Improvement is Now Mainstream in Healthcare

A leading healthcare improvement organization has declared that we have reached a watershed moment in efforts to improve healthcare.

            Don’t look for any formal announcement on this – there isn’t one. But I came across just such a declaration in the description of a new workshop being offered by the Institute for Healthcare Improvement.

            In April, IHI is offering a program called “Executing Change to Achieve World-Class Performance.” The fact that they are presenting such a program is certainly not remarkable; these kinds of events are offered all the time.

            What interests me is what IHI has chosen to say on the Web page for the event:

 

            In recent years, quality improvement in health care has progressed from a fringe philosophy to mainstream movement. Nearly all care delivery organizations are participating in some quality improvement, and many or most organizations can now reach results on a focused project.

 

            Is that true? I hope so.

            And I give credit to IHI for not only focusing on this area but also for trying to develop a relevant workshop. And the workshop is not just a two-day event, but part of a three-month “collaborative learning initiative” that will also involve individual coaching, phone calls and video conferences.

            It’s hard to say whether the event will truly be of value. First, as lean believers know, improvement is something you focus on continuously, not just for three months – though in fairness to IHI, it says the goal of the program is to “create a roadmap for establishing the capability to achieve unprecedented system results through well-organized execution of system changes.”

            (Yes, I know, it sounds like the grandiose statements of many consultants, but I’ll assume their hearts are pure.)

            Second, I’m not clear on exactly what type of framework for execution is being taught. In the description, the word lean is not mentioned. What it says is:

 

            IHI launched an R&D project to gather data on world-class approaches for execution used by organizations inside and outside of health care. Interviews were conducted with leaders from Caterpillar, Milliken, DuPont, Baldrige-winner OMI, and SRF from India (one of the few winners of the Deming Prize outside of Japan). Through its programs and alliances, IHI also had opportunities to observe, interview and learn from top-notch health care organizations such as Ascension Health, the Bellin Health System, HealthPartners, OSF, the health system of Jonkoping County in Sweden, and Cincinnati Children’s Hospital Medical Center. Each of these organizations contributed important insights on executing change when world-class performance at the system level is the goal.

 

            IHI apparently intends to offer a small smorgasbord of lessons learned from these organizations. I question whether that’s the best approach, but if it helps at least some attendees begin an improvement journey, then it probably won’t be all bad. Let’s hope for the best.

 

The Best Leaders Are Discontented

            That concept of discontent, at the heart of a lean strategy, was recently confirmed by the results of a survey of manufacturers conducted over the past two years.

            Imberman and DeForest, a consulting firm that specializes in designing employee incentive plans, surveyed 427 manufacturing plants in 16 industries in six states (Indiana, Michigan, Ohio, Illinois, Pennsylvania and Wisconsin). The survey of top executives took place in 2004-2005, but was followed by interviews with mid-level managers and first-line supervisors. It also included analysis of the financial records of the companies. (The survey is described in a recent issue of Target, the magazine of the Association for Manufacturing Excellence.)

            The consulting firm analyzed the results to determine what distinguished the better-performing companies – according to metrics that include inventory turns, scrap/rework, employee turnover, on-time shipments and return on sales – from all others.

            Two key factors emerged, both pertaining to leadership. In the Target article, firm principal Woodruff Imberman, Ph.D., defines superior leadership as:

 

            …a gnawing internal drive to improve and dissatisfaction with any performance short of the best… The leaders of those companies reporting top (for their industries) performance in our survey exhibited a perpetual drive to improve, a focus which balanced outside sales and opportunities with a concern for efficient internal operations. Such a drive generates a sense of self-respect, credibility and urgency. Executives in the less-profitable companies lacked these key leadership traits; in turn, they accept the status quo rather than attempt to improve on it.

 

Imberman said the second key factor emerging from the survey was how lower-level managers and supervisors are trained and directed.

 

Those with good financial results trained supervisors and management how to organize their employees’ work efficiently within an environment of continuous improvement. The ones with poor results trained supervisors how to manage their employees’ behavior.

 

As an example, he discusses a Wisconsin foundry that, in the early 1990s, added a machine shop to finish rough castings.

 

Nearly a decade later, the effort still floundered. A group of supervisors from the foundry’s machine shop reported that they lacked a system to monitor accurate rates and scrap and that no one checked blueprints coming down from engineering. As in many other “also-ran” companies, supervisor training covered how to manage employee behavior – absenteeism, etc. Organization of their work was ignored.

 

What I found even more insightful was Imberman’s description of what he said were the “almost universal” traits of those companies in the middle or back of the financial pack. These include:

 

·        The tendency to deal with a problem by talking rather than acting

·        Confusing effectiveness with “busyness”

·        The inability to listen

·        A failure to communicate effectively to subordinates the need for high goals

 

He concludes:

 

Many manufacturers say their employees are their biggest asset, and boast they urge them to “work smarter, rather than harder.” Yet many do not provide the inter-related tools, the monetary incentives, the properly trained supervision or the systems of work for them to do so.

 

 

Lean Supply Chain is a Key Initiative

Growing numbers of industry executives are making a lean supply chain one of their top priorities, but their use of outdated technologies is a barrier to achieving that goal.

            Those are some of the findings from a survey conducted by software company E2open at the recent SAP Logistics and Supply Chain Management conference, an annual event. Attendees from more than 160 companies completed the survey, ranking their top supply chain initiatives.

            (As an aside, using conference attendees is not a scientific approach to conducting a survey, but the results can still provide some insights.)

            Lean supply chain was the top initiative, identified by 48 percent of the respondents. Close behind was operational improvement programs, identified by 45 percent. The survey defined operational improvement as, for example, obtaining visibility into supply chain information by replacing manual processes with automation.

            Globalization – leveraging economies of scale across multiple operating units – was third at 39 percent. And fourth, at 29 percent, was improvement in trading partner integration by migrating from legacy systems to multi-enterprise supply chain platforms.

            (It’s not surprising that the results of a survey conducted by a software company at another software company’s conference have a bias toward technology issues.)

            Asked to name the top business objectives for their supply chain initiatives, respondents cited:

 

• Reducing operating costs (66 percent)
  
• Reducing inventory (52 percent)
  
• Improving on-time delivery (41 percent)
  
• Improving availability and cycle times (39 percent)

 

            But what an E2open news release called “significant capability gaps” stand in the way of achieving improvement. That statement is based on what respondents said when asked how they synchronize their supply networks on inventory data, forecasted and actual demand and supply, and other information.

 

• 44 percent use EDI
  
• 42 percent use email
  
• 29 percent use Excel spreadsheets

 

            And according to the news release, “numerous respondents indicated that they are still using paper and fax.”

 

            I’m a little startled, though I probably shouldn’t be, that so many companies have not moved up to the most modern technologies. You don’t hear a lot of mention of technology in lean discussions, but we all know technology is essential to a smoothly functioning supply chain.

 

            Is achieving a lean supply chain a key priority at your company? Are you using the best technologies to make that happen? What’s your experience?

 

More Lean (and Other) Blogs

Not long ago I posted a list of what I viewed as The 10 Best Lean Blogs, also including links to several other interesting blogs not entirely focused on lean.

            I recently updated the links to other blogs on this site. (You can see them by scrolling down the left column.) However, I wanted to specifically mention those I’ve added that were not in my original list.

            Under Lean Blogs, I’ve added Lean tool & die making.

            And under Other Interesting Blogs, I’ve added:

 

                        Business in China

                        Kent Blumberg

                        ShopFloor.org

 

            That last one is produced by the National Association of Manufacturers.

 

            I hope you enjoy these. And let me reiterate that if you know of any other good, relevant blogs, please post a comment and tell us about them.

 

Update: I recently wrote about Hewlett-Packard and suggested that, while the company is pursuing what appear to be lean strategies, they’re not known for embracing lean concepts. I have since learned that HP has a vice president for corporate quality, Katherine Armstrong, who spoke at a conference this week on the topic “Driving Marketing Excellence Through A Customer-Centric Six Sigma Approach.”

 

How Better Hospitals Use Scorecards

Measuring performance is essential, and many organizations use a scorecard or dashboard as one measurement tool. But what makes a good scorecard, and how should it be used?

            Some intriguing answers come out of a study conducted by Eugene Kroch, Ph.D., vice president and director of research for consulting firm CareScience. (This the second posting I’ve written about Kroch’s study; the first talked about the role of hospital leadership.)

            The study, described in a presentation at the recent conference of the Healthcare Information and Management Systems Society (HIMSS), was based on 438 responses to a survey of top hospital executives in nine states (Arizona, Colorado, Illinois, Iowa, Maryland, New Jersey, New York, Pennsylvania and Wisconsin).

            Kroch correlated the survey results with data developed by CareScience from several sources about hospital quality, to determine how the responses of the best-quality hospitals were different from all others.

            When it comes to dashboards, Kroch found that:

• Dashboards with fewer measures are associated with higher quality. Seventy percent of all hospitals surveyed had dashboards with between 15 and 45 measures. (The full range was 2 to 104.) But the higher-quality hospitals had an average of 25.6, slightly below the overall average of 28.6.
  
• High performers are more likely to view board dashboards on a monthly basis or more, while low performers view them quarterly or less.
  
• At higher-quality hospitals, the board quality committee and the quality improvement staff are strongly involved in the development of dashboard content.
  
• The better hospitals also use scorecards for more than just informational purposes. Specifically, better performance is associated with hospitals that link scorecards to quality improvement projects, daily operations management and public performance.
  
• Hospitals using dashboards for more than two years have higher quality than those with a shorter history.

            As I said last time, the only people likely to be surprised by any of this are those not familiar with lean concepts. Let’s hope they are paying attention and take the information to heart.

 

Hospital Leadership is Key to Quality

A new study confirms that in hospitals, as in other institutions, top management commitment is critical to achieve improvements. And in healthcare, that includes the hospital board.

            That is one of the findings in the study, conducted by Eugene Kroch, Ph.D. He is vice president and director of research for consulting firm CareScience. And he is a senior fellow at the Leonard Davis Institute of Health Economics at the University of Pennsylvania, where he also he teaches health economics and econometrics at the Wharton School.

            The study, described in a presentation at the recent conference of theHealthcare Information and Management Systems Society (HIMSS), was based on 438 responses to a survey of hospitals in nine states (Arizona, Colorado, Illinois, Iowa, Maryland, New Jersey, New York, Pennsylvania and Wisconsin). Fifty-five percent of the responses were from CEOs, 25 percent from executives involved in quality improvement, and 13 percent from chief medical or chief nursing officers.

            (This is the first of two postings I’m writing about the survey results. The second will discuss how the hospitals use performance scorecards.)

            Kroch correlated the survey results with data developed by CareScience from several sources about hospital quality, to determine how the responses of the best-quality hospitals were different from all others. He found that better outcomes are associated with hospitals where:

• The board spends more than 25 percent of its time on quality issues.
  
• The board receives a formal quality performance measurement report.
  
• There is a high level of interaction between the board and the medical staff on quality strategy.
  
• Compensation for senior executives is based in part on quality improvement performance.
  
• The CEO is identified as the person with the greatest impact on quality, especially when so identified by the quality improvement executive.

            These findings may come as no surprise to those of us familiar with lean concepts. However, with any luck they may serve as a wake-up call for at least a few of the top executives whose hospitals are not among the best.

 

 

 

Is Hewlett-Packard Lean?

Hewlett-Packard is not a company one normally thinks of as pursuing a lean strategy. Indeed, as far as I can tell, lean terms are not ingrained as part of HP’s vocabulary.

            But HP is doing well, and at least one profile I’ve seen implies that some of that success involves lean principles – consciously or not.

            A recent issue of Forbes declares HP to be “Tech’s New King,” noting that, for the first time, HP’s sales – $92 billion in 2006 – have passed those of IBM.

            The story gives a lot of credit to CEO Mark Hurd, who assumed his job on April 1, 2005. After the mediocre performance under Carly Fiorina and the spying scandal that brought down chairman Patricia Dunn, Hurd has quietly cut costs, reorganized, and boosted sales, profits and the stock price.

            How has he done it? Several of the methods mentioned in the story embody what a lean strategy is all about. For example:

            An unrelenting desire to improve. “The day you feel like you’ve won, you need to drive out of the parking lot and not come back,” Hurd is quoted as saying.

            Dedication to measuring performance. The story describes how Hurd questioned top executives about their divisions. One was Steven Nigro, a senior vice president.

 

            'If you can't explain this better than I can,' he told Nigro at one point, 'come back in two months and tell me then what's going on.' When they met again as planned, Hurd recalled every number Nigro had told him, without resorting to notes. News of such meetings flooded management, and the message was clear: You must understand how the revenue moves through your business and how your business fits into HP.

 

            That’s also an example of policy deployment and aligning goals (hoshin kanri).

 

            Adopting a lean organizational structure based on products. Hurd found that HP’s most powerful executives controlled only 30 percent of their budgets. Marketing and selling were run by the Customer Solutions Group (CSG), set up by Fiorina to get rid of autonomous product-line fiefs. She succeeded in reducing the number of brands, but the structure blocked direct feedback from the sales force to product designers.

            Hurd eliminated CSG and handed budget control over to product division heads. The result:

           

            'Now I have 80% control of my P&L. Sales, marketing and supply are all under my control,' says Ann Livermore, who runs the servers, software and services division. Todd Bradley, head of HP's PC division, adds: 'It's a no-place-to-hide model. Accountability is a big part of the strategy.'

 

            Hurd is still dealing with the aftermath of the spying scandal, and much remains to be done. But it sounds as if he understands, perhaps implicitly, what lean is all about.

 

The Best Machine Shops are Lean

An often-heard challenge to lean is that it is only good for high-volume operations and doesn’t work well in high-variety, low-volume operations such as job shops.

            But according to a recent report by American Machinist magazine, the key factor that differentiates the best shops from all others is (drum roll, please): continuous improvement.

            The magazine conducted a benchmarking survey of machine shops in which respondents were asked how their cycle times have changed from three years ago. All shops reported a decrease in cycle times, with an average decrease of 25 percent. Independent shops reported the greatest decrease, 40 to 50 percent.

            The survey did not ask how shops reduced cycle times, but it did ask about the tools and techniques used that contributed to the decreases. The magazine then analyzed the differences between the top-performing shops and all others. The results:

 

            Perhaps the most important tool that shops use is an organized approach to continually improve the way they operate. Top shops are twice as likely to use formal continuous improvement programs — 51 percent of the top shops have formal programs in place compared with 27.4 percent of all other shops. Additionally, 88.2 percent of the top shops use lean manufacturing techniques, while half that number — 41.1 percent — of all other shops do. Reduced cycle times are a result of those programs.

 

            Another interesting finding is what I view as evidence of constant innovation by the leaner shops. The magazine notes:

 

            Tool manufacturers continually develop tools that can reduce cycle times dramatically, and the top shops are using them. The average top shop spends $125,000 a year on tooling, four times as much as other shops that indicated they spend about $30,000 a year on tooling.

 

            But the story about the survey, written by Larry Hafti, also observes that reducing cycle time is, by itself, not enough for success:

 

            If a shop is going to invest the time and money to reduce cycle times, then it should also invest time and money in improving the overall production process so that it can then reap the benefits of reduced cycle time. And that is what the top shops are doing…

            It all goes back to the most important tool — a program and commitment to continually improving the total production process. Cycle times certainly need to be considered, but cycle time improvement without overall production process improvement will not improve a business's bottom line.

 

            I think that says it all.

 

Changes in the Baldrige Criteria

Those with an interest in the Malcolm Baldrige National Quality Award should note that the criteria for the prize have been significantly changed this year, much more so than in past years.

            The award, established in 1987, is intended to recognize U.S. organizations for achievements in quality and performance, as well as to enhance U.S. competitiveness.

            The award program has its critics, as noted in a previous posting about a controversy over one of last year’s recipients. However, the recent criticism concerns whether a particular company should have received the award last fall, not the award criteria. Also, the changes in the criteria were also announced last fall and had clearly been in development since before last year’s awards were announced.

            Among this year’s changes:

• The Senior Leadership section now includes questions on performance measures that senior leaders regularly review and how they use the reviews for action.
  
• Strategy Deployment has been modified to clearly address strategic challenges and advantages, as well as how strategic objectives address opportunities for product and service, operational, and business model innovation.
  
• Strategy Deployment also has two added focus areas: ensuring adequate financial and other resources for accomplishment of action plans and ensuring that human resource plans address workforce capability and capacity needs.
  
• Customer and Market Knowledge has an enhanced focus on capturing and using the voice of the customer to become more customer-focused.
  
• Workforce Focus is a totally redesigned category, with two items. Workforce Engagement focuses on workforce enrichment, workforce and leader development, and assessment of workforce engagement. Workforce Environment addresses workforce capability and capacity, and workforce climate.
  
• Process Management is totally redesigned. It now includes Work Systems Design, addressing core competencies, work process design and emergency readiness, and it includes Work Process Management and Improvement.

There are more changes. Virtually every section includes substantive revisions.

            We sell both regular and pocket versions of Baldrige Award Winning Quality – 16^th Edition: How to Interpret the Baldrige Criteria for Performance Excellence, by Mark Graham Brown.

            Personally, my experience with the Baldrige award is limited, so I’m interested in reading any comments you may have. Do you regard the program as worthwhile? Do you have any reaction to the changes this year? Let us know.

 

What You’ll Get Paid in a Lean Job

A job in lean or continuous improvement management pays, on average, $81,846.

            That is one of the findings in the annual manufacturing salary survey headlining the current edition of Industry Week magazine.

            The findings are based on anonymous replies from 1,400 readers of the magazine. In breaking down the numbers to show average salary by job responsibility, the story notes that the lean management category represented only one percent of the respondents.

            So what does that lean salary figure mean? By itself, it serves as an indicator of what you might make in a dedicated lean position.

            However, you learn more when you compare it to other positions. Doing so can give you a sense of where lean managers rank in the manufacturing hierarchy as well as what your other career options might pay.

            For example, the lean figure is greater than the average salary for jobs in safety management ($67,511) and human resources management ($71,589). But it’s less than you’ll make, on average, if you work in manufacturing/production management ($84,013), engineering management ($90,582) or operations management ($99,333).

            Moving up the organization chart, the Industry Week list doesn’t include any categories of directors or vice presidents of lean. (Are there any?) However, directors of manufacturing/production make, on average, $119,708 while vice presidents of manufacturing/production rake in an average $144,979. A VP of operations is paid, on average, $148,132. It’s also true that, nowadays, many companies want people in those director/VP jobs who have lean experience.

            Averages, of course, do not necessarily reflect what you’ll get paid in any specific situation, which may depend on the industry, the size of the company, the location and other factors. The Industry Week article includes a list of average salary by industry, with 18 industries listed. The top industry, petroleum and coal, pays an average salary of $159,667, nearly double the figure of $86,790 for the bottom-ranked industry, apparel and textiles.

            Is the lean principle of respect for people reflected in what you get paid? Does your company place a high value on lean skills and experience? Tell us about your experience.

 

5 Books Win Shingo Prize

Five books published by Productivity Press have won the 2007 Shingo Research Prize.

            We’re proud of this, of course. I usually don’t use the blog to sing the praises of our company or products, but I would like to devote a little space to talking about these books.

            The books are:

• Hoshin Kanri for the Lean Enterprise: Developing Competitive Capabilities and Managing Profit, by Thomas Jackson
  
• Inside the Mind of Toyota: Management Principles for Enduring Growth, by Satoshi Hino
  
• Lean Software Strategies: Proven Techniques for Managers and Developers, by Peter Middleton and James Sutton
  
• The Toyota Product Development System: Integrating People, Process, and Technology, by James Morgan and Jeffrey Liker
  
• The TWI Workbook: Essential Skills for Supervisors, by Patrick Graupp and Robert Wrona

            We understand that a majority of the authors of these five books will be attending at least part of the Shingo Prize conference March 26-29 in Jacksonville, Florida.

            Note that these books do not focus on tools or tactics. Three of them – Hoshin Kanri, Inside the Mind of Toyota, and The Toyota Product Development System – are clearly focused on a more enterprise view of lean. And even the two other books are more strategic than tactical, focusing on broad approaches rather than limited techniques.

            We also publish books devoted to tools and tactics. But the Shingo organization, rightly, is focusing more on strategies and key principles in selecting prize winners. Our website includes a page devoted to all the books we publish that have won the prize.

            A research prize was also awarded this year to an unpublished article (which had nothing to do with us). Its title is “Lean Dilemma: Choose System Principles or Management Controls – Not Both,” by H. Johnson. According to the Shingo news release, this article “explains that despite enormous attention paid to Toyota’s ‘Lean’ practices in recent years, no business has achieved Toyota’s long-term business results. This paper traces that failure to a difference between how managers believe a business produces its results and how businesses actually do achieve those results. The author challenges conventional cost accounting thinking, including activity based costing, and causes the reader to think deeply.”

            Perhaps a journal or magazine will now publish that article. I’d like to read it.

            The purpose of the Research Prize is to recognize and promote outstanding research and writing regarding new knowledge and understanding of manufacturing consistent with the philosophy of the Shingo Prize. The Research Prize had 21 applicants this year, including workbooks, papers, websites and DVDs.

            The greatest wisdom comes by accumulating knowledge from a wide range of sources – not just our books. But I hope you’ll include at least some of the books in your lean library.

 

The 10 Best Lean Blogs

            I thought some of you might be interested in a list of good lean blogs.

            I actually have two lists here: One of lean blogs and another of blogs that are not specifically about lean (at least not all the time), but do focus on in some way on process improvement.

            The creation of these lists was not scientific or even objective. These are simply lists of blogs that I like, in alphabetical order.

I only included blogs whose authors post on a regular basis. I left off blogs that I like, but which haven’t had new postings in several months.

            Those of you who are paying attention will note that the lean list below contains only nine blogs, while my heading says “The 10 Best Lean Blogs.” I’m hoping that you will see fit to include the Lean Insider on the list and make it an even 10.

            Also, if there is a lean or improvement blog you like that is not on these lists, I encourage you to post a comment and let us know about it.

 

Lean blogs:

 

Evolving Excellence

Gemba Panta Rei

Got Boondoggle?

Lean Blog

The Lean Executive

Lean Reflections

Learning About Lean

63 Buckets

TPM Log

 

 

Other improvement blogs:

 

Be Excellent

Frank Patrick’s Focused Performance Weblog

Herding Cats

Reforming Project Management

Six Sigma Blog