The Perils of Internal Disruption (Part 2)

“Disruption” has become another business buzzword that obviates the need for prudent, careful thought and consideration. If something is “disruptive,” then it must by definition be good. But when it comes to internal operations at least, disruption is often both bad for business and for employees, because it causes unevenness in work.

Last week, I wrote about how the unpredictability of “management by walking around” disrupts daily operations in an organization and leads to mura (unevenness), muri (overburden), and muda (waste). This week I’d like to address sales incentives and volume discounts. Incentives and discounts create tremendous disruption in a company’s business by distorting both incoming market signals and outgoing orders to suppliers.

Sales incentives—for example, bonuses to meet monthly or quarterly revenue goals—cause salespeople to stuff the company’s distribution channels with inventory far in excess of consumer demand. Volume discounts have the same effect, by encouraging customers to order more product than they need in order to get a larger discount. Both these practices wreak havoc on the supply chain through the “bullwhip effect.” Hau Lee, professor at the Stanford Graduate School of Business, illustrates this problem with a story about Volvo: in the mid-1990s, the Swedish car manufacturer found itself with excess inventory of green cars. The sales and marketing departments began offering special deals to clear out the inventory, but no one told the manufacturing department about the promotions. It read the increased sales as a sign that consumers had started to like green cars, and ramped up production.

The former president of Wiremold, Art Byrne, explains in his book The Lean Turnaround that he eliminated volume discounts and incentives for sales to book the largest possible orders. Instead, he pushed his sales team and his customers to provide a steady flow of small orders that would smooth demand and reduce disruptions. Large customers received cash rebates at the end of the year as a reward for their business, but without the supply-distorting incentives for large individual orders. This clever approach allowed Byrne to square the circle: provide incentives without increasing demand variation.

It’s worth mentioning that not all incentives are bad—only poorly designed ones are. In highly seasonal businesses, they can actually be a useful tool for leveling demand and reducing unevenness. I consulted to an outdoor goods company whose warranty department got into trouble every summer. Usage for this company’s products are overwhelmingly concentrated in summer months, and as you might expect, consumers wouldn’t send their products in for warrantee repair till the summer started. The sudden spike in warranty requests meant that lead time exploded from less than a week to five or six weeks. The company reduced the fluctuation in demand by sending out regular emails to customers from January-March, reminding them to send in their products for repair early, and promised a free logo t-shirt for people who sent in their item before April 1. This incentive not only increased the number of items that came in early, it got more brand logos on the street. With more level demand, the warranty department was able to keep its turnaround time to under a week, even during the peak summer season. 

Next week: Batch Processing.



The Perils of Internal Disruption (Part 1)

“Disruption” has become another business buzzword that obviates the need for prudent, careful thought and consideration. If something is “disruptive,” then it must by definition be good. But when it comes to internal operations at least, disruption is often both bad for business and for employees, because it causes unevenness in work.

Taiichi Ohno, one of the fathers of the Toyota production system, described three manufacturing evils that companies should avoid: mura (unevenness), muri (overburden), and muda (waste). In fact, unevennness is often a cause of overburden, which leads to the much of the waste that companies are so eager to eliminate. Unevenness in any aspect of a business—customer demand, process time, quality of raw materials, staffing, etc.—results in overburdening some resources at the expense of others, or alternating between overburdening and underutilizing a resource over time. For example, the spike in toy demand at Christmas puts enormous pressure on factories, warehouses, and logistics providers, to say nothing of front-line retail staff. Similarly, unevenness in machine availability will cause workers and machines in downstream processes to be alternately starved and overburdened with work. 

Unfortunately, while pursuing industry disruption for a better share in the market, leaders are often oblivious to the disruptions that their personal actions and business practices create for their organizations. These disruptions generate enormous unevenness for employees and processes, and make it more difficult for the organization to excel.

In this five part series, I’ll describe five types of disruption that can undermine a company’s performance.

Management By Walking Around
in their seminal book In Search of Excellence, Tom Peters and Bob Waterman popularized the concept of “management by walking around” (MBWA), encouraging leaders to get out of their offices and randomly walk around the company to see firsthand what’s going on. They specifically advise managers to make their walks unpredictable, both in terms of where they go and when they go. Peters and Waterman believe that if frontline workers are expecting management’s visit, they won’t see what’s really happening on a regular basis. They argue that frontline staff will work differently; they’ll clean up their work area; they’ll cover up small problems. Leaders won’t get an accurate picture of how the processes are operating. 

But this kind of unpredictability is a powerful form of disruption for the worker. If a senior leader randomly shows up, the workers will inevitably be anxious and stressed. They’ll work differently under the watchful eye of the boss, possibly creating variability in quality of their work. Or worse—they’ll stop working while they answer questions, affecting the timing of a production line, and creating unevenness for downstream workers. 

In contrast, organizations that have embraced lean thinking, like JD Machine, Stanford Medical Center, Lantech, and others, substitute standardized “gemba walks” for random MBWA. At these places, the leadership team has a regularly scheduled walk through the various departments to see first hand what’s happening. There are no surprises for the staff—they know who’s coming and when, with the result that these visits are smoothly integrated into daily work without disruption. Moreover, it’s both helpful and rewarding for front line staff to know that they’ll get to talk with the CEO or VP of Operations on a regular basis. 

Next week: sales incentives and volume discounts.


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Book Review: Four Types of Problems

The title of Art Smalley’s new book, Four Types of Problems, is misleading. It doesn’t actually address four types of problems. Rather, it covers four types of problem solving. In that regards, it’s an excellent reference book that belongs on every bookshelf.  

Smalley starts with the hoariest example of root cause problem solving: the machine tool that stops working because of insufficient lubrication. This is the classic example that probably every consultant has used to demonstrate the 5-Why approach to finding root cause. Smalley points out, however, that in focusing on the 5-Whys in this story, we’ve missed the bigger picture—that there are actually four ways to address this problem, and we need to be skilled in of all of them. (And, in fact, Toyota has used all four types over the years to deal with this issue.) 

Smalley helpfully categorizes these four approaches using the machine tool example:

  • Type 1: Troubleshooting.Quick response that provides immediate relief without getting at the root cause. In the case of the machine tool, this was cleaning the metal chips off the tool during the shift so that it wouldn’t seize up. Of course, this led to significant down time. 

  • Type 2: Gap from standard.Identifying the root causes of a problem that prevent something from operating as it should. The 5-Why inquiry that identified the lack of a strainer, and kept production on target, is emblematic of this type of problem solving. 

  • Type 3: Target condition.Setting a higher standard than is currently used and reaching it through kaizen. This type of problem solving led Toyota to figure out how to reduce the need for cleaning out the metal chips so that they could run the tool with higher uptime and shorter lead time in the service of better meeting customer demand. 

  • Type 4: Open-ended.Innovation that seeks to fundamentally change how something operates. Toyota added sensor technology, industrial washers, and larger combined systems to better manage the cutting chip waste. 

So again, not four different types of problems, but rather, four different ways to deal with the one problem of cutting chip waste buildup. 

After a chapter-long digression on the history of problem solving approaches, Smalley takes a deep dive into each of the four types of problem solving. He discusses the conditions that call for each approach, identifies key points of each one, and calls out their strengths and weaknesses. There are valuable insights in this section that I’ve often overlooked. For example, in Type 1 problem solving, Smalley cautions that “people naively assume that documentation and training are the best or only way to make countermeasures stick. That view is incomplete and should be challenged.” Similarly, “a weakness of this method [Type 2 problem solving] is that it can lead to an attitude of acceptance of the status quo, which can lead to a general lack of inventiveness.” I know that I’ve fallen prey to this tendency in my own consulting.

His most compelling warning—which all people pursuing continuous improvement should remember—is this:

Some organizations will try to jump from Type 1 troubleshooting to Type 3 level of improvement activities to save time. This strategy will rarely be successful. Even when it is, the success is essentially a matter of luck. The necessity of tackling existing gap-from-standard problem cannot be wished away or ignored in favor of a Type 3 approach. Gap-from-standard problems are rampant in most organizations, and they require the discipline of definition and root-cause analysis to solve and ensure stable operations. 

He points out that Toyota’s remarkable success in Type 3 (improve the target condition) problem solving is built upon its focus on Type 1 (troubleshooting) problem solving in the 1950s and ‘60s, and its subsequent attention to Type 2 (gap from standard) problem solving skills. 

The section on Type 4 problem solving is a foray into the world of innovation and the various approaches to it: lean startup, design thinking, set-based product development, TRIZ, etc. all get their turns on stage here. “Innovation” seems to be the business buzzword of recent years, which makes Smalley’s admonition against “succumbing to the allure of breakthrough innovations to the neglect of the first three types of problem-solving approaches” all the more important. 

If you’re familiar with the different ways of approaching problems, Four Types of Problems is a useful reference book. If you’re introducing your team to the concept of a methodical, structured approach to problem solving, this is an invaluable primer. You won’t need to look at it all the time, but you’ll be glad to have easy access to the information. 

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First, You’ve Got to Show That You Care

The overhead light in aisle two has been burned out for three months. It’s hard for the workers in that row to see the small parts they handle and repair. Workers sent a request to the facilities department when the light died, but for some reason nothing was done, and no one bothers to complain anymore.

Fifteen percent of the stations are missing the adjustable stools workers sit on when they’re doing repairs. Workers at those stations either stand, or use folding chairs, or office chairs. Another 10% of the stools are missing some of the casters, so the stools wobble when they sit on them.

The full-size paper drinking cups were replaced with tiny two-ounce cups by an over-eager executive in the finance department looking to cut costs. That may be fine if you’re running an espresso bar, but not in an industrial facility without air-conditioning, where the temperature can easily reach 90 degrees in the summer.

Do I even need to tell you that the company is struggling with both productivity and quality? That workers don’t seem committed to their jobs? That tool theft is a problem? That workers “steal” time by stretching their breaks?

I’ve been working with this company to improve performance on the shop floor, but progress has been incremental. I’ve drawn value stream maps of the process, stood in an Ohno Circle and watched closely for the seven wastes, and engaged workers in Toyota Kata, but without a tremendous amount of success.

It was only after a couple of months at the site that I finally noticed the burned-out light, the missing/broken stools, and the pathetic paper cups.

My slow progress finally made sense: You can’t get people to care about their work until you first show that you care about them.

Bad lighting, bad seating and bad drinking doesn’t exactly scream care and concern.

Shame on me for not seeing this problem earlier.

As I’ve been reflecting on our slow progress, I keep coming back to the story of NUMMI. John Shook describes how within the constellation of GM plants, the Fremont plant went from worst to first in quality in one year, with a 180-degree turnaround in culture, all while keeping the same workers. (In fact, the only people let go were from management ranks.) Shook explains that

what changed the culture at NUMMI wasn’t an abstract notion of “employee involvement” or “a learning organization” or even “culture” at all. What changed the culture was giving employees the means by which they could successfully do their jobs.

At NUMMI, that meant the tools, the training, and the managerial support that was so badly lacking in the old GM organization.

Organizational development expert Edgar Schein argues that the way to change culture is to change cultural artifacts—the observable elements of an organization, which include what people do and how they behave. That’s what NUMMI management did, by showing in all ways, large and small, that they cared about the workers and believed in their intrinsic motivation, and not just pushing product out the door.

What story do the cultural artifacts at my client tell? That management really doesn’t care about the workers as human beings—no matter how much they say the opposite.

To be clear: I am NOT indicting my client for running some sort of Dickensian sweatshop. Having spent many days at their factory, it’s clear that management really does care. And it’s not as though the management is uniquely inept or cheap. In fact, the management is actually quite good—the new plant manager, in particular, works hard, is concerned about employee welfare and is more than willing to spend money when he needs to.

But this issue is something that all companies deal with, at one level or another—issues that get lost in the shuffle, as they get passed from one department to another, or from one person to another. Or small issues that don’t necessarily make it to the radar screen of leadership even if they’re important to the employees.

But while they may be small, they nevertheless send an unambiguous signal of disrespect. And until management shows that they care about the workers, the workers won’t care about the products.

I pointed this out to the plant manager last week. They now have a full complement of working stools and full-sized cups. They’re working on the overhead light this week.

I’m hopeful that now we’ll start to get traction. I’ll keep you posted.



If You Can't Save 1/10 of a Second, You Can't Save 1 Second

I’m back from joining Honsha on their semi-annual Executive Development Mission to Japan. It was a remarkable learning experience — although I’ve been on two other study trips to Japan, there’s always something new to see and understand when you visit a company that has adopted (and adapted) the Toyota Production System.

The president of one company we visited said something that really resonated with me:

“If you can’t save 1/10 of a second, you won’t be able to save 1 second.”

He made this comment when we mentioned how impressed we were with the kaizen done in a production cell. It was an incredibly efficient cell already, with no obvious waste that we could see. The president pointed out that in a recent kaizen, one of the workers had moved a handle to reduce his arm motion by approximately three inches. (This was in a cell where the cycle time was less than a minute.) It didn’t change the amount of walking or the overall cycle time. It just reduced the amount of reaching with his right arm.

Such a small improvement was clearly the result of careful observation and thinking. Frankly, it would have been easy for a worker to say that there was no room for more improvements. But the president steadfastly believes that before you can ask for big improvements, you have to be able to find small improvements.

To me, there are two levels of meaning here. Most obviously, one second is composed of tenths — you’ll have to combine ten of them to save one second. And if you can’t find even 1/10, you’ll never get one second.

On a deeper level, developing the eyes to see a one second improvement takes practice. It’s hard to see the opportunities for large improvements if you can’t even spot simple, small improvements.

That’s a good reminder for leaders that kaizen means *continuous* improvement, not necessarily large improvements. The foundation for major improvements is built with bricks of 1/10 of a second.



A Better Way to Visualize Hoshin Plans

The hoshin kanri X-matrix makes my head hurt.

I mean, kudos to the person who invented it for creating something so incredibly compact and information-dense. But I’m not sure it’s the easiest way to convey the information in the hoshin plan. Small dots in three locations on a spreadsheet with text running in two directions isn’t a recipe for easy digestion.

image via

image via


(I was gratified to learn from Katie Anderson that Toyota doesn’t use the X-matrix. Probably they realized that in an effort to make things easier/better/faster/cheaper for workers, it doesn’t really pass the first test.)

As a result, I’ve been using a series of spreadsheets adapted from a template by Karen Martin. Karen’s template is great for making the goals and projects of the annual plan easy to read, since you don’t have to rotate your head like a great horned owl to read the X-matrix. However, one of my clients recently struggled to understand the connection between the corporate goals and their associated projects, and the projects with their associated tasks. The vertical relationship between these three levels—generated through catchball—got lost in the multiple spreadsheets. They couldn’t see how these levels were tied together.

My client came up with a new way to represent the information contained in a hoshin plan that highlighted the relationship between the levels. They essentially created an org chart with all the necessary information—the corporate goal at the top of the hierarchy (where the CEO would be), with specific departmental goals, projects, major tasks, and due dates listed below (where you’d typically put direct reports). They even color-coded the critical tasks for each project to highlight which team was responsible for each task. It looks like this (with confidential information redacted):

Lumentum X Matrix.jpeg

This has become one of the most widely used charts in the company. The relevant teams hold hoshin review meetings around it as they track progress towards their departmental goals, and they have a clear picture of how their daily work ties into the larger corporate goals.

This was a terrific improvement on the spreadsheets that I originally gave them. Give it a try—it might work for you, too.



Speaking the Language of Your Team

I started using Mike Rother’s Toyota Kata approach at a new client in NYC recently. The mechanics are young (18-25 years) old, and the education level is low. No one has been to college, and not all of them have even completed high school. 

Some of the obstacles I ran into were predictable to anyone who’s used kata before—people jumping to solutions rather than identifying real problems, focusing on symptoms rather than root causes, turning the discussion around obstacles into a (long and loud) general complaint session. 

But the big surprise for me was how difficult it was for the team to grasp the terms that I put on the learner’s storyboard. “Focus process,” “target condition,” etc. may be perfectly familiar to me, but they were about as accessible as a German language menu in an Applebee for the mechanics. They weren’t comfortable using those words, and they struggled to understand the meaning of a phrase like “focus process.” So not only was I presenting them with a new way of thinking about their work, I was essentially asking them to learn a foreign language. (Ironically, my book Building the Fit Organization was written precisely to explain lean principles without using Japanese buzzwords or references to Toyota.) This is a beautiful recipe for failure.

Of course, I wasn’t perceptive enough to see the problem. One of the managers had to point it out to me. 

So we changed the terminology to something more comfortable for the mechanics:

  • Focus process => Problem area
  • Challenge => Long-term goal
  • Target condition => Where we want to be next
  • Current condition => Where we are now
  • Experimenting record => Experiments
  • Obstacle parking lot => Obstacles

I haven’t run these changes past Mike Rother, but I think that he’d approve. After all, the terminology doesn’t really matter. What’s important is learning how to think—and experiment—scientifically. And if changing the language makes it easier to grasp the new way of thinking, so much the better. 



Why I Was Wrong About 2 Second Lean

It’s time to admit that one of my consulting approaches has failed. 

I’m a huge fan of Paul Akers’ 2 Second Lean philosophy. It’s simple, easy to understand, and has an intrinsic appeal: “fix what bugs you.” “Figure out how to do your job two seconds faster each day.” Who wouldn’t sign on to a lean program that promotes that mindset?

So off I went to my clients, with Paul’s videos embedded in my PowerPoint presentation, ready to show them how 2 Second Lean is the answer to their productivity problems, their low employee engagement and morale scores, their mediocre customer service, and their too-high defect rates.

And I failed.

When I look back at the clients I introduced to Paul’s method, I have to be honest and admit that a more traditional, kaizen event-driven approach would have served them better. 2 Second Lean didn’t hurt them, but they didn’t reap the rewards that they wanted, and that I promised. 

I missed the most obvious fact: 2 Second Lean is simple. But it’s not easy. The commitment required of the president is enormous. 

If you want to follow in Paul’s footsteps, you really have to follow in Paul’s footsteps. That means that you have to be a relentless, maniacal cheerleader for lean. You have to be at the office nearly everyday, talking to everyone, asking them to show you their improvements. You have to make videos of every little kaizen, and show them to the whole company at the daily huddle. You have to celebrate—loudly and visibly—every single improvement, no matter how small, every single day. You have to be more excited about the improvement than the person who’s actually made it. 

How many presidents/CEOs are willing to make that commitment? Not many. Travel gets in the way a lot. There are other meetings to attend, other issues to address, other decisions that only the president can make.

So the president misses a day, or two, or a week. He supports 2 Second Lean, but he doesn’t lead it.

If you’re trying to get the kaizen flywheel turning from a dead stop, you have to constantly put energy into it. You can’t build momentum if you slack off even for a moment. At best, employees will assume that the president doesn't really care that much about 2 Second Lean—it’s nice, but it’s not as important as their day jobs. At worst, they’ll decide that it’s just another flavor of the month, and they’ll wait for it to go away. 

There are people who understand this. Paul has a host of acolytes who have embraced and succeeded with his approach. Their companies are doing great—they’re growing profitably, and they have terrific employee morale. Day by day, they’re building wonderful businesses. These leaders have committed wholly and completely to the daily care and feeding of the kaizen mindset. They talk to all employees about their latest improvements, and they celebrate and share all the kaizen work that’s being done in their daily meetings.

My mistake? I didn’t adequately determine whether or not the presidents of my clients were willing to make that commitment. They all liked the idea of 2 Second Lean, but they weren’t willing to dedicate the time, effort, and energy to getting the lean flywheel turning. That was my fault. 

As a consultant, it’s important to live in the world of the possible, not the world of the desirable. It’s incumbent upon me to tailor an approach to the constraints of a given situation. If a client is willing to follow in Paul’s footsteps, then great. If not, it’s my responsibility to find a different approach. 

Lesson learned.


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Interested in going to Japan with me?

I’m excited to announce that I’ll be joining the Japan Executive Development Mission to Japan from October 7-13, 2018 as guest faculty and facilitator. 

Having been part of different Japan study trips in the past, I can tell you that learning about lean at the source is a unique experience. The closer you get to the origin, the clearer you can see and understand the original purpose for each technique. 

The Japan EDM is hosted by Honsha, a network of former Toyota team members. Honsha’s missions to Japan include executives and practitioners from a variety of industries, ranging from healthcare to airport operations to manufacturing and many others. 

Darril Wilburn and Sammy Obara will be leading the study trip. (At least at the host companies. I'll be leading the trip at the bars and izakayas.) I’ve had the privilege to work with both of them many times — not only are they incredible lean practitioners, they're seriously nice guys (which is good, since we’ll be together for a week). My friend and colleague Mark Graban, lean healthcare expert and Japanese whisky aficionado, will also be on the trip as a speaker and facilitator. 

You can find additional information, along with a sample itinerary, on the mission website.

Let me know if you’d be interested in joining us. October is a beautiful season in Japan, and it would be great to spend some time with you in Japan learning more about lean.

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Six Failure Modes to Avoid in Strategy Deployment

I’ve been working with a company on a strategy deployment project recently, and noticed some common problems across the teams as they’ve worked on their hoshin plans. 

1. No, you’re not an army of one. Leaders are smart and experienced, which makes them think that they can develop the hoshin plan on their own. But without including the whole team in the conversation, they may not be fully on board during the year. It’s equally important to include people from other organizational silos so that their efforts are coordinated and aligned with yours. The HR and Finance departments would love to know six months in advance that you need to hire two more process engineers, instead of dropping the request on them at the last minute. And you can avoid a lot of heartache if the sales team knows today that you won’t continue work on the new project that one of your customers was hoping for. 

2. Projects are not chocolate: more is not better. Leaders are ambitious, and it’s difficult for them to turn down opportunities. However, it’s essential to face reality—there’s limited time, people, and money, and it’s impossible to do everything, no matter how appealing. Even companies that thoroughly analyze expected ROI for equipment or new products are usually not as thorough in calculating it for non-revenue producing projects. But that analysis is critical in enabling you to cull the list of projects from the attractive “nice to do” list to the “must do, can’t fail” list. 

3. Fear the walking dead. And the zombie projects. Every group has “zombie” projects that seemed like a good idea at the time. Perhaps the projects seemed small and relatively easy at the outset. Or perhaps a customer pulled a Lucyand assured them that no, really, this time, they really would jack up their orders if the company just made this onechange. Even though everyone knows that they should kill these projects, they survive on momentum and a reluctance to forgo possible revenue. Be tough. Kill them. Individually these projects may seem insignificant, but taken together, they compromise the team’s ability to execute on the critical few hoshin priorities. 

4. Beware the Hemmingway rule of bankruptcy. In The Sun Also Rises, Ernest Hemingway's character Mike Campbell explains how he went bankrupt: “Two ways. Gradually and then suddenly.” In an environment where you’re working on multiple projects at a time, it’s essential to check on progress at least weekly (if not daily). Monthly or quarterly reviews just aren’t frequent enough to identify and deal with the inevitable problems that arise—they lead to the “green-green-green-red” syndrome, where everything is on track until suddenly it’s delayed by two months. Frequent check-ins on projects will increase the likelihood that you’re able to stay on track, and if not, at least have more time to adjust. If Alan Mulally, the former CEO of Ford, could convene his top executives for a weekly business plan review, you can manage it, too. 

5. For god’s sakes, not another email. Email is fast, free, and easy—unless you’re using it to stay on top of ongoing projects, or to solve problems. Then it’s slow and clunky, and the important information is at risk of disappearing into the bottomless pit of an inbox. It may seem charmingly retro at best, or a logistical hassle at work, but discussing projects while standing around visual boards that have project timelines, KPIs, problem solving worksheets, etc. posted on them is a better option. Avoid the temptation to deal with problems via a lengthy series of emails. It’s easier and more productive to address them when you’re all standing around the visual management boards, looking at the data together.

6. Look through the windshield. Not the rear-view mirror. We’re so used to looking at lagging indicators that we often don’t realize that they’re useless in helping us improve. You cannot drive forward (safely) by looking at the rear-view mirror. You have to look through the windshield to see where you’re going. If you’re trying to improve corporate culture, don’t just conduct an annual survey or exit interviews—track attrition rates and number of resumes received for job openings. If you’re trying to improve first-pass yield, by all means measure it—but also look at compliance with 5S policies, machine maintenance records, and employee training measures. These leading indicators are more useful than lagging metrics. Make sure that you’re choosing KPIs that tell you where you’re going, not where you’ve been. 

The mechanics of strategy deployment are actually pretty easy (even if you do use an X-matrix). But the way to make it truly superior to the strategic planning you’ve done in the past and fully reap the benefits of this powerful tool, is to avoid these six pitfalls. 

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Netflix Brings Lean Thinking to Board Meetings

Well, not really. I doubt Netflix was thinking how Jim Womack would apply lean to their board meetings. But in a new article, the Harvard Business Review describes how the company reinvented board meetings by creating a better way to share information with its board of directors.

The authors point out that without day-to-day exposure to the firm’s operations, directors typically have a thin understanding of the company. Their knowledge is based solely on turgid PowerPoint slides and carefully scripted presentations delivered by a chosen few executives.

Netflix takes a different approach (to the benefit of the company and the relief of anyone who’s had to sit through a 175 slide deck). First, board members attend monthly and quarterly senior management meetings as observers. CEO Reed Hastings says that direct observation of critical management discussions “is an efficient way for the board to understand the company better” and develop trust in the leadership. 

This approach is really just an elegant adaptation of the lean precept of going to the gemba. In the same way a supervisor needs to see an operation or a process with her own eyes instead of relying upon reports delivered in a conference room, so too should a director directly observe how a company’s executives perform while doing their core work of planning and decision-making. The authors explain that

By directly observing management, directors gain a greater understanding of the range of issues facing the company, the analytical approach that underpins managerial decisions, and the full scope of the tradeoffs involved. Ultimately, the aspiration is that this will translate to significantly more confidence in management and its choices.

A second innovation is the format of communication with directors. Instead of the typical slide deck, Netflix provides  

30-page online memos in narrative form that not only include links to supporting analysis but also allow open access to all data and information on the company’s internal shared systems. This includes the ability for directors to ask clarifying questions of the subject authors. . . . The memo itself consists of written text that highlights business performance, industry trends, competitive developments, and other strategic and organizational issues. 

Directors receive these memos a few days in advance of the board meeting, during which time they can ask questions within the memo. Senior management responds to the questions prior to the meeting. As a result, board meetings are only three to four hours long, compared with the all day or multiple day exercises in tedium at many large corporations.

This approach reminds me of the lean approach to reducing setup times in machine changeovers. Essentially, Netflix has separated internal and external steps—the directors can ingest information and clarify issues before the actual meeting, rather than spending time receiving that information when everyone is gathered together. Not only do they benefit from shorter meetings, but there’s more time—and more mental bandwidth—to delve into substantive governance issues. (You could make a good argument that this approach should be taken with all serious company meetings, but I doubt that will ever happen.)

Netflix doesn’t explicitly pursue lean, but its willingness to rethink how it operates displays the hallmarks of an organization that’s constantly seeking to reduce waste and increase the amount of time and attention that people can devote to value-added activities. (Read about the legendary PowerPoint on corporate culture that Netflix created to rethink HR policies and make life easier for everyone.) Too many companies apply lean thinking only to manufacturing operations where the direct labor and material costs make it easy to calculate benefits. Netflix shows clearly that lean thinking can benefit a company everywhere. 



How To Get A “Single Minute Exchange Of Brain”

Reducing changeover time of machines—the time it takes to switch from the last “good” part of product A to the next “good” part of product B—is one of the most powerful tools in lean manufacturing. The goal is to achieve “SMED”—Single Minute Exchange of Dies—in other words, bringing changeover time below 10 minutes. (Although "SMED" is perhaps the ugliest sounding acronym ever invented. It sounds like some horribly virulent disease. Or something that oozes from some body cavity.) Legendary consultant Shigeo Shingo introduced this concept to Toyota in the 1950s, helping them reduce the changeover time for some of their stamping processes from eight hours to less than 10 minutes.

The concept applies to any other process in which you need to make a change from one “product” to another. Turning over hospital operating rooms so that they can accept the next patient is one example. Changing tires on race cars is another example. (Here’s a mind-boggling video of the fastest Formula One tire change (1.92 seconds!) in history. And here’s a 21 minute analysis of how they did it.) Although we don’t think of people as products, hiring and onboarding new employees is actually another place where reduction in “changeover” time is important—what organization wouldn’t want a new employee to be fully ready to work on the first day of the job?

For an individual in an office, changeover isn’t visible the way it is in a manufacturing plant. But knowledge workers are constantly changing over the most critical piece of equipment: their brains. Any time people are interrupted in the middle of a task, they’re forced to execute a complex mental changeover (particularly when the tasks are vastly different). This task switching imposes a real cognitive tax on the worker, too—greater stress, and a longer time to complete the work. Gloria Mark, professor at the University of California, has estimated that after a significant interruption, people take about 23 minutes to return to the original task

Interruptions—even self-imposed “multitasking” interruptions—are costly, but there are ways to mitigate the damage, even if you can’t get down to a “single minute exchange of brain. 

One of the key tenets of SMED is to do as much prep work as possible before you stop the machine—in the language of manufacturing, you externalize preparation steps that can be done while the machine is running. For example, you might get all the tools and replacement parts lined up at the machine before stopping it. For a knowledge worker, that can mean having the information (files, emails, reports, etc.) for your next task already pulled out, rather than having to look for them when you switch. That’s pretty obvious. 

But a more valuable kind of setup externalization comes from simply knowing what it is that you’re going to work on next. There’s a real and significant “initiation” energy required to scan your to-do list and just decide your next task. We’ve all had that experience—trying to decide whether you should fill out your expense report, work on your annual peformance reviews, or call your mother-in-law back is an exhausting choice that usually results in you checking email, or getting a cup of coffee instead.

However, if you consciously plan and sequence your tasks—if you “pre-decide” your work—you reduce the cognitive burden of simply figuring out what to do next. You’ve essentially externalized one of the key elements of the changeover. And that allows you to make the changeover to the next task faster. 

You can do this in a few ways. You could use a personal kanban to show you what five things you’ll work on today. You could schedule the work in your calendar. You could simply lay out the files on your desk (but just the ones you’ll work on today). Or you could make a very short to-do list, with just the 3 or 4 things you’ll take on today. Or you could use phone apps or other software to help. 

This improvement may not seem like much. But if you could reduce mental changeover time by five minutes per day, that adds up to about 20 hours a year, which you can either spend doing something more useful for the organization, or just adding to a vacation on Maui. 



Respect for Humanity Starts with Yourself

I recently gave a talk to the Bay Area chapter of the Lean Construction Institute. One of the most active discussions centered on how the lean concept of flow translates to individual work. (This was a topic in my first book, A Factory of One.) The group concluded that enabling people to have flow in their work is a demonstration of respect for humanity. 

The notion of 1x1 flow in a lean production environment is pretty easy to grasp—individuals or teams should build one product at a time, in contrast to the classic mass production approach of building and warehousing large work-in-process inventories of parts. But what does that look like when you’re a knowledge worker sitting at a desk, handling multiple types of work?

This is where lean thinking intersects with classic time management principles. The time management community understands the peril of multitasking. Research from people such as David Meyer, Clifford Nass, and Gloria Mark (among others) proves conclusively that multitasking is a myth. Humans can’t multitask between two cognitively demanding tasks. (Folding laundry while talking? Sure. Calculating square roots while writing down the lyrics to It’s The End of the World As We Know It?" No so much.) Instead, we “switch task,” going from task A to B, and back to A. The cognitive tax from this switching is severe, resulting in more errors, longer processing times, and higher levels of stress. In lean terms, we’re not working on 1x1 flow, because we never finish a task; we just start another one. 

One-by-one flow for a knowledge worker means having the opportunity to finish a task before starting the next one. Enabling people to work this way is another form of respect for humanity—it means recognizing the brain’s limitations, and allowing people to work in accordance with those limits. We’d never dream of interrupting someone who was pouring molten aluminum, transplanting a heart, or landing an F/A-18 on an aircraft carrier. Similarly, we should respect our colleagues who are closing the books at month-end, solving a customer complaint, or creating a new marketing campaign. It’s not as dramatic as what the metal workers surgeons, or pilots are doing, but it’s still important to the organization.  

But first we have to carve out time in our calendars for our own knowledge intensive work. We can’t expect others to respect our need for single-tasking focus until we make that commitment ourselves. 

Anything less, and we’re disrespecting our own humanity. 



Of Course People Aren’t Going to Do What They’re Told

According to the Wall Street Journal, passengers on Southwest Airlines flight 1380, which suffered an engine failure and broken window, didn’t use their oxygen masks properly. Some passengers only put the mask over their mouths (as you can see in this photo) -- even though everyone has heard the instruction to “put the oxygen mask over both your mouth and nose” countless times.

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Jonathan Jasper, manager of cabin safety at the International Air Transport Association, said “We were surprised when we saw the pictures [of passengers incorrectly putting on the masks].”

He shouldn’t have been.

As one passenger on the flight explained,

That 30-second demo of how to put the mask on properly is such an insignificant portion of most of our lives. Having to use the oxygen mask for the first time amid all that chaos and the turbulence and fact that there was huge hole out the side of the window made it very difficult.

That sounds about right to me. Airlines and regulators can’t get passengers to follow instructions because it’s absurd to expect them to remember what they’re supposed to do in such a terrifying situation no matter how many times you’ve told them. Leaving aside the panic that clouds rational thought (OH MY GOD I’M GOING TO DIE!), virtually no one has had the experience of using a mask during a flight. Moreover, passengers don’t even practice using the oxygen masks during pre-flight instructions. With no kinesthetic training to support the flight attendant’s instruction, it’s highly unlikely that people will do it properly. Manufacturers of modern defibrillators understand this—that's why there’s a step-by-step audio recording when it’s activated explaining how to use it. 

Given this reality, the pre-flight instruction is about as silly as all the warnings we see in workplaces to just “be more careful.” And based on this Southwest Airlines accident, it’s about as effective.

What to do?

I’m sure that there are better brains than mine working on this problem, but one simple idea would be a version of poka-yoke. Take a look at the opening of the standard airplane oxygen mask itself: it’s a circle. There’s nothing in the shape that indicates it should go over the mouth and nose. If anything, the symmetrical shape makes it looks like it should just go over the mouth. 


But a mask that’s molded with a clear location for the nose would be an unambiguous signal of how to wear the mask: 


It seems like a pretty simple and inexpensive solution to a potentially serious problem for the passengers. And not having to remind people how to use the masks would free up the flight attendants’ time to deal with other issues in the emergency. 

[N.B. In fact, I just found that the National Aerospace Training And Research Center is looking for volunteers to test this new design for an oxygen mask this week!]


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Are We Sending the Right Message?

The latest issue of the Spring 2018 AME Target magazine excerpts some mind-boggling—and depressing—data from LNS Research about continuous improvement. As you can see in the chart below (copied from the magazine), fully 44% of responders said that ROI justifications are a key operational challenge in making improvements.


The lack of executive support (20%) and the lack of an improvement culture (30%) is predictable. These complaints are aired at all lean conferences.

But the issue of ROI justification is both mysterious and worrisome. One implication is that workers are looking to major investments in machinery, software, or other technology for their improvements, rather than exercising their creativity. 

Another interpretation is that the executive leaders don’t value small improvements. Instead, they’re looking for huge gains from a few major events. They’re looking for home runs instead of singles and walks—while at the same time, they’re unwilling to make the investments unless they can be guaranteed a huge ROI.

In a particularly ironic twist, the very fact that organizations are relying upon large improvements instead of small, daily improvements drives another problem: the lack of continuous improvement culture and processes. Large improvements tend to be episodic, and they often involve just a subset of workers. As a result, the kaizen mindset doesn’t spread throughout the organization. 

Obviously, I haven’t been to these gembas, so I have no idea what the actual situation is. But legions of organizations—including Toyota—make enormous strides in performance through small, simple kaizens that are free or cheap. In fact, many companies report that their biggest gains come from the steady accumulation of these small improvements, and not from some heroic—and expensive—fix to a problem. Paul Akers, for example, has kept his company on a remarkable growth trajectory by focusing on 2 Second Lean

Moreover, focusing on small improvements increases the likelihood that everyone gets involved in kaizen, and not just one or two times per year. Culture is an outgrowth of our daily behaviors. If you want to develop a continuous improvement culture, you have to start doing continuous improvement—even if those improvements are small changes that won’t directly affect the company’s financial results. As Masaaki Imai said, kaizen means “everybody, everywhere, every day.”

I wasn’t involved in the research presented in Target. But if these results are reflective of the lean community at large, then it raises an important question: what message have we been sending to the leadership and employees at these companies? 

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How to Build a High Trust Workplace

Megan McArdle of Bloomberg View recently wrote about the benefits of a high level of trust—among individuals, companies, and even government— in Denmark:

[The high level of trust among people] allows Danish labor to be more productive than workers elsewhere. An economy’s labor productivity, after all, is its output divided by the number of hours worked. Supervision and enforcement are in some sense wasted labor; they don’t, by themselves, produce extra output. So if you can get rid of the people who are paid to stand around ensuring that people do their work and don’t cheat, and instead redeploy them to make something or perform a necessary service, productivity will go up. When labor is highly productive, employers can afford high wages.

It seems to me that one of the great benefits of lean tools is the way they increase the level of trust among people in an organization. Functional and divisional silos will never go away, of course, but the tools we deploy tend to reduce the mistrust that corrodes the relationships between them.

Value stream mapping, for example, gets people from different departments to sit on the same side of the table (literally and metaphorically) so that they can see a process from the same perspective, rather than from their entrenched positions. People in a value stream mapping exercise don’t point fingers at each other—they point fingers at the work.

Toyota kata does the same thing. At a new client I’ve started working with, kata coaches are working with learners in all different departments, enabling them to see how work gets done in other functional areas. It doesn’t matter whether or not the work they’re observing was passed from the coach’s department. Seeing the learner struggle with problems creates understanding, empathy, and eventually trust.

In fact, most lean tools foster trust in the same way. You can’t draw a spaghetti chart by yourself, but when your supervisor maps your steps, she gains a deeper appreciation for the burden of your job under the current layout. Or when you level the workload on a production line, you’re forced to think about the burden of a person’s job in the context of his productive capacity.

At the most fundamental level, the entire ethos of “going to the gemba” is the essential tool in building trust. Seeing your colleagues and your employees struggling with their actual work, instead of just complaining about them in a conference room, is the soil in which trust—and respect—grows. A3 problem solving is so powerful precisely because it institutionalizes this activity.

As Megan McArdle points out, we don’t have Denmark’s level of trust. Given the size and heterogeneity of the US, it’s unlikely we could ever develop it on a national level. But we can certainly do so in the smaller environments of our companies by using the lean toolbox.

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Improving Teamwork Through Kata

I introduced Toyota Kata to a new client last week with a short simulation. It was the first time that I formally taught this approach to problem solving, and it was probably as educational for them as it was for me. (Note to self: need to get a few more cycles in to adequately model the coaching kata!)

The people in the class loved the approach. Not only could they see improvement from the first round to the last, they could feel how different this kind of structured experimentation was from the way they typically solved problems at work. But what really struck me—and them—was the way that kata improved teamwork.

This is a small company that suffered through layoffs last year, which caused people to emotionally hunker down in their silos. Problems were always due to the other department, not their own. People pointed fingers rather than looked into mirrors. The relationship among functional silos may not have been acrimonious, but it certainly wasn’t open and cooperative.

However, during the kata exercise they were all on the same side, trying to solve a shared problem rather than assign blame. And the emphasis on rapid experimentation eliminated the fear about suggesting the “wrong” solution. As Mike Rother frames it: “We know this isn’t going to work, so don’t worry about it being “right.” But by trying it, we can learn what might work.”

The participants said that the atmosphere during the simulation was totally different from what they regularly experienced at work. And the atmosphere in the classroom changed, too—they interacted with each other far more after the simulation than they had prior to it. The exercise had changed their behaviors as students, not just employees.

Kata isn’t the answer to all problems, and it may not be the way to introduce continuous improvement to all companies (any more than 5S is always the right first step). But in this case, it worked perfectly for this company.

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And in an only tangentially related note, James Dyson (of Dyson vacuum cleaners) was the subject of a recent How I Built This podcast. His description of improving his vacuum (through 5000 iterations!) epitomizes the kata mindset:

It was entirely empirical . . . .I was building one prototype at a time, making one change at a time. So I knew what difference that one change made, and so I progressed. There were quite a number of problems to solve. Firstly, at that time the state of the art was that cyclones were only good at separating dust down to 20 about microns, whereas I had to get it down to half a micron – cigarette smoke type particles. So that was the first problem. And the second thing was that I found that hairs and fluff would go straight through the cyclone and not be collected. And I built 5,127 prototypes before I got it right.



Why It Makes Sense (Sometimes) to Start With Hoshin Kanri

I just published a new article at Industry Week about why it (sometimes) makes sense to start a continuous improvement initiative with hoshin kanri (also known as strategy deployment, or policy deployment).

Up to now, I've been dismissive (or even scornful), of companies that started with hoshin. Walking before you run has always seemed to be a better approach to me, and so I've been a strong advocate of starting with some sort of small, everyday kaizen -- or as Paul Akers would say, "fix what bugs you."

But a recent conversation with a friend has made me rethink that attitude, and now I believe that there's at least one really good argument to be made for starting down the lean path with hoshi kanri. Read more here



Why You’re Struggling to Improve Company Culture

(This post originally appeared in Industry Week.)

The new Proqis BTOES Insights report on operational excellence is out, and by a landslide margin (55% to 37%), the most critical challenge for respondents is “improving the company culture.”

Anytime I read that culture is a stumbling block for companies pursuing continuous improvement, I go back to John Shook’s reflections on NUMMI. With the same people as those who worked at the GM Fremont plant, product quality in the NUMMI joint venture with Toyota went from GM’s worst to best in one year. Absenteeism dropped from 20% to 2%. Strikes stopped completely. No one was intentionally sabotaging cars. As Shook points out, the union and workers didn't just accept Toyota's system; they passionately embraced it.

If GM/Toyota could make this kind of tectonic improvement in company culture in one year, why are companies that aren’t starting from such a deep hole struggling so much? Why do 55% of the BTOES respondents say that cultural improvement is such a challenge? I think there are several reasons that companies struggle with cultural change.

1. Leading with artifacts. Organizations may have finally let go their obsession with lean tools, but I’m seeing it replaced by an obsession with artifacts: kaizen submission cards, A3 forms, visual management boards, 5S checklists, and the like. Without the appropriate management values and attitudes, these artifacts become just more examples of meaningless corporate flotsam and jetsam landing on the workspaces of hard-working staff. When management doesn’t actually support people in A3 problem solving—not only by coaching the employees, but by giving them time to work on those problems—then the A3 is just another template buried on the file server. When leadership doesn’t come to the visual management boards at least a couple of times per week to ask questions, learn what people are working on, and provide the needed help, then the boards quickly become moveable wallpaper. You can’t lead with artifacts. Artifacts are only valuable when they follow a change in leadership behavior.

2. Lack of investment. Shook reports that in the first year of the NUMMI joint venture, 600 NUMMI employees—anyone who supervised another person—visited Japan for at least two weeks of intensive training. Additionally, Toyota sent about 400 trainers from Japan to the US to work side-by-side with their NUMMI counterparts for three-month stints. That’s an extraordinary investment of time, money, and people. Now look at the “investment” most companies make: they set up an OpEx office with a few people; they run workshops on tools; and they lead kaizen events. Sometimes they’ll pay tuition for employees to get a yellow or black belt from an external Six Sigma training firm. To be sure, Toyota and GM are huge auto companies—not too many companies can afford to spend the kind of money needed to send 1000 people around the world. But you seldom even see a commitment to investing time on a daily basis for practicing lean and solving problems. An employee at an HVAC manufacturer recently told me that he thought lean was just another management flavor of the month. But when the president told him that he would happily pay overtime so that he could do his daily 30 minutes of kaizen, he knew that leadership was committed. And he’s now one of the biggest supporters of lean in the company.

3. Poor framing. Many companies promote lean as simply a different way for employees to do their jobs. But it’s more than that: it’s a fundamental shift in the way both workers and leaders must think about their work. The installation of the andon cord at NUMMI is one of the most well known changes that Toyota made when they started the joint venture. Shook says that GM colleagues questioned the wisdom of installing the system at NUMMI:

“You intend to give these workers the right to stop the line?” they asked.

Toyota’s answer: “No, we intend to give them the obligation to stop it whenever they find a problem.”

There are two critical shifts in mindset here. First is the belief that fixing problems is a worker obligation, not just a right. Most companies don’t talk about this obligation. They talk about tools and artifacts, problem solving and respect for people, true north and customer focus. But they don’t emphasize the absolute, non-negotiable responsibility of every worker to stop a process when they see a problem. The second shift is the change in management attitude towards problems. How does leadership respond when employees find them and bring them to leadership attention? It’s a cliché by now, but management’s matching obligation is to cherish problems, to see them as treasures so that employees are willing to accept the burden of stopping the line. This change in thinking on both sides is the linchpin for successfully changing the organizational culture.

Changing an organization’s culture is no small feat. It takes time and persistence. But a lean organization is one that is fundamentally human-centered, one that enables people to thrive and grow. If we focus more on leadership mindset and behavior, and less on the mechanical aspects of operational excellence, it should be easier to create the culture we want. 



How to Build a Better Organization? Build Better People.

The “All Blacks,” New Zealand’s rugby team, is arguably the most successful sports team in history. Since its founding in 1903, the team has won 77% of its matches. However, something went wrong in 2003. They lost the World Cup that year, and by the following year, players were drunk and disorderly, on-field discipline faltered, senior players threatened to quit, and the team began losing.

A new management team under Graham Henry began to rebuild the world's most successful sports team with a culture emphasizing individual character and personal leadership. Their new mantra was “Better People Make Better All Blacks,” and it was anchored in 15 core principles. 

                                                                                   infographic courtesy of @YLMSportScience

                                                                                   infographic courtesy of @YLMSportScience

Although the specifics differ, many of the principles echo that of lean.

1. Sweep the Sheds. Before leaving the dressing room at the end of the game, all players clean up as a symbol of humility. This humility is at the core of Paul Akers’s insistence that visiting CEOs clean the Fastcap bathrooms with him, or the way the president of HOKS Electronics in Japan sweeps and mops the floor along with his employees everyday.

2. Go for the Gap. A focus on continuous improvement means that even when you’re on top, you always have room to get better. You can see this mentality at all organizations that have truly embraced lean, from hospitals like Thedacare to manufacturers like Danaher.

3. Play with Purpose. People perform better when they’re in service of a larger purpose. For the All Blacks, it’s elevating the performance of the team. Toyota talks about “true north,” and Simon Sinek preaches about starting with “why.”

4. Create a Learning Environment. Team leaders are teachers of the younger players. Teaching and coaching cannot be outsourced to the HR department at your company; everyone must take ownership of that responsibility.

5. No Dickheads. Or as Bob Sutton would say, “No Assholes.” Self-explanatory.

6. Train to Win. Preparation and practice are essential to success in competition. Great organizations enable people to thrive in their daily work, not just by showing them how to do their jobs, but by supporting their growth. Mike Hoseus’s story about how his Japanese teammates actually thanked him for pointing out an error he made is a beautiful example of this approach.

7. Invent Your Own Language. A vocabulary, language, and values that everyone understands bind the group. This, of course, is the reason I wrote Building the Fit Organization—I wanted to provide people with a way to express core lean ideas without relying upon often off-putting references to Toyota. Whether you use the language of fitness (as I did), or something else, the key is finding something that resonates with you and your team.

8. Ritualize to Actualize. Rituals reflect, remind, and reinforce the belief system that you’re creating at your organization. Whether that’s the morning meeting, the 30-minute “lean and clean” time that Cambridge Engineering gives its employees everyday, the daily “walk around review” at Lantech, or the peer-to-peer review of lean concepts at Kaas Tailored, these aren’t just breaks from daily work for the employees. They’re rituals that reinforce the principles and beliefs that the company espouses.

These principles are powerful enough, but their impact is heightened by clarity and simplicity. Compare them to the typically turgid, grammatically tortured, long-winded, and uninspiring mission statements that most companies carve into plaques on their walls. Even organizations pursuing continuous improvement sometimes make the mistake of larding up their intent with meaningless corporate-speak.

Find your own principles. Live them daily. Speak plainly. That’s the road to excellence.