Why Layoffs Don't Make Your Company Fit

If you’re trying to get fit, don’t try to lose weight. And if you’re a business trying to get “fit,” don’t try to cut costs.

Real fitness isn’t defined by overall weight, or by body fat percentage. Sure, if you’re 5’6” and weigh as much as a double-door Sub-Zero refrigerator, you should probably take a step back. Then again, if you’re a 5’10” fashion runway model tipping the scales at 102 pounds soaking wet, you’re probably not very fit either. The important point here, is that real fitness isn’t just about body mass index. It includes cardiovascular capacity, muscular strength, and flexibility. And if you’re an athlete—even a recreational one—you also need coordination, agility, speed, and quickness. You can’t gain those capabilities just by dieting.

There’s an organizational parallel here: a company can’t get “fit” simply by cutting costs. To be sure, you may be able to improve your income statement in the short term by laying off workers, closing offices, banning color copies, and no longer catering meetings. However, organizational fitness isn’t just about low expenses. It includes the ability to react quickly to market shifts, to create and deliver new products and services, and to continually improve process efficiency and effectiveness—all in the service of delivering greater value to customers. Cutting expenses as a way to organizational fitness is like cutting calories as a way to personal fitness. At its logical extreme, it results in corporate anorexia—a feeble organization filled with dispirited employees, unable to compete in the marketplace and serve customers.

Sunbeam Corporation is the poster child for this misguided approach. Sunbeam hired “Chainsaw Al” Dunlap (also known as "Rambo in Pinstripes") in 1996 to turn the company around. Dunlap, widely viewed as a turnaround expert, was legendary for his ruthless approach to financial improvement, which typically involved firing a large portion of the workforce. True to form, within a year, he laid off half the company’s staff (6,000 people) and eliminated 90% of the company’s products. This lowered expenses by $225 million per year and nearly quadrupled the stock price in less than two years. But cutting costs has its downside. He moves made the company less capable of reacting to customer needs -- and by 2001, the company was bankrupt.

There’s another parallel between dieting and simple expense cutting: neither work in the long term. It’s common knowledge that the vast majority of people who lose weight on a diet regain it within a year or so. Organizations that just cut expenses tend not to maintain their new weight either. There’s no concomitant reduction in work after layoffs—it simply gets shifted around. Employees take on the additional responsibilities of a colleague or a boss. They work longer and harder, but because the underlying processes aren’t functioning any better, and because these companies haven’t focused on improving how they operate, work doesn’t get done faster, better, or more easily. Eventually, after the financial crisis passes, the organization eases travel restrictions, permits color copying, and starts catering meetings again. Gradually, the company hires people to refill the roles that were eliminated earlier. The weight comes back on, and the organization is just a market downturn away from another round of layoffs and cost cutting.

The alternative is for organizations to focus on building fitness, not on reducing costs. In this context, fitness means becoming faster, more agile, and better able to take advantages of new opportunities and serve customers better. It means examining the processes by which the organization operates. It means focusing on the means by which work is done, not the (financial) ends. A corporate “fitness program” develops employees’ capacity to solve problems and improve performance, with the long-term goal of increasing the value provided to customers. And with greater customer value comes improved financial performance. In fact, cost reduction is an inevitable outcome of the pursuit of fitness—but cost reduction is not the primary objective.

Wild Things Gear makes technical outdoor apparel that consumers can customize for their own needs. The company is a perfect example of how rethinking processes can make an organization more agile and better able to adjust to market shifts. CEO Ed Schmults believes that customization is especially important for technical clothing, because it allows customers to create the functionality that’s important to them.

Product customization is nearly impossible if you manufacture in Asia (like virtually all outdoor companies). Asian factories are built for mass production: long production runs of hundreds or thousands of garments with minimal variation. It’s also tough to get products to consumers quickly if they’re produced halfway around the world—ocean shipping, customs clearance, and logistics (ocean port to warehouse to consumer) adds three to four weeks of transit time. Airfreight is much faster, of course, but it’s cost prohibitive for the company, since most consumers aren’t willing to pay for that service.

Schmults realized that to deliver the increased value that comes with a customized product, he’d have to develop the ability to make clothing in the United States. He’d have to get faster, more productive, and more skilled in apparel manufacturing—a tough job, given that the domestic apparel industry has been eviscerated over the past 20 years as companies have closed their factories and outsourced their work to Asia. However, using lean manufacturing techniques such as cellular production, one-piece flow, kitting of components, etc.—along with extensive training—Schmults was successful in making technical outdoor gear in the US. Now, with a website that allows customers to configure their products online, domestic production, and the elimination of retailers for distribution, consumers can go from designing their own jacket to delivery at their house in only 14 days.

So, more value to the consumer—but what about the company? Moving away from traditional overseas mass production has meant faster production, less finished goods inventory, and lower working capital requirements. Quality is higher, and overall costs are lower. Indeed, even as sales are growing steadily, the company’s return rate is only 6.8%, whereas most fashion brands have return rates as high as 40%—and that difference goes right to the company’s bottom line.

That’s what real corporate fitness looks like. Not layoffs. Agility.  

How to Honor Your Customer

Many companies talk about honoring the voice of the customer, but how many actually bring the customer's voice to the shop floor? MarquipWardUnited (MWU), a division of Barry-Wehmiller does, and in an elegant and powerful way. 

The company graciously allowed me to tour their facilities in Maryland a couple of weeks ago. The  evidence of their "Living Legacy of Leadership" was everywhere, from the team huddles, to the visual boards throughout the shop floor, to the way in which the company gave all employees an extra day off because they just completed a year without an accident.

[Quick digression: think about that for a moment. The company gave everyone an paid vacation day because workers were able to stay safe for a year. There's a huge economic benefit to the company for not losing any worker days, and the company shares that benefit with the people who make it happen. That's real "respect for people" in action.]

Making a connection with customers is a challenge for this plant. Like shop floor workers in most companies, MWU workers don't ever get to meet their customers. They work hard to meet customer needs, but they don't really know who's using their machines. And that's where the customer profile cards come in. The key details about each customer are put on a bulletin board so that workers can see who's buying their machines and why. 

These cards (actually about 8½ x 11) tell workers which machines the customer bought, why the customer bought them, and what they'll be used for. They also provide information about the customer: where they're located, how many people work there, and what the new machines will mean to the customer's success. And if people want more information, the salesperson's and project leader's names are on the card as well. 

We all know (or should know!) how Barry-Wehmiller honors its employees as full human beings, not just a pair of hands that must be bought. But these cards show that the company honors its customers as human beings as well, not just as wallets dispensing money to fund the company's operations. 

Think fitness, not weight loss.

Weight Watchers no longer wants to sell diets.

After suffering a multi-year decline in sales, the company is now focusing on fitness rather than the strict discipline and self-abnegation that people associate with dieting. As the Wall Street Journal reported:

“We may be the greatest diet company on the planet but the consumer isn’t thinking strictly in diet terms anymore,” said James Chambers, CEO of Weight Watchers International Inc. “They aren’t thinking of diet and deprivation as the path they want to take; they’re thinking much more holistically.”

A key element of the company's new initiative, called “Beyond the Scale” emphasizes overall physical fitness, not just calorie reduction. Key to the change in focus was the realization that Americans still want to lose weight but they don’t want to give up too much. Debra Benovitz of Weight Watchers says that their customers "want a lifestyle shift versus a short-term fix.” 

This is a perfect analog to how organizations should approach their lean/continuous improvement efforts. As I argue in my book Building the Fit Organization, a focus on cost cutting (or dieting) is dispiriting and ultimately doomed to failure. No one (except perhaps the CFO) gets excited about financial deprivation. Instead, organizations must integrate lean (or fitness) activities into daily work. That means teaching people a structured approach to solving problems; helping them figure out how to make their work easier and better; strengthening the connection between all employees and the customer; etc. That creates the "lifestyle shift" that companies need for long-term success. 

There's so much more to physical fitness than mere body mass index. There's cardiovascular health. There's strength and flexibility. There's endurance. For organizations, there's so much more to lean than cost reduction. There's market responsiveness and agility. There's employee engagement and commitment. There's reduction in working capital needs. There's better supplier relationships and increased customer satisfaction.

Measuring only one element in a program, whether that's body weight (Weight Watchers) or item cost (lean) is a dead end that saps people's commitment to the process and reduces the potential benefits. 

The Folly of Stretch Goals

I just finished listening to the terrific Planet Money podcast on the Wells Fargo fiasco. You probably already know the big picture of how the bank illegally and unethically opened accounts for customers. But this episode brings the fraud down to a human scale by interviewing some of the Wells Fargo employees. While John Stumpf was lauded in the business press for his "8 is Great" mantra (that's eight accounts per customer), this goal created what employees called a "boiler room" culture and a "grindhouse."

Of course, W. Edwards Deming fulminated against the absurdity of arbitrary numerical goals. Point #11 of his obligations for management states: "Eliminate numerical goals, numerical quotas and management by objectives."

Back in 2012, I wrote an article for the Harvard Business Review on The Folly of Stretch Goals -- and really, what is Stumpf's "8 is Great" but a stretch goal? I argued that stretch goals can be demotivating, can cause excessive risk-taking, and can lead to unethical behavior. I cite Sears as an example. . . and now you can add Wells Fargo to the list.

In Profit Beyond Measure, Thomas Johnson wrote:

"That happens a lot, we honestly translate aims to goals. And then we do stupid things in the name of the goal get it the way of the aim. We forget the aim sometimes and put the goal in its place."

I'm no oracle, and I'm certainly no Deming. But I do know that the evidence is pretty clear that when you set arbitrary stretch goals, you're taking a bet that may very well end up with you testifying before Congress.

You've Got to Live Lean to Lead Lean

Lou Gerstner weighed in on the Wells Fargo scandal the other day in the Wall Street Journal. He wrote that CEOs who blame a flaw in their company’s culture misunderstand how culture is created and its role in determining corporate behavior.

"What is critical to understand here is that people do not do what you expect but what you inspect. Culture is not a prime mover. Rather it is a derivative. It forms as a result of signals employees get from the corporate processes that structure their work priorities."

His argument that culture is a result, not the cause of corporate processes is only partially correct. Culture isn’t static. As Edgar Schein has pointed out, the creation of organizational culture is a continuous circle: behaviors and recognition create culture, and culture leads to certain behaviors. And this is why it’s essential for any leadership team to model the lean behaviors they hope to instill in their organization. If the leadership team doesn’t live lean, they can’t lead lean.

It’s clear that at Wells Fargo, the stated value of “putting customers first” does not—cannot—coexist with a system that rewards employees for selling more products to those customers, irrespective of customer needs. It’s equally clear that in your organization, the stated need to embrace continuous improvement does not—cannot—coexist with a system that prioritizes cost savings over learning; that asks front-line employees to work differently, but not the C-suite execs; that requires mid-level managers to participate in lean activities, but not the vice-presidents. 

Gerstner points out that it’s the cumulative effect of processes such as performance measurement, compensation, and recognition (among others) that shape corporate culture. They also shape the likelihood of success in your pursuit of lean. Does your company reward individuals or teams for learning? Does your company recognize and celebrate the acquisition and deepening of knowledge about lean, or only revenue, profits, and cost reduction? Can you really expect your employees to care—to truly care—about all this continuous improvement bloviation when you haven’t built the systems and processes that elevate it to the stated level of importance?

If lean really is important to your organization, then you have to build systems to support it. It’s a large part of what the Lean Enterprise Institute calls the “daily management system.” That means that everyone—everyone—gets involved in lean activities, that everyone gets recognized for their lean work, that everyone gets rewarded for adopting (even if they don’t yet fully embrace) the essential behaviors. That’s how you build a culture of continuous improvement. 

Can you run your business on a 5-hour workday?

Fifteen months ago, Tower Paddle Boards abandoned the standard eight-hour workday. Since June 2015, employees work five-hour days, from 8am to 1pm. Five hours. Five.

You can probably imagine all kinds of problems with such a short workday, but no: the same amount of stuff gets done in four days than in five, mostly because when you have less time, you tend to compress stuff out that doesn’t matter. The 10-person firm made it to the Inc. 5000 list of fastest growing companies with a 40% increase in sales, and will hit $9 million in sales this year. 

The switch to a five-hour days was carefully planned. They did a test run for a few months under the guise of "summer hours." They instituted a 5% profit-sharing plan to get employees to focus on outputs (production), not inputs (number of hours on the clock) in order to remind them that they had to be as productive as they were during the old eight-hour workdays. They used improved technology -- a better FAQ page, video tutorials for customers, automation of previously manual processes -- to reduce the burden on the team and to make work flow more quickly. You can read all about the changes here.

However -- and this is the key point -- these improvements were driven by a goal to do more work in less time so that employees could have richer personal lives. (They are a surf lifestyle company, after all.) By restricting the critical resource of time, everyone was forced to figure out how to produce more efficiently. 

Tightening the constraints on office hours is no different from a company telling a division that it has to reduce lead time on a product, or take some percentage of cost out of component. Changing the standard forces the organization to figure out a better way to work. The only difference in the Tower Paddle Boards story is that the new standard was imposed for better work-life balance (surely an element of respect for people), and -- most importantly -- that the president challenged the unspoken assumption that people had to work 40 hours per week. 

Tower Paddle Boards is just one example. Numerous companies, among them KPMG and Reusser Design have moved to four-day workweeks (although they work 10-hour days), as has Slingshot SEO. Jason Fried, CEO of Basecamp does the same. He says, "the same amount of stuff gets done in four days than in five, mostly because when you have less time, you tend to compress stuff out that doesn’t matter." And all these CEOs report that not only do employee morale, engagement, and retention skyrocket, the work schedule makes them the employer of choice in their geographic area. 

I've written before (here and here) about the way that the lean community treats managerial work differently from shop floor manufacturing work. We've come to accept that office work won't get done in 40 hours per week, and that working late at night or on weekends is normal. Instead, we should be seeing that behavior for what it is: a sign of a problem for which weekend work is simply a countermeasure.

The example set by Tower Paddle Boards shows the benefits of forcing a new, higher standard on office and managerial work. You may not be able to run your business on a 20-hour week, but you might be surprised at how much more efficient you can become. 

Are you taking the waste out of your decision making process?

As a lean organization, you probably spend much of your time trying to improve the core processes behind your products and services. But what about your decision making processes?

One of the biggest wastes I see in the office and administrative environment stems from unclear decision-making processes, particularly those that cross functional or departmental boundaries. A team makes a decision and then another department second-guesses it or asks for a change. You often see this dynamic between sales and marketing, or sales and product development. ("What? Of course we didn't want it in green! If you had just asked us, we'd have told you that we wanted pink!") And that, of course, leads to wasted time, wasted money, piles of rework, and all kinds of frustration. When I worked in product marketing at Asics, I was involved in a couple of colossal miscommunications involving the targeted distribution and shipment of what was supposed to be a premium, restricted, product. 

No one is to blame, of course. It's a system problem. Not having clarity around WHO gets input into a decision and WHEN is a recipe for failure. It's like getting on board an airplane and giving everyone on board a say in both the route and the destination. ("Slippery Rock? No, I think we should go to Manitoba.") But really, it can happen between any two or three departments -- anytime there's a silo and a handoff, there's a chance for this kind of snafu. 

The RACI matrix is often trotted out as a way to improve meetings (although I prefer DACI, with the "d" standing for "doer," since I can never remember the difference between "responsible" and "accountable"). But it makes good sense to use it for an entire workflow as a way to clarify the inputs at all key decision points. 

If you've got teams or departments that are continually frustrated by having to loop back and do rework on a project, give it a try. You might be surprised at how much waste you can remove -- and how much time you can free up for value added work. 

The Folly of MBWA

Paul Akers, the president of FastCap, commits to regularly visiting the front lines of his company as part of his leader standard work. But don't confuse this commitment for "management by walking around" (MBWA). Akers does it as much (or more) for his own edification than for the training of his employees. In his view, they know how to do their work, are familiar with the problems, and know how to solve them. Going to the shop floor enables him to see those problems firsthand, and then use his authority to help solve them. He explains that

The most important place for me is on the shop floor doing the work with my people, shoulder to shoulder. The more I do it, the better my company gets. . . . I find out the stupid work that I make my people do. I’m seeing all the things my people are struggling with that I have the power to change, but because I don’t know about it, I can’t change it. The more [I do it, the more] I find out that my people appreciate it when I’m coming there to help them. To learn. To empathize. And to improve processes. . . . At the end of the day, if you want to take your company to a whole different level, get on the shop floor. Deliberately. No differently than we “3S” everyday (sweep, sort, and standardize), and we have a meeting for a half hour or 45 minutes to teach and train our people for eight years that we never miss. Deliberately, in the same fashion. Get onto the shop floor on a regular basis and find out what’s really happening. And I’m not talking about with your clipboard, with your iPad, with your phone taking notes—I’m talking about doing the work. Doing the work that you’re requiring your people to do.

For Akers, seeing and doing the work first-hand—not hearing about it in a conference room—makes him a better leader. It brings him in closer contact with the work that’s being done and with the people who are doing the work. What could be more important?

But as I wrote earlier, these visits differ from MBWA, a concept popularized by Tom Peters and Bob Waterman in their seminal book In Search of Excellence. Peters and Waterman also encouraged leaders to get out of their offices to randomly walk around the company and see first-hand what’s going on. However, 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 front-line workers are expecting your visit, you won’t see what’s really happening on a regular basis. They argue that front-line staff will work differently; they’ll clean up their work area; they’ll cover up small problems. Managers and leaders won’t get an accurate picture of how the processes are operating. This is a fundamentally different perspective from the one held by the leaders at companies like FastCap—and one that, I’d argue, is antithetical to building a truly fit organization. If you’ve been successful in driving out fear and in de-stigmatizing problems, people will have no difficulty showing you the reality of their situations.

In Building the Fit Organization, I use the metaphor of physical fitness to explore the core concepts of lean thinking. Using that metaphor, imagine that your coach only comes by unannounced to check up on you and ensure that you’re following your training program. In the best case, you’d be confused (Why is my trainer at my front door at 6am while I’m still in my underwear?), and in the worst case, you’d feel disrespected (What—he doesn’t trust me to do my workout?). Any momentary surge of motivation would quickly evaporate when her lack of trust in your commitment hits home. Conversely, imagine that you have regularly scheduled sessions with your coach, and that you know precisely what issues you’re going to address during each visit. Would that make it difficult to assess progress or diagnose problems? I doubt it. In fact, it would probably make you more attentive to your recent workouts, or to the minor twinges that might indicate the onset of an injury, so that you can discuss them with him in full.

At its core, MBWA presumes an environment of suspicion, mistrust, and fear. Workers will hide problems, so we have to sneak up on them to see what's really going on. Leader standard work, as exemplified by Akers, presumes an environment of trust, humility, and cooperation. Which environment are you trying to build? 

In Praise of Ignorance

If you have a deep reservoir of experience with lean and a desire to help companies reap its benefits, there’s a nearly irresistible temptation to foist your understanding of improvement upon the people working in the organization rather than allowing people to learn and improve in their own way. As John Shook (CEO of the Lean Enterprise Institute) put it:

The notion of experts, often authorized through a certification process, too often devolves into an approach to improvement in which teams of experts swoop in to “do improvement to” the people who are trying to do the work, the frontline value-creating work of the business.

It doesn’t feel that way, of course. It feels like real help. With the best of intentions, you deploy your proprietary conceptual model for improvement that has worked so many times before. You expertly map value streams; identify improvement opportunities; install kanbans for inventory control; create better layouts for manufacturing cells; and set up visual management systems to monitor work processes.

The motives are pure—after all, you’ll get results more quickly, which is good for your customer. But over the long run, individual recidivism and operational regression to the mean is unavoidable. If you doubt that, just try listing the number of organizations that you think have really succeeded with continuous improvement. I bet it’s a pretty short list.

Mark Rosenthal, an outstanding lean consultant in the US, puzzled why so many organizations plateaued in their pursuit of lean. He found that experts,

were essentially pushing them [managers] aside and “fixing” things, then turning the newly “leaned” area over to the supervisors and first line managers who, at most, might have participated in the workshop and helped move things around. So it really should be no surprise that come Monday morning, when the inevitable forces of entropy showed up, that things started to erode.

There were no experts when the Toyota Production System was first being developed. Without years of experience practicing lean, and without a codified system of knowledge, no one was an expert—not even Taiichi Ohno. Workers, supervisors, and managers saw problems and groped their way towards solutions without guidance—because there was no one who actually could provide guidance. The tools that today’s experts eagerly deploy were developed organically by the workers directly affected by those problems in the pursuit of a countermeasure to a specific situation. But they developed those countermeasures by themselves. 

I haven’t worked at Toyota—or even at a company that embraced continuous improvement. I haven’t been insulted by Shingijutsu consultants in the course of a five-day kaizen. The only black belt I have is from Men’s Wearhouse, not from a lean six sigma program. I doubt Jim Womack or Dan Jones could pick me out of a police lineup. If I’m honest about it, the depth of my knowledge of the Toyota Production System is like a kid’s wading pool compared to the ocean of wisdom of the deeply experienced lean thinkers in the world. But in some ways, I think this makes me a better consultant when I help companies in their lean journeys.

A few months ago, I was working with a client on a shipping problem. Their biggest customer changed their policies, and instituted a penalty if their weekly orders weren’t received by Wednesday. This was a full day earlier than my client had been able to ship up to that point, so they were facing either a near-certainty of chargebacks, or the need to hire more workers in the warehouse. 

What I don’t know about warehouse operations could, well, fill a warehouse—and at that point, I had never done any improvement work in a warehouse. As a result, there was no way for me to “do improvement to” the distribution team, even if I wanted to. What I do know, however, is that in most processes where speed is an issue (as opposed to, for example, quality or safety), the waste of waiting is enormous. And with that level of lean knowledge, I could encourage the the improvement project team to simply walk through the shipping process and look for places where people were waiting for information or materials. 

Sure enough, the workers saw the needless handoffs and the unnecessary steps that forced the pickers and packers to wait. They developed the improvements to eliminate those wastes and smooth the flow of products and information through the process. And they’ve continued to modify and improve that process every few weeks, as they come up with new ideas. They’ve cut the time needed to process the shipment from three days to one or one and a half (depending on the order size).

Had my lean experience been deeper, I probably would have taught them process mapping, designed visual controls, and helped them level the workload of the various departments involved. They would have dutifully followed my instructions, but they’d never have owned the improvements. Performance would probably have slipped over time—and without a doubt, they certainly wouldn’t have continued to tweak the system to make it work even better. 

If your continuous improvement efforts are stalling, consider whether you’re relying too much on experts who are “doing lean to” people. The fathers of lean didn’t have experts they could rely on, and they did pretty well. Maybe you should try professing ignorance and letting the workers solve the problems.

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(Note: This article was first published at the Business Transformation & Operational Excellence Insights website: http://bit.ly/2b7omF7)

When Less is More

Shortly after joining Target as the company’s new CIO, Mike McNamara told his boss that his budget was too big:

“We were just doing too many things. I mean we had over 800 projects. Even a company as big as Target doesn’t have 800 priorities.”

I’ve often written about the problems with individual attempts to multitask. In her book, The Outstanding Organization, Karen Martin wrote extensively about the corporate analog—how the lack of organizational focus leads to lousy outcomes, including frustration, inefficient allocation of resources, and poor customer service. (See Tony Rizzo’s bead game for an elegant simulation of this problem.) The fact is that both humans and organizations have a limited ability to do multiple things at once.

But it’s not just ongoing operations that fall victim to the lack of focus. Continuous improvement efforts often make the same mistake. In the rush to improve, and under pressure from leadership, internal kaizen promotion offices and external consultants often cram multiple initiatives and kaizen events into the project pipe in the hopes of realizing rapid benefits in SQCDM (safety/quality/cost/delivery/morale). But the result of too many projects is that very few ever get done well, and none get finished in a timely fashion. Little’s Law applies to corporate initiatives, not just customers in a Starbucks queue.

Hoshin kanri/strategy deployment is a well-established way to ensure that you don’t get 800 projects on the board in the first place. But if your organization doesn’t do strategy deployment, you can at least begin by seeing how well your projects align with the larger strategic priorities. That’s what McNamara did at Target: he convened a meeting of the company’s top executives, weighed each project against their strategic priorities for growth, and cut the list from 800 projects to 80. 

The result is faster execution and better concentration of resources on the important few, rather than the trivial many.

Sometimes less is more. 

"Lean closet"? Stop the madness.

Clothing company Cuyana advocates a minimalist fashion lifestyle, encouraging women to only buy quality items that they truly love. Rather than producing the cheap, replaceable items that dominate the market (think: H&M), Cuyana manufactures more expensive, but more durable, pieces. The company calls this shopping philosophy “lean closet.”

The timing for this philosophy couldn’t be better. Japanese organizational guru Marie Kondo’s approach to a better life through decluttering by (among other things) throwing away old or unloved clothing has become a sensation, spawning two best-selling books and an app.

Regardless of what you call it, lean thinkers will recognize familiar elements of 5S in all of this. And honestly, there’s nothing wrong with reducing the production of disposable crap and getting rid of stuff you don’t wear or use. But at the risk of sounding like an irritating schoolmarm, calling it “lean closet” does a disservice to the word “lean,” because it runs the risk of making people think that “lean” only means “less.”

Author and lean practitioner Norbert Majerus of Goodyear runs a terrific exercise in his lean workshops in which he has attendees pair up, stand face-to-face, and memorize the other person’s appearance. Then he tells them to face away from each other and make a change. Almost everyone takes something away—they remove their glasses, take off hair bands, pull pens out of their shirt pockets, take off sweaters, etc. Even though everyone is standing in a meeting room with pencils, notepads, highlighters, water glasses and the like, virtually no one picks up any of these items. No one adds anything to their appearance. As Majerus points out, when we think of change in a lean context, we tend to think we have to remove things. We have to reduce. We have to do without.

Obviously, eliminating waste is a central idea in lean thinking. But when “lean” is used as a synonym for “less,” it leads people to think that’s all there is. Less stuff in your house. Fewer clothes in your closet. It misses all the truly important aspects of lean—like, say, respect for people. Or problem solving. Or creating value for customers.

So, let’s call it “smart shopping.” Or “sustainable fashion.” Or “intelligent consumption.” But please take “lean” out of the closet. It’s a short step from there to the old joke that lean means “less employees are needed." And that's not helping anyone.

What is real fitness?

In Building the Fit Organization, I argue that organizations need to think about "fitness" -- flexibility, agility, and resilience -- rather than simply weight loss (i.e., cost cutting).

Now there's a new attitude permeating the world of physical fitness, which echoes my recommendations for organizational fitness. Athletes increasingly see exercise for sculpting the perfect body or for weight loss as less important than exercise for performance -- witness the growing ranks of people engaging in parkour, cross-fit, and acroyoga. According to the Wall Street Journal, 

"one of the key features of this new fitness movement is an emphasis on working out for performance and a rejection of the increasingly outmoded aesthetic of emaciation. When your focus shifts from your reflection in the mirror to how well you function in the world, a number of things happen. You may well look better naked, but you will also become more agile, more flexible, stronger, more confident and mentally sharper."

This attitude is consistent with where we're trying to go with lean. Rather than focusing on emaciation or accounting gimmicks that make the reflection in the books look good, we need to focus on the organization's function in the world. And if we achieve that, we'll be more agile, flexible, and stronger. 

The problem is that after every financial downturn, companies focus on cost cutting. They lay people off, close offices, and cut back on all possible expenses. But the vast majority of these organizations tend not to maintain their new expense base. More often than not, there’s no concomitant reduction in work — it simply gets shifted around after layoffs. Employees take on the additional responsibilities of a colleague or a boss. People work longer and harder, but because the underlying processes aren’t functioning any better, and because these companies haven’t focused on improving how they operate, work doesn’t get done faster, better, or more easily. Eventually, after the financial crisis passes, the organization brings back the coffee machine, permits color copies, and caters meetings again. The company lifts travel restrictions. Gradually, the company hires people to refill the roles that were eliminated earlier. The expenses come back, and the organization is just a market downturn away from another round of layoffs and cost cutting. In fact, McKinsey estimates that only 10 percent of cost reduction programs show sustained results three years later.

The alternative is to focus on improvement, not on cost cutting. In the world of physical fitness, that means learning and skill development: 

"The effort is about learning, not just pain. This was a foundational truth for the Greek gymnasion, which served as a place of both athletic and intellectual instruction. But ever since, it seems, we have tried to separate mind and body, to the detriment of both. One of the key insights of the new attitude toward fitness is that mind and body are best improved through the labor of skill development. This notion is being articulated more these days, but it has been implicitly understood for centuries."

In the world of organizational fitness, that means operational excellence. It means examining the processes by which the organization conducts its business. It means focusing on the means by which work is done, not the (financial) ends. A corporate “fitness program” develops employees’ capacity to solve problems and improve performance, with the long-term goal of increasing the value provided to customers. And with greater customer value comes improved financial performance. In fact, cost reduction is an inevitable outcome of the pursuit of fitness—but cost reduction is not the primary objective. 

For too long, athletes have separated the mind and the body in their training. Similarly, for too long business leaders have separated the means from the ends in their desire to achieve financial results. Neither has worked very well.

Let's follow the lead of the cross-fit, parkour, and acroyoga athletes and labor for skill development. 

Come to my A3 Thinking Class on Jun 28 in Oakland!

I'm teaching a full-day class on A3 Thinking & Problem Solving for the Association of Manufacturing Excellence on June 28 in Oakland, CA. 

Most people work in organizations that can’t effectively deal with gaps between desired and actual performance, because the company lacks effective problem-solving processes.

A3 Thinking is the antidote. A3 Thinking is a powerful management tool that teaches clear thinking, engages people at all levels of the organization, and increases the likelihood that any proposed changes will actually be effective. 

The class is geared toward anyone who wants to lead and manage their teams more effectively, and to those who wish to improve their own critical thinking and problem-solving skills.

Read more about the content of the class, logistics, and fees on the AME website.

NOTE:  We will be using Managing to Learn by John Shook as a textbook. You don’t need to read it in advance, but please purchase it prior to class.

What Tom Brady can teach you about standard work.

[Note: this article was originally published at The Leadership Network.]

He’s one of the most decorated quarterbacks ever to play the game. Indeed, six Super Bowl appearances, four wins and two Most Valuable Player awards have assured Tom Brady his place in the pantheon of football greats. He can also teach you about standard work.

Tom Brady, the quarterback for the New England Patriots, is unquestionably one of the greatest football players of all time (and as a lifelong New York Jets fan, growing up in a family of Jets fans, you have no idea how much it pains me to admit that). Brady is also remarkably durable: aside from losing a full season for knee surgery, he’s missed only one game during his 15-year career. Yes, he’s talented. Yes, he’s surrounded by skilled players who both protect him and catch his passes. Undoubtedly, he’s lucky as well. But Brady’s success is also due to an unbelievably methodical, structured approach to skill development and physical fitness. A profile of Brady in Sports Illustrated explains his process this way:

Brady is a quarterback whose daily schedule, both in and out of season, is mapped clearly into his 40s. Every day of it, micromanaged. Treatment. Workouts. Food. Recovery. Practice. Rest. And those schedules aren’t just for this week, this month, this season. They’re for three years. That allows Brady and [Alex] Guerrero [Brady’s body coach] to work in both the short and long terms to, say, increase muscle mass one year and focus on pliability the next. “The whole idea is to program his body to do what we want it to do,” says Guerrero. “We don’t let the body dictate to us. We dictate. Everything is calculated.”

. . . The in-season portion of his regimen is designed to run through Super Bowl Sunday; if New England’s campaign ends in a playoff loss. . . Brady completes every drill, every throw, anyway.

That’s their system. From the outset the principles made sense to Brady, who had spent the early part of his career like most athletes. He’d worried about injuries after they happened. He’d focused on rehabilitation as opposed to preventative maintenance.

If this doesn’t epitomise standard work, I don’t know what does.

Building—and leading—an organization requires a similarly structured approach to work. And yet, most leaders don’t have this kind of structure in place. Many haven’t identified what their high-value activities are, and fewer still reflect upon how they’ve actually spent their time during the year. Their calendars are largely filled with standing meetings, obligatory travel, and corporate events, with the balance of the time dedicated to fire-fighting and email management. Most executives don’t even have a clear plan of how they want to spend their time each year, aside from a vague and wistful sense that they’d like to spend less time in meetings, and more time thinking deeply about where they want to take the company.

Of course, building and leading a fit enterprise is much more challenging than maintaining a fitness program, no matter how scientifically complex it is. Take Brady’s strict regime for example. A freak injury may derail his training, but ruptures and tears aside, his plan is relatively easy to follow providing he maintains his discipline throughout.

There’s a temptation to think that a manager’s (to say nothing of a higher level leader’s) job is too complex to define best practices, that the issues he grapples with are so fluid and so diverse that the job necessitates constant improvisation and adaptation. There can’t be best practices for a leader.

That’s flat-out wrong.

Standard work for a leader doesn’t look like the detailed job instructions for someone working the fryer at McDonalds. A leader’s work is highly variable, and often chaotic. But it’s nonetheless possible to create pockets of stability within the chaos. Indeed, leaders hoping to achieve Tom Brady’s level of excellence need to create and deploy standard work at all levels of the company. Just as Brady would have struggled to stay healthy and reach his staggering level of excellence without following his standard work, so too will a leader fail without standard work. That means the leader has fixed times to walk the shop floor so that she can see the work being done, learn about improvement projects underway, and provide coaching on structured problem solving. It means discussing quality, safety, cost, delivery, employee morale, daily stats and targets with his team. It means actually working shoulder to shoulder with employees to more deeply understand what they’re dealing with, so that he knows what needs to be improved.

Making these types of activities standard ensures that the leader’s work gets done the right way, at the right time. Beyond that, it serves to double check that the tasks she spends her time on are the tasks necessary to support the organization’s strategic goals, not just the daily “administrivia” that chokes so many leaders’ days.

So next time you tune into a New England Patriots game, keep a close eye on Tom Brady. Watch how he methodically surveys the field. Notice his practiced footwork. Witness the controlled precision of his movements. Observe the trajectory of the tightly spiralled ball as it finds its target—and marvel at the countless hours of disciplined practice, the standard work, that makes it all possible.

Reflections On Hansei

Here’s how Escoffier teaches you to make hollandaise sauce:

1. Set out your mise-en-place.
2. Whisk yolks of three eggs with 22 milliliters of water in a bain-marie until thick (about 4 minutes).
3. Add about 20 milliliters of lemon juice and stir.
4. Melt 110 grams of butter and whisk in.
5. Add fleur de sel to taste.

Oh, I’m sorry. Was this confusing because of the French? Or the metric measurements? Would it have been easier if it were in English and Imperial units? 

Isn’t this essentially what we’re doing to our employees when we introduce lean with talk about kanbans and gembas, about kaizen and hansei? Wouldn’t it be easier for learners to grasp the critical concepts of lean if we use our own language to communicate these ideas?

When we bring lean to an organization, we’re asking people to do nothing less than work differently, act differently, and even think differently. That’s a pretty heavy cognitive lift for anyone. And yet, rather than making it easier by using language, examples, and metaphors that people can relate to, we tend to use Japanese, the language of Toyota. Lean consultants and leaders will argue that it’s often necessary to use Japanese because (1) lean was developed by Toyota in Japanese, and (2) for some of the words, there’s no exact English (or Dutch, or Portuguese, or French) translation.

Of course, if we follow that argument, students should be learning calculus in German (Leibniz); geometry in Greek (Euclid); how to construct fireworks in Chinese; and how to make Hollandaise sauce in French (see above).

But of course, that’s absurd. When we teach difficult skills, we use the language of the learner. Acquiring the skill is hard enough. There’s no reason to compound the difficulty by adhering to the original language like it’s some holy scripture. 

Some people argue that certain nuances are lost when we translate the original words into another language—and that’s true. But that hasn’t stopped you from enjoying Crime and Punishment, Madame Bovary, or the Odyssey in translation. Remember, you’re not going for a Nobel Prize in literature here. You don’t need absolute fidelity to the original text.

That’s why companies that are successfully pursuing continuous improvement adapt the language so that it resonates with their employees. For example, Quality Bike Parts, a distributor of bike parts and accessories in Minnesota, doesn’t talk about kaizen and kaikaku. They talk about “little GRIPS” and “big GRIPS,” where GRIP stands for “great results from improved processes.” And of course, grips make sense in a place where everyone rides bikes.

Make the language work for you. As long as you honor the underlying principles, you won’t be struck down by the ghost of Taiichi Ohno by using your native language.

So let’s dispense with the hansei, and start being more “reflective” about the way we talk about and teach lean. 

[This article first appeared at the Lean Post]

Let's Get Serious About Lowering the Water Level

[Note: this article first appeared in Industry Week]

When it comes to the shop floor, every organization embracing lean uses Toyota’s rocks and lake metaphor to talk about improvement: You lower the water level (inventory) to reveal the rocks (obstacles) that prevent you from reaching the ultimate goal of 1x1 flow.

People constantly strive to remove inventory and other buffers that hide problems in the various production processes.

Now, consider what happens in the office. Since knowledge workers aren’t dealing with physical items as workers on the shop floor do, the resource they use as a buffer -- their version of inventory -- is time.

But unlike operators in a factory, office workers and executives don’t lower the water level at all. In fact, it’s just the opposite. The more problems they have with flow (lousy meetings, unexpected firefights, etc.), the more buffers they add. They raise the water level! They stay at the office till 9 p.m.; they come to the office on Saturdays; they join conference calls while on holiday.

This makes no sense. If you’re going to preach the gospel of lean, everyone in the choir should be singing from the same page of the hymnbook—whether they’re wearing blue collars or white.

We often talk about office workers as though they deserve special treatment and different rules from shop floor workers. It’s true that their work is (often) more variable than the work on the production line. But this argument ignores the truth that they’re still production workers -- a different kind of production worker, but production workers nonetheless. And that means that we’re obligated to approach their work, and solve their problems, in the same way that we approach the work and the problems on the shop floor.

In Toyota Kata, Mike Rother argues that we should define target conditions for our processes. We probably won’t reach that target condition, but the attempt to solve the problems between our current state and the Promised Land will take us in the right direction.

Imagine what would happen if you set as a target condition something like, “Go home at 5 p.m.,” or “Only work 50 hours during the week.” There are countless obstacles to reaching that target, and the innumerable problems on the shop floor, with HR issues, with customers and suppliers, will almost certainly keep you from achieving that goal.

And yet.

And yet, if you actually defined that as a target condition, imagine how you would approach the waste that floods your day -- the meetings that start late with unprepared participants; the “reply-all” emails that everyone complains about; the torturous annual performance evaluations that don’t do a terribly good job of helping employees grow; the unnecessarily formal presentations you have to prepare on company-approved PowerPoint templates; the tracking and monitoring of vacation requests. You’d figure out ways to minimize or eliminate these low or no-value added activities rather than simply accepting them as an inevitable part of business life.

The lean mindset that is so valuable in improving the work on the shop floor is just as valuable (if not more so) in improving the work in the office. It’s time to start lowering the water level in the office, too.

What you can learn from football coach Bill Walsh

As a knowledge worker, the choices facing you each day can be overwhelming. You have nearly infinite options on what to work on and in what sequence—and that flexibility can be paralyzing. As Columbia business school professor Sheena Iyengar pointed out, when confronted with too many choices (she believes that the optimal number is about seven), people shut down and default to the easiest, most familiar, course of action—which is often doing nothing. 

That's why standard work is so important for leaders. It provides guidance and guardrails for your daily activities so that you don't end up mired in "administrivia," or so overwhelmed that you end up watching cat videos. 

Bill Walsh, the football coach who led the San Francisco 49ers to three Super Bowl championships, was famous for scripting the first 20-25 plays of each game for his team. “Pre-determining” the early phases of the game provided multiple benefits—the ability to practice the exact sequence of plays before the game, and the ability to see how the opponent responds to certain formations—but I would argue that it had another advantage. It reduced the complexity of the game and the number of decisions that both Walsh and his quarterback faced. Scripting the first plays of the game is akin to what Columbia University social theorist John Elster calls “self-binding.” Like Ulysses lashing himself to the mast of his ship in order to prevent himself from succumbing to the Sirens’ song, Walsh made the advance choice to limit his (and his quarterback’s) choices, and reduced the cognitive burden they had to deal with.

Leader standard work functions the same way. It reduces the complexity of your day and the number of decisions you face. You know you have to walk the floor, have to coach a team member, have to review cost and delivery with your team, etc. 

Your work consists of much more than emails, meetings, and firefighting. The predictable pockets of stability in your day created by standard work make it easier to, in the words of Steven Covey, "keep the main thing the main thing."

Kaizen Means You Care

[Note: this article originally appeared at The Lean Post]

Peter is a 63 year-old man who operates the punch press at his company. At the end of the day, he drags a 50-pound garbage can through the building and out to the dumpster, a distance of about 75 yards.

His colleague, José, is about twenty years younger. Peter and José have been working together for years. Whenever possible, José tries to take out the trash because he doesn’t want Peter to hurt his back—but work being what it is, that doesn’t always happen.

I’m shepherding this company along its lean journey, and we’ve started by asking people to simply fix what bugs them. We’re not making people sit through lots of classes, we’re not doing 5S, we’re not trying to “move the needle” on the business—we’re just trying to get people to see that the way things were yesterday isn’t the way they have to be today. We want people to know that they have the power to make things better and easier for themselves. We often forget that’s the real first step in establishing a culture of kaizen—just knowing that you’re allowed to improve things.

Peter and José are men of few words. Neither said a word during the kickoff meeting, nor at any of the training sessions. I figured that they were resistant to change, or that all those years of punching the clock sapped them of any desire to do anything other than the bare requirements of their jobs. I assumed that they weren’t going to be active participants in the lean transformation.

So I was surprised when I saw an idea card on the improvement board from José. He wanted to put wheels on the garbage can in the machine shop. When I asked José about his suggestion, he said simply, “I’m worried about Peter. He’s 63, and I don’t want him to hurt his back dragging the trash to the dumpster.”

Lean leaders, and lean consultants (like me), often talk about the organizational benefits of kaizen: lower costs, bigger profits, shorter lead times, higher quality, etc. But the truth is, those benefits are pretty far removed from the daily lives—and wallets—of the people working in the company. What we don’t talk about quite as much is the human reason that kaizen is important. When we do kaizen, we make work easier for ourselves and for others. We use our creativity to help others. And as social creatures, that’s a lot more salient and inspiring than an increase in the company’s earnings per share. There’s a reason that Shigeo Shingo said that the four goals of improvement—easier, better, faster, cheaper—are listed in the order of priority.

The wheels that José put on the garbage can will have absolutely zero effect on the company’s financial performance. But it’s a first step on the road towards building a culture of kaizen. And even more importantly, it’s a way of showing that he cares.

Ditch the Diet. And the Layoffs.

If you're trying to get physically fit, don’t try to lose weight by going on a diet. 

If you’re trying to get organizationally fit, don’t try to cut costs through layoffs. 

In my new book, Building the Fit Organization, I argue that real fitness isn’t defined by overall weight, or by body fat percentage. Sure, if you’re 5’6” and weigh as much as a double-door Sub-Zero refrigerator, you should probably put down the box of Twinkies. But if you’re a 5’10” fashion runway model tipping the scales at 102 pounds soaking wet, you’re probably not very fit either. Skinny, yes. But not especially fit. Real fitness isn’t just about body mass index. It includes cardiovascular capacity, muscular strength, and flexibility. You can’t develop those by dieting. 

There’s an organizational parallel here: a company can’t get fit simply by cutting costs, especially through layoffs. To be sure, it can improve its income statement in the short term by laying off workers, closing offices, banning color copies, and getting rid of the coffee machine. That’s not going to make the organization fit, however, because organizational fitness isn’t just about low expenses. It includes the ability to react quickly to market shifts, to create and deliver new products and services, and to continually improve process efficiency and effectiveness—all in the service of delivering greater value to customers. Cutting expenses as a way to organizational fitness is like cutting calories as a way to personal fitness. At its logical extreme, it results in corporate anorexia nervosa—a feeble organization filled with dispirited employees unable to compete in the marketplace and serve customers.

Organizations that simply cut expenses tend not to maintain their new weight either. More often than not, there’s no concomitant reduction in work—it simply gets shifted around after layoffs. Employees take on the additional responsibilities of a colleague or a boss. They work longer and harder, but because the underlying processes aren’t functioning any better, and because these companies haven’t focused on improving how they operate, work doesn’t get done faster, better, or more easily. Eventually, after the financial crisis passes, the organization brings back the coffee machine, permits color copies, and caters meetings again. Travel restrictions are lifted. Gradually, the company hires people to refill the roles that were eliminated earlier. The weight comes back on, and the organization is just a market downturn away from another round of layoffs and cost cutting. 

A new article from Knowledge@Wharton provides further support for my argument. The authors point out that there's precious little evidence that layoffs are good for operational performance or for long-term profitability:  

Contrary to popular belief, there’s not much evidence that layoffs are a cure for weak profits, or, to use the current euphemism, that they reposition a firm for growth going forward. . . . There is no evidence that cutting to improve profitability helps beyond the immediate, short-term accounting bump. . . . Employers also often underestimate the cost of layoffs in immediate financial terms, as well as in the lingering burden it places on remaining resources — both financially and emotionally. There is definitely a huge problem in HR generally that the stuff that is easy to put on a spreadsheet outweighs the stuff that isn’t.

And then, of course, there's the downstream consequence of those layoffs:

But what does that [the short term cost reduction] mean two or three years from now when the firm is growing and now has to ramp back up by hiring a bunch of people? Now the firm must incur all these costs to hire and train workers. In addition to the laid-off employees. other workers may now leave voluntarily, all of which is disruptive for the firm and lowers productivity. Layoffs may look good on paper because they have an immediate effect on costs. Yet in reality there are a lot of costs that layoffs impose on firms that might not show up on an income statement quite as clearly.

What's the alternative? Just as a person striving for true physical fitness has to increase strength, cardiovascular capacity, and flexibility, so too must an organization focus on increasing value delivered to customers. Wayne Cascio, a professor at the University of Colorado at Denver points out that companies that that have avoided layoffs in times of financial difficulty position themselves for greater growth when the good times return: 

[They] come out the other side with positive results. "He points to Southwest Airlines, which, like the rest of its industry peers, suffered during the Great Recession. People were not flying as much, so they took their job recruiters — who are typically great with people interaction skills — and instead of laying them off, redeployed them into frontline customer service jobs, which made flying on Southwest a better experience for its customers. And as the economy recovered they transitioned back to their original jobs.”

Another approach was taken by Steve Jobs, Cascio says, who took advantage of downturns to focus on innovation. “When the dot.com bubble burst, he said, ‘We are going to invest our way through the downturn.’ Look back at when the introduction of the iPod was and the iPad. It turns out shortly after the 2001 recession ended was when the iTunes Store opened. Then after the Great Recession, they bring out the iPad in 2009 and 2010. So while the economy was bad and people were being laid off, Apple was actually investing in R&D. 

And of course, we can't ignore the human element, which is nearly impossible to capture in a spreadsheet. Loyalty, morale, commitment to one's job and one's company don't appear in a company's cash flow statement. Yet according to Wharton management professor John Kimberly,

if a company can manage through a rough patch with creative strategies without laying off, employees will emerge with a greater sense of loyalty, and that loyalty will pay off for the company. “I believe at the heart of the issue, that is going to motivate outstanding performance, in any company, no matter what business they are in.”

If you're going for fitness -- personal or organizational -- you've got to do more than cut your food intake or cut your employees. Long-term, sustainable fitness requires that you learn to increase value to your customers. Any other approach will give you a short term thrill, but leave you too weak to compete in the future. 

Shameless Self Promotion: Lean Leadership Institute Podcast

Chris Burnham of the Lean Leadership Podcast interviewed me recently. We covered a lot of ground that I haven't spoken about before, including: 

• How my background as a running coach has influenced my lean journey
• The need for leadership to act and think differently as well as front line associates in applying lean principles
• An experience I recently had with a simple idea that really captures the true spirit of kaizen
• How a lot of people get lost on their lean journey by getting tripped up by 5S
• The generosity of the continuous improvement community
• The power of benchmarking
• The need to overcome learned helplessness

Check it out here.