To 'Lean'or not to 'Lean'

In an earlier article (https://www.dhirubhai.net/pulse/put-fat-kid-front-timeless-lessons-from-forgotten-classic-banerjee/), I mentioned some key lessons from a period classic, ‘Goal’ by Eliyahu Goldratt ( Published – 1984, that features in Time magazine's list of Top 25 business management books) and which remains one of my favorites over the years. This book had given me great insights early in my career , helping me understand concepts of bottlenecks, waste elimination, throughput, effectiveness & the Socratic method of ‘co-operative argumentative dialogue’ to scale efficiencies beyond linear commercial indicators.

In recent decades, the 5Ss of 6 Sigma that had captured the collective imagination of the manufacturing economy of the 80s & 90s ( Sort, Set, Shine, Standardize, Sustain) has evolved and joined hands with Lean thinking principles (value, value streams, flow, pull, and perfection) & the Kaizen way [Sort (Seiri), Straighten (Seiton), Scrub (Seiso), Standardization (Seiketsu) and Sustain (Shitsuke)] , a combination that’s increasingly being adapted at organizations who are extending the principles beyond manufacturing & into other functions as well.

To say it in plain English, we’re talking of overall process improvement through the problem solving method, breaking big problems into small ones in a stepped manner & creating quick wins, each step showing a measured improvement over the previous one. No rocket science, right ? But yes, when systematically & diligently deployed like what the Japanese did, it can indeed tighten your business & improve throughput by making it, well, Lean ?? .

As a mid-level manager in a large organization, I see this as an interesting toolkit. I also see some drawbacks. Let’s examine both – 5 good and 5 not-so-good things about this (fusion) philosophy. And try to see what could be an optimum set-point for large multi-business organizations to adapt this. Some of the concepts might sound a tad technical, but once you import them into your situation, they’re pretty easy to grasp.

Some concepts that I like & which are pretty useful ( borrowing from a training by Chris Croft that I attended recently) –

1. Statistical Process Control ( SPC) - Is a method of quality control which employs statistical methods to monitor and control a process ( detection, study, prioritization, illumination and then charting). In our relentless obsession to measure everything, we sometimes measure without applying the right context. SPC can provide you the optimum point to intervene. For example, in a 50/50 probable event, the ideal number of events that should trigger an intervention is 8 [1/256 = 0.0039], meaning - when you have a 99% confirmation that the event is not a chance occurrence. There’s a geeky formula to calculate the action point that you may look up. This gives you the point where you ( the management) need to intervene for unlikely as well as likely events ( say, number of accidents going up, or the ticket size of sales going down, etc).
2. Cost of quality – Every process stands on the tripod of Lead Time, Cost & Quality. Quality can be quantified as a sum of Preventive Cost and Failure Cost, inverse curves to each other when plotted. While most organizations have the Preventive Costs sorted out ( resources, training etc), they falter when it comes to anticipate Failure Costs. Interestingly, the ideal point to adopt is NOT the intersection point of these curves ( which is the lowest cost of quality), but rather to its right, which is the maximum profit point. The way to arrive at your ideal cost is by listing all your PCs and FCs and making a trade off between the level of service you plan to give to the cost. To get a 10/10 on quality is not often optimal for biz.
3. Downtime & Poka Yoke – Process improvement techniques, when applied at organizations, often focus on inanimate sections & ignore people effectiveness & lost hours. Downtime is an acronym to measure this ( D- Defects, O-Overproduction, W- Wastage , N – Non-used employee talent , T-Transportation of components, paperwork etc, I – Inventory, both raw materials as well as finished goods , M – Motion, wear & tear of man & machine, E-Excessive processing). Poka Yoke means ‘mistake proofing’, i.e. fool-proofing not just a component but the system itself ( quick example – a Diesel-filler nozzle at a gas station being of a different size that cannot fit into petrol car tank, eliminating the possibility of accidental filling of diesel in a petrol car).
4. Business Process Reengineering ( BPR) – The 4 question method ( Can any step be just deleted ? Can any step be automated ? Can any steps be combined into a single step ? Can any set of steps be run in parallel ?). BPR, when applied can reduce complexity & improve efficiency drastically.
5. Dealing with Bottlenecks & improving Performance Queues – I covered bottle necks in my earlier article (‘Fat kid’). The key concept is that a system eventually settles at the speed of the bottleneck ( or the fattest kid). The main lessons are – a. Spending resources on non-bottleneck areas is a waste, b. Time lost in non-bottleneck areas is not wasted time, but it gets converted into a production backlog that queues up for future output & C. Setting your system way above the bottleneck speed is wasteful & inefficient ( a small buffer is ideal). Once you have identified your bottleneck, put your best resources on it, measure & reduce downtime & work up a small buffer. Performance queues occur due to fluctuating arrival & service rates. From staffing a 10-employee cafeteria to a 1000-employee BFO vertical, you need to arrive at the optimum headcount to deal with fluctuating demands & deliver your best throughput at the desired margins. The formula ( Geek Alert ! ?? ) is Q=1 (100-U), Q and U being the Queue count & Utilization. The objective of understanding the Q-count is to design a Pull System of optimum batches so that the upstream & downstream speeds are aligned.

Phew !! ??

Now, let me try and highlight five not-so-good points ( in my humble understanding, and I am open to correct myself if wrong) of plunging all-hands-on-board, into a Lean Culture –

1. Deployment - Lean & Kaizen need top management sponsorship & a buy-in by senior leadership because it needs aggressive deployment & training. What I have observed in organizations is that when a non-Lean legacy embraces it , the deployment gets cluttered, with diminishing chunks of content being handed out down the ladder. By the time it reaches the working level, it starts sounding like a new fad that the top bosses have fallen for & which calls for new paperwork for old information. Also, most large organizations are already sitting on piles of (often unnecessary) acronyms. This new culture adds a ton of new acronyms that the new converts love showing off below the line without adequate explanation. So the buy-in fizzles out down the chain.
2. Adopting -  Of Lean & Kaizen often gets clunky because some departments are quick to do so while others are detractors. This results in confusion and an heterogenous output. Also, sometimes it can turn into a force-fit and trying to fix a process that might not need fixing. Case in point, a methodology of improving throughput in manufacturing might not be the right methodology to improve a sales process. When you mount such a technique on your commercial team, you just add flab without getting sharper. It makes sense to let each function go with what is best-in-class in that function instead of going for a uniform philosophy across.
3. The 10% Rule - When you pull out 10% resources & still get a job done, your efficiency jumps. When you reduce inventory by 10%, close down 10% service centers & eliminate 10% JDs, your cash flow bulks up. When you construct a 10% lag between demand & manufacturing, you eliminate storage costs. When you reduce sales HC by 10% on a slow year & ‘optimize’ 10% project HC between projects, your numbers get sharper. When you shave 10% spending from innovation, you can get away with it w/o anyone noticing. When you cancel training progs, push out promotions, delay raises, hire 10% cheaper talent or convince employees to take a 10% pay cut, you make your CFO smile. Lean is great till it stops being great. Eventually, you’ll reach that 10% band where you’ll cut back on quality, safety & your credibility. Importantly, you’ll cut back on the dignity of your people. Sooner or later, the 90% will get a whiff that they’re the next 10%. Raising the quality of your bench, edge of your product, promise of your services & expanse of your reach by 10% is a better message to put out.
4. One Way Street - The drawback of going all out into Kaizen and Lean is that you end up distorting your entire organization which may have had some great processes of its own. This is a unidirectional journey & once taken, you cannot go back. It always makes sense to keep yourself flexible in this disruptive world where uncertainty is the most certain adversary you’ll deal with.
5. Cultural fit - Lastly, both Lean ( eliminating waste) and Kaizen ( improving efficiency) are about measurement & control. While they might work very well in some cultures and age-mixes of workforces, they could invite cynicism and friction in other cultures & age brackets of employees. So what will be readily accepted as a work ethic for a 50 year old employee who seeks method over madness in a day job, it might be a classic red flag for a free spirited youngster at the starting line who might want to be more exploratory and creative in her job without wanting to be chained to some continuous control cycle.

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(From my blog, 22/10/20) – Views expressed are personal & may not have any relevance to my day job.

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