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.