Creating a Satisfying Workplace

Does a lean strategy make a company a good place to work? I would certainly think so, since a fundamental concept of lean is respect for people. And a column this week in The New York Times reinforced that idea.

            The column was written by Milton Moskowitz, who co-authored (with Robert Levering) the book “The Best Companies to Work for in America,” published in 1984. Since then, the two of them have developed an annual update of the list, published every January in Fortune magazine.

            In his column, published as a “Preoccupations” article in the Sunday edition of the Times, Moskowitz writes:

As a result of our surveys, people are always asking me what makes for a good workplace. Early on, Robert and I came up with this definition: A good workplace is one where management trusts the employees and where employees trust the management.

Of course, there’s more to it than that. We do evaluate companies on various attributes — communication, training, recognition and rewards, pay and benefits, fairness, camaraderie, celebrations. But our primary measuring rod is the employee response to the survey, including voluntary comments.

Employees enter yes-or-no responses as to whether they agree with statements like these: “I feel I get a fair share of the profits of this organization,” “I am proud to tell others I work here,” and “There is a minimum of politicking and backstabbing here.”

A not-so-surprising lesson is that it takes more than high pay and lavish benefits to make a work force happy. Employees tell us how important it is to work for a company whose culture embraces fairness, teamwork, education, fun and contributions to society. And they thrive on being engaged in the company’s mission.

            That certainly sounds like a description of lean culture. Which raises an interesting question: Why isn’t Toyota on the Fortune list?

            The list is compiled by the Great Place to Work Institute, a research and management consulting firm co-founded by Levering. I’ve read their eligibility guidelines, and – unless I am misinterpreting them – there is nothing that would exclude Toyota.

            To be considered, a company must first be nominated. Is it possible that no one has ever nominated Toyota? Possible, though it seems unlikely.

            Once a company is nominated, it must agree to take part in the review process, which includes sending surveys to at least 400 randomly selected employees and completing a Culture Audit questionnaire. Did Toyota receive a nomination and then decline to participate?

            Another possibility, but one I view as the most unlikely, is that Toyota was nominated and participated, but just didn’t make it on to the list.

            Does anyone have any information about this? (I have contacted both Toyota and the Great Place to Work Institute. The Institute won’t discuss companies not on the list. Toyota hasn’t responded yet.)

            By the way, the top 10 companies in the 2007 Fortune list are, in order:

• Google


• Genentech


• Wegman’s Food Markets


• Container Store


• Whole Foods Market


• Network Appliance


• S.C. Johnson & Son


• Boston Consulting Group


• Methodist Hospital System


• W.L. Gore & Associates

Consultant: Sourcing from China is a Mistake

At least one consulting firm actually understands that going abroad to reduce manufacturing costs is a bad idea.

            Lean advocates have long argued that the increased waste from overseas sourcing – in the form of additional transportation plus longer cycle time – makes no sense. Unfortunately, too many businesses and consultants believe – wrongly – that the lower production costs in China make up for any negatives.

            Kudos to Boston Consulting Group, which issued a report earlier this year entitled Surviving the China Rip Tide: How to Profit from the Supply Chain Bottleneck.

            BCG cites a variety of factors other than actual manufacturing that contribute to costs, including delays caused by bottlenecks at ports and the increased risk of stocking items that don’t sell because you had to purchase them too far in advance.

            The authors of the report – George Stalk, Jr., and Kevin Waddell – don’t say you should never outsource from China. Rather, they argue that if you do pursue that strategy, you should be focusing on your supply chain processes:

 

We believe strongly that a firm focus on reducing time and variability in the China-anchored supply chains serving North America and Europe can help companies dramatically reduce their costs, improve their margins and build competitive advantage. We believe that such performance improvements will dwarf the more conventional profit-improvement efforts now under way at most of the companies we are familiar with. We also believe that companies should be looking closer to home (North American companies to Mexico, Central America and South America and Western European companies to CEE), where the cost-of-labor penalty is more than compensated for by superior supply-chain performance that is significantly less variable and virtually unaffected by port and surface-capacity constraints.

 

In their rush to source from China, many companies are blindly walking into a strategic trap. The trap is thinking that sourcing from China will result in lower product costs, when in reality the supply chain dynamics will, in many cases, drive up overall costs and reduce profitability, thereby creating an opening for a competitor. The only hope for these companies is that all of their competitors will make the same mistake. But competitors that do not source from China – or that focus on supply chain speed – will be competing with a different set of economics. The first company to see and correct the strategic error of sourcing from China without an appropriate investment in supply chain dynamics to minimize costs will seal the fate of its competitors.

 

            Stalk and Waddell don’t actually use the word “lean” in their report. But they seem to understand.

 

            Incidentally, in a posting on the same topic, Kathleen Fasanella at the Fashion Incubator blog writes about the book Birnbaum’s Global Guide to Winning the Great Garment War. She comments:

 

His greatest lesson is that it's a wasted exercise to chase the lowest cost production considering the variables of quotas, the nation of origin politics and general conditions including infrastructure. If anything, I think this book is more likely to convince you to produce domestically than not.

Accenture Buys George Group: An Encouraging Acquisition

Earlier this year, I leveled some criticism at consulting firm Accenture for what I believed was a misguided article on their Web site about cost control. I suggested that people at the firm paid lip service to lean principles without really grasping their true essence.

            Now comes word that Accenture has acquired another consulting firm: George Group, a name that is pretty well known in lean and Six Sigma circles.

            I have no personal experience with George Group, and I am not trying to say anything good or bad about the quality of their work. However, I do know that what it calls Lean Six Sigma is one of the firm’s specialties, along with areas it labels Fast Innovation and Conquering Complexity. Founder Michael George has written several books, including one on Lean Six Sigma for Service (not published by Productivity Press).

            In a news release, Mark Foster, chief executive of Accenture’s management consulting and integrated markets group, said the acquisition “will significantly expand Accenture’s capabilities in process excellence and next-generation process re-engineering.”

            George Group employs 250 people, which is equal to about 0.16 percent of Accenture’s global workforce of 158,000. So I don’t know how much influence George Group will actually have on its new owner’s operations.

            But I hope Foster is right in suggesting there will be a real impact (even though I don’t care for his use of business jargon like “next-generation process re-engineering.”) Accenture is so large that its work has an impact on a sizable number of businesses. If this acquisition improves Accenture’s understanding of lean, and subsequently helps more of its clients become lean, then I hope this deal works out well for both parties.

 

What Should You Expect From a Lean Initiative?

The latest Industry Week survey of U.S. manufacturers causes me to raise this interesting question, particularly since lean has made significant gains in popularity.

            The article about the survey, written by David Blanchard, notes that

 

…nearly 70% (69.6%) of all plants have adopted lean manufacturing as an improvement methodology)... What's more, lean is more than twice as popular as the next closest improvement method, Total Quality Management (34.2%).

 

            Similarly, the article includes a table of “strategic practices,” with Continuous Improvement at the top of the list, cited by 76.9 percent of respondents. It is followed, in order, by Recycling/Reuse Program, Quality Certifications (e.g., ISO), Customer Satisfaction Surveys, Value Stream Mapping, Kaizen Events/Blitzes, Environmental Management, Benchmarking, and so on.

            (Environmental Management showed the biggest increase from last year, and the category of Recycling/Reuse Program was new this year.)

            However, Blanchard notes that

 

…just because something is popular doesn't necessarily mean it's working according to plan, and part of the reason is that manufacturers have a wide variety of expectations when it comes to lean. Most companies believe that lean's main benefits come from cutting costs, but that's a mistaken perception, observes James Womack, founder of the Lean Enterprise Institute. 'Lean management is not a quick solution for cost reduction,' he points out. 'It's a fundamentally different system than traditional management for organizing and managing employees, suppliers, customer relationships, product development, production and the overall enterprise.'

Be that as it may, cost reduction strategies are on the rise, with the number of companies focusing on 'low cost' up 1.9% from last year. The only other area seeing a bigger gain is 'high quality.' Conversely, product development strategies are somewhat on the wane, with focus on 'product variety' down 2.8%, 'customization' off 2.3% and 'innovation' down 0.3%.

            I’m sure Blanchard is correct when talks about a wide variety of expectations. So I ask, what can we, or should we, expect from lean?

            I don’t mean at the kaizen level. Most people understand that a specific improvement project will have a specific goal, such as reducing cycle time by X percent.

            I’m speaking more broadly. Should a CEO expect that adopting a lean strategy will reduce costs? Improve time to market? Increase capacity? All of the above, and more?

            All of the above is the easy answer, but it is too vague and general to satisfy a CEO. What is a more satisfying answer? And should the answer focus on quantity as well as quality, meaning the amount or percentage that time to market is typically reduced or capacity is typically increased?

            Or to put it another way, how do you make a case for lean to the CEO?

            I suspect many of you have thoughts on this subject. Post them below.

 

The Customer Experience: What You Need to Know

Every business says it is committed to meeting the needs of its customers. But most do a poor job of that because they are not in touch with what the customer experiences.

            That is the position of Chris Meyer, Ph.D., chairman of the Strategic Alignment Group, a consulting firm. I heard Meyer speak at the recent Customer Needs Discovery & Innovation Congress sponsored by the Management Roundtable.

            Meyer argues that there are many factors contributing to the customer experience, including the logical, the emotional and more. Customer satisfaction, he says, is equal to customer experience divided by customer expectations.

            One problem, he said, is that while many companies collect feedback from their customers, too few do anything meaningful with it. A survey conducted by his firm of European companies found the following list of declining numbers:

 

• 95% of enterprises collect feedback


• 50% alert staff of the findings


• 30% make decisions using this insight


• 10% deploy and improve


• 5% inform customers of the change

 

            Too often, there is a wide disparity between the company’s view of whether a compelling customer experience was discovered, and the customer’s view. This results, Meyer says, from confusion, arrogance, no accountable owner, an internal focus, no persistent data or metric, and other factors.

            He described several examples of companies discovering they were out of touch with customers.

            One was McDonald’s. They wanted to increase milkshake sales, so they developed some new, sweeter flavors they thought kids would like. Sales went down.

            Research into the problem revealed that a significant percentage of milkshakes were purchased not by kids, but by adults in the morning for breakfast. (Seems odd to me, but apparently a lot of people like something slightly sweet that is filling enough to last until lunch.) So they went back to the old flavors and re-tooled the marketing to target adults.

            Another was Gilead, a pharmaceutical company that began selling a new anti-viral AIDS medication, promoting its life-saving effects. Sales were good to new AIDS patients, but not to existing patients.

            Research revealed that existing patients were convinced that their current medications were saving their lives, and didn’t want to risk switching. Gilead re-tooled the marketing, promoting the fact that their new drug had fewer side effects.

            Marketing is not the only issue here. Having a strong understanding of customer value – a lean fundamental – strengthens product design, customer service and more.

            None of this is new, but Meyer was an engaging, down-to-earth speaker who helped remind those of us listening of fundamental realities we sometimes forget.

            Has your company ever found it was out of sync with its customers? Were you able to solve the problem? Tell us about it by posting your comments below.

 

Nine Authors at the Productivity Inc. Conference

While many of the authors whose books we publish often speak at conferences and workshops, a rare opportunity to hear a wide range of authors is taking place next month.

At the 12^th Annual Lean Management Conference sponsored by consulting firm Productivity Inc. Oct. 15-19 in Atlanta, nine of our authors will be leading presentations or workshops, all at this one event.

The authors are:

 

·        Clifford Fiore, author of Accelerated Product Development: Combining Lean and Six Sigma for Peak Performance

·        Chris Harris, co-author (with Rick Harris) of Developing a Lean Workforce: A Guide for Human Resources, Plant Managers, and Lean Coordinators

·        Ray Floyd, author of A Culture of Rapid Improvement: Creating and Sustaining an Engaged Workforce (to be published in February 2008)

·        Thomas Jackson, author of Hoshin Kanri for the Lean Enterprise: Developing Competitive Capabilities and Managing Profit

·        Beau Keyte and Drew Locher, co-authors of The Complete Lean Enterprise: Value Stream Mapping for Administrative and Office Processes

·        Ray Louis, author of Custom Kanban: Designing the System to Meet the Needs of Your Environment  as well as the soon-to-be-released Creating the Ultimate Lean Office: A Zero-Waste Environment with Process Automation

·        Brian Maskell, co-author (with Bruce Baggaley) of Practical Lean Accounting: A Proven System for Measuring and Managing the Lean Enterprise

·        James Vatalaro, co-author (with Robert Taylor) of Implementing a Mixed Model Kanban System: The Lean Replenishment Technique for Pull Production

Several of these men have authored other books as well; I list just the most recent ones above.

Since the conference lasts an entire week, not all of the authors will necessarily be there on any given day. Also, some of the authors do not appear on the conference Web site because not all workshop speakers are listed online. Check with Productivity Inc. for details.

I can’t recall another event where this many authors of lean books were assembled at one time. If you can, I urge you to attend and take advantage of their collective brainpower.

Forbes’ New Columnist: The Right Stuff?

Michael Marks, currently manager of a private equity fund and former CEO and chairman of Flextronics, has joined Forbes as a columnist writing about global manufacturing, outsourcing and offshoring.

            Marks has extensive manufacturing experience, and in his introductory column, he outlined some of the broad beliefs that will form the foundation for his writing.

            While I am encouraged by several of them, at least one of them surprised me a bit.

            Marks describes himself as an optimist who supports globalization of the U.S. economy and adding an international perspective to boards of directors.

            No argument there. However, I am intrigued by another of his statements.

 

--outsourcing makes companies more efficient and is a requirement to compete effectively

 

            That comment might seem to be at odds with lean principles. Those of us who champion a lean strategy argue that you don’t have to outsource operations to be an effective competitor.

            On the other hand, it depends on what and how you are outsourcing. Simply saying you support outsourcing doesn’t necessarily make you anti-lean

            In addition, Flextronics has received praise for its support of a lean strategy, and Marks has been given much of the credit for that direction.

            The reason I care about what Marks writes is that Forbes is widely read and well-respected. A Forbes columnist can influence what business leaders think.

            I look forward to reading Marks’ future columns. He should have some interesting things to say.

 

Developing a Process for Innovation

Can innovation be formalized into a process?

            Coca-Cola believes the answer to that intriguing question is yes.

            While attending the recent Customer Needs Discovery & Innovation Congress sponsored by the Management Roundtable, I heard a presentation on this topic by Richard Staten, senior manager for innovation business development at Coke. (See, they not only have a process, they have job titles to go with it.)

            Staten laid out, in broad strokes, what Coke is trying to do. (He didn’t provide a lot of detail, apparently because the lawyers at Coke don’t like employees to give away too much.)

            Coke has developed what it calls CIF – the Common Innovation Framework. That framework consists of three parts: Idea generation (“Feed the Pipeline”), pipeline and portfolio management, or PPM (“Manage the Pipeline”), and stages and gates (“Execute the Pipeline”).

            The goal is to build ideas into screened concepts. The steps in the process include:

• Source Concepts and Ideas


• Assess Strategic Fit and Potential Value


• Build Concept Statements


• Screen with Consumers and Shoppers


• Submit “winners” at Stages and Gates

            The screening is an especially important part of the process. Coke uses a variety of methodology to recruit and develop panels, and to obtain input from them. They also use a variety of analytics to evaluate ideas.

            One example Staten cited of a product whose development and marketing were influenced by this process is Diet Coke Plus, a new version of Diet Coke with vitamins and minerals added.

            As I said, his presentation was at a high level, so it was a bit difficult to see exactly how this process works.

            But I thought it was a topic worth discussing here. Product development is just as much a part of business success as actual manufacturing, and having a process to do that is the start of a lean approach.

            One of our more popular books is The Toyota Product Development System, by James Morgan and Jeffrey Liker, which also focuses on this key issue.

            Is innovation the result of process as well as pure creativity? How does your company focus on innovation? Post your comments below.

 

What is your favorite lean book?

Have you read a book about lean that you felt really helped you improve your business? Or one that gave you an understanding of some aspect of lean principles you never had before?

            And why was that book so good?

 

            Here at the Lean Insider blog, we’d like to find out what you believe are the best lean books. Which book (or books) would you recommend to others? Which one had the greatest impact on your lean transformation?

 

            Equally important, why did you find the book so valuable? Was it because it explained lean concepts clearly? Did it provide a step-by-step lean implementation plan? What did it tell you that you didn’t know before?

 

            A blog is a means of sharing insights, and that’s what we’re trying to do. Register (if you haven’t already), log in and post a comment. Your thoughts could be a valuable resource for others trying to decide what to read next.

A Lean Approach Improves a Medical Laboratory

The latest news about lean principles being applied to healthcare comes, appropriately, from the Henry Ford Health System in Detroit.

            In an article being published in the September 2007 issue of the American Journal of Clinical Pathology, researchers describe how they used what they describe as “deep and honest self-analysis and the concerted effort of all workers” to improve operations of the laboratory, which is the 15^th largest lab in the U.S. The institution processes more than 6.5 million specimens annually.

            A news release describing the article reports:

         The new system has resulted in more than 100 improvements, each making a small but effective enhancement to the quality and timeliness of care. For instance, they have implemented the use of bar code-specified work processes to reduce specimen identification and work product defects, and results for routine biopsies have improved from 73 percent being completed in one day to 92 percent being completed in one day.

'The Henry Ford Production System is not just about waste reduction but adopts the best of the Toyota Production System's approach to people,' said co-lead researcher Richard J. Zarbo, MD, DMD. 'To be successful in using manufacturing-based approaches to quality requires nothing less than a complete cultural shift in the American workplace that gives every worker and manager a way to design their work in a blame-free and cooperative environment thereby unleashing their profound creative potential.'

            I don’t usually hear people talk about the “Henry Ford Production System,” but we’ll let that one pass.

            How did the staff achieve the improvements?

         Zarbo and co-author Rita D'Angelo, MS, ASQ CQE, SSBB found most helpful the use of a mounted visual data display poster to enter defects, rate their importance and their root causes. Six Sigma performance metrics were then utilized to make choices to improve quality.

The team redesigned specimen sorting to eliminate redundant steps, standardized tissue size to eliminate cassette opening during processing, and implemented action alerts to flag cases for critical values.

            Sounds like classic applications of lean approaches.

            What is particularly encouraging about this report is that it is being published in a clinical journal, which is read not by manufacturing people who have already heard about lean ad infinitum, but by healthcare professionals who are only beginning to hear about it.

            Good news.

 

Beyond the Theory of Constraints: The Key Issue

            I previously wrote about the new book Beyond the Theory of Constraints: How to Eliminate Variation & Maximize Capacity and how its author, William Levinson, challenges traditional thinking about the theory of constraints. He argues that it is possible to eliminate variation and operate a balanced factory at 100 percent capacity. Eli Goldratt and Jeff Cox, when they first presented the theory of constraints in their book, The Goal, claimed this could not be done.

            Now that the new book is available, I invited Bill Levinson to describe in his own words the key theme of the book. Here are his comments:

 

            When manufacturing professionals think of variation, product characteristics are the first issue that comes to mind. Beyond the Theory of Constraints argues, however, that variation in processing and material transfer times must be taken as seriously as variation in product characteristics.

 

            Variation in product characteristics is a major obstacle to 100 percent quality, and variation in processing and material transfer times prevents achievement of 100 percent throughput. This is not to say that 100 percent equipment utilization, which is often a dysfunctional performance goal, should be the ultimate objective. On the other hand, Henry Ford showed that this utilization is approachable if the variation can be suppressed, and the book covers the methods he used to do this.

 

            Even if the factory does not need to increase its capacity utilization, variation also increases cycle time. On-time delivery is a major competitive advantage, and the ability to make to order instead of to forecast can provide an overwhelming advantage. Its achievement, however, requires sufficiently short lead times between order placement and order fulfillment. Long cycle times work against this consideration while increasing inventory in the bargain.

 

            All variation comes from two sources: assignable or special causes, and random or common causes. Beyond the Theory of Constraints shows that a substantial portion of the variation is not random, and that factories and service organizations can often remove it. The chief obstacle to its removal is often failure to recognize it, because people become used to living with it or working around it. This is one of the book's central themes, and lean manufacturing experts like Henry Ford, Shigeo Shingo, and Taiichi Ohno point out that it applies to all forms of waste. Plant personnel, including frontline workers, can be trained and empowered to recognize the variation, and there are analytical techniques that can force it to become visible.

           

The major factor that prompted me to write the book was the obvious discontinuity between the statement in The Goal – “Why do you think it is that nobody after all this time and effort has ever succeeded in running a balanced plant?” – and Henry Ford's statement, “The idea is that a man must not be hurried in his work—he must have every second necessary but not a single unnecessary second.”

 

Ford succeeded in doing what The Goal says is impossible, and this led me to investigate how he did it: namely, by treating variation in processing and material transfer times as seriously as modern quality practitioners treat variation in product characteristics.