Wednesday, November 4, 2009

Why Lean Doesn't Work

Just to be clear, I am a huge fan of lean. I led lean implementations in a number of companies and have personally seen some great results from projects over the years. Lately it seems, though, that lean in the United States and Europe is turning into just another overused, misunderstood concept that everybody does but few actually do well.

As an example, during a recent flight, I had a discussion with the head of operations for the airline I was flying. He proudly told me that the airline was "doing lean" and that they had been doing it for awhile. As he was telling me this, though, it was quite clear to me that the airline was not "doing lean." They may have people working on lean projects and trying to cut costs (or I should say, slash costs), but there is so much more to lean that he obviously did not understand.

In the lean world, waste and costs are reduced as quality is improved. the noticeable drop in the quality of service from most airlines in recent years (including this one) is a sure sign that this company was not "doing lean."

In another example, a large European company spent a great deal of money on their lean implementation. they hired a coordinator for the production department in one of their regions and appointed several people to be lean facilitators. They poured a lot of money into the initiative, but the process failed to really take hold in the company. Although they had isolated projects that showed huge savings, they could not successfully replicate their results to similar processes in other parts of the company.

Why?

Like the airline example, this company's senior leaders had not bought into the concept of lean. they did not truly understand what the initiative was or what it meant to the company. They had heard about the success some companies were having with lean and decided one day to do it themselves. Instead of being involved in the process, they delegated its implementation to someone outside of the senior team and sat back expecting results. In response to a directive to add facilitators to their teams, department managers found it convenient to assign the role to people returning from overseas assignments who did not have an open position waiting for them (whether or not they had the characteristics to be successful). As a result, the people responsible for facilitating improvement projects often had no interest in lean. They did, however, have an interest in remaining employed, so they accepted the positions, considering them temporary until something more permanent came along.

The Elements of Failure

In my experience, I have found that there are common elements to failed lean initiatives. These elements all stem from the lack of understanding that it is counter to the way most companies operate and, therefore requires a fundamental change to the company's systems and culture.

What I mean when I refer to a failed lean initiative is that it never comes close to achieving the potential savings that are possible. Although the company may see financial benefits from isolated projects, it is not addressing the issues that lead to the big gains. I'm referring to the difference between eliminating 3%-5% of waste (at best) versus the 90%-95% that is possible. Basically, without a clear understanding of lean, leadership, culture, and systems, you may never even know that your initiative is failing.

Although there are a number of elements that prevent lean from being truly successful, I listed below the five most common that I've seen in organizations.
  1. A Technical Approach
    The tools of lean are easy - it is the cultural barriers that are the most difficult to address. the tools will not lead to big gains unless the cultural barriers to improvement and change have been broken down.

  2. Lack of Top Management Understanding
    You can't commit to something that you don't understand. Lean requires commitment and involvement by senior leaders. The organization's leaders must work on identifying and eliminating the barriers so others can focus on process improvements.

  3. Fear
    Fear can cripple creativity and the willingness to become involved in an improvement process. the company's leaders must continually identify and remove the causes of fear to release the potential of team members.

  4. Distrust
    People must trust in management that improvements in productivity will not lead to layoffs and management must trust in the knowledge and intentions of workers.

  5. Short-Term Thinking
    Changing the culture of an organization is a long-term process. Benefits will be seen along the way, but the large gains will only come when the cultural barriers are removed, which requires patience and consistent efforts by senior leaders. Costs are reduced as the organization's health is improved. Efforts to slash costs through layoffs, across-the-board cuts, etc. will offset any progress made through lean.
There are so many barriers to lean within the typical organization that they cannot possible be covered within a short blog post. I can only hope that, by increasing understanding of, and addressing the five elements listed above will prevent lean from being cast off a few years from now as another management fad that failed to change Western business thinking.

2 comments:

Joe Jenney said...

Good review and five important points. I can share my experience in overcoming the cultural issues. I learned from one of my customers that a weekly philosophy session with my staff was helpful. It took a year of these sessions but it worked and paid off handsomely. We met without interruption for one hour each week, listened to one of the Deming tapes and discussed how it applies to us.

victor@effectivetrainers said...

You are right. The key problem is most business and public services have not been able to create relationships based on trust between team leaders and the teams they lead throughout the organization. As a result most emloyees, particularly as you approach the guys who add value, are not motivated or engaged to do their best, whether you try to apply Lean or anything else.
Actually, a huge mistake is made calling the The way Toyota manages Lean because it gives people the idea there s a thing called Lean that can be applied outside Toyota if you apply a number of techniques. Yet Toyota itself states what theey do is based on establishing relationships of trust with all employees and continuos improvement of everything based on the creativity of allemployees.

Few organizations work on first creating trust.

The Toyota systemb should have never been renamed Lean. It fools people into thinking Lean is what Toyota does.

For exemple, no book I have seen on Lean, not even "The Machine that Changed the World" says that before you introduce Lean you must have the trust of all employees. Neither the books say "no lay offs unless the company itsel is in danger". That means no lay offs just because profits have dropped or analyst pound the shares. As we all know most companies that apply Lean lay people off like the rest. They even lay people off as a result of efficiency gains obtained through Lean!

So, it is obvious Toyota does not practice Lean and that Lean does not really describe what Toyota does.

To me Lean has turned into another quick fix bag of tricks and a fad because most vompanies, specially in the US, still practice that terrible sentence of Alfred Sloan of GM fame: "we are not in the business of making cars, we are in the business of making money". That still is core idea of what is taught at the MBA schools around the world. In essence financial and marketing tricks to keep profit and value of shares up for the next quarter. By following Sloan's and MBA thinking GM would not exist in 2011 if the US Government had not rescued it.
Long term.planning is another key Toyota practice, you do not find any book or Lean guru insisting upon: "forget about the value of the shares for the next quarter or even next year, think on the long term survival of the company"