Lean management: how to transform a business
INTERVIEW - To really change, an organization must use lean management as a strategic asset rather than just a set of tools. In this interview, Art Byrne talks about rewarding people and the process of transforming companies.
Interviewee: Art Byrne, Operating Partner, J.W. Childs Associates
lanet Lean: What process would an organization follow to successfully turn around?
Art Byrne: First of all, it needs to set a vision, and create a strategy that will support that vision. Secondly, it needs to re-organize for change, moving from a batch to a value stream structure. In my experience, organizational changes should be made before the kaizen activity starts, so that a new structure is put in place that can receive the results of the improvements.
Only after the vision is set and the correct changes are implemented can you start an aggressive and formal kaizen process. You have to pick where you are going to attack: normally it’s the biggest value streams, because those give you the biggest results. It’s going to take a lot of kaizens, and even one or two years focusing on nothing but that. You are going to move every piece of equipment several times, until you get to the right combination. And every time you move equipment you should get a productivity improvement, lead time reduction, quality improvement, as well as inventory and space reductions.
PL: What sort of steps does an organization need to take to make sure people are ready to implement change?
AB: The first step is getting everyone on board. You have to tell them WHY you are moving to the lean approach, WHAT kind of results you expect, HOW you will go about implementing it and what is in it for them. There is no need for three to six month long training, because this is not about green belts or black belts, or certifying people. It’s about fixing a business, and because all the learning comes by doing, you might as well get at it as fast as you can. The more people you get on multiple kaizen teams the more the organization starts to change. It gives you the traction you need to go forward. One kaizen brings more kaizens - it just multiplies. When every one participates in kaizen you get ideas for improvement. It is a team sport and you very quickly create a learning environment. Non-manufacturing organizations can start by reorganizing their value streams: for example, anything related to the heart could be a value stream in a hospital. Most hospitals still work in silos, but it makes sense to bring all the processes and people related to one value stream in one place. That’s why you work on the structure first.
PL: Your first experience with lean was in 1982, which means that you have seen the entire evolution of the lean movement. How has it changed and what do you think is in its future?
AB: To be honest, I would have expected to see more progress with lean than I have actually seen. That’s what convinced me to write The Lean Turnaround in the first place. Part of the reason for the lack of progress is the movement’s own fault. We have allowed the concept that lean is a bunch of tools to exist. A lot of the publications out there are not business books, but books on tools that fail to refer to lean as a strategy. From that comes the concept that lean is a cost-cutting methodology, and when you think about it like that it is no surprise that we haven’t seen more progress. We have promoted the wrong approach. Too many people don’t understand that lean is the best strategic weapon a business can have.
PL: In your opinion, what’s the main responsibility of a leader?
AB: One of the main responsibilities of any leader is seeing opportunities and challenging the organization to seize them, setting the targets. If there is an obstacle preventing lean from spreading I need to get rid of it, no matter how disruptive that change might be perceived as being.
PL: The most common way to understand progress seems to be to look at the number of kaizens completed in a certain period of time, but how do you assess progress based on the quality of those kaizens?
AB: First of all, you need to understand that lean as a strategy means competing on your operational excellence so that you can deliver more value to your customers than your competitors can over long periods of time. The next step is to define what “operational excellence” means for your company. All of these should be stretch goals that will take you some time to achieve. At Wiremold we had five key measurements to define our operational excellence: customer service; reduction in defects; productivity; inventory turns; visual control and the 5 S’s. Watching how you are doing against these goals will give you your way of assessing your progress. If you want to run your company on two measurements, these should be customer service and inventory turns: when they both go up, everything else will too, naturally. On the way, costs will go down, and that’s great too.
PL: You see profit sharing as a way of rewarding people who have given a proven contribution to the turnaround of their organization. Many challenge the idea of rewards, saying that continuous improvement is nothing but the way people should always work. What do you say to that?
AB: As a manager, I’ve always felt an obligation to my people, to keep their jobs, to improve their skills and therefore marketability, and even to create some wealth for them. When we are asking somebody who used to run one machine to now run ten, why shouldn’t we want to reward them? Put simply, what we are trying to achieve wouldn’t happen without our people, so why shouldn’t we recognize and reward their achievement?
Art Byrne, Operating Partner with private equity firm J.W. Childs Associates and author of The Lean Turnaround, has over 30 years of experience supporting transformations that use lean management as a strategic asset.