For the Last Time: Cost Cutting Isn’t “Lean”

The headline in the Wall Street Journal last week was utterly predictable: “Kraft Deal Fueled by Lean Recipe.” It was only a matter of time after Heinz’s acquisition of Kraft that the business press would refer, once gain, to 3G Capital Partners’ use of zero-based budgeting as something “lean.” This approach, which requires managers to justify spending plans from scratch every year rather than simply modifying the previous year’s budget, is many things, but it is certainly not lean.

Yes, lean organizations relentlessly seek to lower costs. And yes, lean organizations constantly strive to eliminate wasteful expenditures of cash. But the layoffs that accompany zero-based budgeting are most certainly not lean. Neither is the infantilizing, management-directed, and disrespectful (to employees) cost cutting that the Wall Street Journal describes:

After chicken processor Pilgrim’s Pride Corp. adopted it a few years ago, it scrutinized how much paper it used to print documents, how much soap employees used to wash their hands, and how much Gatorade hourly employees at one processing facility drank during breaks.

In my new book about continuous improvement (still untitled, but coming out this September), I draw a parallel between individual physical fitness and organizational “fitness.” You can’t get physically fit simply by dieting—sure, you can lose weight, but that doesn’t make you healthy and strong. Similarly, you can’t get organizationally fit simply by cutting costs. Laying off people and prohibiting color copies doesn’t make a company nimble and competitive. It may boost the share price and profitability in the short term, but it can’t develop the organization’s competitive powers for the long term.

Competitive strength comes from the development of employee problem-solving capabilities and the improvement of operational processes. Zero-based budgeting doesn’t do that. Want to reduce the amount of Gatorade people drink? Teach employees how to attack the “problem” of excessive Gatorade consumption at its root cause, which might very well lead to improvements in ventilation, plant layout, and workflow—and along the way, truly significant cost reductions. Want to cut down on soap consumption (which, honestly, doesn’t seem like a great idea in a poultry processing plant)? Challenge employees to redesign the process in a way to reduce the amount of direct poultry handling. At the very least, having employees figure out how to take costs out of a system is far more respectful of their intelligence and creativity, and far less dispiriting than simply dictating a 30% cut in their Gatorade allowance.

There’s plenty of research proving that cost reduction isn’t sustained in the long run. Just like weight always comes back after drastic dieting, costs always creep back two to three years after drastic cuts, because the underlying processes and capabilities haven’t been improved. As soon as the financial crisis fades, people start buying more Gatorade and making color copies.

Look, I fully support the elimination of excessive corporate privilege. I cringe at the thought of executives flying first class on the company dime while front-line workers fly coach. I can’t stand swanky corporate offices with Persian rugs and fireplaces that serve only to gratify egos and create unnecessary distinctions within an organization. But skinny and starved isn’t healthy and fit, and cost cutting isn’t lean.

Reversing the vector of accountability

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One of the most unappreciated benefits of leader standard work is the powerful way in which it reverses the “vector of accountability.”

When we talk about accountability in an organization, typically we refer to the way in which lower level staff is accountable to executives (or managers, or supervisors) for certain actions. Workers must be held accountable if we want to execute and perform well. In this view, the vector of accountability always points upwards, from the front lines to leadership.

This is where leader standard work comes in. When a CEO makes a commitment to visit the shop floor (or the marketing department, or the warehouse) each day and learn what her people are doing and what obstacles they face, she’s now accountable to her team for performance. When a VP creates standard work obligating him to participate in 5S activities once per month, he’s making a promise to his team that he must fulfill or risk compromising his leadership credentials. The vector of accountability flips: the leader is now accountable to the team.

The psychological implications of this reversal are profound. Any organization comprises a web of human relationships, and for those relationships to be healthy and successful, there must be some degree of symmetry. Demanding that lower level staff be accountable to leaders without a corresponding accountability of leaders to lower level staff is a recipe for unhealthy, weak relationships. Reversing the vector of accountability brings balance to the interpersonal relationships in an organization. It’s a concrete way of leading with humility, of being a servant leader.

To implement this idea, post your standard work in the open, visible to the entire company. Create a simple check sheet for the activities that shows what you’ll do and when, and bring it with you when you do that standard work. Then—and this is key—your team checks the boxes to show that you did, in fact, fulfill your commitment. They validate your standard work. Lastly, post the filled in check sheet where everyone can see it.

Try it. It’s one more way to show respect for people. You’ll be amazed at the transformation in your relationships with your team.

Disrespectful communication

Lean Communication

  Microsoft's announcement that it will lay off 18,000 employees is a brilliant example of how not to show people respect in communication. Stephen Elop took 11 paragraphs (!) in his internal email to finally get to the point that, you know, 18,000 people were about to be sacked. Brevity is not only the soul of wit, and plain, direct speech is a key element of respect for people. Less than One Paragraph: This is Donald Trump territory. "You're fired!" hardly constitutes respectful communication.

Eleven Paragraphs: To go this far, you have to bury the lede behind an awful lot of turgid business bloviation. While employees are anxiously looking for information about their jobs, they have to trudge through a bog of business jargon ("financial envelope," "accruing valuing to our strategy," "right-size operations," etc.). If your corporate environment permits emails like this to go out, it's probably ridden with what Bob Emiliani calls "fat behaviors," that create fear, uncertainty, and mistrust. Good luck establishing any sort of continuous improvement culture in that environment.

The alternative to the cruel bluntness of Donald Trump and the clueless circumlocution of Stephen Elop is direct and empathetic communication. State the facts honestly. Be humble. Bring humanity into your conversation. Remember that at the other end of your bloated strategy email is a real human being nervous about losing her job because she doesn't make a seven figure salary, or have millions in stock options, or have the security of a corporate pension.

If you still don't know how to communicate with a little more respect, read Bob Emiliani's work, or talk to Liz Guthridge. And if you want some entertainment, read Kevin Roose's hilarious evisceration of the Microsoft memo here.

Respect for people (Shingo Edition)

More wisdom from last week's factory tours with Ritsuo Shingo: 1. Don't ask workers for improvement ideas. Ask them:

• What work they don't like
• What work is tiring
• Any suggestions they have for management

In other words, you can't just ask for "improvement ideas" unless and until you've established trust -- i.e., until you've earned the right to ask for their help.

2. "Blaming your workers is like spitting in the sky. It comes back down on your face. It's your teaching that needs to be improved."

'Nuff said.

Forget about the Toyota "house of quality"

I'm accompanying the Shingo Institute study tour in Japan this week, and have had the incredible good fortune to spend time with Ritsuo Shingo, son of the late (and legendary) Shigeo Shingo. I asked him about the two pillars of lean (jidoka and just-in-time) in the famous Toyota house of quality, and he told me to forget about the house:

It doesn't matter what the pillars are, or what the roof is, or what blocks are in the foundation. You have to choose the structure that makes sense for your company. The concepts and elements are what's important, not where they go.

The lean community has, in recent years, shifted focus from tools to fundamental concepts and respect for people. To me, Mr. Shingo's advice is of the same piece. Slavish adherence to tools, language, and even graphics is pointless -- you have to translate the ideas to make them relevant for your idiosyncratic situation. As long as you have the right concepts, you can make whatever pillars you want.

For that matter, you don't even need a house. Make a submarine. Or a pop-tart. Or a light bulb. Just make sure you respect people and make it yours.

Meeting behavior is *NOT* a small thing

From the recent WSJ interview with Alan Mulally:

WSJ: Are you worried that Ford will go back to its old ways if, someday, you're not there to hand out the cards [printed with a summary of his "One Ford" strategy]?

Mr. Mulally: I am not only not worried about it, but I am very excited about the institutionalizing of our management systems inside Ford.

WSJ: So you feel it's not just you at this point.

Mr. Mulally: Absolutely. We have it built into the audit process. We actually audit the process and the behaviors.

WSJ: When was the last time you had to remind someone: "No, you didn't get it."

Mr. Mulally: Every once in a while someone in business-plan review will, say, pull out their communication device and start working on it. We have the entire leadership team networked around the world, and somebody would have the audacity to start working a specific issue instead of being laser focused on helping everybody?

Or they'll talk. At Ford, one of the behaviors is you listen, and you don't have side conversations during the meeting. It's just so important everybody stays focused. So if someone has a side conversation, we just stop and we just look at them, and it's amazing how it doesn't happen again.

Here you've got a guy who's universally credited with rescuing a $63 billion market cap company talking about how not using smartphones, or avoiding side conversations during meetings, is an essential element of sustaining the new corporate culture.

Pay attention, people: small behaviors are NOT small things. They're critical symbols of what the company values. Mulally cites these seemingly minor behaviors as evidence that Ford has become a different kind of company. More importantly, he uses them as a way to monitor the behaviors that underpin the company's transformation.

Disregarding others, and not being present to support and aid colleagues in meetings -- these are the leading indicators of a dysfunctional corporate culture. They're not the only reason why Ford teetered on the edge of bankruptcy a few years ago, but they're emblematic of a culture that is rotting at the core. That's why Alan Mulally attends to these seemingly minor indicators. And that's why you should, too.

Hiding from Managers is not the sign of a Kaizen Culture.

Harvard Business School professors are at it again. Last week, I was incredulous about their research suggesting that maintaining "strategic inefficiencies" in a hospital is a savvy way to discourage physicians from ordering unnecessary tests. This week I'm gobsmacked by their research suggesting that decreasing observation of workers increases productivity. I'm sure that Bill Waddell will soon be fulminating about Harvard's ivory tower view more convincingly than I will. But in the meantime, check out what Professor Ethan Bernstein calls the Transparency Paradox: that watching your employees less closely at work might yield more transparency throughout the organization. In his studies at a global contract manufacturer's plant in Southern China, his team of researchers

were quietly shown 'better ways' of accomplishing tasks by their peers-a 'ton of little tricks' that 'kept production going' or enabled 'faster, easier, and/or safer production,'" he writes. "Then they were told 'whenever the [customers/managers/leaders] come around, don't do that, because they'll get mad.'"

The official company practices happened to be less effective than the tribal tricks of the trade—tricks that the employees hid from the higher-ups, thus thwarting the goal of learning by observing. Bernstein says that there was no ill-intent or cheating behind such hiding behavior, but merely a rational calculation about human behavior: Operators were hiding their freshest, most innovative techniques from management so as not to "bear the cost of explaining better ways of doing things to others."

In the paper he recalls a worker telling [a research team member], "Even if we had the time to explain, and they had the time to listen, it wouldn't be as efficient as just solving the problem now and then discussing it later. Because there is so much variation, we need to fix first, explain later."

To be fair to Professor Bernstein, he points out that the workers did share ideas with their supervisors after testing and perfecting them:

"There was a pride in ownership leading to the desire to share," Bernstein says. "And so they did. But only after they had data to support their new approach."

But what's troubling about this study is the assumption that there's an innate and immutable human tendency inside any organization to hide work so as "not to bear the cost of explaining better ways of doing things." Now I don't know anything about the organizational culture in this global contract manufacturer in China, but I do know that Toyota, Autoliv, Wiremold, Lantech, and hundreds of other companies have demonstrated that you can create a culture that prizes, rewards, and elevates the habit of sharing information and improving processes through constant application of the PDSA cycle.

Professor Bernstein goes on to explain that

On the manufacturing floor, the workers were trying to manage the attention of the managers. They knew that if they did something that looked weird, it would draw attention and, quite frankly, would disrupt their current work process. If they didn't look weird, then that wouldn't happen. And they knew that just for the sake of getting the production numbers, sometimes it would be good to attract attention and sometimes it wouldn't.

Professor Bernstein's research was particularly irritating to me because I'm in the middle of reading Jon Miller's excellent book, Creating a Kaizen Culture. Jon argues convincingly that the highest performing organizations avoid the implicit assumption that managers and employees are on different teams (at best) and antagonistic (at worst).

A culture that has as its raison d'etre human improvement  doesn't need to shield workers from managers. When supervisors' and managers' primary function is the nurturing and development of front-line employees, there's no need to hide "for the sake of getting the production numbers."

Going to the (food truck) gemba

Roy Choi, the inventor of the Korean Taco and one of the fathers of the food truck craze, was interviewed on Fresh Air last week. He's a restaurateur, a cook, an author, and clearly a man who understands the power of "going and seeing." The interviewer, Terry Gross, asks Choi how much time he spends in food trucks -- between his book tour and the challenges of running four restaurants in addition to the food trucks, he's a pretty busy guy.

GROSS: So, how much time do you actually spend in trucks?

CHOI: I'm there every day.

GROSS: Oh, really? I just assumed that you had other people doing that.

CHOI: No, I have a crew, you know, that cooks, just like a chef has cooks in the kitchen. But the trucks are my kitchen, and so that's where I am. You know, if I'm not doing something crazy like this [interviews] or doing a book tour, I'm with my trucks, on the streets with the people. I don't know where else I would be. It's my life.

GROSS: But you have several restaurants now, too.

CHOI: Yeah. Every day, I wake up. My only goal every day when I wake up is to try to see every single person within my organizations and shake their hand and give them a hug and then check the food, and then go back through at night. . . . I have four places, four restaurants. So I'll hit all the restaurants during the day, check on prep, say hello to everybody, hit one lunch truck, hit the trucks in the morning, as well, to check on prep, and then do some office work. And then I go back out and check on the trucks again, and then I go back out to the restaurants and then enjoy the crowd and enjoy the people and see them eating. I really get a lot of energy and my information from how people are eating the food. So that's where I am.

Sometimes when the lean community talks about "going and seeing" (particularly as part of leader standard work), it comes across as a perfunctory, mechanical, activity. I think Choi's comments really get to the heart of what "go and see" is all about.

It's about showing concern for your employees -- even if you don't actually give them a hug. It's about respect for people and by seeing how they're working and making corrections or providing help, if necessary. It's about getting close to the customer, and learning by observation when you see how they interact with your product or service.

I don't know about you, but I call that leadership.

You can read the entire transcript or listen to the interview here.

You Call That Leadership? (Part II)

In last week's blog post, I took Strategy+Business to task for suggesting that a leader ought to make three major decisions within the first ten days. I think that's a lousy way to lead and is fundamentally disrespectful to the people who work in the organization. So I was gratified to read this week's NYTimes Corner Office column with Bill McDermott of  SAP. Apparently, Bill also believes that asking questions and showing respect for employees is much more important than acting quickly to impress people:

I moved up to become the sales operations manager for the New York region [of Xerox], then became the district manager for Puerto Rico and the Virgin Islands. Our region was ranked 86th in the company out of 86....

So now the challenge was, how are you going to make these guys winners? I spent two weeks interviewing everybody and listening. I’d sit there and just say, “What do you think we need to do?”

This attitude is exactly what's meant by the lean precept of "go and see." And the result?

After doing that for two weeks, I found out the three things that were unanimous in terms of what people thought we should do. No. 1, they wanted to be motivated. A previous boss, they told me, had been very financial in his orientation, and focused on cutting expenses. The second thing was that they wanted to have a holiday party, because they had lost the holiday party. The third thing is that they needed clear direction on what they were supposed to do. “Just tell us what to do,” they said.

So we basically gave them three things that we were going to focus on in the business. Then we gave them inspiration and pageantry at every turn to celebrate the victories as we made progress against those three goals. And then we had the holiday party, which was the most important of all. By the end of the year, we ranked No. 1 in terms of beating our plan.

Now, some of these things might seem trivial. I have a Stanford MBA, and I'm pretty sure that we never had a class that taught the significance of a holiday party. I can almost guarantee that if Bill hadn't talked with everyone face-to-face right up front, he wouldn't have understood its importance, and he would have missed the opportunity to make a real improvement in morale and employee engagement.

Go and see. Ask questions. Show respect. You might be surprised at what you learn.

You call that leadership?

Booz & Co’s recent article on strategy and leadership misses the point of, well, real leadership. What You Should Accomplish in Your First 10 Days argues that in our “exponentially faster” business world new CEOs must take meaningful action in their first 10 days on the job. Only through rapid, dramatic action can a new leader reinvigorate a struggling company. Nonsense.

The author proposes that the ten-day plan should involve

three significant decisions. Granted, three is an arbitrary number but it is one that will allow the incoming CEO to demonstrate knowledge of the business, surety of direction, and bias for action—without coming across as reckless. These decisions could include a declaration of general strategic direction, moves among senior personnel, or the launch of a new initiative. . . . The goal is to blast through legacy roadblocks, set the organization in a firm direction, and energize activity from top to bottom.

This proposal surely feeds into the egos of those CEOs who want to put their personal brand on the organization, but I doubt that the employees would respect anyone who makes dramatic changes so quickly, before they really know the company.

“Go and see” is one of the core principles of lean thinking. You can’t make good decisions if you don’t understand a situation deeply, and you can’t understand a situation deeply without actually seeing first-hand what the reality is. “Go and see” is also a fundamental way to demonstrate respect for people. Making sweeping changes that effect hundreds or thousands of people in the first ten days—without having a deep understanding—is fundamentally disrespectful.

In rare cases—say, Steve Jobs on his return to Apple—that kind of fast action might be appropriate, but it’s hard to think of any other successful leadership change that involved major changes in the first ten days. Allan Mulally at Ford? Sam Palmisano at IBM? Anne Mulcahy at Xerox? No, no, and no. If you want action that fast, you’re more likely to end up with “Chainsaw” Al Dunlap than with Andy Grove.

Real leadership requires listening and understanding. And that takes longer than ten days.

Respect for People -- Salary Edition

Salaries are an often-overlooked aspect of respect for people. We all know that money alone doesn’t make employees happy, nor does it make a lousy job or a lousy work environment rewarding. Money is considered a hygiene factor. But salaries are nevertheless important, and it’s high domestic wages that are usually blamed for the need to ship jobs overseas. However, Sophie Quinton on the Atlantic Cities website tells the story of several retail companies that are not only thriving in the US with its high salaries, they’re thriving while paying front line employees significantly more than minimum wage.

The average American cashier makes $20,230 a year, which in a single-earner household would leave a family of four living under the poverty line. But if he works the cash registers at QuikTrip, it’s an entirely different story. The convenience store and gas station chain offers entry-level employees an annual salary of around $40,000, plus benefits. Those high wages didn’t stop QuikTrip from prospering in a hostile economic climate. While other low-cost retailers spent the recession laying off staff and shuttering stores, QuikTrip expanded to its current 645 locations across 11 states.

Zaynep Ton of MIT’s Sloan School of Management points out that retailers such as QuikTrip, CostCo, and Trader Joe’s don’t view employees as a cost to be minimized:

They start with the mentality of seeing employees as assets to be maximized," she says. As a result, their stores boast better operational efficiency and customer service, and those result in better sales. QuikTrip sales per labor hour are two-thirds higher than the average convenience store chain, Ton found, and sales per square foot are over fifty percent higher.

These companies make trade-offs to compensate for their higher personnel expenses. Trader Joe's streamlines operations by limiting its product selection and seldom puts items on sale. Costco feels only slightly more luxurious than a warehouse, with products stacked on pallets. But (in my opinion, at least) consumers get a higher quality of service from friendlier, better-trained people than they do at, say, Wal-Mart.

Even if you’re not in retail – and especially if you’re not in discount retail – these companies provide a valuable lesson. Paying people a decent salary is an important form of respect. If you want to get the most out of these assets, it makes sense to show respect through decent pay.

I’ve been in many high-end sporting goods companies that don’t invest in front line staff – particularly customer service or warranty. These jobs are typically low paid, and people in these roles are often not well-integrated into the company: they’re seldom included at the start of the product development cycle, and their opinions generally aren’t solicited during the creation of marketing campaigns. Not surprisingly, turnover in these departments is high. And that’s a real loss to the companies, because these are the people with the most contact with customers.

Better wages (and better integration into the product and marketing functions) will yield surprising benefits. If it works at QuikTrip, imagine what it could do for you.

We are creatures of our environment

Stories about rotting garbage and table scraps aren't the place you'd expect to find powerful lessons about running your business. However, a story the other day on NPR about food waste in restaurants (about 10% of the food a restaurant buys ends up in landfills) provided this interesting insight:

The hardest part for many restaurants may just be getting the workers to become aware of how much edible food they waste every day. A few years ago, when [Chris Moyer of theNational Restaurant Association] was managing a big chain restaurant, he wanted to show his cooks there were plenty of opportunities to reduce waste. So he took away the garbage can.

"You'd be surprised, once you take away the garbage cans, if people have to ask permission to throw something away how little you throw away," says Moyer. "It was really quite amazing."

Let's put aside for the moment the issue of whether taking away garbage cans demonstrates respect for people. (It doesn't.) What's striking is how behavior changes in response to environmental conditions. If taking away garbage cans results in less food thrown away, what might happen if you took away the comfy chairs in the conference room? Or required that all meetings are stand-up? Most likely they'd end on time or early. (And, in fact, there are plenty of stories about companies doing precisely that.)

What if you rearranged where people sat in an office? I've been working with a company that complains about poor communication and coordination between the various groups involved in the product development process: the R&D and manufacturing engineers get last-minute changes dropped on them by the product marketing team. Perhaps not coincidentally, the marketing team sits at the other end of the building from the engineers. While it wouldn't be a panacea, I guarantee that if they mixed the marketing and engineering teams together, communication would be better.

Many years ago when it was still in start-up mode and cash was tight, the employees at Giro bike helmets asked Jim Gentes, the founder, to install a shower in the office. Gentes was afraid that he'd pay $5000 to put in a shower, and people wouldn't use it that much. So he came up with a simple solution: he put a piece of paper next to the shower showing the cost, and told employees to put their names down when they showered, and calculate the average cost of each shower. In other words, the average cost of the first shower was $5000; the average after two showers was $2500; after three showers, $1667; etc. By making the cost and the usage of the shower, Gentes ensured that people didn't take it for granted, and probably increased the usage, as people were motivated to drive the average cost down.

Think about it: what environmental changes can you make to improve the coordination, collaboration, and effectiveness of your teams?

"That's just our culture, and we can't change it."

"That's just our culture, and you can't change it." Last week, while presenting a workshop based on my book, A Factory of One, at the AME Conference, I was struck by the fatalism that infected so many participants. We were talking about the impediments to individual effectiveness -- the things that create waste instead of value -- and so many people said with a resigned air, "That's just our culture, and we can't change it."

The disrespect for closed doors and interruptions by coworkers that force people to multitask? That's just our culture. The expectation that we'll respond to all emails within 10 minutes? That's just our culture. The sense of entitlement (or the ignorance) that permits executives to pile multiple projects on you, despite the inevitable explosion in lead time? That's just our culture. And there's no point in fighting it.

This passive acceptance of the status quo is shocking because it's so different from the attitude that these same people take when confronting other waste-ridden systems. I don't know any hospitals that attended AME that shrug their organizational shoulders and simply accept their ventilator-associated pneumonia rate as an unavoidable outgrowth of their "nursing culture" or systems. I didn't meet any manufacturers at AME who say, "Sure we've got a 22% defect rate on our products, but that's just the culture of our machinists." I don't know of any distribution companies in attendance that think, "It's too bad that our drivers mis-deliver packages all the time, but that's just the culture of the drivers and our lousy systems."

Ridiculous. In all of those examples, the leadership teams drive relentlessly to improve the quality, cost, and reliability of their systems and processes. Accepting the status quo is unacceptable.

So why do we have such a difficult time acknowledging both the necessity and the possibility of improvement in the way our people work? Why do we view the processes by which individuals get their jobs done as something fixed, immutable, or unworthy of improving?

The evidence is clear that, to quote Tony Schwartz, the way we're working isn't working. Whether it's the expectation that people are on call 24/7, or the design of workspaces that don't allow people to focus and concentrate on their work, or the overloaded project schedule that results in frustratingly long project lead times, we're just not being smart about how to get the best results from our people.

Why do we accept the fatalistic complaint that "it's just our culture," and there's nothing we can do about it? Just because the inefficiency and waste of our current way of working doesn't directly show up on the income statement doesn't mean that we should tolerate it any more than we should accept that patients coming to our hospital get sicker when they're with us.

It's time to view individual productivity as a non-negotiable area of improvement. That's nothing more than respect for people.

Open doors and closed minds

I am not making this up. A network admin in a class I taught was complaining that she can't focus on her work because it's so noisy at her desk. Her office is right next to the main conference room, so there's a lot of traffic and noise from the meetings held there. Moreover, the company president has decreed an open door policy -- to the point that no one (at least at her level) is allowed to close their doors. Ever. And people don't like to close the door to the conference room either.

She asked the president if she could close her door. No.

She asked if she could wear headphones. No.

She asked if she could work at another desk. No.

She asked if she could close the conference room door. Yes, but it's politically difficult for her to ask execs to close the door because it's too noisy.

I repeat: I am not making this up.

Consider the organizational culture that would not only allow this situation to happen, but would make it difficult or impossible to improve it. I mean, who really thinks that an open door policy means that a door must be open *all* the time? That's insane.

This situation reminds me of the problems that companies have when they adopt 5S or other lean concepts. Management adopts the tools without understanding the problems they're intended to solve, so they end up with LAME instead of lean. (Or see my piece on Kyocera's pathetic 5S implementation.)

At the risk of stating the painfully obvious, an open door policy does not actually require everyone's door to be open all the time. It's a mindset, an attitude, and a culture. It's not the physical position of a piece of wood. Any organization that is willing to sacrifice not only the productivity but the well-being of a worker, has a lot to learn about the oft-forgotten pillar of lean -- respect for people.

I won't bother listing all the possible ways a company can maintain an open-door mind-set without critically undermining people's ability to concentrate and focus on their work. (But if you're interested, feel free to contact me.)

But I would love to know: where do people come up with these moronic ideas?

For god's sakes, go home. (Part 2)

As clear a statement as you can get, this time from Sheryl Sandberg, COO of Facebook:

I walk out of this office every day at 5:30 so I’m home for dinner with my kids at 6:00, and interestingly, I’ve been doing that since I had kids. I did that when I was at Google, I did that here, and I would say it’s not until the last year, two years that I’m brave enough to talk about it publicly. Now I certainly wouldn’t lie, but I wasn’t running around giving speeches on it.

Dr. Deming talked about the need to drive fear out of the workplace. I think that's a key element of respect for people. An environment where people are afraid to go home so they can be with their families (or just go home so they can take care of themselves) is quite the opposite.

Here's Sheryl's video. Well worth the 57 second investment to watch.

Three key principles at Novartis

I love this interview with Joseph Jimenez, the CEO of Novartis. He hits on several points near and dear to my heart. 1. Simplify: Jimenez knows that elaborate strategic initiatives have zero chance of success if they're not translated to a small number of concrete actions that people can take on a daily basis:

At Novartis, our business is very complicated. But you have to distill the strategy down to its essence for how we’re going to win, and what we’re really going to go after, so that people can hold it in their heads — so that the guy on the plant floor, who’s actually making the medicine, understands the three priorities that we have as a company.

2. Identify the value: Jimenez understands that the value of one's work is ultimately decided by the customer, and that far too many corporate activities are simply empty exercises by that measure:

We needed to shift the company to become more externally focused, versus internally focused. People were proud of producing 75-page PowerPoint documents, and that was seen as a success.  If the C.E.O. or the head of the division complimented you on your PowerPoint presentation, that was a good thing.  And I said, forget that. We have to put the patient at the center of everything we do.

3. First, look in the mirror: Jimenez describes how at an earlier job, his division kept missing their sales forecasts. A consultant pointed out that the root cause wasn't a lack of skills or a poor planning process; it was fear: people were afraid to tell the truth. And he realized that he bore some responsibility:

We had to change the behavior in the organization so that people felt safe to bring bad news. And I looked in the mirror, and I realized I was part of the problem. I didn’t want to hear the bad news, either. So I had to change how I behaved, and start to thank people for bringing me bad news. It’s a chance to say: “Hey, thank you for bringing me that news. Because you know what?  There are nine months left in the year. Now we have time to do something about it.  Let’s roll up our sleeves, and let’s figure out how we’re going to make it.”

Jimenez doesn't talk about lean in this interview. But the lessons and values he discusses certainly fit in with core lean principles.

First, think about the purpose.

If you haven't yet done so, read the NYTimes interview with Phil Libin, the CEO of Evernote. Phil's focus on value, rather than form, eliminates waste, shows respect for people, and leads to better results. For example, there are no offices or trappings of seniority at the company. In Phil's view, they're not only wasteful, they have a negative effect on people's work:

Nobody has an office. In fact, there are no perks that are signs of seniority. Obviously, there are differences in compensation, but there are no status symbols. You certainly don’t get a better seat or any of that kind of stuff, because they’re just unnecessary. They create artificial barriers to communication. They create artificial things that people focus on rather than just getting their job accomplished. We try to have an organization that just helps you get your work done, and then it’s my job to eliminate all of the risks and all the distractions so you can just focus on achieving. That attracts people who are primarily motivated by how much they achieve.

Phil's effort to improve communication extends to the uprooting any sort of email culture:

We strongly discourage lengthy e-mail threads with everyone weighing in. It’s just not good for that. Plus, it’s dangerous, because it’s way too easy to misread the tone of something. If you want to talk to somebody and you’re a couple floors apart, I kind of want you to get up and go talk to them.

I'm most impressed by Phil's approach to vacations. If you think about the real value of a vacation, it's to enable people to refresh and recharge. The typical fixed two week vacation policy is more about the form than the real value. After all, if your job requires insanely hard bursts of work, or if you're having health problems, you might need more time off. Here's how Evernote handles it:

We recently changed our vacation policy to give people unlimited vacation, so they can take as much time as they want, as long as they get their job done. If you want to take time off, talk to your team, but we’re still measuring you on the same thing, which is, did you accomplish something great? Frankly, we want to treat employees like adults, and we don’t want being in the office to seem like a punishment. We always try to ask whether a particular policy exists because it’s a default piece of corporate stupidity that everyone expects you to have, or does it actually help you accomplish something? And very often you realize that you don’t really know why you’re doing it this way, so we just stop doing it.

(N.B. This vacation policy warms the cockles of my heart, because it's the way I managed my team years ago. It told them to take time off when they needed it, and not to bother reporting it to the HR department. Like Phil, I wanted to treat them like adults.)

It's the "default piece of corporate stupidity" that infects most organizations -- things that exist because that's just the way it's always been done: report and presentation formats, agendas and participants at those giant standing meetings, certain expectations, etc. And it's often the "default piece of corporate stupidity" that saps motivation, leeches passion, and inspires cynicism.

Focus on the purpose and the value. Then figure out how to deliver it. You might be surprised at how much easier it is.

Respect for People, Richard Branson Edition

After delving into the meaning of Dr. Shingo's oft-cited quote about the purpose of improvement, and pontificating about the role of transparency in leadership, I figured I'd lighten it up a bit. And what better subject and spokesmodel for lightening up the mood than Sir Richard Branson? Aside from his well-known business bona-fides, and his irreverent attitude towards accepted business standards, he's not a big fan of neckties:

I don’t know why the tie was ever invented. It’s about one of the few things that Britain has exported successfully.... I often have a pair of scissors in my top pocket to go cutting people’s ties off.

I do think that ties most likely are still inflicted on people because the bosses, they had to wear it for 40 years and when they get into positions of responsibility they’re damned if they’re going to not have the next generation suffer. So ties continue to exist. My lifelong campaign to get rid of the tie has failed miserably.

(Before you inundate me with comments about how cutting off someone's tie might not really be the pinnacle of respect -- please don't. It's a joke.) But I do think Mr. Branson is onto something in his efforts to make people comfortable at work.

I have a nearly pathological aversion to ties myself, but sadly, they tend to be de rigueur in the business world. So I'll continue to cheer Mr. Branson on in his quixotic journey to rid the world of this useless (anachronistic?) item of haberdashery.

Respect for People, Shingo Edition

  "There are four purposes of improvement: easier, better, faster, and cheaper. These four goals appear in the order of priority."

- Shigeo Shingo

The wisdom of this quote struck home recently, when I was writing my March newsletter on stretch goals. One problem with stretch goals, I believe, is that they focus on outcome metrics, and can therefore be gamed. The cost of a product or service is an incredibly important metric, but it, too, is an outcome metric, influenced by a huge variety of factors. Because of that, when a (non-lean) organization focuses on cost reduction, the most common first step is laying off people. The second most common step is downgrading the product specs, making the product both cheaper and "cheaper." Neither of these approaches are good for the worker or for the customer.

What's fascinating about this quote (to me, anyway) is that Shingo prioritizes worker health and safety above all else. First, the process must be made easier; then -- and only then -- should we worry about product quality, lead time, or cost. To be sure, making a process easier very often improves quality, speed, and cost, but that's not the focus. The focus is on the people making the product or providing the service, not the product/service itself. Putting humans at the center of kaizen is another example of respect for people. As Mark Hamel pointed out with regards to kaizen at Toyota,

Occasionally, the worker generates a great idea around quality or working process improvement. But, the primary focus for the worker is typically around the “humanization of work.“ In other words, it starts with making the work EASIER.

And this jibes with what Jim Womack wrote all the way back in 2006: that instead of focusing on waste, we should focus on unevenness (mura) and over-burden (muri).

In most companies we still see the mura of trying to “make the numbers” at the end of reporting periods. (Which are themselves completely arbitrary batches of time.) This causes sales to write too many orders toward the end of the period and production mangers to go too fast in trying to fill them, leaving undone the routine tasks necessary to sustain long-term performance. This wave of orders -- causing equipment and employees to work too hard as the finish line approaches -- creates the “overburden” of muri. This in turn leads to downtime, mistakes, and backflows – the muda of waiting, correction, and conveyance. The inevitable result is that mura creates muri that undercuts previous efforts to eliminate muda.

Of course, if we make demand more even, and if we avoid overburdening people, we're essentially making the work easier.

Lean is often referred to as a total business system. As I continue to learn more about it, I see more and deeper linkages between areas that I never realized before. This is one example: how kaizen -- properly done -- is not just a way to remove waste or make more money. It's a profound expression of respect for people.

Disney's Electronic Whip

What's the purpose of visual management boards? Is it to help identify problems and improve processes? Or is it to instill fear and insecurity?

Steve Lopez at the LA Times shows how Disney hotels use visual controls for the latter pupose:

In the basements of the Disneyland and Paradise Pier hotels in Anaheim, big flat-screen monitors hang from the walls in rooms where uniformed crews do laundry. The monitors are like scoreboards, with employees' work speeds compared to one another. Workers are listed by name, so their colleagues can see who is quickest at loading pillow cases, sheets and other items into a laundry machine.

Isabel Barrera, a Disneyland Hotel laundry worker for eight years, began calling the new system the "electronic whip" when it was installed last year. The name has stuck.

Employees in the Anaheim hotels are required to key in their ID when they arrive, and from then on, their production speed is displayed for all to see. For instance, the monitor might show that S. Lopez is working at an efficiency rate of 37% of expected production. The screen displays the names of several coworkers at once, with "efficiency" numbers in green for those near or above 100% of the expected pace, and red numbers for those who aren't as fast.

Measuring productivity among hotel workers is apparently common in the hotel industry: how fast are rooms being cleaned, how quickly is laundry turned around, etc. That's not so different from the measurements that many organizations take. However, there's a huge difference when the measurements are used to identify problems in a system or process in order to aid in improvement activities, and when they're being used to "motivate" workers.

"I was nervous," said Barerra, who makes $11.94 an hour, "and felt that I was being controlled even more."

According to Barrera, the whip has led to a sort of competition among workers, some of whom have tried to race to the head of the pack. But that has led to dissension and made other employees worry that a reasonable pace won't be enough to keep the boss happy. Barrera and Beatriz Topete, an official with Unite Here Local 11, said employees have been known to skip bathroom breaks out of fear that their production will fall and managers will demand an explanation. They say they felt bad for a pregnant employee who had trouble keeping up.

In Disney's case, this system is -- predictably -- doing the polar opposite of Dr. Deming's precept to drive out fear. With no control over the system, and no ability to make improvements, workers are forced into a helpless chase after some arbitrarily defined level of productivity. It's clear that no one knows how the targets were set and what levels will "keep the boss happy." To Deming's point, if the system in which people work accounts for 90-95% of performance, simply displaying people's production speed is less than helpful. It's toxic.

I'll qualify my blog post at this point to say that I don't know anything about the journalist who wrote this piece. Is he a muckraker? Is he biased? Did he truly investigate this situation by talking to management as well as workers? I don't know. However, I can say that the presence of fear and uncertainty is a strong indicator that, from a lean perspective, there's a problem at the Magic Kingdom.

More broadly, the misuse of these visual controls is a powerful demonstration that lean isn't about tools. Used properly, Disney's flat-screen monitors could be similar to an andon, alerting management to a problem in the system, or in employee skill development, or in process design. Used as a instrument of measurement for punitive purposes -- well, all you get is an electronic whip.