What is Lean Leadership?

Transcript on Lean Leadership

I actually visited Radiometer or Radiometer I guess depending on what language you come from, shortly after the invasion and I was in Denmark to give a talk for Danish industry, which is the industry association. And by the way, in my experience one of the very few industry associations in the world that actually creates any value. Most industry associations lobby their government for lower taxes and for other types of support which is fine, but it sort of distributional, it takes it from here and puts it over here. Danish Industry has a very conscious program of trying to teach organizations how to create more value with the same resource, and I would recommend that to any industry association anywhere. They asked if I would come to Denmark and give a talk and I have a condition whenever I go somewhere to talk and that is I have to actually go to some Gemba. Some place where value is actually created and see, so I said fine I’ll give a talk what Gemba are we going to see.

And when I got there I discovered it was a [inaudible 00:01:20] and we went out and the most important things for this audience from that visit was simply what I saw in the lobby. That in the lobby the one page policy deployment matrix was posted where everyone coming in every supplier, I presume every competitor could see this. This was their strategic plan and it was posted in the lobby and of course I said, “Well, why do that, I knew the answer,” and they said the point is not what to do, the point is doing it. Our competitors can figure this out that we need to reduced inventory dramatically throughput time proved quality and so forth, how could that be a secret what’s important is doing it. That chart by the way Dan and I actually used in Chapter five of the lean thinking book 12 years ago, it’s not a secret one page. What are the key business objectives, what are the measures that can see these objectives. Who is going to do what when, who is the responsible person one name please for making that happen, and what is the evidence we are going to collect to show that it has been done. No big thick binder, one page for a year here is our strategy from an inside the business standpoint.

That’s pretty striking and a very impressive story and I took a walk, and I must say what I saw was consistent of what I just saw here. The PowerPoint here was consistent with reality there which is not always the case. And why not in our way of thinking about this increasingly is because we don’t have any what we call lean management. I want to talk for a few minutes for a very few minutes about what we mean by lean management. Now, I’ve written here that the work of management – by the way that is always the question, ” What is the work that you do as managers?” Work by definition is that which creates value. There is incidental work which needs to be done in order to make the real work possible, but no customer would think that is actually valuable to them, and then of course there is muda or waste and what most of us and most of our time doing is not work but waste. So, what is the work of Management and I stated this very simply and you can hardly I think, “Are you with this?” That to work is to align and engage employees in order to create sustained and steadily improve, create sustained and steadily improved value-creating processes that solves customer problems.

You may not think of it quite this way, but your purpose as an organization and that’s whether you’re for profit or nonprofit healthcare education government service manufacturing anything you want. Your purpose is to solve some customer problem because your customer gives you the money to keep going. You’ve got your stockholders or you’ve got your government or wherever, that’s invested in you they want their money back. The money you as managers get to do interesting things with is from your customers and of course, your customers want you to solve their problem. Very simple what is the customer problem you seek to solve, what are the processes that you must put in place to solve it, and then how do you align and engage the people who will create these processes who will sustain them in and who will steadily improve them. Stated another way there in the second bullet, what is your purpose, what are the processes, you got another purpose first, what are your processes that achieve that purpose, and then what about the people who managed the process. There is nothing less natural in the world I suppose, the universe than a brilliant process.

And the only thing that stands between a brilliant process and rapid and chaos is you as a manager. Inherent desire of all processes is too rapidly become bad, in fact not a process at all. What we want to do stated one-third way is to eliminate not just the waist we all know about muda waste elimination, but also to eliminate the mura which is variation in the system typically produced by the system not by the customer. Which creates the muri, which is the panic that you feel every day when you go in the overburden. The things out of control, the [inaudible 00:06:20] behind and that are some important things I would like to do to improve things, but instead I’m going to drive the fire truck and by the end of the day perhaps we will be back were we should have started. This is why managers don’t sleep at night. Mura causes muri that causes more muda, and so we want to make sure we understand the relationship.

All right, this is all very simple. Why is this so hard to do? Well let me suggest and you may not realize this, but let me try to bring this to consciousness. That we have all, every single one of us been trained about what management is and how to manage with a set of principles that are actually inconsistent with doing what I have just said clearly defining purpose of the problem to solve, clearly putting in place a process that achieves that purpose by engaging people. We have actually not been taught to do that, but we’ve been taught something quite different which we call modern management. This is Management School Management, this is by the way, where do people get educated it’s in management schools and in consulting. That when you think how you learn to be a manager. Some of you learned it on the job, but in of a lot were given it prepackaged. Here is what management is and here is how you do it.

What we here call the Alfred Sloan School of Management because Sloan it was the architect of the modern day General Motors, now deeply imperiled, invented an entire way of thinking systematically about management that actually superseded Henry Ford’s way, which by the way was the belief as the founder entrepreneur that management was not necessary. Henry Ford asked Henry School of Management and Sloan inherited a company out of control in 1919 and it gone bankrupt twice in 10 years and said, “What I need to do is to actually create management system,” He did, he wrote it down, “My years with General Motors,” please read it. Fascinating description of modern management as then elaborated by General Electric and other companies, many other multinationals to create, and by the way the business schools to create modern management. As it happens this is a lovely accident, my office in Cambridge is directly across the street from the Sloan School of Management, which is building an enormous new school. And in a lovely gesture this week they have on the top floor on the roof out of steel, they are building a temple which I presume is where the priests of modern management will perform their rituals. We’re looking forward to this, we’ll also designing a bulls-eye to put on building, something that Homeland Security will not recognized as such, because in a metaphor extent only you understand metaphoric this is our target, ‘Modern Management’.

We have an alternate that we call lean management. There is no invention here on my part on dance part on Pascal’s part, on John Shift [SP] part we do not invent, we steel. And by the way, a Toyota has been very happy to a bet theft, and so therefore this is not a secret it is stolen property, no invention was necessary. The architect E.G. Toyota, a gentleman most of you have never heard of, he is 95 years old, he was a family member chairman of Toyota in the 1950′ and 1960′ who actually through a series of experiments, very important in a recurring theme, a series of experiments invented a management system. I do believe that Sloan was the great pioneer of management thinking of the first half of the 20th century and A.G.Toyota was the great innovator of the second half and hardly anybody knows that and part of our mission to make this understood.

What I thought I would do is to take just a few minutes to do a side by side comparison of modern management and lean management. I won’t to tell you who you are, you can figure out who you are. I wont tell you how your company works and what School of Management it resides in, you can figure that out. Let’s just take a little walk through for comparison purposes all of this is in the slides that you will receive. I must say this is quite provocative. Now, this is my initial cut and doing this Dan and I are mounting a big project on management to further elaborate lean management, and we do reserve the right to change our minds about some of the principles. This is not set in cement this is based on not exactly casual empiricism, this is pretty systematic observation, but there are many times you discover levels below levels.

This is a preliminary cut at your leisure while going home looking out the window the of plane, while driving down the motorway, when you can’t sleep at night you might want to just go through and say what kind of manager and what kind of organization are you. What I’ve done here is, in the top in the plain text, I have modern management contrasted with the italics below that I will call Lean Management. Major difference is the difference between authority and responsibility. I was certainly taught that to solve a problem I have to have the authority. How many times have you gone to your boss and said, “Boss you want me to solve this problem if you can just reorganize and get everyone to report to me we’re going to solve this problem”. This is a very natural things for him to do. Give me the authority if you are burdening me with the responsibility.

And in this Toyota world that we have derive this from there is actually a distinction. To win authority which is an on chart idea it’s a vertical idea and responsibility that is a horizontal idea. And as you will hear in John’s talk later about A3 it is a routine thing at Toyota for a person to be asked to analyze and try to solve a problem involving people and departments over which they have no authority at all, and for us that would seem to be an absurdity and yet they do it every day. It’s a difference between an authority focus organization and responsibility focus organization to a chart organization that is vertical and a process organization that thinks horizontally. Vertical, horizontal, authority, responsibility.

Just to ask which of you, how are you judged as a manager? In modern management typically you are judged on results at the end of a reporting period. Make your numbers, let us set your objectives. This is what Toyota calls, ‘Rear-view Mirror Management’ that you drive down the road and you look in the rear-view mirror to see what you run over, and they suggest this is not an intelligent way to drive. The contrast is management by process, instead of telling me about your results please tell me the person above that you’re reporting to, tell me about your process, tell me about how capable it is, tell me about how robust it is, how much Mura there is, how much Muri?

If you are managing every aspect of your process every day, your results will be what they’re supposed to be. A process produces exactly what it is capable of producing. Not more not less, if it is only capable of producing Mura and Muri I guarantee it will produce Mura and Muri. If it has been designed and managed in a way that it is stable you will get the result you’ve expect. That’s why the end of the reporting period what do you know, the result is what you expected. As opposed to a surprise indeed a variance that must be explained away, and all of you I’m sure had times in your career where your great contribution to the company was to explain why the variance was not the problem of your part of the organization. We got a variance, we done some analysis, and we have figured out the problem and this is a survival and a job skill. Just to sum up on that if the process is right the results would be right, if the process is wrong no matter how your being instinctive to get results the result will actually be disappointing.

How do you plan? A third aspect. Do you plan from the top down in which… You say the whole point here is to make the plan. The point of management is to make plan, or do you plan through a circular feedback loop in which the boss says instead of here’s the plan the boss says, “What do you think the problem is?” This is to the next level down in the organization. What do you think the root causes? What do you think the potential solutions are? Not one, please, please, please. And by the way solutions, really the wrong word. Let’s just call them counter measures. What are the potential countermeasures? What is the best of apparent countermeasure to experiment with? And who, when, where, how is going to conduct the experiment with the countermeasure to see if it can deal with the problem. And by the way, what is the measure, the simple objective measure of whether the experiment has been successful?

And in this world they say planning is invaluable, but the plan itself is rapidly worthless. That is expected because things change, everything in life changes all the time so rather than making the boss’s plan we indeed will through a different process, it is a process to draw up a plan and then we expect that plan to change. This idea, to say it another way, that you have this plan from the top and if properly implemented it produces results and just said this in another way, the alternative way to think the Lean Way, is that all plans are simply experiments, they’re simply experiments and they are evaluated through PDCA. That’s Dr. Deming scientific method Plan Do Check Act. It is amazing how in this world this very modern world 2008 a very modern number there is so little science in management, it is really shocking.

My daughter is getting a PhD in chemistry and I go to her lab and she says, “Gee, dad you do realize that real science mostly the hypothesis is rejected. How come out where you live in management it would appear that almost all hypotheses are confirmed, okay that it is successful. This is not true in the physical world why would this be true in the management world?” and I said, “Well, Carry I don’t have an answer, in fact I think you’ve actually answer the question by asking it.” Skip going here. Again, what kind of manager and what kind of organization are you? Are you a generalist? Rotate it frequently with weak knowledge of the process you are currently managing. Tell the truth, but don’t say it out loud, just tell it to yourself have an inner conversation. And by the way, you’ve got an instrument inside your brain, you can see it on your instrument panel which is that the success of your career is proportional to the speed of your job jumps. That if you’re not changing often and you’re not getting anywhere. And in contrast that with the Lean idea that you should have an extended interaction with your process and you should have deep process knowledge none of the itty-bitty details that’s not the point because other people will understand that, but the end end nature the process and its connections to the rest of the business.

As I go around in a lot of companies, it is amazing to me, I simply asked to spend time with manager, a line manager typically business school educated good technical background, started as an engineer, something like that. Become a manager they now have an activity, they don’t even say it in so many words, but this thing they are managing is a process and their knowledge of that process is remarkably scanned, and by the way they are very hard-working people. And everything’s out of control and their beliefs about their contributions to the business is, they think their work is rework, I think their work as managers is rework. Which is to say to do work-arounds, work-arounds on broken processes which in fact they do not understand. So, just ask, don’t say it out loud, what kind of manager and what kind of company are you?

Modern management of course created the modern management school. And it really to management school they say, “What are the management schools themselves?” and they got all these consultancies, young people come out of university they go into McKinsey, Centure [SP], or Boods [SP], or whatever. It get rotated through lots and lots in situations and they observe what management is and that’s how they learn how to become managers or they went to school where they were actually told how to be managers, although it is striking in a business school curriculum how little of it actually has to do with what managers do. It’s lots and lots of tools and technical things how to do financial analysis, and how to do strategic analysis, and how to do operational sort of mathematical operation analysis. But what is it that managers actually do? That’s all learned implicitly. Contrast that with this Lean world than we have been studying that some of us have come off where the belief is that management is learned on the gamba by doing PDCA, this is how you learn to be a manager. You try experiment, you propose counter measures to deal with problems that you have root cause and you see what happens and you learn something every time, and by the way often the hypothesis is rejected and that’s okay because that’s how we made progress, just remember to write down the results and share. We have a wonderful tool after the coffee break for how to share.

Where do you make decisions? This is really interesting. I go to companies I go to a lot of companies, by the way, we’re not consultants in a conventional sense, I go to companies to learn. People call me and say, “How would Toyota run our industry?” I always say will I need to take walk, could I walk through your development process, and your fulfillment process, and your customer support process, which is the three key processes in any business. How you design and bring to the market the things that you want to do to solve customer problems. How do you fulfill them once they actually asked for some of what you’ve got and then how do you sustain and support customer through the life cycle, and through the long interaction you might have? If this goes wrong and you have to plan, and so where do you make decisions? And what I see when I go to companies is this, they make decisions in conference rooms looking at screens with lots of data, lots of data.

And then when I go to the Toyota world that we know about what I discover is that the idea is to go to the Gama which is the place where value is actually being created or perhaps only waste is being created, and to as they say convert data into facts and Taiichi Ono I guess said this to begin with said, “I like data but what I really love are facts,” and what he meant was data in context, you go see. By the way, most data are not right and most data are irrelevant to the actual situation to the actual issue. Gassy [SP] asked why, why, why, why, why, why asked why? And when you do that show respect. Highest form of respect is to go to someone who works for you, works with you and because they’re smart and because you respect them you ask them very hard questions to which neither of you knows the answer, you ask why? That’s how you show respect.

I want to ask how you do that, are you a data in the conference room organization? Are you a data in the conference room manager? Are you a gemba fact-based go see, ask why, show respect manager? And when you do that as a manager, who solves the problem? Well at modern management world at the top, that’s why we have the staff, that’s why we’ve got all the belts. The green belts, the lean belts, and the whatever belts, the black belts, mean belts I don’t know that’s the cost production guys, the cost-cutting guys the mean belts. Staff, you got a problem and by the way, Sloan and his book. In that wonderful book, My year with General Motors talks about the role of the staff and the staff is to have the technical knowledge to solve the problems that the manager outsources. Outsourcing is been going on for a long time in management and you outsource problem solving to your staff. And in at ling world the real idea is, sure in the transformational period you may need a big a group. A big guys in promotion office, but as time goes on just as it happened at Toyota that actually becomes very small group. Why is that, it’s because every manager is problems solver. And by the way, the reason that many of you were sent to green belt school, or black belt school and now I can’t remember a thing, very talented people, who think about the truly truly hard problems.

Standardization. We all sort of in some way believe in standardization. Modern management, again standardizing is done by the staff by the industrial engineer. Someone who goes around and standardizes others work typically with little gamba interaction, and with no audacity, very interesting, recently in a company where they had engineers that worked out the amount of time it took to do every job, and so we walked along through a in to in process, and it turned out that the amount of time on the official engineering documents can do the job, had no relation whatsoever at all at that point in history to how long it took to do anything. And yet all the Travelers that were then bundled up in the MRP had all these time assumptions that were all wrong, everybody knew that we were wrong and they said, ” But the engineer did it and so it’s been documented,” and so there it is. And it’s so totally different from thinking that the job of front-line management working with direct primary workforce is to standardized the work.

So, everybody agrees this is the best way to do it, this is how long it takes, this is precisely what we need and we’re all going to do it that way because we were involved in figure it out until we agreed to try an experiment, which is what Kaizen is. Kaizen is PDCA to see if we can do it better and if can’t do it better well then we will have a new standard and if we can’t we go back to the previous standard. How do you think about standardization as a staff activity done to people or as a line activity done with people. Suppliers in that modern world, pick on market criteria, and you managed the contract. I was just out with a big multinational big household-name highly successful company and the way how they manage their suppliers is to scream about the contract. And by the way, the key number one metric is delivering on time to MRP and of those of you who live in an MRP environment the only problem is that it’s always wrong. And so therefore you are being judge or whether you deliver to a schedule that has no relation to actual need. By golly, you better on time to imaginary need, actual need, not even measured, and everything is very tough because as a supplier we’ve got other changeable alternative of course is to have a long-term alignment. That’s a whole long story right there.

And then customers. How do you identify what customers you want to work with and what is your relationship and typically in a modern management company its categories of customers involved in short-term transactions. One of the biggest problem with a short-term transactional relationship between you and your customer is neither you nor your customers can learn anything. And we’ll have very interesting discussion later today about what happens when you reverse that logic as you see below as you identify customers by category of problem to solve. What problem is that we’re going to solve for you and how we going to do that through a long-term problem solving collaboration. And I should think many of you and many of your organizations just can’t imagine that’s impossible. That how can we do that. Isn’t everything just a deal or offering a deal. We’re offering a deal let’s change you money for something we give you give me money we give you something and off we go to the next time.

Go fast. Don’t you all think you are to go fast? All of you as we say in the states quick studies. I’m a quick study I figure things out real quick. Finally I found a place where I could live that’s the bottom part of the chart because as a kid I was always a slow study, and I had a big brother, brilliant big brother who’s a quick study and we would have these interactions, it was years ago and I didn’t realize what was happening, but my big brother would get the answer very quickly and after about a 30-minute leg I would say, “I think that was the wrong question,” and I was thought to be retarded. I’ve been thinking about this for a while, I think it was the wrong question, I don’t think that’s the problem but most of us have learned. By the way the way, the boys are the worst, when you were in school as soon as the same on this side of the ocean at least I as a young boy in school, I was trying to play the game and so when the teacher was asking the question I had my hand up before the question was finished because I knew I can come up with an answer or I hoped that I can come up with an answer. Even though I really wasn’t very good at that game, we’ve all been taught somehow or other that you need to go fast.

What we call now jumping to solutions, jump to solutions. And it is amazing how much of what goes on in an organization is jumping to a solution and then working backwards to prove that that actually is the answer to the problem. And by the way, once you got that solution you become deeply invested in it because you’re going to be judged as we say before there are no tolerances in most organizations for experimental failure, for experiments that fail. Alternative in the Toyota world is go slow. Start with the problem keep digging you probably haven’t figured out the problem go deeper. Once you figured out the problem, what are the whole range of possible counter measures? Not just one. Now, let’s think about it looks like this is the best probably some combination of those you thought of let’s try and experiment, what they call go slow in order to go fast. If you look at it the development process Toyota, their pursuing a whole range of alternative solutions to a design problem much later and longer than other organizations would. Tremendous front loading looks very costly, so slow and then once they get to the point of this is it then they can go very, very fast. Go slow to go faster, do you work in a go fast or go slow. You don’t need to go slow. You just end up going slow because that it’s all rework.

And then finally, again as you’re flying home or as you can’t sleep at night or driving down the way. Ask are you a vertical organization or horizontal organization? Most organizations are vertical and by the way they evaluate performance at single points. They are point optimizers brilliant point optimizers, my point. By the way, we are each of us the point we seek to optimize which is the great challenges civilization, that I just want to make myself as do you but, the problem is we can’t survive doing that. Well organizations don’t do well either with point optimization. The alternative is to adopt a horizontal focus with responsibility for someone to look at a process to take the responsibility for getting it to work faster and better to solve customer problems. That is a way to control or to reconcile so it control with flexibility which is the issue of Alfred Sloan in the first chapter of My years with General Motors sets out to address.

So, the great problem of modern management is how to reconcile control, so that the captain on the bridge has some likely that the ship is going to sail in the direction at the speed that it’s desired, and yet have flexibility down below because the captain can’t possibly know what’s going on in the engine room and if he does well there is something wrong here. So, that is the challenge. How would you pursue that and this gets us the after the break discussion but let me just summarize it real quick. What we heard was policy deployment, strategy deployment, at of all Japanese mouthful of Ocean County, but it is the effort to align and engage people and what the critical issues are that one page in the lobby at Radiometer that most organizations have in a thick book that nobody believes to the extent they even understand it. And by the way, if you wanted to transition from modern to lean management that would itself become an objective of your strategy deployment exercise, something to think about.

Then how do you actually deploy? You have these objectives that are identified as the few priorities at the top someone has to make those happen, that’s deployment, and that’s where they have the wonderful tool of a three which will be explained by John Schuck [SP] here in minute. You also use it for the solving the problems that come up every day and every business this is what managers do and then how do you evaluate proposals that come up from below, your people if you’re a manager at any level are always coming to you with ideas. Some of them are really good, most of them probably are really terrible not because they’re bad people because the solution they are proposing doesn’t address the problem that they have it really analyze. What is your method as a manager to deal with all of those proposals coming to you other than just to say get lost or just to say just do it. And then finally at the frontline of management, standard management, standard work with continuous [inaudible 00:37:11].