The Lean Executive
Prices, customers, and especially competitors are all difficult variables for executives to control. But there is one variable over which executives can exert some level of control: cost. As such, it is the role of the executive to minimize costs and, more broadly, build a culture that values the same.
Lean is a proven method for not only building such culture of cost-minimization but also increasing quality, improving delivery performance, and more. If executives launch a Lean initiative, they must be prepared to address a variety of misconceptions and myths about Lean—even the myth that Lean is only about cost control. If not addressed head on, these misunderstandings can undermine a Lean implementation and the building of a Lean culture. The purpose of this article is to share these common myths, offer counter-narratives and executive commentary (from by Mr. Wright, who has led many Lean transformations), and discuss some confirmatory research outcomes (provided by Dr. McCormick).
Myth #1 – Workers lose jobs when Lean is implemented.
Counter-narrative: Lean enables organizations to survive the inevitable vicissitudes of the business cycle.
Executive Commentary: Because Lean is so effective at reducing cost, and because labor is usually such a big component of cost, it is certainly possible that employees will be worried about a Lean implementation. Though employee reductions are seldom the reason Lean is implemented, if your workers assume layoffs are going to happen, then you have lost them before you even started. Executives must fully communicate that Lean initiatives are primarily a transformation of the organization’s culture. They should share the key objectives of a Lean transformation, and employee reductions should not be among them. When there is risk of reductions, executives should find visible ways to redeploy and invest in those people and clearly communicate this as an objective.
I learned the importance of addressing this myth up front when I was involved in a Lean deployment in a well-established business with union-represented employees. The very first day of training, the Lean trainer noticed that no one was listening or engaging. When asked why, the employees stated that they would not participate in laying off their fellow workers. The Lean trainer summoned me to the room to address their concern. I told the workers that we were facing a 50 percent reduction in work orders coming into the facility for the coming year. The intent of our Lean initiative was to invest in them during this contraction. By training them and deploying Lean now, we would not have to lay off any of their team members because of next year’s work reduction. Further, our backlog indicated that work orders would increase by 200 percent in the year following the reduction. With a Lean culture in place, the workers could also handle the increase without having to add members to their current team.
Communicating a bigger context for Lean made the difference, and the workers went on to successively implement the initiative. Executives must address this myth up front, whether they think it is on employees’ minds or not, because they will not always have employees who communicate as clearly as mine did that day.
Consider the Evidence: If Lean is all about getting rid of workers, why does the company that invented most of our Lean practices continues to grow? In 1977, Toyota reported about 50,000 total workers. As of 2020, Toyota reports having more than 370,000 workers worldwide. Ground zero for evidence that Lean practices work is surely the 1977 article by four Toyota Production Control Department workers published by the International Journal of Production Research. For the first time, Toyota began sharing its production ideas and outcomes in the public domain—and forty-plus years later, the paper is still an amazing read. Observers then and now clearly understood that something new was emerging, and it was time to pay attention. The data on setup times, “man hours” for completion of a vehicle, turnover ratio of working assets, and per capita improvement proposals continue to impress—and clearly workforce reductions were not a primary goal. This is one 1977 Toyota that still gets good mileage!
Myth #2 – Lean applies only to manufacturing processes.
Counter-narrative: A surprising amount of Lean happens away from the factory floor.
Executive Commentary: At its core, Lean is more a culture than a method. The culture that Lean creates when properly applied and fully embraced is one of continuous improvement and relentless elimination of waste within the entirety of an organization’s processes—not just those on the factory floor. Take a moment to think about a few of the processes in your organization. Lean suggests that waste is present in most of them and, if eliminated, will reduce cost, improve quality, and get things done faster. In fact, at the executive level we sometimes inadvertently create waste by inserting unneeded bureaucracy, controls, and metrics that we seldom pay attention to. These can put a tremendous strain on the organization.
I am reminded of the time I took over as top executive for a very large division. The administrative assistant brought in a thick stack of papers needing my signature to approve petty cash expenditures. I immediately saw this as potential waste. So, I set them aside and did not sign them. The next week the assistant came in again with a similar stack and asked why I had not signed the previous stack. I asked if anyone in the organization was complaining or unable to make these “unapproved” expenditures. The assistant quickly answered that all those expenditures were already made before the paper was generated for me to sign, so there was nothing to complain about. I then asked if I was holding up reimbursement of these expenditures. The assistant told me that everyone would get paid whether I signed them or not. My final question regarded how much trouble it was for everyone to put these requests together for my signature and track them. The assistant informed me that it took several hours to create each form for signature. We immediately stopped the practice.
This is just one small example of hundreds I could convey, a great deal of which would have no relation to the factory floor. What would happen if every one of our executives, managers, and people looked for waste in every part of the organization, and the company culture rewarded those who did?
Consider the Evidence: In the service sectors, healthcare providers and hospitals embrace Lean more and more with each passing year. In the early 2000s, Seattle’s Virginia Mason Medical Center responded to a performance crisis by applying tools from the Toyota Production System at the hospital. At the beginning of the implementation, executives proactively announced a “no layoff” rule. Rapid process improvement workshops sprang up and employees were encouraged to turn in “My Everyday Lean Idea.” Now, the Virginia Mason Medical Center is a leader in Lean training for healthcare providers.
Myth #3 – Firms must hire experts to implement Lean.
Counter-narrative: Executive leadership matters far more than experts.
Executive Commentary: I have seen Lean, when correctly implemented, result in 60 percent reductions in cycle time (speed) and cost reductions exceeding 50 percent for large, complex organizations. But I have talked to many leaders who say, “Oh yes, we embrace Lean here,” without seeing any evidence of that in their organization.
Over the years I began to discern a pattern in the performance histories of companies I worked with. The metrics looked more like an electrical sinewave, mirroring changes in executive leadership rather than underlying business cycles. I slowly became convinced that executive and managerial leaders play the most critical role in the Lean transformation, through their role in initiating and sustaining a Lean culture in the organization. Lean experts, while important in the deployment and use of the improvement tools, seldom influence the culture over the long run. Experts can apply Lean methods, but only internal executives and leaders can meaningfully change and sustain a culture. At its core, Lean is a culture of continuous improvement focused on the relentless elimination of waste within and organization. As such, executives and leaders must set the example and walk the Lean talk. They must serve, reward, and support everyone in the organization who embraces the Lean culture and show that it is in their best interest to do so.
Consider the Evidence: Since 2003, the World Management Survey has collected management and performance data in 35 countries while conducting over 20,000 interviews with managers. The WMS is one of the most extensive data-driven projects to document outcomes associated with good management practices—and Lean is central to their efforts. A 2013 paper published in the Quarterly Journal of Economics by Nicholas Bloom and others titled “Does Management Matter? Evidence From India” compared the performance of Lean practices introduced in treatment plants with control plants in a randomized control trial in India. Treatment plants using Lean practices documented 17 percent productivity gains in the first year via quality and efficiency improvements and reductions in inventory. The authors noted that “managerial time” was central to the success of the transformation. So, management does matter—especially managerial attention!
Myth #4 – Lean is only about cost cutting.
Counter-narrative: Lean certainly cuts costs, but it also can improve safety, worker participation, process flexibility, and other important outcomes.
Executive Commentary: I have transformed organizations using Lean multiple times, and the reason was never solely cost reduction. Lean also improves cycle time, process flexibility, quality of the product or service being delivered, and even worker safety. When we transformed organizations, we would ask everyone within the organization to relentlessly look for ways to eliminate waste as well as ways to improve safety and quality.
During a regular shop walkthrough, I once observed a worker putting himself in a very unsafe position to do some work. In fact, it was a stance that could ultimately limit his ability to work this job into the future. I stopped and asked why he hadn’t done something to improve this. A crowd quickly gathered while the employee told me that they thought all we cared about was cost savings. I responded that we also worried about their safety and asked them to find a way to improve the way to do this particular job. The employees informed me that they had already done that multiple times and their ideas were rejected by engineering and management. Many of them said they had done this job before but couldn’t anymore because of the cumulative damage to their bodies.
I directed engineering to once again meet with these workers and find a way to do the job more safely. Engineering returned with unaffordable estimates to build new tooling, even though the employees who did the job every day showed me how the improvement could be made for no cost. The engineers acknowledged that the employees’ way was cost-free, but they could not guarantee that a certain $500,000 part would hold its shape if this new method were used. If the part couldn’t hold its shape, we would have to scrap the part and lose $500,000. If Lean was only about cost, we would have stopped right there. We proceeded, and the employee’s idea worked perfectly. Was it worth the risk? I would say yes, because the number of employee improvement ideas increased tenfold from that point on and the cultural change towards Lean also accelerated.
As an executive, I have many times been told by Lean experts not to promise employees that we will consider implementing every one of their ideas. These experts would warn me that considering “stupid” ideas is harmful to the Lean implementation. In a single, isolated implementation, I would tend to agree, but when we are using Lean as a transformation of the organization’s culture, no idea should ever be considered “stupid.” Workers generally know their processes and job better than anyone, so they must be allowed to generate and implement improvement ideas freely without fear. In some instances, they must even be allowed to fail. It is only in this environment that a culture of continuous improvement can begin; people see we are serious about change, serious about supporting them, and willing to let them implement their ideas. As they learn, they will grow and begin to embrace their successes.
Consider the Evidence: Can Lean improve social performance metrics in addition to productivity metrics? A 2016 paper in Management Science provided strong evidence that Lean proved transformational in the Nike supply chain. Social protestors consistently spotlighted Nike’s practice of manufacturing shoes in developing countries and raised questions about labor practices in these environments. Nike’s multifaceted response included the introduction of Lean practices to their contractors, along with 5S, visual management, Kanban inventory systems, and the like. Surprisingly, labor compliance outcomes improved significantly in tandem with the introduction of Lean manufacturing practices. These practices also helped Nike accurately identify truly dangerous workplaces in Bangladesh. Nike began reducing its Bangladesh footprint before the Rana Plaza garment factory collapse forced many other companies into that conversation.
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Customers are demanding, competition is relentless, and costs always seem to rise. Executives live and work in this context, and our hope is that understanding these four Lean myths can help you better control those factors you can control—costs, certainly, but also culture.
