Paul Levy, the chief executive of BethIsraelDeaconessMedicalCenter in Boston is winning praise – from employees and some people outside the hospital – for finding ways to lay off only 150 people, rather than 600 as was originally planned. An article in The Boston Globeexplains how.
The steps he is proposing, which would save $16 million, include suspending the employer match for retirement plans, withholding some raises and rolling back executive increases, and eliminating cash payments for surplus earned time.
Job openings will not be filled and less-busy areas will have to reduce their headcount, Levy's plan also suggested. The employee barbecue will go, saving $50,000, as will reimbursement for cellphones and BlackBerrys, for an estimated $100,000, and an early retirement offer is being explored.
The article (by Elizabeth Cooney) quotes some employees as supporting the actions. They’re not really happy, but relieved more jobs weren’t eliminated.
If you have some understanding of lean operations, you may already realize that I am writing about this because of what is missing from the list of Levy’s actions. There is no mention of finding ways to save money by operating more efficiently and eliminating waste through improvement of the hospital’s processes.
Would someone like to ring Mr. Levy with a wake-up call?
Word is starting to leak out about this year's Shingo Prizes, and we are delighted with what we have learned so far: that two of the books we publish have won the Shingo Research Prize, which recognizes and promotes research and writing regarding new knowledge and understanding of manufacturing.
One of the books isn't about manufacturing, but healthcare. Lean Hospitals: Improving Quality, Patient Safety and Employee Satisfactionby Mark Graban is a best-selling book explaining the application of lean principles to hospital operations.
Optimizing a supply chain is always challenging. And when what you’re doing is not working on an existing supply chain, but trying to bring suppliers and customers together, it can be even tougher.
I was thinking about this after reading a recent posting on The Wall Street Journal Health Blog describing the event known as Match Day. That is when thousands of graduating medical students find out where they will do their residences, which is accomplished by use of what the blog refers to as “a great big computer.”
The matches are announced on a Thursday. But lately the supply of graduates exceeds the number of residencies, so three days earlier, on Monday, many students are informed that they weren’t matched with a program.
That leads to a stressful and chaotic event known as the “Scramble.” That means these graduates spend Tuesday rapidly contacting hospitals that still have open slots, sending out applications, making calls and conducting phone interviews. A graduate in the Scramble will usually grab the first offer that results (assuming he or she gets one), even if it is not in their chosen specialty.
What made this item of particular interest to me is that those involved in the process are actually trying to improve it. And they seem to understand at least one lean concept: that the order of steps in a process can be just as important as the steps themselves.
Mona Signer, executive director of the National Resident Matching Program, describes their proposal like this: Instead of the students finding out Monday that they haven’t matched, and the remaining open slots being publicized at noon on Tuesday, both of those steps would take place on Monday. Then, the students would be able to send their applications for open slots on Monday (though that timing is still a bit unclear). They’d have to use an electronic system run by the Association of American Medical Colleges, rather than the multitude of communication means, such as email and faxes, that are used now and that can jam up programs’ systems.
Rather than the very fast mating dance on Tuesday, the programs wouldn’t be able to make offers until Wednesday — which believe it or not, would be significantly more time for them to make decisions. Applicants could receive multiple offers, which would be sent through NRMP’s system. Match Day would be moved from Thursday to Friday…
Signer says the proposal is still under consideration and could change significantly before it’s finalized. The changes wouldn’t happen until 2011.
How would you approach this problem? Value stream mapping? Post your thoughts below.
I encountered an interesting use of technology at my local supermarket recently. What I liked about it, from a lean perspective, is that it eliminated some waste from the process of shopping.
The introduction of bar codes and scanners (which I believe was 30 or 40 years ago) speeded up shopping tremendously. In the past few years, many supermarkets (and other stores) have added self-service checkout lanes, where you scan the items yourself rather than hand them to a cashier. I find that convenient when I have just a few items, though I doubt it makes much difference in how long the process takes.
But at our local Stop & Shop in New Jersey, my wife and I encountered something that was new to us (though I understand this has been in place for a while in other parts of the world).
Upon entering the supermarket, we were offered an easy-to-use handheld scanner. (You have to have one of the store’s bar-coded frequent shopper tags to get one. Your tag is scanned, and you receive the scanner.) As we walked through the aisles of the store, we scanned each item we selected, then placed it directly into a bag in our shopping cart. (You can bring your own reusable bags, as we do, or obtain plastic bags from the store.)
If you change your mind about buying something, the handheld unit has a “remove” button to take it off your list.
For fruits and vegetables, we went to a special station in the produce section. We placed each bag of produce on a scale, and typed in either its name or number code. The scale printed a bar-coded label for the amount we were buying, which we then scanned with the handheld unit.
At checkout, with our groceries already in bags, we handed the scanner to the cashier, who then scanned our frequent-shopper tag again, along with any coupons we had. The total was displayed, we paid, and the register printed out a receipt listing every item we had purchased. Checkout took little more than a minute.
The biggest time savings occurs because you place your groceries directly into bags, rather than having to place them in the wagon, unload them at checkout and then put them in bags. A little additional time is required to scan each item, but I believe the time saved more than makes up for this.
It’s a win-win situation. The customer completes shopping in less time, and the store can process more customers through checkout.
Has anyone else had experience with this? What do you think?
Sometimes one plus one is more than two. That can be the case when you link two separate lean tools. And that is the focus of Using Hoshin Kanri to Improve the Value Stream,a new book by Elizabeth Cudney.
The title makes it pretty clear which tools the books discusses. Cudney points out that organizations often fail at improvement because they go after symptomatic problems rather than the faulty system-wide processes at the root of those problems. She shows how to avoid this common misstep by using value stream mapping to create a current-state map.
But then comes the challenge of creating a future-state map – and, more importantly, achieving the goals of that future state. And that is where hoshin kanri – policy deployment – comes in.
Cudney - an assistant professor at Missouri University of Science and Technology who also has manufacturing experience – contends that hoshin kanri is not only a methodology, but an approach that will catch people’s attention, encourage their involvement and increase the momentum of improvement.
The book includes both a “Leancyclopedia” and a lean glossary.
Do you have a question or comment about a book(s) that you would like addressed in Book Talk? Email me directly at Ralph.bernstein@taylorandfrancis.com.
The furor over the bonuses paid to AIG executives reveals a fundamental problem, not only with AIG but with most Wall Street companies and probably many other corporations as well.
Before I get to that, let me mention a pet peeve that stems from my background as a journalist. I believe words should be used properly. If the bonuses on Wall Street are a major – and expected – part of an employee’s compensation, then don’t call them bonuses. Wall Street may have its own reasons for calling them bonuses, but if so, I take a different position.
However, that is a minor point. The major one is that huge bonuses distort what a business should be all about.
People work so they can make money to live and prosper. And the owners or shareholders of a business have making money (i.e., maximizing shareholder value) as their mission.
But that is different from the mission of the business itself – which should be, as lean advocates understand, to serve customers by providing them with value.
People are human, and they respond to incentives. When the incentives are huge – hundreds of thousands, or even millions, of dollars – that overrides everything else. Serving customers then takes second place to getting that big bonus.
The result is that everything becomes focused on making money, even to the detriment of customers. Wall Street firms eagerly throw money at mortgage lenders and brokers to buy the mortgages they’ve created because securitizing those mortgages produces huge profits. Never mind that the underlying sub-prime mortgages are junk that will eventually blow up in their faces. They justify their actions by deluding themselves into believing the value of real estate will always go up.
In the case of AIG, the company essentially assumed the risk of those assets on behalf of many other companies, eager to take the profits that came from doing so, foolishly assuming they would never have pay claims on the insurance they provided.
Ratings companies facilitated these deals, giving high ratings to products that never came close to deserving them – because it was so profitable.
Everyone involved probably claimed they were providing value for their customers. Everyone should have known better.
The best example I’ve heard recently of people who truly were concerned about serving customers was in a column written for The New York Timesby Thomas Friedman.
I live in Montgomery Country, Md. The schoolteachers here, who make on average $67,000 a year, recently voted to voluntarily give up their 5 percent pay raise that was contractually agreed to for next year, saving our school system $89 million — so programs and teachers would not have to be terminated. If public schoolteachers can take one for schoolchildren and fellow teachers, A.I.G. brokers can take one for the country.
Executive compensation is a thorny issue, and I don’t have any easy answers on how it should be structured. I have no problem with people making lots of money, or even getting bonuses. I’m inclined to think bonuses should be tied to the rising and falling of the company’s performance, with stock options preferable to cash.
But whatever the structure, compensation should not get in the way of executives being dedicated primarily to providing value for customers.
AIG – and the rest of Wall Street – lost sight of that.
Salaries for people in dedicated lean positions in manufacturing haven’t changed much in the last couple of years, and salaries in manufacturing generally are down since last year, according to the annual salary survey by Industry Week. The magazine’s survey, based on nearly 1,700 responses, found that the average salary for a lean or continuous improvement manager is $83,387. Six percent of the survey respondents, or more than 100 people, fell into that category. For comparison purposes, the same number two years ago was $81,846. The new number is up less than 2 percent over that amount. Any the magazine found that the average salary for all people in manufacturing, $95,248, was down 9.7 percent from last year. Lean skills can be valuable in a variety of manufacturing positions, and many people who are lean leaders work at companies that don’t have dedicated lean posts. For example, the average salary for a VP of Operations is $135,869. That is the second-highest salary for any position, after corporate management (CEO, COO, president). The average for someone in operations management not at the VP level is $79,043. The lean manager job mentioned earlier pays less than any director or VP position, but more than a position in manufacturing/production management, plant or facilities management, supply chain management, or purchasing/procurement management. The vast majority of survey respondents were white men. In fact, Industry Week used the survey results to describe the “average manufacturing manager”:
A white male, between 50-59 years old, has worked in the manufacturing industry for more than 26 years, lives in the North Central region of the United States (i.e., the Midwest), has been with his current company for 3-5 years, has a bachelor's degree, works for a manufacturing of industrial products or machinery, and earns $95,248.
Does your experience match the survey results (in terms of salary level, or salaries going down in the past year)? Post your comments below.
Since its publication last summer, Lean Hospitalsby Mark Graban has been one of our best-sellers. The book explains why and how lean can be used to improve safety, quality, and efficiency in a healthcare setting.
Many of you may know Mark as the author of the Lean Blog.
For this week’s book talk, I chatted with Mark about reaction to the book, as well as lean in healthcare. He said he has been getting a lot of feedback on the book, the most encouraging regarding senior executives (the target market) who said the book helped them understand lean is not just a set of tools (one of the book’s key points).
He commented, “I do get a lot of feedback in particular about Chapter 10, which talks about engaging and leading employees. People are really interested in engaging staff in continuous improvement. How do you motivate people to want to participate in lean efforts? The whole discussion of standardized work as a management system is helpful. It is not just a matter of writing documentation, but how do you manage, how do you engage people?”
“A pleasant surprise is the amount of contact I’m getting from people around the world about the book,” he added. “In the last couple of weeks, I was contacted by somebody in Sweden who bought 100 copies to do training. There was a person in a hospital in Netherlands. It’s real exciting to see, and a gauge of how much lean thinking in healthcare is spreading throughout the world.”
Mark says he is very busy with his consulting work, even in the current economy. “In a way, (the economy) makes the case for using lean more compelling. While there has always been a focus on both operational and service improvements, and return on improvements, there is a little bit more focus now on hard-dollar-return on improvements.”
In addition, “One other situation hospitals are somewhat being forced into: If you look at capital expansion, one solution to problems in healthcare is ‘we just need more space.’ In the last five to 10 years, hospitals have learned they can actually use lean methods to make better use of the space they have. Now some hospitals are being forced into that. Lean is an alternative to improve productivity and service without that expansion.”
What progress are we making in seeing lean applied to healthcare? “In terms of the adoption curve, I think we’re still in the upward part of the curve. We’re beyond the area where people can credibly say this won’t work in healthcare. We’ve got the wave of hospitals, the early adopters, and now there is the wave of hospitals seeing what others have done, saying ‘OK, this does work.’ It’s hard to say what percentage of hospitals are using lean. There is not good data out there…
“It is certainly not the conventional wisdom in the industry yet. There are certain departments. We are right on the verge of it becoming the accepted notion in the laboratory profession. Lean laboratories significantly outperform traditional hospital laboratories. For hospitals as a whole, we are still educating people, still selling the notion of lean.”
It’s a new blog written by David Silverstein, the CEO of consulting firm Breakthrough Management Group International (BMGI).
I don’t necessarily agree with everything David says. For example, he defends companies making deep layoffs in our severe economic times, a practice of which I am not particularly fond. But he also promotes the ideas that idle time is a great time to train people, and that the entire workforce should be engaged in improvement efforts. So I give him credit for that.
