The Shingo Model -- Will it Work in Your Organization?

In February, Gerhard Plenert published a book entitled Driving the Enterprise to Sustainable Excellence:  A Shingo Process Overview. Essentially, his book presents a big-picture overview of the entire Shingo improvement process. It fully discusses the needs and benefits of the Shingo process, and what is required if you seek to execute the Shingo Model in your enterprise and focuses on creating an enduring organization-wide continuous improvement process. 

When I spoke with Gerhard this month, I asked him: "What does your book provide that readers cannot get from the Shingo-Model course materials?" Here is his complete answer:

Countless organizations have, at one time or another, began a “Lean jour­ney” or they have implemented a continuous improvement initiative of some sort. At the foundation of these initiatives is a plethora of tools that seem to promise exciting new results. While many organizations may initially see significant improvements, far too many of these initiatives meet disap­pointing ends. Leaders quickly find that Lean tools such as Six Sigma, judoka, SMED, 5S, JIT, quality circles, etc. are not independently capable of effecting lasting change. There is an integrated synergy that occurs between these various tools built upon a set of eternal principles, that creates an environment of lasting change. That is the topic of this book -- How to create a sustainable culture of continuous improvement.

Years ago, the Shingo Institute set out on an extended study to deter­mine the difference between short-lived successes and sustainable results. Over time, the Institute noticed a common theme: the difference between successful and unsuccessful effort is centered on the ability of an orga­nization to ingrain into its culture timeless and universal principles rather than rely on the superficial implementation of tools and programs. These findings are confirmed time and again by nearly three decades of assessing organizational culture and performance as part of the Shingo Prize process. Since 1988, Shingo examiners have witnessed first-hand how quickly tool-based organizations decline in their ability to sustain results. On the other hand, organizations that anchor their improvement initiatives to principles experience significantly different results. This is because principles help people understand the “why” behind the “how” and the “what.”

To best illustrate these findings, the Shingo Institute developed the Shingo Model™ (see Chart 0.1), the accompanying Shingo Guiding Principles, and the Three Insights of Enterprise Excellence™. The Shingo Institute offers a series of six workshops designed to help participants understand these principles and insights and to help them strive for excellence within their respective organizations.

My book is not a detailed review or a replacement of any of the Shingo workshops that teach in-depth the Shingo methodology far beyond what this book is capable of doing. This book is an overview of the entire Shingo process, starting with a discussion of the challenges that many of today’s enterprises are experiencing. I, in my role as a Ph.D. in economics, have studied industries and has worked closely with many of them, attempting to understand their weaknesses. I has found that this is the only methodology that encompasses the Toyota Production System (TPS) principles at a depth and level that just studying the TPS tools can never accomplish.

Next, this book builds upon an understanding of these weaknesses. The book discusses how the overall Shingo methodology fits into these organizations and highlights the benefits. The next step is then to discuss what requirements are necessary for an organization to get ready for a Shingo transformation. What are the steps that the organization needs to go through, and when will it know that it is ready to begin?

This book briefly reviews the Shingo Insights and Principles and explains how the Shingo courses should be best utilized to facilitate the desired transformation. It suggests some alternative plans for over-all implementation based on the current state of the enterprise. It explains why there is no “one way” for successful implementation and how the implementation sequence needs to be customized to fit the requirements of each enterprise. It also discusses the length of time needed for success and how this differs depending on the current enterprise environment.

Lastly, the book explains how the implementation of a continuous improvement methodology and Shingo training for any enterprise is never finished. It is an on-going process and success is defined by internal improvements, not by some arbitrary external benchmark.

The book is intended to be educational, thought-provoking, entertaining in its stories and examples, and a guideline towards the development of a plan for continuous improvement. This book is filled with stories and examples, showing successful and not-so-successful implementations. The stories are used to highlight many of the pitfalls that have arisen and may arise for you and which can be avoided if the reader is aware of them and knows how to watch for them.

The Shingo methodology, which is recognized as the world standard for developing enterprise excellence, offers access to a large volume of specialized information on how to achieve a sustainable environment of continuous improvement. However, before this book, there wasn't a high-level overview of the entire Shingo methodology. That is what this book offers. It offers a high-level review of all the elements of the Shingo methodology and is an excellent introduction for anyone looking for an overall vision of what a Shingo implementation means to themselves and to their organization.

This book is filled with ideas intended to help the perspective Shingo implementor achieve success. Let’s make you, the reader, successful.

What is your experience with the Shingo Model? Have you used it in your organization? Do you feel Gerhard's book is an asset to those organizations seeking to build a sustainable culture of organizational excellence?

What are the Key Ingredients for a Lean Culture?

Paul McCartney, while in the Beatles, famously claimed that “money can’t buy me love" --  According to author Richard D. Brimeyer, money also can’t buy Lean. Rick’s book Working Great! Lean Leadership Lessons for Guiding Your Organization to Excellence contains 52 lessons for leader-managers, each with challenges for applying the lesson. The format is particularly conducive to a leader’s book club.

I chatted with Rick recently to discuss his assertion that sustained Lean success is driven by a handful of critical behaviors by managers at every level of the organization. Here are some of his comments:

Unlike so many management fads (reengineering, quality circles, etc.) that have come and gone over the decades, Lean owes its endurance to the fact that it benefits all stakeholders -- customers, owners/funders, and employees. Waste doesn’t help anyone. Unfortunately, I believe a lot of organizations embark on a Lean expedition underestimating the behavior changes required of managers at every level.

Although important, the ultimate measure of success for any Lean expedition is not how many kaizen events are completed, but rather how many improvements occur outside of formal events. The latter ultimately comes down to creating a place where employees care, where they are willing to expend discretionary effort, and feel competent solving problems and removing waste. Creating that place is almost totally reliant on the behaviors they observe from their leaders day in, day out to ensure:

• Everyone understands the relevance of their work. 
• Employees feel appreciated for who they are as well as what they do. 
• Pathways for growth are evident. 
• Successes (and efforts) are regularly recognized. 
• A fair and responsive system exists for dealing with performance issues when they occur. 

Regardless of what we say, employees believe what we do. So being clear on key behaviors for leader-managers is very important. Ironically, these behaviors are consistent with any excellent supervisor, regardless of whether they are working in a Lean environment where flow and pull are practiced or not. Thus, the word “Lean” in my subtitle is practically superfluous, but these key behaviors are absolutely essential for establishing a Lean culture.

My goal for the book Working Great! is to provide a simple and useful resource for leader-managers, regardless of their level or experience. I hope to take the mystery out of culture by tying it to the behaviors to which they can hold themselves, and each other, accountable.

What do you think of Richard's points? Does the behavior of leadership at your organization reflect the true goal of the Lean initiative?

Lean Initiatives in the Construction Industry -- Can they succeed?

Just this month, Gary Santorella published a new edition of his forward-thinking book, Lean Culture for the Construction Industry: Building Responsible and Committed Project Teams. Much has changed in the construction industry since Gary published the first edition of his book back in 2010, so I contacted him to discuss what he has observed and learned working with professionals in this industry during the past seven years. One of the questions I asked was:“What are the main obstacles to a Lean initiative in a construction environment?” Here is his very candid and insightful answer:

The main obstacle is not an intellectual one, but psychological. In an industry that relies heavily on a multitude of personalities and companies, all of whom have competing interests, there is a natural tendency to resist tools that were developed in a controlled manufacturing environment. When you allow people to talk freely, there is a sense of skepticism that Lean practitioners “just don’t get us or what we do.” And, in many ways, they are right. Many of those trying to implement Lean in the construction industry are a bit tone deaf. They hear resistance as an intellectual challenge, and therefore counter it by generating copious amounts of data, imposing weighty (and sometimes faulty) measurements, and implementing Lean tools in such a way that is cumbersome – all of which only serves to justify the divide.

Given that most Lean practitioners are engineers by training, I understand the inclination to go straight for the analytics rather than attend to interpersonal struggles and issues influencing workplace culture, but in doing so, they ignore the realities of our industry. On any given day, the average Project Manager interacts with scores of individuals, each of whom comes from a variety of different backgrounds. From owners, architects, and city planners, to inspectors, workers and various employees and departments within their own company,  managers in construction, more than any other industry, have to be able to navigate the murky waters of human dynamics and interpersonal politics. That’s not to say that there aren’t ample opportunities for measurement and Lean tool implementation. Pull-planning, Value Stream Mapping, 5S and Kanbans have literally transformed businesses that were bleeding money in the form of waste. We know the flow stoppages that are the result of people choosing to store information idiosyncratically on their personal hard drives rather than using the standard practice of uploading to a common share drive. But when we emphasize data, and measurement, and tools we are taking Lean out of its proper context and missing the most transformative element of Lean – it’s ability to transform a culture.

The construction industry is, unfortunately, fraught with blame, finger-pointing, and self-protective cover-your-butt behaviors. The average Owner-Architect-Contractor meeting is more of an exercise of the fine art of attack and counter attack than productive waste identification and problem solving. Teaching people to use Lean tools in the context of their interactional realities is far more productive than measuring everything. When all of the competing parties understand that there is far more to be gained – financially and psychologically - by viewing problems as opportunities to improve, rather than as weapons, that’s when people start to understand the true power of Lean.

As Lean practitioners, we need be as interested in helping people to embrace the concerns of all of the parties, as we are in implementing the tools. To me, this is the true power of Lean. I love the framework because if implemented properly, it melds process and measurement with the psychological realities of human interest, and embodies the true meaning of the word teamwork by empowering people to change their working environment for the better. It’s exciting and humbling to see people come to the realization that they are far better off as a united whole, than a bunch of separate competing interests who are resigned to doing battle with each other. To me, this is the true power of Lean. The tools should be a means to get there, rather than the end result. 

What do you think of Gary's comments? For those working in the construction industry, do you agree with his observation of behaviors and habits?

Employee Engagement is More than Just Rewards

At the beginning of May, Kelly Graves published a compelling new book titled The Management and Employee Development Review: Competitive Advantage through Transformative Teamwork and Evolved Mindsets, which helps managers build a motivated an engaged workforce. I spoke to Kelly this past week, and I asked him: What are the common mistakes managers make when trying to motivate employees? What can managers do to successfully engage and motivate employees? Here is his detailed answer:

It is human nature for managers to take the path of least resistance, and this choice often leads to only temporarily solving symptoms -- not the core problems. When motivating employees, however, it is wise to look to behavior modification techniques to guide you. First, let’s look at what most managers attempt to do to motivate employees -- Often, they want to prove they have all the answers or simply short-cut the process due to time constraints, so they follow what they have seen or read what other managers have done to motivate employees. 

Many managers rely on what they think employees want using short-term rewards -- such as money, pizza parties, gift cards, or a fun-oriented team-building event with no long-term follow-through, which can often cause more harm than productivity if not handled by someone educated in cultural dynamics. These are all fun ideas and may provide short-term excitement but they will not create lasting motivation. In fact, employees may not want some of these because they involve spending more time away from their families and more time with people at work, with whom they feel they already spend too much time. In addition, one-time financial rewards doesn’t directly equate to long-term motivation.

As a manager, it is imperative above all else to provide that “why” to your team -- why are they here and why they should embrace the company goals.In other words, you must give them something to believe in that is bigger than themselves.  Provide them with a clear destination, and make sure they understand that this goal is paramount for the success of the organization, the department but more importantly, how it directly impacts their lives. The central objective of a great manager and motivator of people is to touch your employees at their core so they see and believe in your vision as fervently as you. To achieve this higher state, one must climb inside the mind of their employees and tap into their intrinsic motivation.

Intrinsic motivation is the desire to seek out new challenges, to analyze one's capacity, and to observe and to gain knowledge. It is driven by an interest or enjoyment in the task itself, and exists within the individual rather than relying on external pressures or a desire for reward. Intrinsic motivation is a natural motivational tendency and is a critical element in cognitive, social, and physical development. Employees who are intrinsically motivated are more likely to engage in the task willingly as well as work to improve their skills, which will increase their capabilities. Employees are likely to be intrinsically motivated if they:

•    Attribute their results to factors under their control, also known as autonomy.

•    Believe they have the skills to be effective agents in reaching their desired goals, also known as self-efficacy beliefs.

•    Are interested in mastering a skill, not just in achieving it for some outside force.

Try these 10 steps to motivate your employees: 

1. Provide a healthy environment: As the manager, it is your responsibility to provide the environment that enables members of your team to feel challenged and engaged by the work they perform.  
2.  Create a trusting environment: Trust is a powerful motivational element and managers that are more transparent with their employees will create employees who return that trust. Once trust is part of the culture, innovation, creativity and performance follow. 
3. Involve them: Asking what  would make their jobs easier, more productive and more fulfilling. In essence, people want to feel valued and acknowledged for their expertise.
4. Encourage responsible risk taking: Encourage your employees to exceed expectations by taking responsible risks. If they succeed, reinforce the effort and the ability to take responsible risk. If they fail, ask what parts went well and what parts didn’t. Help them to learn and utilize critical thinking skills so they can learn how to learn to take responsible risk. 
5. Anticipate failure and normalize it: Coach your employees that responsible risk taking comes with a certain amount of experimentation or adjustment also known as short-term failure. This type of thinking must be coached or all you will have on your team are drones following your lead or “doing it the way we have always done it” due to fear to step out of their comfort zones, which will result in continuous mediocrity. 
6.  Challenging Work: People simply want to improve at their jobs. Overcoming a challenge or finding a creative solution to a problem is a characteristic that strongly motivates employees. 
7. Career Advancement: One of the most forgotten yet powerful motivators are helping employees outline their careers. Employees are extremely motivated when they know what the next rung on the ladder looks like and what they need to do to achieve it. 
8.  A clearly defined goal. First the manager needs to outline what the department goals are. Next, spelling out specific tasks and behaviors which support the department goals help employees understand how they contribute to the greater organizational objectives. This helps the employee understand the organizational objectives, how the departments goals directly support’s the organizational objectives and how their specific tasks and behaviors directly support the department goals. This concept transcends work for the sake of work and teaches them how they directly contribute to the success of the company. 
9. Give regular, direct and supportive feedback: Both positive and performance enhancing feedback is vital to continuous improvement and when done well it provides the motivation to move employees continually on the path toward success. Feedback needs to be timely, specific and presented in such a way that the employee is clear about what behaviors they need to modify or continue using in order to improve performance.  
10. Recognition and increased status when the goal is achieved: People not only want to be recognized for doing a good job, their emotional well-being depends on it. Similar to involving them in the process is recognizing them in front of others, which increases their status among peers. This simple tip will jump start a poor performer or catapult an already strong performer to superstardom.

What do think of Kelly's advice? As a manager, what do you think works best regarding work culture and employee engagement?

How Do You Engage, Involve, and Motivate Employees?

Any Lean or performance-improvement initiative cannot survive on tools alone. Leaders must cultivate learning environments and develop the shared values that serve as the foundation for  dynamic culture. This month, Janis Allen and Mike McCarthy published an interesting book called How to Engage, Involve, and Motivate Employees: Building a Culture of Lean Leadership and Two-Way Communication that shows just how important it is to motivate and excite employees to take ownership of their roles.

When I spoke with Mike recently, I asked him, "Why do current employee-engagement programs fall short?” Here is his complete answer:

When asked, “Do you have an employee engagement program?” many managers answer, “Sure! Look at these engagement survey scores.” Beware! Quite often, people tell us what we want to hear on engagement surveys. If you really want to know about engagement, gemba gembutsu (go to the shop floor and see for yourself). Ask questions. Ask operators what ideas they have for improving the work. Then: 1. listen, and 2. help them test their ideas. You are now engaging people in improving their own work.

“Engagement” is a noun. Nouns are names of objects. Engage is a verb. Verbs are action. So, instead of asking your company’s managers “Do you have engagement?” say “Let’s go walk the shop floor and engage with our operators by asking what improvements they are making.” It’s the difference between saying “I have a stapler,” (the name of the object sitting on the desk doing nothing) and saying “I’m stapling these papers” (stapling is a verb, action, and you are doing something).

Engaged = observable actions by employees working on improvements. So, when a visitor comes into your workplace and asks, “Are your employees engaged?” say, “Let’s go talk to them. Then you tell me.” Take that visitor to the work area and introduce him to an employee. Say, “Allie, would you show our visitor the changes the team made on the shop floor?” If your employees can do this, they are actively engaged. The purpose of engaging employees is to inspire them to make improvements they can be proud of.

Survey Scores Vs. Go Engage. My new automobile monitors oil level, tire pressure, and other indicators electronically. I get an email with a link once a month that shows me if the tire pressure etc. has been low during the past month. What’s wrong with this picture? After all, I “have” a tire pressure report. Here’s what’s wrong: If I’m about to go on a long trip, I need to know right now if the tire pressure is low. I need to go to the garage (gemba gembutsu) and measure the psi in my tires by pressing (action verb) my tire pressure gauge to each valve stem and see for myself. When your focus is on a measurement tool rather than the actions you want, you get off track. If you steadily gazed at the speedometer while driving, you’d run off the road!

“What do you want me to say, Boss?” Many employees don’t tell the truth on engagement surveys; they say what they think management expects them to say. And in case this so-called anonymous survey isn’t really anonymous, who wants to be the one who says, “I’m not engaged?” This is another reason survey data is not an accurate indicator of actual engagement.

At an airline departure gate, we heard the announcement, “Please complete our customer survey when you receive the email. We want you to rate us a five, not a four. Five is alive; four is out the door. Ha ha. Just to help you remember to rate us a five, we have this basket of snacks here on the counter for you. Help yourselves. It’s not a bribe or anything.”

We saw a half-dozen people help themselves to the snacks. We wonder how many completed the survey, and even if they all rated the airline “Five is alive,” if it was an accurate indicator of their customer experience, whether they would fly with that airline again, and what they tell their colleagues about that airline. Often, people say what they think someone wants to hear. Why not? The person giving the score has nothing to lose. So beware of surveys. People have all kinds of wrong motives for the ratings they give.

Leaders can show people how they can take actions to make improvements they can be proud of. You can help them to do it. The most important results for your organization are the real actions taken to make improvements. But a positive side-effect of those engagement actions is that answers on engagement surveys will also improve. The survey improvement will be based on employees’ actions, their good results, and the satisfying feeling of being on a team. With action-focused engagement, your survey results will be based on actions and their real experience, not just words! And your company will be growing and prospering. 

Does your company have an employee-engagement program? Does it commit many of the mistakes Mike McCarthy mentioned here?

Global Lean -- When the Gemba is All Over the World

For many organizations, manufacturing processes were once contained within specific areas and defined locations, and most managers and supervisors could see and observe the entire work area -- the gemba -- by merely taking a walk.

Currently, however, with globalization, many manufacturing processes have been dispersed over thousands of miles, across oceans, and different time zones. Sam Yankelevitch, in his new book -- Global Lean: Seeing the New Waste Rooted in Communication, Distance, and Culture -- demonstrates how to use Lean thinking to uncover and reduce waste in the interactions required in today's global organizations.

During a recent conversation with Sam Yankelevitch, I asked him: "To succeed globally, what are the substantially new obstacles organization now face?"

Here is his response:

Many companies try to copy and paste the success they’ve had in their natural, local environments when they expand their operations internationally. My experience managing global companies, has shown me otherwise and, in my new book, I’ve tried to share some key items companies and their leaders should be aware of to avoid financial losses.

As the title of the book suggests, communication, distance and culture should be taken seriously. Just labeling these factors as “soft” will not make them go away. “Soft” can have very “hard” impact on your execution and results. A positive point is that Lean thinking applies just as well to reducing or removing these obstacles.

Starting with distance, this is a factor that is related to trust and cause and effect. It is hard enough to establish trust with some of the local stakeholders and being physically separated also creates a mental distance. Furthermore, when cause and effect happen with a longer interval,  problems might not be easy to solve because the source is tough to pinpoint.

Culture is, of course, a very abstract topic, but it affects the way your requests and expectations are perceived by someone outside of your normal circle. One point is sure:  “our way” is not always the best way or the only way when dealing with people from a different culture.

And then there’s communication. Distance and culture are of course factors that influence how a message is sent and received. But it is evident that because communication precedes action, it’s best to figure out how to do this effectively across continents to improve your chances of success.

Success in the past can sometimes turn out to be a big obstacle because circumstances that helped and hastened success previously have significantly changed. It's important for leaders to see new situations in a new light and not be trapped by routine.

Here's a short video of Sam Yankelevitch speaking about the topics covered in his new book:

What is the Key to Lean's Long-Term Success?

I recently had the opportunity to speak with both Bill Baker and Ken Rolfes about their new book, Lean for the Long Term: Sustainment is a Myth, Transformation is Reality. During our conversation, I asked them: "Why did you write this book? What was unique about your experiences?" Here are their complete separate responses:

William (Bill) Baker: When Ken and I began this book, we found we had been in different industries during the past 40 years, but we had witnessed similar transformations that had started strong with management commitment, but when the low-hanging fruit had been harvested and/or a new executive was hired, the transformation was derailed and lost its momentum. It seemed many times lean was viewed as a “project” executed by a manufacturing manager or continuous improvement leader, but it did not have full-time support by upper management. So we researched organizations that have been on the Lean transformation journey for 30 to35 years to discover their approach to share in Lean for the Long Term: Sustainment is a Myth, Transformation is Reality.

Ken Rolfes: Having been an early adopter of the Toyota Production System methodologies we call "Lean," I have had the opportunity to benefit from Lean strategies in multiple industries and companies. I have seen businesses transform with Lean and then lose it. We wanted to understand why so many Lean initiatives start off strong, plateau, and then recede as well as how can that be prevented. What we found is the Lean transformations that fail to last were not transformations after all. They were high-energy attempts to rally the organization to action, and when the energy is spent, so goes the transformation effort. A Lean transformation is, in reality, a different management system. Lean for the Long Term challenges our organization and management system models.

Business transformation is currently on most CEOs' agenda, and General Electric (GE) is only one example. GE’s announcement in April that it plans to sell off most of its big finance unit, GE Capital, represents one of a number of moves in the transformation of the company under the CEO Jeffrey Immelt. Mr. Immelt described it as a lengthy and often humbling corporate journey recognizing that GE’s real strength lies in industrial engineering rather than financial engineering.

A few years ago, when he was speaking at Stanford Business School about following Jack Welsh after his tenure at GE, he stated “The trick, if you follow someone famous, is that you’ve got to drive change every day without ever pretending anything was ever wrong,” This is the premise of the Lean management system described in Lean for the Long Term. Most are familiar that core idea of Lean is to maximize customer value, but many lean practitioners are hung up in their current business model and structured organizations that are compartmentalized, departmentalized and driven by MBO (management by objective) goals.

The structure and isolation from the customer will not work in the unprecedented trends in sheer number, speed, and intensity of today’s business transformation activity. The need for business transformation may be caused by external changes in the market such as an organization’s products or services being out of date, changing income streams, new regulations, and/or competition becoming more intense. Organizations need the flexibly and responsiveness required to drive business model transformation which a Lean management system is designed to deliver.

To accomplish this, management must change the focus from optimizing separate technologies, assets, and vertical departments to optimizing the flow of products and services through entire value streams that flow horizontally across technologies, assets, and departments to customers. The Lean management system described in Lean for the Long Term describes that system and gives examples how it applies in every business and every process and the line of sight management process required from the front-line operations to the board of directors. The application of the principles described in our book can make any business more effective and profitable. At the end, this can benefit all of us – owners, managers, employees, and communities. 

So many companies have experienced the Lean initiative "plateau" -- the beginning of the initiative is strong but it soon loses direction and energy. In your experience, what is the cause of this situation? Do you agree with Bill and Ken's perspectives?

What Can Lean Do for the Banking Industry?

The banking industry comprises many accounting, regulatory, process, and management challenges, and because its customer-satisfaction and efficiency rates are ripe for improvement, many feel Lean improvement initiatives can transform these financial institutions. A book published just this month titled Lean for Banks: Improving Quality, Productivity, and Morale in Financial Offices, authored by Bohdan Oppenheim and Marek Felbur,shows how Lean and Six Sigma can significantly improve the efficiency of bank operations.

During a recent conversation with Bohdan Oppenheim, I asked him: "Why should financial organizations choose Lean as a methodology to transform and improve their culture and results?" Here is his complete response: 

Few traditional banks are aware that they have vast reserves of productivity. Typically in such banks, both managers and staff work extremely hard, often overtime. Their intuition tells them that there is no reserves left in the system, and that the system is "as Lean as it can be." The knee-jerk reaction is to blame this frantic pace on an excessive amount of work and a lack of employees. The solution appears to hire more employees, but this often has the opposite effect. With more people hired, the system becomes even more difficult to manage, more convoluted, and less efficient.

Fortunately, an excellent solution exists: Lean Thinking. In Lean, employees transition from fighting crises to increasing both customer satisfaction and bank competitiveness. Work becomes more predictable, stable, and pleasant. It soon becomes truly shocking to both management and staff how much work can be accomplished in the same amount of time and with the same resources, simultaneously improving productivity, quality, cost, work morale, and customer satisfaction.

The effects of Lean can be dramatic: up to doubled productivity in the entire system; process times cut by 50-90%; the number of errors reduced by 50-90%; development time for new bank products reduced by half; approval time cut by 90%; modest capital investments (only training); dramatically better human relations at all levels; and, most importantly, vastly better customer satisfaction and company competitiveness.

When faced with stiff competition, traditional companies brutally cut costs, usually by massive layoffs, head-count reductions, and by overworking the remaining employees and suppliers. Without addressing underlying systemic problems, these cuts simply eliminate needed resources and therefore slow down the operations. This causes more frantic work pace, loss of quality, and decreasing customer satisfaction. When this happens, additional customers and profits are lost, resulting in even more cuts and more layoffs. This spiral of failure can easily lead to collapse.

In contrast, Lean focuses on recovering productivity reserves by waste elimination. This in turn leads to lower costs, higher quality, and increased customer satisfaction. Lower operating costs enable banks to keep the employees on the payroll because they will be needed as customer satisfaction attracts more business. During the Lean deployment period, the employees can address those improvements for which there was never enough time, contributing to better productivity and quality. So, the success spiral occurs without layoffs.

One of the most pervasive myths in banking industry is that higher quality requires higher costs. This may be true in the superficial sense of marble floors in front offices, but is totally wrong in terms of the cost of operations. Lean demonstrates that a high quality of operations is actually the least expensive. In Lean, we avoid the high costs of mistakes, errors, defects, rework, delays, frustrations, and subsequent crises, and focus instead on making operations better and better.

The bank industry seems to be one of the last Lean frontiers, delayed no doubt due to the severe 2007-2011 crisis and subsequent massive layoffs in the industry. However, pioneering banks, listed in the book, are rapidly implementing Lean. 

Do you agree with Bohdan's assessment? In which area do you feel Lean can acutely improve financial institutions and the banking industry?