12.15.2014

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?

12.03.2014

Grasping Lean

A very handy new book was published last month called The Lean Anthology: A Practical Primer in Continual Improvement, authored by Rebecca Goldberg and Elliott N. Weiss, and it provides simple case studies of people observing and integrating the principles of Lean into their personal and professional lives.

I had a chance to discuss the book with Rebecca and asked her: "Which aspect of a Lean initiative is usually the toughest to grasp by those without an operations management background?" Here is her complete answer:

The successful understanding and teaching of Lean means getting people engaged, involved, and committed. This is the toughest aspect of those involved in a a Lean initiative to grasp and those leading the initiative to overcome. So often, students of Lean -- whether in a corporate or an academic setting -- get lost in the esoteric, “armchair Lean” side of the methodology. This misplaced focus prevents or delays success. The Lean Anthology: A Practical Primer in Continual Improvement uses practical examples that readers can intuitively understand and apply -- bridging the gap between Lean theory and true Lean integration. Colleagues and associates are engaged when they understand the benefits of change and are able to generalize Lean concepts in a holistic way. 

Here are some examples: Two people discuss their approaches to car care -- which helps to explain predictive, preventive, and reactive maintenance. A busy executive changes his daily routine to accomplish the same amount of work, yet preserves more time for family. A busy mother designs a "critical path" to shepherd her children to the school bus each day without any "defects." The stories in The Lean Anthology walk participants through a strategic path toward a Lean conversion, represented as the 5-Cs of Customer, Capability, Control, Coordination, and Context/Culture. The best investment an organization can make in successful change is to support true understanding and engagement -- our book makes that investment tangible and accessible. 

How do colleagues without an operations or engineering background in your organization function within a Lean initiative? Has it significantly hindered their involvement?

11.06.2014

Lean is the Medicine that Healthcare Systems Require

Last month, an important book titled The Lean Prescription: Powerful Medicine for Our Ailing Healthcare System, authored by Patricia Gabow and Philip Goodman, was published, and it details how Denver Health became the first healthcare organization to be awarded the Shingo Bronze Medallion Prize for Operational Excellence. 

I had the chance to speak with Patricia about her book, and one of the main questions I asked was: "Why should healthcare organizations choose Lean as a methodology to transform and improve their culture and results?" Here is her complete response: 

Let me go back one step from this question and first answer an even more basic question, “Why must healthcare organizations transform at all?” Pondering this question is what led me to Lean. There is a national-level answer and an organizational-level answer to this question. I contend that the USA doesn’t have the best healthcare system in the world. Fortunately, both the state and federal governments are taking a wide array of steps to begin to address the issues of coverage, cost, quality and care co-ordination. But the fruits of the policy changes will only occur if individual healthcare systems are transformed. 

My 40 years in healthcare, first as a practicing physician and then as an administrator, convinced me we needed transformation at an organization level. Standing in any clinic or any hospital unit tells you we are basically doing things like we did when I was an intern more than 40 years ago -- we have new drugs and new technologies, but most of our processes are the same. We need transformation in all our healthcare institutions and that will require clear (and new) methods to achieve it. We must identify, prescribe, and administer some powerful medicine to the system. 

I think Lean is that medicine. The power of Lean lies in the fact that it is both a philosophy and a tool set. The Lean philosophy teaches us that transformation is built on the two pillars of Respect for People and Continuous Improvement. These should always have been the pillars of healthcare. Even if healthcare had to wait for an automobile manufacturer to teach us this, we can embrace it. 

In my decades in healthcare, I, as others in healthcare have tried many approaches to reducing cost and increasing quality. Lean was the most powerful approach I had ever seen. There are few, if any other, approaches that hit the target on quality, cost and employee empowerment. 

For example, other approaches that reduce costs at best can hope to keep quality the same and keep employees neutral about both the process and outcomes of the cost reductions. Because Lean focuses on getting rid of waste that shouldn’t have been there at all, its focus can’t be argued about -- who wants to defend waste? Because Lean is built on respect for people, the Lean tools that let us see and eliminate waste can be used by every employee. You don’t need a PhD to use an elegantly simple tool like a spaghetti diagram. Every employee becomes an engaged problem solver. We gain an army of problem solvers -- it is no longer just up to executives to make our systems better. 

While these are the intellectual reasons why Lean is the methodology for healthcare organizational transformation, the real “proof is in the pudding.” At Denver Health we realized over $192 million of hard financial benefit, achieved outstanding quality such as having the lowest observed to expected mortality of all academic health system members of the University Healthsystem Consortium and having 83% of our employees say they understood how Lean helped us maintain our mission. Lean is the method that hits the bull’s eye on cost reduction, quality of care, and employee engagement. How could you not use such an approach? 

What do you think of Patricia's thoughts on the power of Lean to transform health systems? I'd particularity like to see comments from those in the healthcare sector who are currently part of a Lean initiative.

10.15.2014

The ”Just Do It” Approach to Strategy Deployment Has Proven to “Just Not Work”

Randy Kesterson recently published a book titled The Basics of Hoshin Kanri, and it explains the basic steps to a strategy deployment and execution approach that has proven to be highly effective by companies such as Toyota, Danaher, and 3M.

The book includes interviews with many of the world’s leading Hoshin Kanri experts. For example, when asked to define Hoshin Kanri, Jeffrey Liker stated: “It’s a method for deciding the strategic direction from the top and then cascading that down to goals and objectives and then the means to achieve those goals and objectives.” Lisa Boisvert defined Hoshin Kanri as: "a strategic planning practice that defines a direction and priorities, aligns the organization around that direction through dialog and detailed plans, then implements and measures against those plans in a disciplined way.”

My direct question to Randy was: "What makes Hoshin Kanri a unique and useful strategic objective delivery system?" Here is Randy's complete answer:

What makes Hoshin Kanri unique can be summed up in two words … Catch Ball (which is an interactive process of tossing items and possibilities back and forth like a game of “catch.” It sometimes results in changes to proposed objectives, means and measures). 

Hoshin is unique in that it involves an unusual level of employee engagement in the strategy deployment process by means of the Catch Ball process, which is explained in the book. Hoshin Kanri and employee engagement enjoy a symbiotic/synergistic relationship. Hoshin Kanri requires employee engagement to be effective, and the effective use of Hoshin Kanri will dramatically improve employee engagement within an organization. 

What do you think of Randy's summation of Hoshin Kanri? Has Hoshin Kanri been applied in your organization? Feel free to discuss your results.

8.29.2014

Eco-friendly = Profitable

I came across a very interesting article over on the Ensia site titled Manufacturing Goes Lean and Green written by Justin Miller. The article focuses on Highwood -- a manufacturer of synthetic woods -- that considers its product and its manufacturing facility environmentally friendly. 

Although the company was designed as a "green" operation, it started embracing Lean methodology years after inception and here are the results that grabbed my attention:

"In 2009, for example, Highwood cut its energy consumption for lighting by more than 50 percent just by retrofitting its facility with high-efficiency fluorescent light bulbs. With help from MEP (Manufacturing Extension Partnership), the company installed solar panels, which now provide about 20 percent of its energy needs"

"Highwood not only has reduced its landfill waste by 70 percent, but has reduced monthly removal fees by roughly 65 percent."

I'm sure these results came after embracing nontraditional mindsets, which certainly evolved the culture within the organization. The most important test for Highwood will be sustaining and expanding this new culture of challenging the traditional way of thinking.

I am always interested in hearing stories about organizations that are combining their formal Lean initiatives with "green" policies as it is proven to be the natural extension of Lean thinking and implementation.

What are your thoughts on this article? Do you think Lean initiatives can ultimately lead organizations to "closed-loop, zero-waste processes"?

7.23.2014

How the LEGO Group Built a Global Learning Organization Using TWI

Patrick Graupp, the foremost thought leader on the topic of Training Within Industry (TWI), has authored an important new book titled Building a Global Learning Organization: Using TWI to Succeed with Strategic Workforce Expansion in the LEGO Group. He wrote the book with two coauthors, Gitte Jakobsen and John Vellema, both employed by the the LEGO Group. The book completely outlines the actual organizational and planning models used by the LEGO Group to build a true Global Learning Organization.

I recently met with Patrick at the 2014 TWI Summit in Nashville and asked him: Why should a multinational company develop a Training Within Industry (TWI) program? What makes LEGO’s unique? Here is his complete reply:

Companies struggling to achieve and sustain gains from their Lean programs have come to realize the vital role Standardized Work plays here and just how difficult it is to achieve. It takes tremendous amounts of skill and effort to get literally everyone in an organization performing tasks in the same way. When this vision of consistent processes and performance expands to include facilities in different countries, with varying languages and cultures, the complexity magnifies exponentially. However, as the LEGO Group recognized when they began to rapidly expand their worldwide production, children don’t care whether their LEGO pieces are made in Denmark, Hungary, Mexico or China, but they have to all fit together perfectly and this requires stable quality across all production sites.

What the TWI programs, especially the Job Instruction element, give to this multinational effort is a “common language” around which leaders and operators can communicate effectively. By creating a simple but clear structure for “breaking down” a job into its essential elements, the What and the How and the Why, and then providing an effective “4-Step Method” by which any person can be trained in that job, TWI has allowed any LEGO associate regardless of where they live or what language they speak to learn the job identically to any of his or her counterparts, even in facilities in separate countries. While employees are being trained in their various native tongues, of course, the content and methodology of the training is consistent following the TWI method.

What is truly unique and special about the LEGO Group is that in implementing their global training system they made the conscious decision to regard equally all LEGO employees around the globe thus abandoning the old culture of “headquarters knows best.” This was no easy task. But it embodied the Lean philosophy of Respect for People in the most fundamental way -- across borders and cultures. As one top executive is quoted in the book expressing this new approach: “Any employee of the LEGO supply chain should be able to move from any factory to any other factory and notice nothing else but the language and the local temperature.”

In my own personal experience teaching the TWI courses around the world, everyone understands and agrees with the principles embodied in the TWI methods. In other words, they transcend differences in cultures and attitudes and represent what is fundamental to people from any society. With these foundations in place, TWI skills allow leaders in any country to effectively lead people by building strong relations that lead to good results. When a multinational company attempts to implement their own vision of leadership and business overseas, they would be wise to bring these methods with them. 

What do you think of Patrick's reply? Has your organization instituted any type of TWI program?

6.16.2014

Moving Production Back to the USA -- The Better Business Strategy for US Manufacturers?

A new book by Tim Hutzel and Dave Lippert titled Bringing Jobs Back to the USA: Rebuilding America’s Manufacturing through Reshoring was published this month. This book continues the theme of their first book, Keeping Your Business in the U.S.A.: Profit Globally While Operating Locally.

As many US businesses have relocated operations to different parts around the world for supposedly cheaper labor costs and materials, I asked Tim and Dave why should a US company now consider reshoring and reestablishing its manufacturing back in the USA? Here is Tim and Dave’s response:

Some reasons may stem from the original motivation to offshore. Was it strictly cost? If so, what costs were considered? In many cases, the labor cost was the driving force. If that is the case, then looking at the current offshore labor costs, as well as the near term labor cost trend, may paint a very different picture from the original. The rapidly rising middle class in China is eliminating that country’s labor cost advantage.

Another cost is transportation. Energy costs have increased markedly from the days when many companies began their offshoring operations. This is another development that may make domestic manufacture appealing.

Travel costs and time spent coordinating with offshored production are trackable and must be included. While travel costs are calculable, the opportunity costs are probably ignored. That is, could executives traveling to offshored locations be using that travel time in much more productive ways? Also, could the staff time spent dealing with offshore production issues, including complicated logistics, be more productively spent on other matters?

There are also hidden costs that burden the offshoring company in ways it fails to recognize. Scrap and rework can be immense and also unpredictable costs. Do batches of product arrive and sometimes need rework? When that happens, are those costs tracked accurately and reflected in the actual cost of the imported product? What about outages – are there times when product is en route, and stock outages occur prior to arrival? What is the cost of an unhappy customer? Are customers driven to competitors’ products? That can be an unacceptable cost. It can also be difficult or even impossible to measure.

Is the cost of stocking large inventories completely and accurately covered? To avoid outages, extra stock may be kept and stored. Is stock sometimes damaged, or even lost, and are those costs captured? Is a heavily stocked product susceptible to obsolescence through design changes?

Perhaps the most difficult costs to identify are those that result from the distance between production and design/engineering. Are product improvement opportunities lost due to the disconnect between these two entities? Are there quality problems that result in substandard product, which can lead to lost market share? How can such subjective or camouflaged costs be measured, even though they are very real? Sadly, we are convinced that costs like these have been left out of the offshoring equation for many companies. 

What do you think of Tim and Dave's points? Do you think that the era of US companies locating their operations offshore because of supposed cheaper costs are drawing to a close?

5.19.2014

What Can a 21st-Century Business Leader Learn from a 19th-Century Military Theorist?

I had an opportunity to talk with Norton Paley about his just-published book Clausewitz Talks Business: An Executive’s Guide to Thinking Like a Strategist. I started with the obvious questions: “Why did you select Clausewitz?” and “What influence does his concepts have on today’s business problems?” Here’s his response:

Carl von Clausewitz is regarded as one of the greatest Western military thinkers. Many eminent scholars consider his epic 1832 classic, On War, the most distinguished Western work on war ever written.

In recent years, his insightful concepts have gained serious attention among business executives, as have other military classics, notably Sun Tzu's
The Art of War. As significant, interest has spread from the C-suites to the lower echelons of organizations as individuals increasingly accept the parallel of how military concepts apply to business. 

 I've taken Clausewitz’s original text and interpreted and transposed his most durable ideas on leadership and strategy to help executives think like strategists. To my knowledge, this book represents the first serious effort to tap into his entire work and extract his remarkable lessons on strategy for business application. 

Readers can now see how to integrate his lasting historical references with modern business practices and thereby uncover potential solutions to some of today’s more critical competitive problems. 

“Can you give examples of Clausewitz’s better known concepts?”

 Here are some of his timeless principles:
 • In conflict, even the ultimate outcome is never to be regarded as final. The outcome is merely a transitory evil for which a remedy may still be found in a variety of possible conditions at some later date.
 • Two basic principles underlie all strategic planning: First, act with the utmost concentration; second, act with the utmost speed. 
• What matters is to detect the culminating point of actions with discriminating judgment. 
• Action in conflict is like movement in a resistant element. Just as the simplest movement, walking, cannot easily be performed in water, so in conflict it is difficult for normal efforts to achieve even moderate results. 
• The opponent’s capabilities must be neutralized; that is, they must be put in such a condition that they can no longer carry on the conflict. 
• Just as a businessperson cannot take the profit from a single transaction and put it into a separate account, so an isolated advantage gained in conflict cannot be assessed separately from the overall result. 

“How would you sum up the advantages of your book?”

The central aim of the book is to help individuals think strategically about such managerial issues as human behavior, leadership, and organizational culture. If the book provides executives with a better understanding of how to face up to competitive struggles and apply appropriate strategies to outmaneuver the competitive obstacles they face, its purpose will have been achieved. 


What do you think of Paley's interpretation of Clausewitz? What books have influenced your business leadership and strategy?

4.15.2014

How Can We Overcome Toxic Conformity at Work?

Why are many of our organizations almost allergenic in their responses to innovation? Why do we penalize those courageous individuals who challenge the status quo by swimming against the tide? What can we do at work to ensure that dissenting voices speak up and make us reflect on where we are going and what we are really trying to achieve? 

 I recently put these questions to Bill Templeman, author of the just-published book, Leadership Basics for Frontline Managers: Tips for Raising Your Level of Effectiveness and Communication. I wanted to know why this dynamic happens and what managers or anyone in a leadership position can do about it. Here is his complete response:  

All organizations with any sort of hierarchy are prone to believing in their visions and plans for the future; the stronger the culture, the greater the belief that “We are on the right path!” It is no secret that business plans become documents of faith, just like party platforms become documents of faith for politicians. The CEO of a major hi-tech firm recently said that he measured his executives’ teamwork skills by assessing their degree of commitment to the corporate business plan. But what if this plan is flawed? 

Admiral John Godfrey, the former Director of Britain’s Naval Intelligence Division, in analyzing "Operation Mincemeat," a highly successful World War II espionage operation, identified two major weaknesses of the Nazi’s command structure: "wishfulness" and "yesmanship."

Wishfulness is that tendency among individuals and organizations to believe information that supports their own view of reality while simultaneously to reject all contradictory information. Yesmanship is the tendency of those with less positional power to agree with those who have greater power, mainly out of fear. Yesmanship is an enabling behavior for wishfulness. 

What can we do to ensure that wishfulness and yesmanship do not distort our business planning and decision- making? How can we encourage people to speak their truth?

• Be the change you want to see in your people. If you want the truth, you must speak the truth and be the truth. 
• Encourage debate and dialogue. Welcome ideas that conflict with your own assumptions. 
• Hire people who are likely to disagree with you on business issues. 
• Instead of arguing with dissenters, ask for explanations of their thinking. 
• Treat everyone according to a set of worthwhile values.
• Build a culture of trust by demonstrating trust.
• Show your commitment by demonstrating everything you believe in through your own behavior.
• Cherish your dissenters and critiques. 

How far would Bill’s ideas go in your organization in terms of encouraging new thinking that goes against the current? Are there other ways you could discourage the toxicity of conformity at work?

3.18.2014

Generating Sustainable Power: What Are the Considerations?

Joao Neiva de Figueiredo and Mauro F. GuillĂ©n recently edited and published a book titled Green Power: Perspectives on Sustainable Electricity Generation, which provides a systematic overview of the current state of green power and renewable electrical energy production in the world. 

During a recent conversation with Joao Neiva de Figueiredo, I asked: "What are the key considerations for adoption of sustainable power generation practices around the world?” 

Here is his very enlightening response: 

In analyzing different examples and situations of power generation around the world, it becomes apparent that some conditions favor sustainable energy practices: 

1. Consistency with a country’s or region’s geographic, climactic, anthropological, historic, and social characteristics. Understanding a country’s natural and cultural endowments is necessary for the development of a successful green energy set of policies. Electricity generation technologies must be consistent with a region’s environment. For example, the fact that important energy sources in Iceland are geothermal, in Canada and Brazil are hydro, and in Denmark are aeolic, indicate paths to success in each of those parts of the world. 

2. The need for a systemic approach when considering the mix of different potential generation technologies to be adopted. It is necessary to consider the interaction among the different components of the electricity system (generation, transmission, distribution) and of those with a country’s traditions to propose sustainable programs. For example, Germany capitalized on a strong bottom-up sentiment in favor of green energy (resulting from a cultural tradition of respecting nature) to implement successful policies. 

3. The advisability of incentive alignment not only among different stakeholders at each point in time, but over time. Because power generation projects need high levels of capital investment, take time to be developed and built, and have a very long useful life, consistency of policies over time is extremely important. Northern European countries have provided a positive example of this as energy policies benefited from continuity (albeit with slight adaptations) even as different political parties alternated in power. The counterexample is French Polynesia, where in the first decade of the millennium alternating political parties in power led to inconsistencies in energy policy. 

4. The desirability to continue research and implementation efforts to mitigate the negative effects of fossil fuel. Because some countries do not have natural endowments favoring the immediate adoption of green energy sources, there will be a transition period during which fossil fuels are a major component of energy generation. China’s efforts to improve “cleaner coal” generation technologies alongside the effort towards wind and solar generation are a case in point. 

5. The necessity for increased efficiency in energy consumption. It is encouraging that in recent decades some countries (albeit few) have been able to decouple their per capita GDP growth rate from their per capita energy consumption rate. The path towards a sustainable world is not limited to electricity generation: better use of energy generated is also a requirement. 

What do you think of Joao's explanations? How has green power production and dissemination in your part of the world affected your business? Has your organization established a "lean and green" initiative?