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Jeff Liker

Jeff Liker: Can we positively influence Short-term transactional thinking?

By Jeff Liker, - Last updated: Sunday, July 11, 2010 - Save & Share - Leave a comment

Let’s consider a company that we are working with that has already decided it needs lean to improve quality, productivity, and timeliness of delivery to the customer.  It happens to be a major retailer and they brought in an outside CEO to “professionalize” the business. The outside CEO is a financial guy who grew another similar business by several times.  He claimed to use lean, but it quickly became apparent that it was what we might call “fake lean” focused only on the tools.  What we mean by that is that he had a bunch of black belts certified and they were running around doing projects to take out cost.

We started with our usual model line, in this case in a process that repaired product damaged somewhere in the value stream and hit a home run improving productivity by 30 percent. It took about one month and cost almost nothing in capital investment beyond the costs of some tables and tape and paint.   They had a large backlog and customers sometimes waited weeks for their new product to get repaired.  The vice president in charge of the lean transformation marveled at the level of employee engagement beyond anything he had ever seen in his thirty five years with the company and wanted more.  Life was good….for one month.

Six weeks into the engagement, the CEO, who had largely been quiet and absent from all lean activities, started demanding ROI calculations.  What was saved specifically from lean? A quick analysis showed the 30 percent productivity gain was worth $400,000 annually.  We were pleased.  The CEO was not.  He wanted a week-by-week breakdown of all costs for lean, including wages paid to employees who participated in the kaizen event, versus benefits attributable to that week’s activities.  Suddenly all lean activity—workshops, plans for training, follow-up coaching in the areas launched—came to a screeching halt.  All hands were on deck to calculate ROI.  Momentum was stalled for about two months, if not completely lost.

Now you could take a lesson from this that he should have been satisfied with the global ROI calculation and let us go on.  Many CEOs would have.  But that is still missing the point.  We now full well that that repair area could still double productivity yet again.  And then probably double it again.  We also know from our experience that the changes we made, WITH the people in the area, are vulnerable to going backwards if they are not continually updated as conditions change. In short, we know that continual, or what we might call continuous, improvement is the only way to keep that repair are operating at a high level.  Otherwise processes will decay.  So the small lean group we began to train could spend all their time working in that area improving it and motivating the people or they can teach those people to improve it largely on their own.  That would free the lean group to move on to other people and processes and develop them.   If we use the analogy of juggling dishes, when we throw more dishes in the area (“lean out” more processes), it takes continual effort to keep them in the air.  If one person is doing the juggling soon dishes will come crashing down.

That is well and good but we still have our friendly neighborhood CEO who does not think as we do.  What can we do?  First of all we will plead guilty to focusing most of our attention on the Vice President who contracted with us and already is sympathetic with our point of view.  He has lived in the company and has a passion to make it better, not just in short-term profits, but in adapting to the environment and better serving customers.  He believes as we do that is the long-term road to success.  Early on we pointed out that the CEO did not seem to be on board and he said “let me worry about that.”  We were more than happy to and that did not work.  So we may have gotten farther simply by making a personal investment in developing a relationship with the CEO and working to influence him over time.  In the meantime we helped get all the detailed ROI calculations and are restarting so have a short-term reprieve.  We are working to get the CEO to visit with us an exemplar lean company.  There is a heightened urgency to focus our limited collective transformation resources on high impact projects that will deliver visible ROI in a conventional way.  This will be a continual process of demonstrating results while building internal capability and earning the confidence of the CEO in the process.  The good news is that it will keep everyone on edge focusing on the most pressing business issues.

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