By Bob Emiliani
This article is from the Superfactory Archives, an archive of content from the Superfactory website that existed from 1997 to 2012.
When do top executives adopt Lean management? Usually, it’s when times are tough. Why do top executives adopt Lean management? To reduce costs, improve profitability, and increase the stock price. This reasoning is totally incorrect and contributes to the many failed Lean transformations that we have witnessed over the last 30 years. So when should management adopt Lean management and what is the right reason for doing so?
Executives should adopt Lean when times are good and not when times are bad, as they normally do. Adopting Lean management when times are bad is like cramming for a test in school the night before the test. You should have been studying all along, but instead procrastinated and failed to manage your responsibilities and meet your commitments.
We all know that cramming for tests yields poor results. Likewise, cramming to adopt Lean management in a year or two because business conditions have deteriorated is not going to succeed. But that won’t stop executives from trying to lessen the impact of the 2008 recession. Truly, I wish them well, but they should not have waited until circumstances became dire.
The odds are against executives who adopt Lean when the economy is poor. In fact, the failure rate is nearly one hundred percent. The reason is that Lean management is not a simple addition of new Lean knowledge to executive’s existing base of conventional management knowledge. Adopting Lean means that conventional management knowledge and practices must be removed and replaced with Lean principles and practices. This replacement process requires learning new things over an extended period of time, just as it takes an extended period of time to learn conventional management.
Most executives will not do this when times are tough. Instead, they will reflexively rely on what they already know how to do, and they will add a little bit of Lean – mostly the application of some cherry-picked Lean tools to improve short-term operating performance and reduce costs. They will surely resort to layoffs, many of which will not be needed, and workers will view layoffs as having been directly caused by Lean. Management’s actions will quickly kill all enthusiasm for Lean among workers and supervisors. They won’t behave like Lean leaders because they do not possess the beliefs of Lean leaders.
The leaders of the Lean community have done a pitiful job over the last thirty years, and particularly the last twenty years, of informing executives about the “Respect for People” principle in Lean management [1] and protecting workers from harm. This principle has been hidden in plain view for decades, but has only recently become a subject for discussion [2]. It should have been the main subject of discussion from the start because of executives’ consistent, long-term pattern of behavior, since the 1880s, which is to lay people off after process improvements have been achieved [3].
The failure to acknowledge this reality, identify root causes, and implement countermeasures means that many people will get laid off as a result of Lean as economic conditions deteriorate. We lost the opportunity to prevent this new round of human suffering by spending too much time focusing on the application of Lean tools, such as value stream maps and creating value stream managers, to improve operating efficiency. The approach to implementing Lean has long been narrow and unbalanced. This is a repetitive error.
So what can we do? The reality is that we are not prepared to respond to the problems we now face. Broadly speaking, Lean community leaders are too deeply invested in comprehending Lean narrowly as just tools for managers’ tool kit. It is not yet able to articulate Lean as a management system consisting of two principles: “Continuous Improvement” and “Respect for People,” and especially how these two principles interact with each other [4].
We could, together, try to quickly swing the pendulum in the opposite direction, for a limited time, and teach executives that Lean is a human-centered management system that is congruent with corporate fiscal responsibility [5] and ethical behavior towards its stakeholders (employees, suppliers, customers investors, and communities). In other words, Lean management, practiced properly, has the ability to greatly strengthen fiscal and ethical responsibility in a manner that cannot be achieved in any other way [6]. This will address executives’ concerns about the long-term success of the business.
But what about the short-term, which executives will surely be more focused on? One thing is certain: executives make a lot mistakes when they are immersed in a crisis. Many of the decisions they make will marginalize the interests of key stakeholders in the name of ensuring the company’s survival. Stakeholders who have been marginalized will be less motivated to help the company out of the crisis and will surely remember the unkind actions they suffered. No doubt, most will find a way to get even when economic conditions improve. However, these costly tit-for-tat behaviors are not a given; it does not have to be that way.
Given the plethora of short-term business problems created by a recession, Lean management could be used to promote widespread collaboration among stakeholders to identify and correct thousands of short-term problems that affect everyone in some way or another. Instead of one stakeholder winning and other stakeholders losing (zero-sum), all stakeholders win (non-zero-sum) – maybe not as much as they would like, but they will be satisfied with outcomes that are fair. In other words, put the “Respect for People” principle into practice immediately and with genuine conviction – within the company and between the company and its stakeholders.
Lean management can help executives weather an economic storm with fewer mistakes and also be better prepared for when business conditions improve.
However, if Lean management is adopted by executives because of the recession and is practiced in the usual zero-sum manner – for example, laying off workers who have improved processes or using reverse auctions to squeeze suppliers [7] – then this will strengthen the already negative perceptions that many people have of Lean. This will make it even more difficult to convince executives and workers of the merits of Lean management when business conditions improve.
Indeed, pervasive misapplication of Lean management in this recessionary period, which is likely to last for some time, could really hurt Lean, perhaps to the point where it is no longer relevant to most executives.
This would be an unfortunate outcome because Lean management will always be relevant to the cooperative human-economic activity known as “business.” Why? It is because Lean management, practiced in a non-zero-sum fashion, helps a business compete better in every process and every activity. That’s why executives should adopt Lean management.
Lean management has numerous unique advantages compared to conventional management, all of which executives should seek if they are sincere about fulfilling their duties as officers of the company. These advantages include:
- Best way to align management system with buyers’ market and grow [8]
- Create flow [9]
- Improve fiscal responsibility, as well as financial and non-financial performance
- Develop human resources
- Simplify the business and improve reliability
- See reality clearly so that people can respond to it
While the timing and rationale for adopting Lean is often poor, it nevertheless is a point of entry into a better way to manage and to satisfy customers. What the Lean management system offers to executives is a proven way to deal with economic turmoil, in ethical and fiscally responsible ways, with fewer mistakes, and strengthen competitiveness.
Disciplined application of Lean principles and practices during the downturn will prepare the business for when economic conditions improve. However, executives must be vigilant to avoid complacency and backslide into old ways of managing and leading when favorable business conditions return – or when the next down cycle comes.
M.L. “Bob” Emiliani is a faculty member in the School of Engineering & Technology at Central Connecticut State University in New Britain, Conn. and President of The CLBM, LLC. Before joining CCSU, Bob worked for 20 years in manufacturing and service industries, and has implemented Lean principles and practices on the manufacturing shop floor, in supply networks, and in higher education. Bob has authored four books and over 30 papers on various aspects of Lean management. His latest book is Practical Lean Leadership: A Strategic Leadership Guide for Executives, published in 2008. Copyright © 2008 by M.L. “Bob” Emiliani.
Notes
[1] "The Toyota Way 2001,” Toyota Motor Corporation, internal document, Toyota City, Japan, April 2001
[2] B. Emiliani, “The Equally Important ‘Respect for People Principle’,” Superfactory.com newsletter, February 2008
[3] B. Emiliani, REAL LEAN: Critical Issues and Opportunities in Lean Management, Volume Two, The CLBM, LLC, Kensington, Conn., 2007, Chapters 1-6 and 10
[4] See B. Emiliani, Practical Lean Leadership: A Strategic Leadership Guide for Executives, The CLBM, LLC, Kensington, Conn., 2008, and B. Emiliani, with D. Stec, L. Grasso, and J. Stodder, Better Thinking, Better Results: Case Study and Analysis of an Enterprise-Wide Lean Transformation, second edition, The CLBM, LLC, Kensington, Conn., 2007
[5] By “fiscal responsibility” I mean the following: Look at a current state value stream map that depicts conventional batch-and-queue processing of materials and information, full of waste, unevenness, and unreasonableness. It is fiscally irresponsible for executives to operate a business in that manner. Compare with a future state value stream map where material and information flow. That condition depicts fiscal responsibility.
[6] Executives who understand business to be zero-sum (winners and losers), and who therefore lead and manage in zero-sum ways, will not be in compliance with their own corporate ethics policies. Their zero-sum actions will conflict with corporate ethics policies in relation to trust, respect, integrity, fairness, communication, and good faith.
[7] See “REVERSE AUCTIONS: A Ten Year Research Project Investigating Business-to-Business Reverse Auctions,” M.L. “Bob Emiliani
[8] B. Emiliani, REAL LEAN: Critical Issues and Opportunities in Lean Management, Volume Two, The CLBM, LLC, Kensington, Conn., 2007, “Manage to the Market,” p. 63-73
[9] Flow is how costs and lead-times are reduced, how quality is improved, and how customers are satisfied.