexity in our systems and the nature of emergent problems may be making some of our traditional approaches to problem solving redundant.
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Is it all too complicated?
is it all too complicated? jeff mcgowan
Why 1 Why 2
Why 2
Why 2
Why 3
Why 3
Why 3
Why 4
Why 4
Why 4
Why 5
Why 5
Why 5
Arguably these methods are still relevant in certain scenarios but we need to be clear about how and where we use these tools. I do not believe it is advisable to use solely 5 why or fishbone to understand and root cause complex problems, as we have identified there are more suitable methods which we need to consider and develop to
Fig 2: Fragmented Man
Machine
Effect
Method
Methods
meet our changing needs.
The opportunity
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1. Keep it simple: Relentless simplification of processes and interdependencies will create more a predictable system. However a change in paradigm is required i.e. it may apparently cost more at a local level in order to be more efficient at the overall system level. We also seem to retain a prevailing belief that if we have a problem then we need to control it, this results in ever increasing levels of management and processes which drive more complexity and thus more problems. To counter this we have to accept a different view, we need to equip people within the system with the knowledge, skills and responsibility to deal with the variety of possible issues that may affect their work as they occur. This enables a more adaptive approach and enables decisions based on knowledge of the system. However, this should be clearly linked to testing and standardisation. 2. Understand the system: VSM is very popular, however it doesn’t tell the whole story, understanding and dealing with complexity requires further methods to complement current lean approaches. The use of causal loop diagrams and other systems thinking methods are
I hope this article has prompted some thought and challenged readers to continue to evolve lean, keeping it relevant for the future based on the real challenges ahead. The ideas mentioned here require new perspectives and perhaps adaptation of the methods used in the many scenarios lean practitioners face. Lean is ideally placed to pick up the mantle in driving complexity reduction, it is a tried and tested method which we can build upon with confidence. What we are looking to do here is further develop lean and enhance practical methods in order to build response business systems that deliver real value. E N D
Ebly Sanchez Comments
This is a highly relevant article. Complexity is here to stay and understanding the interaction between the process of creating value and the complexity of a manufacturing or service delivery system is fundamental in order to reach a sustainable and effective continuous improvement process. This article frames some useful ideas about how to start understanding the complexity that is within the control of our organisations through more advanced root cause analysis approaches. However, although focus on root cause analysis when reacting to a problem is necessary, the prevention process is essential and requires effective interaction between product development and production .Prevention tools help us to keep a hold on predictability in our systems. Tools to be considered in manufacturing environments includes FMEAs (Failure-Mode-Effect –Analysis), DFM (Design-for- Manufacturing) and DFA (Design for assembly). As the author highlights here, keeping things simple is the key to controlling the complexity we have influence over, but the challenge is how to reach a common understanding throughout a system of complexity triggers so that a prevention process can be designed and implemented to minimise the trauma of the reaction process.
Principles and
There is no doubt that there will be reduced waste and more predictable outcomes but we also need to consider that consumers are looking for products that are more integrated technologically, have more advanced features, are environmentally friendly and are available at lower costs for each new generation. Products will become more complex, that is a reality and unless we have methods of reducing the complexity within
In the spirit of keeping it simple, we can look to distil some guiding principles and ideas.
3. Manage Complexity: Identifying and managing complexity within our control will create opportunities for the exploitation of more complex products and the ability to manage complexity outside our control. Ultimately we all want to see improved technology, products and services but not at the expense of reliability and with emergent problems as a consequence. We can control what we do within our organisational structures and our supply chains. We can use capacity, talent and many other aspects of our organisations in coalition to improve how we simplify and rationalise for better exploitation of unavoidable complexity. We need to stop trying to optimise parts in order to optimise the whole. This means a shift away from focussing on understanding core manufacturing or service operations alone to a more holistic approach which considers all business aspects and interrelationships.
purpose
So what is the relevance and real value in taking a systems thinking approach to understanding complexity?
Here is the opportunity: build a business system that manages and minimises complexity enables the exploitation of more advanced and complex products. These can be produced and distributed more effectively and efficiently, not just improving the apparent value proposition but allowing companies to be nimble in the face of the changing dynamics of the global economy.
advisable in looking to understand and improve at a systems level and to support effective root cause analysis. It is highly possible that complexity may be coming from areas such as management policies, transactional processes, target setting or functional planning processes. Many of these activities may be conflicting resulting in emergent problems that are not immediately apparent. An approach is needed which supports the building of knowledge and a common understanding across the business of the wider implications and critical interdependencies of localised work.
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our control, the complexity in our systems, we will not be able to handle the complexity outside our control.
Fig 1: Linearity of 5 Why’s
cult ur e a n d r e sult s paul i n e f o u n d
Culture and results Fig 1: The lean iceberg model
Individual
above, and explained in Staying Lean, we can see that it requires focus on the below waterline elements of change. Organisational culture – the collective behaviours of the organisation – is influenced by leadership, the groups and individuals that direct the organisation. However the relationship is interdependent and leadership will in turn be influenced by the individuals and teams they are responsible for. Fig. 2 illustrates this independent relationship.
The role of leadership in the cultural side of progression from current to future state is central and will require leaders to understand that behaviours in their organisation are part of an interrelated system. If we refer to the lean iceberg model pictured
The key point of culture is that it shapes the beliefs of organisational members about what behaviour is appropriate regardless of whether it is productive or not. While there are many factors that determine a culture, leadership is the single strongest influence.
So how can a leader influence beliefs to create lean behaviours? First, an individual has to believe that something is right for them, and is consistent both with their own values and the perceived values of the organisation. Second, they need reassurance that the people they respect would behave in a similar fashion. Finally, they have to believe that they have the necessary skills and resources to make change possible. Organisational culture is the shared belief system that guides the way we think, behave and interact within the organisation. Linking this to the all-important issue of productivity and profit, the extent to which organisational culture affects an enterprise’s ability to be adaptive has been shown by Kotter and Heskett (Corporate Culture and Performance, Free Press, 1992) to be related to key performance factors. Based on interviews with key stakeholders they categorised organisations as either adaptive or unadaptive and contrasted that with published data on their performance over an eleven-year period (1977-1988). Fig 3 shows a startling difference in growth between these two groups of companies. One subtle, but very important, piece of data on this table is the 1% growth in net income for the unadaptive companies. After eleven years and 166% more revenue (a growth
Principles and
E
Group
purpose
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Leadership
Behind this network of influences are the beliefs which prompt behaviours. In order to shift culture leaders need to acknowledge these beliefs and understand why they exist. This model does not take into account the skills and knowledge that exist in organisations but it does help to explain inconsistencies between skills and actions; the reasons why capable individuals may not always apply their talent in the best way due to the influences of superiors, peers or the overall culture of the workplace.
very successful lean implementation starts with an honest and accurate understanding of the current situation or current state and the development of a future state aspiration. In order to bridge the gaps between these current and future states lean practitioners must understand that there are two sides to the lean journey. One focuses on technical skills and tools and the other on culture.
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Culture
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Pauline Found, co-author of Staying Lean: thriving not just surviving investigates with Michael J. O’Brien and Lynne Oliver of The Pacific Institute the dynamics of organisational cultures, their influence on bottom line results and the role of leadership in building constructive lean cultures.
Fig 2: Interdependent relationships
cult ur e a n d r e sult s paul i n e f o u n d
of 10% per year) the bottom line has not moved significantly. All that additional revenue has been used to fund increasing overheads – more appropriately defined in lean terms as waste. At the same time, the adaptive companies’ net income has grown faster than their revenue, which means that they are not only growing revenue, but they are also eliminating waste and overhead.
Adaptive Culture
Revenue
166%
682%
Workforce
36%
282%
Stock prices
74%
901%
Net Income
1%
756%
Fig 3: This table presents the growth in select organisations from 1977 – 1988 from John Kotter and James Heskett Corporate Culture and Performance, Free Press, 1992
Culture and Performance
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The passive/defensive styles are at direct odds with the principles of lean, and represent wasteful behaviours. The underlying drive of a passive/defensive culture is to avoid risk by preventing the organisation from changing. The bureaucratic, unresponsive nature of these cultures stems from an entitlement belief and any proposed change to the organisation or its systems is seen as a threat to stability. These cultures resist change through inaction, creating more and more waste in the system. The customer, adding value, and striving for excellence is frustrated by “this is the way we have always done it!” This cultural style not only creates massive amounts of waste, it creates complexity that places undue burdens on disparate parts of the organisation
The arrogance that is the hallmark of the aggressive/defensive styles has clearly been shown to create uneven performance. Aggressive/defensive organisations will generally discover a new approach and utilise it blindly, well beyond its period of appropriate use, until a business critical issue forces a shift to a new paradigm. This creates a disruptive pattern of success and failure. The positivity just after a new approach is embraced causes the culture to lock onto it but means it is oblivious to early signs of changes in the market place that mean the approach is becoming redundant. Aggressive/ defensive arrogance can become so strong that it not only ignores customer preferences but articulates that the customer is wrong. This is clearly counteractive to the creation of la true lean culture. Readers will note that ‘perfectionistic’ is one of the four styles of aggressive/ defensive cultures. It is important to understand that this is significantly different from a culture that strives for perfection. On the circumplex ‘perfectionist’
Principles and
In simple terms the OCI measures the extent to which the culture is constructive (adaptive) or defensive (unadaptive). Utilising the OCI as part of an integrated lean transformation process enables an organisation to measure the shift in culture and any corresponding growth in performance. One of TPI’s first engagements with this new transformational process was with a shipping company in Asia. In a two-year period, the client achieved an amazing shift in culture and a corresponding shift in financial performance. The data below documents that change.
The circumplex model presented above plots the results of a culture audit along 12 behavioural styles grouped into three factors. For the purpose of this article we will focus on three factors: passive/defensive, aggressive/defensive and constructive.
purpose
While Kotter and Heskett have clearly shown the relationship between culture and performance, the real test is: can you change organisational performance by shifting culture? At The Pacific Institute (TPI), the work of Drs Robert Cooke and J.C Lafferty of Human Synergistics, who created the Organisational Culture Inventory® (OCI®) have used the circumplex as a method for further investigation of this possibility.
Fig 4: OCI circumplex from Robert A. Cooke and J. Clayton Lafferty, Organizational Culture Inventory®, Human Synergistics International, USA. Copyright © 1987-2010. All rights reserved. Used by permission. (Reduced staffing costs came from reduced overtime and absenteeism (higher employee engagement) and without any staff reductions.)
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Unadaptive Culture
cult ur e a n d r e sult s paul i n e f o u n d
This disconnect starts with the belief that the organisation’s current system is already perfect, and the only reason that the results do not follow, is due to people not following the system. This type of culture forces compliance, and when problems occur, the assumption is that it was an error in execution, not the system itself. This results in the organisation being past focused instead of future focused. It also perpetuates blame culture. The concept of striving for perfection is a key characteristic of the achievement style of constructive (adaptive) cultures. Here there is a belief in growth through continuous improvement; an acknowledgement that no matter how good we are today, we can be better tomorrow. This is an essential belief for sustainable lean. Achievement along with the other three styles of the constructive cultures (self-actualising, humanistic and affiliative) help to reinforce and sustain lean by creating a culture that rewards and expects its members to do the following:
Believe their effort makes a difference Be goal focused Be customer oriented Encourage and strive for growth through innovation Face problems with integrity Coach and teach others to achieve Cooperate and operate as a team Be proactive and accountable for their own performance
In a research project conducted by TPI to aid organisations in their implementation of quality improvement efforts, not only was the culture assessed but also the quality improvement program. Specifically, employees were asked the extent to which they agreed with the following statements:
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This data helps to confirm what makes practical sense; if you are in an organisation that is built on fear and distrust then any effort to improve the
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1. Building efficacy at the individual level 2. Creating alignment within the leadership team Building efficacy at an individual level is crucial since a characteristic of defensive cultures is a sense of being stuck without alternative options to the current state. To counter this you have to get individuals to believe their effort makes a difference. This shift in beliefs will move an organisation from the helplessness of the passive/defensive cultures to the goal focused approach of the constructive. To support this education in personal change it is critical that the leadership is aligned. Leaders exert the single strongest influence over culture but in most organisations different members of the leadership team send different messages and expectations to employees. When employees cannot meet all the inconsistent expectations leaders tend to focus on what is not working and create policies to prevent the mistakes and failures of the past. To create alignment the collective leadership team must work together and create focus by clarifying, simplifying and leveraging the organisational vision, values and strategy. Leadership need to devise plans using upward feedback which will grow constructive characteristics. It is likely that leaders will need coaching to enable this including training that appreciates how to tap into the teleological nature of humans and use this to lead people towards a desired outcome. Having examined the complexity and interdependence of organisational behaviours the importance of the issues which lie below the waterline in the lean iceberg model (Fig 1) and their influence on the performance of an organisation become sharply defined. Senior leadership must acknowledge this relationship and look to develop constructive cultural characteristics while rooting out defensive traits with consistency and belief. E N D
Brenton Harder comments
Pauline Found makes a convincing case that clearly supports what we’ve all experienced as quality professionals; that we have a greater chance for success with lean initiatives and driving change in corporations with constructive and adaptive attitudes. Her use of industry data comparing revenue and net income to company culture coupled with a 12-point behavioral model clearly identifies both the visible and invisible traits necessary for success. Leadership is paramount within this model.
Principles and
The answers to these questions were used to measure the overall attitude of employees towards the quality improvement program. Those who agreed with these statements the most (the top 15% of respondents) viewed the culture of their organisation as being extremely defensive, with very few constructive characteristics. However, those who did not agree with these statements (the bottom 15% of respondents) viewed their organisation’s culture as highly constructive.
Leveraging the model presented earlier in Fig. 2 the transformation process should recognise that to develop a constructive culture we have to address, simultaneously, the two components that influence it by:
purpose
1. The idea of quality improvement may sound good, but does not apply to everyone’s job 2. People in this organisation put more energy into catching mistakes than into figuring out how to do things right the first time 3. I do not think this quality improvement program will have a lasting impact on this organisation
organisation – such as lean – is going to be received with fear and distrust and lead to unconscious sabotage of the programme. Conversely an organisation that already expects innovation, accountability and cooperation (constructive cultures) would embrace the concepts of lean as a natural extension of who they are as an organisation.
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cultures are defined by the extent to which they drive people to be perfect, accepting nothing less than perfection in all that is done. On the surface this may seem to be aligned to lean, but in reality it is an extension of the arrogance within aggressive/defensive systems.
Accounting for lean John Darlington
In the first of a two part article based on his recent research with Professor Dan Jones, John Darlington of LERC explains the limitations of traditional accounting methods.
Fig. 1: Illustrating flow accounting principles and priorities.
Y
ou might think it inevitable, certainly it has been a long time coming, but gradually accounting practice is beginning to emerge as another aspect in developing lean enterprises. However, as a new subject, it is fair to say that it has yet to establish the consistency of approach achieved by other disciplines which have embraced lean earlier and which have improved greatly in terms of quality, planning and scheduling, and work organisation. Before we embark on a more detailed discussion of the nature of lean accounting methodologies available it is worth bit of reflection and we offer the following quotations to assist. “Many accountants are so long in getting their figures in shape that they are practically worthless for the purpose intended, the possibility of using them having passed” “The man who knows what to do and how to do it shall gradually supplant the man who knows what was done and who did it”
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Sales
586,833
Material Cost
229,732
Throughput
357,101
Indirect Salaries
130,622
Direct Salaries
89,744
Other direct costs
20,028
Depreciation
14,438
Utilities
12,830
Freight & other
7,034
Amortisation
7,178
Maintenance
5,483
Profit
69,744
As Kate Mackle, founder of the consultancy Thinkflow, has observed “A lot of lean implementation activities are wellintentioned but naïve applications of tools and techniques and do nothing to fundamentally alter the capability of the business to sell more, with less inventory and lower operating expenses. That is the only way to make more money” Now put yourself in the position of the accountant for an organisation that has been blindly applying lean tools in the manner described above. They are often asked to “value improvement activity” but they have about as much hope of doing that as you may of revaluing the cost of work in your kitchen!
Sensitivity Analysis A 5% change for better effects the bottom line by:
Principles and
Again you may be moved to shout “I told you so, accountants are infuriatingly slow to change!” but this would be too simplistic and to make the sort of
£000’s
purpose
Well said you might think, in anticipation of a paragraph or two of accountant bashing. But the distinctive aspect of these quotations is not that they characterise accountants as backward looking bean counters. The quotations are interesting because they were made in 1915 by Gantt of Gantt Chart fame! (Comments made at a meeting of the American Society of Mechanical Engineers in Buffalo New York, 1915) These criticisms were made nearly 100 years ago and you cannot but notice that they are uncannily similar to the ones being used today by proponents of lean accounting in an effort to persuade their organisations to adopt new conventions.
Key Drivers Profit and Loss Actual 2009
The inconvenient truth is that not all waste removal is synonymous with cost reduction. You do not need a factory or call centre to confirm this, your own home would suffice. Simply re-arrange the organisation of a room, say your kitchen, by laying it out more conveniently so that you do not have to travel so far to accomplish your day to day tasks. You have certainly saved waste of travel distance and possibly time but the costs of running your home are exactly the same as before.
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Accounting for lean
breakthrough we need to work out the role of accounting in a lean organisation we must confront operational shortcomings as well.
Accounting for lean John Darlington
Conventional accounting systems encourage overproduction by their clumsy interpretation of the valueadd principle as “each time I make something I add value to the business” when it should be “each time I sell something I add value to the business” Accounting does not recognise the importance of bottlenecks, constraints or pacemaker processes Accounting encourages local efficiency creating islands of excellence Accounting has little or nothing to say about lead times Accounting promotes the idea that the bigger the batch the lower the unit cost Accounting encourages cost reductions which prove to be mirages
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No one, particularly in the current financial climate, is knocking being careful with the money we spend and taking every opportunity to save, but this simple analysis confirms that the wealth producing aspects of business lie in creating new sales volumes and adding product or service innovations for which the customer is willing to pay better prices. There are many aspects of lean accounting literature which need more serious development. Certainly some of the lean accounting models which attempt to reveal ‘spare’ capacity are either naïve or downright and dangerously misleading. Particularly poor is the suggestion that lead time compression frees up capacity that could be used to generate more sales. This is wrong. Unless action is applied capacity remains exactly the same under differing lead time conditions. Similarly, although the call for value stream accounting is valid, shared resources both exist and for many businesses represent a perfectly valid way of organising operations. Labelling them “monuments” (and not in the flattering sense) and calling for duplication or allocation is not a productive way forward. Here is the core problem. We do not need, or find it desirable to create, a new breed of accountants with a superficial knowledge of what lean is about. We are trying to break down departmental barriers not develop new ones. Accountants are numerate and pay attention to detail, so if they want to get involved with lean activities so much the better. But is money really so hard to understand that we cannot rely upon the good sense of sales and operational staff?
I will be clear that I am not talking about financial reporting to external interested parties. Financial accounting has developed a series of concepts, conventions and rules which serve the outside interested party and many of these rules are of a statutory nature and can vary from one country to another. These must remain in the accounting department. What we are referring to is management accounting, which is not regulated like financial accounting. For instance there is no statutory period over which they must be produced and although it is quite common to find monthly management accounts, shorter periods are often found. Neither is the content prescriptive in the same way as financial accounting statements. Management accounts can focus on specific areas like the contribution from products, the performance of different locations, divisions or departments. Management accounts will also often include non-financial information to highlight certain aspects of the running of the business; employee turnover for instance. In management accounting territory we can get back closer to what Taiicho Ohno had in mind when he explained that, with lean, all we are trying to do is “reduce the time it takes from when we commit money to raw materials to when we collect money from our customers”. In flow accounting we can use Fig. 2 to scope out the potential for this improvement in terms of time and money. These are the two lowest common denominators to any lean application.
Principles and
This latter point is particularly important; the removal of waste is actually the freeing up of capacity. This can be in the form of space, machine availability, people’s time, and so on, but what is the best way of turning this waste removal into bottom line impact?
Fig.2 Flow accounting highlights potential for improvement.
purpose
Because accounting systems are a significant part of an organisation’s measuring systems, they contribute to the culture. By this we mean how people think and behave in work.
Fig. 1 is used in ‘flow accounting’ applications and lifted from a real life situation. The purpose of the information it displays is to confirm priorities. It is a way of reminding the organisation of the relative financial importance of differing aspects of the business.
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So, we need a combined fresh start. Current accounting practices actively pull the opposite way to lean deployment for a few conspicuous reasons:
leadership ? ? ? ? ? ? ? ? ? ?credibility ? ? ? ? ? ? ? ? ? ? dr ? ? ?david ? ? ? ? ?bamford ???????
Performance Measurement
“Tell me how you are going to measure me and I’ll tell you the way I’ll behave” (E. Goldratt The Goal, 1984) Because accounting systems are a significant part of an organisation’s measuring systems, they contribute to the culture. By this we mean how people think and behave in work. Until recently the drive for cost reduction has focussed on busyness or utilisation of resources and, in sympathy with these sentiments, it follows that speeding processes up also reduces product or service costs.
The inconvenient truth is that not all waste removal is synonymous with cost reduction.
However, each time we produce a value stream map one of the key outputs is the contrast between combined cycle times and overall lead times through the system. The following map highlights the difference. If we really want to do justice to the legacy left by Ohno we need an accounting system which penalises the queuing time of 97% rather than focussing on speeding up the 2%. Flow accounting, which uses lead time to calculate flow cost, does exactly that. It has been labelled tongue in cheek as “inactivity based costing” because it penalises delay. Accounting for lean enterprises is new and the material is not yet mature. It is going to be interesting to see if what emerges offers something discernibly different or simply a “tick in the box” for the accounts department to claim “we’re lean”. E N D
Leadership credibility Dr David Bamford, senior lecturer at Manchester Business School, maps lean leadership challenges and the concept of credibility against management thought leadership and academic literature over the last decade and more.
T
wo questions often asked by leaders of organisations are: ‘Is there a ‘best’ way to implement lean?’ and, ‘is there a ‘best fit’ solution for implementation?’ Within academic literature the best means of implementing lean thinking causes the most difference in opinions, though it arguably provides few answers. According to Safayeni et al (1991) there are three key motivations behind implementing lean: The constant requirement for key performance indicator information about accomplishments The ‘fashionableness’ of the idea External pressures on suppliers from customers to implement.
Fig 3
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It should be mandatory to understand the importance of throughput and flow and sensitivity analysis is a good way to describe it. A big thanks to John for bringing our attention to this understanding.
The nature of this framework however, means that lean is less suited to one-off, big bang implementations and far better viewed as a progression or journey. Opportunities for the exploitation of lean thinking during the course of this journey will be manifold but from a strategic
Principles and
It’s about time we put the spotlight on lean accounting in the right way. Some think lean accounting is ‘doing lean’ in the accounts department - how wrong they are! Reading John Darlington’s article I find lean accounting explained in a way non-accountants can understand and the guidelines should be fairly easy to use in our everyday lean projects and endeavours.
However, despite such discrepancies the accepted wisdom is that the sound managerial and operational principles at the core of lean systems will deliver some improvement to any organisation that moves towards them. Harber et al (1990) argue this point with great clarity showing that the flexibility of the lean thinking with reference to different organisational needs will provide a strong framework for change.
purpose
Jacob Austad Comments
In the reality of lean implementation in a complex world these leadership credibility and behavioural issues are amplified across leadership teams which must be aligned in their approach
Literature on the success of lean implementations shows us that the beneficial impact of intelligent implementation is almost undisputed, though there are some notable exceptions such as Beard and Butler (2000) who argue that not all organisations are suitable for lean systems and should, therefore, not expect guaranteed success from any improvement programme modelled on its principles.
leadership credibility dr david bamford
point of view are likely to be used for the following priorities:
To gain a strategic competitive advantage To improve operational efficiency Its provision of a framework to implement a change strategy.
The first and perhaps most important of these uses for lean brings us neatly to the importance of leadership in lean initiatives and clearly highlights the reason why senior members of any organisation on a lean journey must engage closely with the programme if they hope to reap benefits.
The importance of leadership in effecting cultural change with relevance to organisational needs cannot be underestimated, especially in a world were 70% of change programmes fail to achieve all set objectives (Aiken and Keller, 2009). But what is leadership in this context? Attempts to describe and define leadership are prolific. Some use memorable phrases, some focus on how leadership operates and some focus on what can be observed in leaders’ actions. In addition it is obvious that our ideas about what good leadership entails have changed significantly over time. These two definitions are a case in point: “The process by which an agent induces a subordinate to behave in a desired manner” (Bennis, 1959) “Transforming followers; creating visions of the goals that may be attained, and articulating for the followers the ways to attain those goals” (Bass and Riggio, 2005).
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The reality of leading and sustaining lean transformation throughout an organisation is challenging, but can also be tremendously rewarding. Achieving the set implementation objectives proves an aptitude for leadership that goes beyond ‘book smarts’ and demonstrates ‘street smarts’. Lean can act as a mechanism to improve credibility, to actually demonstrate senior management commitment; success can be immensely fulfilling on both a personal and organisational level. E N D
Adair: Effective Leadership: How to be a successful leader, (Pan Books, 2009) Aiken and Keller: “The irrational side of change management” McKinsey Quarterly (April, 2009) Bass and Riggio: Transformational Leadership, (Lawrence Erlbaum Associates, 2005) Beard and Butler: “Introducing JIT Manufacturing: It’s easier than you think”, Business Horizons (Vol.43, Iss.5, pp.61-64, 2000) Bennis: “Leadership theory and administrative behavior: The problem of authority”, Administrative Quarterly (No.4, pp.259-260, 1959) Covey: The 7 Habits of Highly Effective People (Free Press, 2004) Harber, Samson, Sohal and Wirth: “Just-in-Time: The issue of Implementation”, International Journal of Operations & Production Management (Vol. 10, No.1, pp. 2130, 1990) Hughes, Ginnett, and Curphy: Leadership: Enhancing the Lessons of Experience, (McGraw-Hill, Higher Education 2009) Safayeni, Purdy, Van Engelen and Pal: “Difficulties of Just-in-Time Implementation: A Classification Scheme”, International Journal of Operations & Production Management, (Vol.11, No. 7, pp.27-36 1991) White, Ojha and Kuo: “A competitive progression perspective of JIT systems: evidence from early US implementations”, International Journal of Production Research, (First published November 2009)
Principles and
Conviction – the passion & commitment you demonstrate Character – consistently demonstrating integrity, honesty, respect and trust Courage – stand up for own beliefs, challenge others Competence – hard & soft skills Composure – appropriate emotional reaction Care – a concern for others.
So what solutions exist? Well, insight into the situation certainly helps. The ‘Action Centred Leadership’ concept proposed by Adair (2009) suggests that leaders generally need to balance their time equally between task, team, and individuals – but to realise that at certain times one of the areas will dominate. Ultimately though, any solution will involve senior management commitment and strategic leadership – making decisions across different cultures, agencies, agendas, personalities, and desires. This requires the devising of plans that are feasible, desirable, and acceptable to one’s organisation and its partners; and it determines the ends, chooses the best ways and applies the most effective means. The strategy is the plan; strategic leadership is the thinking and decision making required to develop and effect the plan (Hughes et al, 2009).
References
purpose
One interesting recent view on leadership centres on the concept of credibility and Hughes et al (2009) provides the 6Cs or six definitions of credibility as a framework for identifying appropriate behaviour and predicting the traction individuals will gain as they attempt to implement change and improvement initiatives:
This model is helpful in assessing both ourselves and others and Covey (2004) takes the concept further with his concept of the ‘emotional bank account’. This provides a metaphor for defining the amount of trust that has been built-up in a relationship. Deposits are made through keeping your word, meeting commitments, being trustworthy and so on. A positive balance indicates high levels of trust. An overdrawn account, created through demonstrating disrespect and threatening behaviour, severely limits options to communicate effectively. In the reality of lean implementation in a complex world these leadership credibility and behavioural issues are amplified across leadership teams which must be aligned in their approach.
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The importance of leadership in effecting cultural change with relevance to organisational needs cannot be underestimated, especially in a world were 70% of change programmes fail to achieve all set objectives
The cost of a cost focus Dr Zoe Radnor
Dr Zoe Radnor, associate professor in operations management at Warwick Business School and practice fellow at the Advanced Institute of Management (AIM), examines the impact of the fiscal squeeze on lean improvement projects within the UK’s public services
F
irst, I would like to say how delighted I am to be invited onto the editorial board of LMJ. It is a journal which reflects an excellent combination of theory and practice, publishing relevant and timely material with a focus on reflection as well as practicalities. I hope that I can contribute to the debates and content in a time where there is a great focus on lean across all sectors but especially public services.
The public sector involves disciplines and environments far removed from those for which lean was originally developed. Thus new thinking and ideas are needed to ensure that the essence and principles are not lost. This is accepted and well established among practioners but we must remember that many coming into contact with lean projects for the first time will not have this appreciation.
There are many misconceptions and suppositions among lean firsttimers, for example, “Lean is all about job cuts and cost cutting” is something I hear all the time at in my current work with public sector. My answer is “No – the spending review and budget cuts are causing the job losses, not lean.” Indeed, if used properly, then lean can enable public sector organisations manage the inevitable austerity measures with minimal damage and maximum gains in effectiveness.
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Positive outcomes from the 2006 consultancy period were; increased quality, a more structured approach to problem solving, better team working and a well supported process for transferring capabilities from the consultancy to the organisation. This last achievement has meant that since the consultancy period came to a close HMRC has developed internal lean expertise and expanded lean concepts into receptive areas at all levels of the organisation; so even the director general of personal tax has her own visual management board! The official HMCS lean programme was launched in autumn 2008. HMCS is now rolling out a three year lean programme, during which it will carry out an ‘initial touch’ of all courts in England and Wales by December 2011. All jurisdictions of the courts are involved and the programme is designed to be consultant free; focusing on the development of internal capability in the form of change agents. These agents will have undergone training at one of government’s lean academies
which, among other things, are striving to support sustainable lean programmes by bringing greater consistency to the variety of improvement approaches in progress across government departments. The initial touch at all courts starts with a lean event. This looks to introduce revised processes through standard operating procedures and to introduce new practices. Like HMRC and DWP these practices include the introduction of team information or performance boards which are used to manage workload allocation, identify problems within process and team skills and to monitor success. The performance boards should be used in conjunction with short daily team meetings of no more than 15 minutes and led by the team leader. The meetings should communicate the current day’s work and, discuss any perceived problems. For HMCS the lean programme has had an exceptional impact (breaking-even within six months). The key elements in this success were; motivational ‘quick wins’ in processes such as revised filing (allowing the removal of many tons of waste) and revised post process (resulting in the post room being cleared of clutter and more conducive to work). Visual management has also been critical to success, especially the use of performance boards and other visual management tools including trays for highlighting the current state of work and for sifting post. Developing internal capability through strong change agents has been central. They have made more
Principles and
Through my current research with AIM I have the privilege to build on existing work within Scottish Government, HM Revenues and Customs (HMRC) and a range of Health Trusts around lean thinking and possible routes for further development, particularly with regards to its application in HM Courts Services (HMCS), the Department of Work and Pensions (DWP) and local government. This work, often taking the form of evaluations, is designed to consider how the implementation of lean is being developed in relation to the
HMRC began its journey in 2006, engaging management consultants to roll out an organisation-wide programme in the processing areas of the department. Findings from the initial period of consultancy included the identification of a direct correlation between the depth of understanding displayed by senior management with regards to lean initiatives and the engagement of staff at their site. It was also observed that poor communication lead to engagement challenges as staff did not link lean with any improved quality and productivity achieved. There was also a mixed understanding of who was represented by HMCR’s customer.
A realisation is needed that the implementation of lean is a long term undertaking, not a short term fix
purpose
The coalition government is constantly reminding us that we have to do more with less – that we have to be efficient. However, there is a danger that finance will rule and the focus will be on taking money and people out without due consideration of creating value. While it is true that reducing waste cost is necessary, a thorough lean programme should also innovate around ways of increasing valueadding activities. The challenge for public sector organisations is to take the money out while retaining and improving the service delivery – in order words ‘better for less’ – effectiveness not just efficiency!
principles of value, flow and the elimination of waste (in that order!) to benefit appropriate service delivery to individual citizens and the general public.
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The cost of a cost focus
The cost of a cost focus Dr Zoe Radnor
Across government lean is being introduced to improve service delivery by eliminating waste, simplifying processes and creating capacity to do more work with fewer resources. However, the challenges of gaining proper commitment and understanding from senior management are significant. In all the cases I have researched there was a direct correlation between the manager enthusiasm for lean and the overall positivity of the programme. In programmes where leadership was lacking or unstable many staff, while willing to acknowledge that the working environment had improved, could not articulate how it had impacted the delivery of the service to the customer and tended to use phrases such as “when lean was here” or “after lean had gone”, giving the impression that lean was seen as something faddish which imposed changes rather than facilitating them. This last point links to an issue of short-termism in the public sector perception of lean. A realisation is needed that the implementation of lean is a long term undertaking, not a short term fix. It is about tools but more importantly, behaviours. A series of rapid improvement events does not make a lean organisation! Although it is true such events can result in process redesign and the removal of ‘low hanging’ waste, (e.g. moving from 14 shift patterns to 3 or a reduction in paperwork) if other lean tools are not employed, particularly visual management which engages and empowers team members in ongoing problem solving, then inefficiencies may return.
The tools and techniques are represented as the pillars of the house. The purple assessment and improvement tools should be implemented first as these achieve quick wins, clear focus and engagement. The orange pillars are focused on monitoring tools which allow the impact of activity to be identified and established. The green pillars are tools which will allow lean to become embedded in the day to day processes and service delivery. The house allegory integrates the technical and culture aspects of lean throughout lean maturation. The two aspects feed into each other in order to achieve a whole process, value chain or system view with embedded improvement behaviours and stable robust processes.
There is little doubt that there is a burning platform for implementing lean in the public sector with highly publicised pressure to reduce the cost base and increase efficiency. However, it is important that this does not give the wrong message about the aims of lean but is seen instead as an incentive which could turn crisis into opportunity, allowing the ways in which public services are delivered to be radically re-structured. The financial challenge is upon us, we must now explore what lean can, and is, doing for the public sector to enable that challenge to be met systematically and effectively. E N D
Fig 1: The public service house of lean
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References
For further insight into the research which has informed this article see: Radnor: “Review of Business Process Improvement Methodologies in the Public Sector”, (AIM Report, London May 2010) Radnor and Bucci: Evaluation of the Lean Programme in HMCS (HMCS, London 2010) Radnor and Bucci: Evaluation of Pacesetter, Lean, Senior Leadership and Operational Management within HMRC Processing (HMRC, London 2007)
Principles and
Although many of these points appear to be similar to other change initiatives the concept of organisational readiness is particular to lean. We can define this readiness as engagement of staff through appropriate training and development, having an improvement strategy, having a process view, understanding customer requirements, strong committed leadership and understanding demand, capacity and variation. All of these are important in supporting the principles of lean and delivery of value. In Fig 1 these elements are clearly illustrated, along with a clear communication strategy and supported by a steering group and project team. These act as the bedrock and foundations of developing lean in public services.
purpose
In previous work regarding lean in public services five key success factors have emerged to support implementation. These include: Remembering that lean is about developing a culture of continuous improvement where the main ingredient is time Having senior management commitment and leadership throughout the organisation in actions as well as words Committing adequate and capable resources Having a clear communication strategy developed and implemented through appropriate channels Ensuring organisational readiness is in place to so the implementation can gain traction quickly
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of an impact the longer they have been present at a site and this speaks volumes for the importance of lean leaders and champions in maintaining focus and momentum.
c o ur t i n g l e a n s a r ah l e t hb r i dg e
Sarah Lethbridge, senior research associate at LERC describes the establishment of a lean exemplar for the UK court system at Sefton Magistrates Court. Lethbridge relates how the transformation team’s experience has contributed to the Lean Enterprise Research Centre’s knowledge sharing thinktank for public sector lean practitioners.
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National deployment of the lean programme began in earnest in January 2009. The Ministry of Justice (MoJ) developed and grew its Lean Academy, transferring lean skills to key individuals within the organisation to champion lean work (some of this work has been previously reviewed in LMJ issues04 and 05 in the articles ‘Justifying Lean’ parts one and two).
My fear is that in these troubled economic times, with 25% axes swinging from Whitehall, that the observable momentum achieved to date is crushed by indelicate budget slashes or a dramatic shift of programme objectives.
All of their hard work has resulted in some great results. The equivalent of 457 hours of capacity has been released each month thanks to extensive kaizen events and value stream mapping activities. The teams made sure that they undertook a data capture stage pre and post event enabling them to track the value of their work. They can now detect that 90% of results from court proceedings are uploaded onto the system just one hour after the case finishes, a dramatic difference from the days of delay experienced previously. Police have informed Sefton Court that they greatly appreciate the ability to see decisions earlier as it means that they are better able to deal with the outcomes of a release or conviction. Also, thanks to the efforts of the lean team and HMCS employees, court utilisation has increased by 20%, enhancing the value for money proposition for the taxpayer and enabling more cases to be heard more efficiently. The staff’s confidence in lean thinking is growing. They are starting to move on from a prescriptive lean approach to more of a contingent one, adjusting tools to meet their particular needs. Their obvious enthusiasm will help them to face new challenges, such as beginning to realign capacity to more accurately reflect demand and to tackle the national problem of cracked and ineffective trials (those trials that do not happen because of a last minute guilty plea or because the judge does not feel that the evidence provided is satisfactory enough to proceed).
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HMCS began testing the effects of lean in the South East of the UK in late 2007 through week long kaizen events within processes such as post opening and filing. The success of these activities secured the launch of the first HMCS Lean Academy, set up to train change agents in lean theory and techniques. In April 2008, a 22 week pilot study was undertaken at three large courts, two of which were based in Liverpool, in order to bring about improvements within court operating systems, management infrastructure and to nurture positive mindsets and behaviours.
Brown was honest about how difficult their journey had been. Some employees had found the introduction of standard operating procedures problematic and there had been early resistance. However, through perseverance, employees came to see the benefits and staff have now reached the point where they ask “how did we actually work before we had these?!” Team Information Boards were introduced and although it was difficult to adjust working life around them initially, they soon proved invaluable, securing real engagement from the teams. Debbie stated that now employees actually compete for the chance to lead a team meeting!
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The staff’s confidence in lean thinking is growing. They are starting to move on from a prescriptive lean approach to more of a contingent one, adjusting tools to meet their particular needs.
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t can sometimes feel that the life of a lean practitioner is a lonely one! Battling against adversity in order to help others understand what lean can do for the organisation, the team and the individual. Listening to members of our LERC community, we realised that change agents within public sector organisations were particularly keen to get together to share their experiences and to give each other support in the midst of turbulent times. LERC’s Lean Public Sector Thinktank was created to offer such a safe space and the latest Thinktank meeting took place on September 27 at Liverpool Crown Court to learn about the lean journey that Her Majesty’s Court Service (HMCS) have been undertaking for the last three years.
A ‘model court’ exemplar was established at South Sefton Magistrates Court in September 2009 and the LERC Thinktank was lucky enough to view the great achievements made there firsthand. Shirley Brown, the North West Regional Lean Lead for HMCS, Debbie McLaughlin director North West Homes and Communities Agency and legal advisor, Carol Lynch kindly shared their experience and expertise with Thinktank participants including representatives from the NHS, the Environment Agency and the Higher Education sector.
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Courting lean
L o g i c a l l e a n S t e v e W i lk i n s o n
Much can be learned from the HMCS lean journey. Thinktank participants all stated that the collective knowledge that they had acquired from the visit had given them lots of ideas and recharged their enthusiasm for their own lean initiatives. As the Liverpool Courts continue their work, extending the lean lens along criminal justice value streams, the sheer scale of the improvements that could be realised is immense. It was clear from the Thinktank visit however is the need for great investment in time and training to make these improvements happen. It is a testament to the MoJ that they have understood this and have supported the work thus far so completely. My fear is that in these troubled economic times, with 25% axes swinging from Whitehall, that the observable momentum achieved to date is crushed by indelicate budget slashes or a dramatic shift of programme objectives. E N D
Zoe Radnor comments:
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While automatic systems for collecting performance data have been around for some time, it must be admitted that these have rarely given due attention to ways of putting information into a context that will support lean thinking and join up different areas in an enterprise.
However, as lean grows and techniques expand from beyond the shop floor throughout areas such as training, management, finance and more the need for accurate and pertinent information also grows. In many cases the various business systems deployed in each of these departments are more akin to islands and fiefdoms than integrated operations that freely exchange accurate information. Not having access to all the information throughout the whole enterprise exacerbates tendencies towards islands of excellence for lean and for problem solving, limiting overall gains. This does not reflect the idea of flow that is central to lean. Information flows should be maximised to ensure accurate, timely decision making that prevents problems recurring. If we wish to become lean then should the systems we use to help us on the journey not also be leaner?
Seeing the bigger picture: finding the root cause
Let’s look at a real life example where having the correct information can provide a complete picture of the problem at hand and allow better lean decision making. While trying to eliminate waste from their processes a large vitamin manufacturer determined, through Pareto analysis that their largest cause of downtime in packaging was due to label jams at the labelling machine. Traditionally the operations team would clear the jam and continue with production, while manually noting the number of jams. At the end of the week, machines with a large amount of downtime would be reported to engineering. Engineering would then schedule in an overhaul of the machine (further downtime) in order to resolve the issue.
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I have been in the fortunate position to evaluate the HMCS roll-out of lean across 17 of their courts (including Sefton) and as the report (Radnor and Bucci, 2010) notes, the department has to now consolidate, stabilise and become consistent. In terms of consolidation they need to continue rolling lean out to touch all courts but also consolidate what has been done in terms of the concepts and ideas that have been introduced. For stability it is important that a programme team and change agents are kept place in so the development of capability and shared learning is managed. Finally, consistency will come through continuing to underpin and reinforce lean concepts and ideas across the whole of MoJ, not just the Courts.
Steve Wilkinson, systems integrator at Cimlogic, provider of Manufacturing Execution Systems, defends the sometimes controversial role of IT in lean decision making. Wilkinson describes how software can enable lean problem solving across departments and disciplines for better end-to-end value flow.
ll lean initiatives rely on accurate information, whether through mapping a system or continually monitoring it to see whether improvements are taking place. Manually collecting this data can often result in a localised focus to problem solving, missing the bigger picture and the root cause of problems.
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This reflection on the HMCS lean implementation highlights the fact that lean is a journey or even an adventure where there are good, exciting bits and difficult and challenging parts! The example of Sefton illustrates the involvement of the staff (through performance boards and daily meetings) is critical in the early stages of the journey although it is the recognition of problem solving and matching capacity with demand which will take the journey further.
Logical Lean
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Brown was honest about how difficult their journey had been. Some employees had found the introduction of standard operating procedures to be problematic and there had been early resistance...
There is a definite realisation from the lean team that the model court lean work has so far been limited it ability to bring about revolutions within the criminal justice system itself. It is only through collaborative work involving the Police, Crown Prosecution Service and Defence lawyers (those stakeholders involved in the crime–arrest–charge– convict supply chain) that dramatic improvements can be realised. Excitingly Sefton Court, in collaboration with the wider MoJ, is beginning to tackle these larger programmes of lean work.
L o g i c a l l e a n S t e v e W i lk i n s o n
This seems like a logical progression and a pro-active approach to resolving the local problem. However, it can be seen that when this downtime information is combined with additional business information stored on a separate system the decisions being made were not looking at the bigger picture.
Event Breakdown
Here we have looked at a fairly small example focussed on machine performance in order to demonstrate the importance of accurate data for decision making. Other examples could include looking at how performance changes under different personnel setups. These can be used to identify areas for training, or to calculate reductions in labour costs by restructuring teams. Comparisons could quickly be made between performance, quality and inventory, based on work in progress, customer demand and so on. Now we can start looking at the issues that drive a lean enterprise, rather than just increasing the OEE of a machine. Of course, it is important that a line or machine operates at a high OEE, but it is also important that this is being done in a way that is of benefit to the entire operation.
How do we get at this information?
For some time now many manufacturers have sought to deploy IT based, end-to-end, enterprise applications, that, in theory, should resolve the problems with information management. Many of these endeavours have proven to be quite costly, time-consuming, and only partially successful. On the surface, having a unified solution across the enterprise sounds exactly like what is needed; no more isolated islands of information, no more speculation, no more guessing, and hence intelligent decision making.
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Meeting the Challenge
Cimlogic are UK implementation partners for TrakSYS™, Parsec’s real-time performance management and decision support software. In developing the software, the objective wasn’t to develop another infrastructure component or to replace other infrastructure applications. The primary objective was to deliver real-time, accurate and actionable intelligence to the decision makers – for significant productivity improvement – while leveraging existing assets, resource and infrastructure. The reasons for this objective were crystal clear: improve operations without disruption, quickly, economically and measurably. E N D
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Using this information the problem was escalated to the bottle supplier. The outcome was reduced downtime, not only from the jams, but also from unnecessary engineering interventions, with little more than a phone call from the manufacturer themselves.
For this to work, the solution must: Not disrupt operations, existing applications and systems Collect data from existing systems and applications Allow validated and streamlined manual data entry Selectively and non-intrusively involve users to contextualise the collected data Provide configurable and rules-based analytics Propagate the personalised business intelligence to users in real time Rank improvement opportunities by importance; cost, impact, quality etc Provide escalation rules and keep track of actions/decisions and results
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When the label jam events were put in context, with operator information (bottle or label related), and business information (product being run, bottle supplier, and shift), it became immediately apparent that the problem was in fact not with the machine, but with the bottles being supplied by supplier S1. Sixty five per cent of jams occurred when using this bottle.
In actuality the results have been less than ideal because: There are many complexities in manufacturing and business operations It is very difficult to be an expert in all aspects of manufacturing enterprise Many of the components themselves are not well integrated Companies have invested in existing infrastructure that may not be compatible with end-to-end offerings End-to-end solutions are very expensive and time consuming to roll out, and they disrupt operations during deployment
In many instances the solution may be found by improving the functionality of the already deployed systems and applications. The question is whether it would be possible to leverage the existing assets and resources – without having to replace them – in order to quickly, economically, and (with little disruption) significantly improve productivity? This is an appealing approach if it doesn’t prove to be as difficult as the idea of end-to-end enterprise applications.
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Hours
Line 1: Downtimes
thinking outside the box Ken rohleder
outside the box
as needed and only because the boxes are too big; on-demand packaging systems completely eliminate that problem.
Ken Rohleder, chief strategist at packaging company, Packsize, explains how a new perspective on customer value allowed the organisation to create a unique system of on-demand packaging that has revolutionised the packaging supply chain, the environmental potential of packaging efficiency and customer control over the packaging of their products.
What is meant by on-demand packaging and why does it matter to customers in terms of lean value? Our customers need boxes for the delivery of their products. In a nutshell, our revised packaging system cuts out the packaging supply chain by locating the box production at our customer’s facilities. This means boxes can be made just in time and that the need for packaging inventory is eliminated. The enabling technology is a CNC (Computer Numerically Controlled) machine designed to make one-off boxes in a few seconds. So it was the customers’ desire to eliminate packaging inventory that drove Packsize to develop this system? Yes, but it goes well beyond the inventory issue. When you map the value stream for the box supply chain process, the activities around planning, purchasing, receiving and moving the packaging through the plant are significant and costly but completely non-value added from the end customers’ point of view. The end user values undamaged merchandise, but they view the box itself as rubbish so they don’t want to pay for that complexity.
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With lean solutions in factory and warehouse environments the potential of capital equipment can be obscured by inflexible monument machinery and the cost of change. Explain how bringing a box-making system in-house will enhance your customer own lean environments and how you have dealt with the issue of cost. When you compare a CNC on-demand system to a conventional box-making press, the CNC system is relatively low-
so our business model reflects that. We provide the equipment and support and the customer pays for the materials. The customer doesn’t value the system per se; they only value the box that comes out of it, so that’s the way we sell the product. How else do lean principles influence your operations at Packsize? We believe in eating our own cooking, so we apply lean to every process flow. Our factory in Enköping, Sweden builds our machinery in a single-piece flow using simple visual management tools. We have no production reports. We make principlebased decisions usually without Excel spreadsheets. The result is that we’ve increase our capacity 500% over the past few years without increasing our overhead significantly. Our cost per machine is 40% less than when we did batch production. Even our business development strategy is based on lean principles. Our goal in the sales process is to provide a framework that enables the customer to make a high-quality decision. We don’t win the day on every engagement and that is perfectly acceptable provided the customer had a high-quality decision making experience. Our customers appreciate that approach. E N D
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This is currently the number-one challenge for internet retailers. We carried out a study which shows that 50% of the shipping volume in the single-package delivery system is air. That means there are twice as many trucks and airplanes
You mentioned online retailing. What other industries are using on-demand packaging? Manufacturers and distributors with a high-mix of products in a single plant almost always have packaging issues that can’t be solved with traditional supply chains. For example, products like office furniture, kitchen cabinets, commercial lighting, windows/doors and ventilation products are all relatively fragile and difficult to pack if the box isn’t exactly the right size. Shoddy packaging hurts their ability to compete but they can’t afford to add cost because the box is thrown away in the end. Industrial parts distribution is a market where saving transportation cubes is even more attractive than saving money on packaging. We have customers in virtually every category of industry except consumer packaged goods – there, scale economies still win the day.
The end user values undamaged merchandise, but they view the box itself as rubbish so they don’t want to pay for that complexity
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Have environmental concerns on the part of the customer given further motivation to the development of the on-demand system? When a consumer receives a product they ordered online, and it is packaged in a box that is too large and filled with air pillows, they are alienated from the online shopping process and become more inclined to buy their next book or DVD at the shops. Increasingly customers want to feel good about their purchasing decisions and this includes having confidence in the environmental integrity, not only of the product itself, but also of the packaging and distribution process.
So in the case of packaging, lean and sustainability complement one another? We believe that they always complement one another and we manifest that in all our business policies and strategies. For example, as a company we only drive the Toyota Prius. In general though, streamlining value always reduces both cost and the environmental impact because it pulls the value creation closer to the customer.
tech. The footprint is comparatively tiny and the technology has been right-sized to fit the capacity demands of a single factory or even a single production line. The systems are easy to move around the plant as needs change and more reliable than a conventional supply chain. Early on, customers were telling us that they didn’t want to invest in box making equipment,
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Thinking
Jan Santerre, VP lean business at Hillenbrand Inc. describes how the company’s customercentric principles motivate improvement activities and enhance engagement with lean programmes across the organisation.
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illenbrand Inc has a strong heritage of lean expertise. The former parent company Hillenbrand Industries was early on the uptake of lean techniques in the 1980s and since that time lean culture at the organisation has grown from top to bottom and beyond the manufacturing function. At the centre of this activity however there has always been a knowledge that improvement on product quality and process must add to the customer experience if it is to help the organisation grow. For the Batesville Casket Company, a subsidiary of Hillenbrand Inc. and a supplier of caskets and other products and services to the death care industry, this is a particularly sensitive issue. “When we look at improving any of the companies we own we always look at everything right from the front end sales service through to the product being delivered to the customer in a high quality manner. We spend a lot of time in analysis and value stream mapping to make sure that all these processes are really working and we work with cross functional teams to make sure they fit together. We always bear in mind that at the end of the day our goal and our purpose is to delight the customer.”
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Jan Santerre is one of a key group of inspirational lean leaders who have spoken at IQPCs Lean Leaders events. These invitation only seminars allow practitioners access to the best qualified lean professionals from across Europe and the US. For more information on the next meeting from December 1-3 in Zurich go to www.leaders-in-lean.com . LMJ subscribers will receive discounts. Don’t forget LMJ’s own Lean Directors’ conference addressing thought leadership behaviours and senior engagement in lean on December 2 in Warwickshire. See p51for more details of both events.
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In order to keep in touch with how well their products are ‘reaching’ the end consumer Bateville, and indeed all Hillenbrand companies, have strong communications with their customers. This is important for Santerre: “We are very actively engaged with our customers in the death care industry. We host hundreds of customers at our customer service centre in Batesville Indiana where we can show our products, but we also host factory tours where we walk the customer through the processes we are using and make clear how we are working to ensure that we deliver products with a white glove level of satisfaction to their funeral homes.”
Hillenbrand is dedicated to a continuous improvement approach which touches all areas and engages all of its associates. “The stronger the PDCA skill set, the healthier the organisation. Every area in the Hillenbrand enterprise, from manufacturing to logistics to the office environment, is expected to incorporate lean business strategies into its annual planning. Just in the past year, I’ve conducted numerous training sessions on PDCA tools to ease the process, and most areas of Hillenbrand corporate and Batesville Casket have implemented glass walls and begun to use standardized tools. It’s simply a way of life for the company’s everyday operations and overall strategy.” This open culture has eased clarity of process flows and has made a deep impression on customers as they visit the Batesville facilities. “It is a very powerful way of playing to the strengths of natural teams and there is a great impression of pride in work. We actually had a customer recently request that we come and help them implement lean in their back office systems. We are viewed as a valued asset to our customers in what is a highly relationship based industry and we are now finding new ways to become even more valuable.” E N D
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Although this may seem like an insurmountable challenge when in the business of death care, Santerre insists that the Batesville customer base of funeral homes and funeral directors have much in common with previous customers she has dealt with in automotive and industrial products. “There are a lot of similarities. Our products have to be very aesthetically pleasing and so in terms of finished quality our products need to match the quality of any car or other high value product. What is slightly different in this industry is that it is very important that we make our products meaningful. They need to reach people.”
In terms of the lean techniques Batesville are currently employing to deliver this satisfaction Santerre explains that activity has lately been focused on the logistics network that moves the finished product to the customer at their chosen time. “We are working on how we can introduce kanban systems throughout our transport and warehousing network and how to use pull systems to really enhance the flow. We already have very high satisfaction in terms of delivery but we are seeking to take it to a new level in order to differentiate ourselves.” Santerre has also done extensive work to establish lean values in the back office environments at Hillenbrand, encouraging teams to identify key value streams that they would like to develop but being careful that work contributes to issues that really matter. “We want to work on challenges which will really take the business forward and think about our quality as perceived by the customer in terms of our responsiveness and how we are servicing them via phone calls and other routes.”
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Transparent customer care
Transparent customer care Jan Santerre
Essent Delivers Peter Stoppelenburg
Essent Delivers G
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Training is a soft measure for encouraging the right kind of leadership but at Essent we also have hard measures since I truly believe that leadership is what will come to differentiate more and more between bad, good and really great organisations. We have a certain profile for leadership and unfortunately some people do not fit the bill. Then you have to make firm choices. We had an excellent opportunity at Essent for ensuring that all our senior leaders were bought into the company leadership profile. One year ago we were taken over by a German company called RWE. We took the opportunity to implement an open sourcing procedure for senior management whereby all director positions
Case studies and
This competitive environment is driven by consumer choice of course but that is on the retail side of things. We must also consider our supply side. This aspect of business has internationalised – a couple of years ago utilities worked within a fence in every country – now there is a great deal interconnection and this puts huge pressure on the pricing of the wholesale market of energy generation. These dynamics, and others, make a complicated competitive world and although we are a good company if we stay still, in five years we will not exist.
At Essent we have robust, high impact leadership training for anyone involved in change throughout the business. We are also running an experimental programme to teach stress and health management techniques to help senior management maintain a balanced approach as leaders – handling stress for a productive approach to work will become more and more a part of leadership roles as we seek to accelerate in a competitive environment.
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ood is no longer good enough. I speak with authority only for utilities and for the Netherlands but I think the same trend has been experienced elsewhere. Eight years ago in this industry it didn’t really matter what you did because the customer would stay with you regardless. What we see now is a race to be the best because the best in the market will get the largest market share and the highest profitability. Good is no longer good enough because of how much harder the competition is running. This means, compared to the way we worked five or six years ago, we have to accelerate the way we improve performance exponentially.
The key to driving a good company to be a great company is leadership. I would say this is 50% of the make-up of any truly successful organisation. But leadership today means something different to five years ago. If we compare key characteristics we see that there used to be strategic leadership with directive approaches where the person at the top held all the knowledge. Now we see a much more people empowered approach where the leader is in the role of a coach.
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Peter Stoppelenburg, director of High Performance Organisation at Essent, the largest sustainable energy supplier in the Netherlands, describes how to act on the realisation that “good is no longer good enough”.
We have a certain profile for leadership and unfortunately some people do not fit the bill. Then you have to make firm choices.
were made available for application and existing management had to reapply for their roles against competition from the next top three hundred members of staff. This was a dramatic opportunity but we had in fact already undertaken this procedure on a smaller scale within an individual business unit. If you are serious about getting the right leadership behaviours you have to be prepared to show the strength of your convictions. Beyond behaviours an essential part of the Essent leadership profile revolves around understanding what motivates our need to change. For utilities this includes pressure from governments. We are a highly regulated industry; tax systems and subsidy schemes have a huge impact on the direction of the company.
People need to work for more than the concept of delivering a service to a customer. They need a dynamic and developing change programme that gives them a sense of belonging.
Leading an active and developing change programme helps to do this. People need to work for more than the concept of delivering a service to a customer. They need a dynamic and developing change programme that gives them a sense of belonging. This is our major focus as leaders in Essent at the moment. We strive to make a compelling story that represents why people want to work for us. Our first major step toward this was to create a clear statement; a brand that people can be proud to own. We call it Essent Delivers.� END
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But of course the customer’s voice gets stronger by the day and we must understand how to respond to that. There are elements of both push and pull that need to be considered. Push comes from the need to satisfy demand in order to meet customer expectations and stay in competition. Pull comes from within the company through the creation of a vision that leads people to excel.
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Damascus moment In the latest of LMJ’s stories of realisation about the meaning and potential of lean thinking Elaine Lewis, service improvement manager at Cardiff and Vale University Health Board explains how the appropriate exploitation of data is critical if a real impact is to be made on systems and processes.
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ne of the most powerful and often frightening aspects of applying lean thinking is the switch from using judgements to using facts when tackling process improvement and breaking the practice of basing solutions on assumptions. It is a ‘Damascus moment’ that hits us all and it is quickly accompanied with the certain knowledge that unearthing good data leads to good process insights. So, data brings transparency and new insights but we need to be sensitive to the fact that using data is not to everyone’s taste and that it takes some getting used to. Visual measures can make data more accessible and easier to understand as well as showing value in the form of something we can influence. This sets new standards and refocuses staff attention on which elements of a process need to be managed to ensure effective control over it and stop errors being transmitted to the next stage of patient care. A further element of transparency – which adds depth and insight to what the data is telling you – is the engagement of the real customer in the process. In healthcare that is the patient and before changing service provision they need to have their voice, not just to identify what adds value but to express what they have experienced. The reflections I have heard coming forward to assist lean healthcare programmes are illuminating.
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In response to the special focus of LMJ issue 06 on lean education and training Gary Griffiths, partner at lean consultancy S A Partners, describes his vision for the development of lean expertise with meaning.
Organisations are in business to make a profit and grow by offering better services to their clients, customers and stakeholders. Any lean learning programme therefore needs to give its employees and partners the capability to support the business vision and goals. Unfortunately, learning programmes often fall short of this purpose. For any corporate learning programme to succeed, I believe you must:
Align lean learning to business strategy
Deploy lean learning as part of your business strategy. In many organisations training is treated as an optional activity driven by the “nice-to-have” skills of today but not by the “must-have” competencies of tomorrow. During strategy formation and deployment cycles we can use tools to envision what tomorrow’s business will look like and which new skills and competencies will be needed Link lean learning to individual Performance Development Programmes - what gets measured gets done, especially in large organisations Continually question how lean learning enables performance. It is important to conduct periodic reviews to ensure employee learning is adaptable and relevant to the organisation’s goals as well as the employees’ requirements and evolving strategic goals
Create concurrent multi-level lean learning across senior management, middle management, team leaders and workers
Provide appropriate lean learning for all levels. Learning is not a luxury or a reward for high achieving
l ette r s a n d
Once you have these new models of flow correct it has been proven there is a reduction in waste and improved flow thereby improving efficiency and service quality. Lean thinking demands that you follow a structured approach to understanding the service and how it works before you can improve. END
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uring the past 15 years I have had the privilege of working with a number of leading organisations to develop businesses that have both the process capability and behavioural culture needed to achieve the holy grail of sustainable continuous improvement. Working in diverse sectors including health, automotive, defence and retail across five continents I have experienced a range of approaches to lean implementation, some, inevitably, more successful than others. On this journey, one major piece of learning for me has been how corporate education, done well, not only helps a business move forward, but can be the critical factor in creating and sustaining a business wide culture of continuous improvement.
comment
The investigation of data and customer experience brings you to the next challenge – which is how best to improve the system. All too often, sending an email is seen as a means of enacting change but this is a poor change management strategy. Discussion, learning and ‘gemba’ are essential in order to maximise engagement in change and minimise the feeling that change is being dictated. If you believe that no person can ever know enough about the system they work in then it is important to take every opportunity to learn about that system, its effectiveness in terms of the voice of the customer and its efficiency in delivering safe and highly reliable quality as well as timely care. To achieve this aim the randomness of traditional improvement processes must be unlearned and replaced with an inclusive and data-driven approach. In the hands of skilled teams of healthcare service improvers – data unites and drives behaviour for healthcare process thinkers.
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A lesson well learned
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l e t t e rs a n d c o mm e n t
A lesson well learned
Develop a lean learning system of continuous development
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Plan every programme thoroughly. The success of a good lean education programme starts with good planning. The planning
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Consider partnering with external education and training providers, e.g. universities. These providers can bring objectivity to programme design and development and can often introduce the latest thinking, concepts and methods, which might not be accessible through internal resources. Join external lean learning networks. Interacting with like-minded people from external and varied environments challenges traditional thinking. Joining an external learning network can expand perspectives and employees have more opportunity to engage in informed improvement experiments
These critical factors are not exhaustive and are dependent on your situation and level of capability. Having said that, for the lean learning programme to begin to make a difference, all of these factors need to be carefully considered and applied. Remember, what we want is a lean learning programme that ensures engagement and provides ongoing evidence of continuously improving business results while providing space for individual and team development. E N D
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Apply a plan-do-check-act methodology
Partner with lean learning expertise
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Look at learning as a process. The most successful organisations approach lean learning as an integrated system, not as a secondary or functional activity. Be clear on what you want the programme to achieve and design a full end-to-end or life-cycle learning framework with appropriate systems to monitor and manage successful fulfilment of the defined value criteria. Share good practice across the business. Different areas of organisations usually have certain training systems that are tailored to suit their specific learning and development requirements. Sharing what is working well can help reinforce the organisation’s core values Translate lean learning to added value competence. Corporate education needs to involve more than just passive attendance at a course. The programme should encourage participants to break-out into groups to discuss issues, interact with their colearners, and have the opportunity to apply or experiment with concepts and tools. Employees with a proven track record for the successful and continued application of learned skills and competence need to be recognised and rewarded
phase needs to consider the realistic learning goals, the current skills of the participants and their learning styles. Content and structure should be defined during planning and any support materials and teaching aids that will be required. It is vital during the planning phase to clarify the desired (and measurable) outcomes of learning and how these will be demonstrated by learners Create a listening process. While an organisation will have learning goals, it is also important to listen to the views of stakeholders. All too often course evaluation forms are left in the back of the HR information cabinet and are not used to take the programme onto the next level. Make sure you continuously and rigorously apply the principle of P-D-C-A Check learning is making a difference. The most effective means to check the value of a lean education programme is the difference it makes on the job. Some training has an immediate impact, but often the real difference in an employee’s skills and competence becomes apparent over time. Therefore learning and development should be monitored over time to observe and measure changes in the skills and performance of each employee and to ensure the application of the new skills is sustained
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employees. Learning is crucial to the development and success of an organisation and should be approached as a whole organisation experience involving all employees in some form of structured learning and development Link lean learning to roles and responsibilities. Learning needs to be tailored to the current and emerging skills necessary for employees to be effective in their roles. The learning should combine common skills and competencies required for specific functions and responsibilities in the organisation with other competencies such as situational leadership, coaching, facilitation and team-work Create mixed level networks. A progressive learning environment should remove all forms of rank so that employees interact, share experiences, ideas and learn from each other, regardless of position or status. Use the ‘actionlearning set’ methodology encourages groups to examine real and personal issues so that the group can work out some options for improvement, but more importantly agree on a collaborative set of improvement actions
EVENTS
B OO K R E V IE W J o h n b i c h e n o
LMJ Lean Directors’ Seminar –December 2, Chesford Grange, Warwickshire
Following popular demand LMJ will be hosting a re-run of its successful Lean Directors’ Seminar on December 2 at Chesford Grange in Warwickshire. Once again the interactive seminar for lean leaders and senior executives supporting lean deployments will be chaired by Dr David Bamford of Manchester University. Industry speakers at the second Lean Directors’ Seminar will include Jon Alder, director of lean enterprise at Rexam, Billy Storer, global lean controller at United Biscuits and David Brook, engineering and supply director at the Royal National Lifeboat Institution. To book a place at this event contact Benn Walsh on 0207 401 6033.
Living with risk and uncertainty November 22, Warwick
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his book is the second edition of a book that won a Shingo Prize, and became a great favourite among Cardiff Lean Operations MSc students. The earlier edition popularised leader standard work – something that has since gained wide acceptance in lean circles. This edition parallels developments at LERC and across the wider lean community in that the original manufacturing focus of the first edition has been joined by another stream focusing on administrative and office work. The first edition helped answer questions around what individual leaders can do differently day by day to give greater meaning to lean analysis, current and fututre state mapping and decisions on strategic direction. Now we have extended answers for a variety of environments, illustrated with numerous short examples. A ‘leader’ here may mean anyone who is in charge of others – from plant manager to supervisor.
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The core of the book remains centered around the interlinked ‘big three’ of leader standard work, visual controls, and daily accountability. These three topics are essential for any manager in manufacturing and administration. ‘Discipline’ that figured as the fourth element in the first edition, has been dissipated. A pity! Perhaps the most useful chapter, certainly for a relatively inexperienced lean manager is ‘Leading a lean operation’. Here Mann gives specific advice on the behaviours and attributes to adopt
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both for project implementation and for ongoing operations. These tend to be quite general statements. But leader standards are also addressed by two extensive appendices of self audit questions, one relating to manufacturing the other to the office. If you are in repetitive lean operations in manufacturing or office environments, this book will certainly be of benefit. However, it does not address leading non-repetitive work in, for example, the design office or in service. Perhaps we can look forward to a third edition. Is the second edition worth buying if you already have the first edition? Certainly, if you have repetitive office operations. But for manufacturing, you may be a little disappointed. ‘Culture’, a vexed question in lean, is, despite the title, not addressed directly. Instead, old habits are extinguished and new ones built by repetitive application and follow up of leader activity. In this regard, a useful supplement for readers would be Mike Rother’s Toyota Kata (reviewed in LMJ issue 04). If you are seeking a treatise specifically on culture Ed Schein’s classic Organizational Culture and Leadership has just come out in a fourth edition. Personally, I have become somewhat overwhelmed by the volume of material on leadership, whereas ‘followership’, I think, deserves much more attention. E N D
This evening lecture will investigate how the use of experience and probability for the formulation of predictions can be obstructed when we add complexity and do not have an appropriate view of influential factors. This has proved to be the case in scenarios such as disease epidemics (like swine-flu) and with global climate change. These kinds of events can have a massive impact on markets and supply chains. Cambridge University’s Professor David J Spiegelhalter OBE, FRS, will show delegates how to use probability and statistics to measure knowledge gaps and build an awareness of ignorance: www2.warwick.ac.uk/newsandevents/events/david_ spiegelhalter
Challenging Orthodoxies: Critical governance-studies 2010 December 13 and 14, Warwick
Lean Connect
March 1 2011 , Chesford Grange, Warwickshire This event will put service and manufacturing organisations in touch with the external resources they need to support lean progress and fast track the scoping and selection process. Sponsors will be drawn from consultancy, academia, training and IT providers and more. Added value will be available in a parallel conference event populated with broad ranging case study insights. For sponsorship opportunities at this event please contact David Alstin (d.alstin@sayonemedia.com) on 01603 671300. For delegate information please contact Benn Walsh (b.walsh@sayonemedia.com) on 0207 4016033.
The Lean Office 2011
March 21-23 2011, London
The goal of this conference is to bring together scholars and critical practitioners challenging orthodoxies around the study and practice of governance. The conference is cross-disciplinary and we encourage colleagues to submit abstracts on topical themes including; critical approaches to the governance of citizens, space, money, networks, risk, security, science and Higher Education: www2.warwick.ac.uk/newsandevents/events/ challenging_orthodoxies
IQPC offer the chance to further explore the potential of lean thinking for office processes and the use of continuous improvement for value creation and greater bottom-line savings. Addressing issues from organisational realignment through to identifying stumbling blocks and value-add measurements this event will encourage discussion and provide varied case study investigations. LMJ subscribers will receive a 20% discount on this event: www.the-lean-office.com/Event.aspx?id=406266
LERC Membership Network Day
The LMJ Annual Conference
A day of topical presentations from lean practitioners and academics for all members of the LERC community. This stimulating event will encourage delegates to continue challenging and expanding their understanding of lean: www.leanenterprise.org.uk/networks/lercmembership-day.html
The second annual conference will celebrate the growing LMJ community and provide another chance for knowledge sharing, access to research and clarification of lean thought leadership. Book the date in your diary now.
January 18 2010 , Cardiff
June 16 2011, Chesford Grange Warwickshire
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John Bicheno reviews Creating a Lean Culture (second edition), by David Mann, CRC Productivity Press, 2010
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