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Posts Tagged ‘Practical Guide Volume 2’

One of the mistakes companies make when they try to create a business system or develop a continuous improvement culture is that they focus on the wrong things. They scrutinize behaviors. They spend their energy reacting to unexpected results. They bounce from tool to tool trying to find a fix for their problems.

What they often overlook, though, is that fact that their employees are often not guided by unifying principles. There is no clear corporate identity. Guiding principles are like beacons for the team, and create continuity as people come and go.

The following list of principles comes from our continuous improvement transformation model. It breaks the progress from an ordinary company to a world-class one into six phases. Each of these phases requires the adoption of certain principles to successfully navigate through it. While this is a fairly long list of principles, they are rolled out over an extended period. By the time you move to the next phase, living by the previous principles should have become a habit.

PHASE 2: COMMITTING

In the committing phase, the key leaders of an organization turn the corner from accepting business as usual to choosing a new path. It is one of the most difficult of the phases because it entails accepting that there is a flaw in the way the business is currently being run, or at least that there is a better way to do things.

  • Build RelationshipsIn the later phases, it is imperative that team members and the leaders in the organization work together. It takes a long time to cultivate a strong relationship, so the groundwork has to be laid early in the process of change.
  • Develop Trust: An integral part of relationships is trust. It is important enough to warrant a separate principle. Team members have to feel safe and confident in their bosses. Leaders have to believe that team members will act in the best interest of the organization.
  • Develop Leaders InternallyGreat organizations push themselves. Weak leadership results in a lack of stretch goals, and an inability to successfully reach them, regardless of how demanding they are. Strong leadership gives an organization purpose and direction.
  • Show Respect for PeopleFirst of all, treating employees respectfully is the right moral thing to do. After all, employees are people. They are not bodies, heads, etc. But beyond that it is good for business. Respect breeds satisfaction, and satisfaction breeds success.
  • Think Long TermFar too often, people think in a short timeline and don’t invest in the future. Creating a strong business system takes time and requires patience.
  • Embrace Facts and Data: You can’t effectively improve without a deep understanding of things. Far too often, decisions are based on opinion and create conflict. Facts and data create clarity and alignment.

PHASE 3: STARTING THE JOURNEY

There is an old expression that says even the longest journeys begin with a single step. The same is true when developing a continuous improvement culture. You won’t immediately reach your destination. This phase transitions the leadership team from deciding to acting and sets the tone for your Lean journey.

  • Look WithinThere is a tendency to focus on external factors and other people when facing barriers and obstacles. It is important to look at yourself first. This remains important throughout the development of a business system. The performance bar is continually raised. If you continue to operate at a static level, you will eventually become a barrier to progress.
  • Align the TeamIt should come as no surprise that great organizations have a unity of effort. Leadership tools like policy deployment and operations reviews are the tools for getting the team working together. The guiding principles on this list, though, are the bedrock of that alignment.
  • Avoid BureaucracyOrganizations without strong principles need lots of rules and policies to get things done. When you have a strong belief system, you need less bureaucracy to be effective.
  • Invest WiselyContinuous improvement is not free. It is an investment in the same way that buying a rental property has an upfront cost. Eventually, if you do the right things, you’ll get a payoff. But it is important to make sure that everything you spend has a purpose and will contribute to your overall goals. One of the best investments you will make when developing your business system is in people.
  • Know Your Customers and What They ValueIt is impossible to be successful in the modern, competitive world without understanding what your customers want and are willing to pay for. Pay close attention to the Voice of the Customer (VOC).

PHASE 4: BUILDING THE FOUNDATION

There are some key skills that your team will require as you develop your business system. You’ll also need some basic structure and systems. The focus of this phase is developing the required talent and building a Lean infrastructure.

  • Focus on Processes: Processes are the lifeblood of any business system. If people do things in a haphazard manner, you can’t expect consistent results. And without consistent results you cannot rely upon each other.
  • Learn to LearnPeople have three basic problems when it comes to learning. The first is that they don’t know what they don’t know. The second is that when they do see a knowledge gap, they tolerate it. The final problem is that they don’t know how to close the gap when they do identify it as a shortcoming.
  • Build and Empower TeamsIf you can replace your team with a robot, you’re not using people properly. Strong teams have the proper training to make decisions in the absence of leaders.
  • Create StructureCreating a business system based on a continuous improvement culture needs the right framework within which it can operate effectively. This structure doesn’t happen by accident. It needs to be planned and maintained for the business system to flourish.
  • Embrace SimplicityWe often confuse technology with effectiveness. Now, technology is fine when it makes things better, but technology for its own sake is not. Look for the simplest solution first, even if it is not as exciting as other options.

PHASE 5: RAMPING UP

Once the foundation is built, it is time to start building upon it. In the early part of the ramp up, you’ll probably focus on cultivating talent (though you will still need to deliver results). While that sort of focus on skills growth never goes away, by the end of the ramp up phase, most people on your team should have at least some continuous improvement experience. At that point, there will be a subtle shift from learning and teaching as the priority to a greater focus on results. Learning should not go away, but there will be a change in the ratio of how time is spent.  Note that this phase can take a number of years. It is important to be patient.

  • Structure Your ThinkingPeople need to think scientifically. That means that they gather and interpret facts about a problem before acting. This way of thinking is unnatural for many people. In the early days of humanity, fight or flight were the two basic responses when cavemen were presented with a problem. The decision had to be made quickly and was based upon what one had seen before. Modern problem-solving, though, tends to be ineffective when done with snap decisions.
  • Focus on FlowEvery time works sits it creates a problem. It takes more energy and effort to manage it, and customers wait longer to get what they want.
  • Create StandardsContinuous improvement requires a baseline the start and the ability to recognize abnormal conditions. This means that you have to have standards in place. Without them, there is no foundation upon which to improve.
  • Manage Your Value StreamCompanies often erect artificial barriers within the organization. They arrange their functions as silos. That makes it hard to create value for customers. Instead, the company should be arranged by value stream.
  • Improving Your Job is Part of Your JobCompanies turn the corner on their CI journey when employees start taking responsibility to make their own job better. In typical organizations, changes in work are driven by managers. When continuous improvement is part of the company’s DNA, people become dissatisfied with waste in their work and take action to do something about it.

Phase 6: Keeping Momentum

The risk during Phase 6 is complacency. Once the company gathers steam, it has to keep it. Don’t confuse this phase for steady state, though. The improvement trajectory should still be steep. It is just that it is using well-established systems with highly trained people. The stability of this phase also allows for greater experimentation with more sophisticated tools.

  • Build in QualityEvery company understands the quality is important to their customers. Most, though, inspect it into their products. Great Lean companies build quality into them.
  • Adopt a Zero Defects MentalityThis is a tricky principle. No company has ever achieved perfect quality. But that does not mean you shouldn’t strive for zero defects. It is a mentality more than a goal, and it results in localized pockets of excellence. Get enough of those pockets, though, and quality ends up being pretty great.
  • Strengthen Your SystemsSystems put tools into context. They also make sure that you understand how a change in one place will impact operations in another. Good systems also reduce the day-to-day effort required to run an operation.
  • Build Full EngagementEmployee engagement is actually the result of many other factors. Engaged employees, make customers happier, take the initiative more, contribute to higher morale, and make systems work better. The bottom line is that employee engagement helps the bottom line.
  • Monitor ProcessesIt is important to manage operations and solve problems with actual facts and data. You don’t get that information unless you monitor processes. Pay attention to that word choice. Make the distinction between scrutinizing people and tracking processes.

Phase 7: World-Class Performance

Few companies will make the leap from Phase 6 to Phase 7. First of all, it is hard to uncover the subtle distinctions between a very good company and a great one. Secondly, even if you know what to do, it can be extremely difficult to actually accomplish it. Winning isn’t easy.

  • Expect to WinThere is a fine line between confidence and overconfidence. Top-performing companies know that they have the right team and systems to take on the competition and beat them.
  • Think BigThe companies that have changed the world, or at least their industry, have always done it with great leaps forward. With a strong business system in place, an organization opens up more possibilities.

About this article: This article is part of “The Nuts and Bolts Guide to Continuous Improvement.” This practical guide to Lean takes a phased approach to creating strong business systems to create a culture of continuous improvement in your organization.

In each phase of your development, we introduce a handful of new principles to integrate into your corporate DNA. These principles are presented here in a rule format, but they are actually derived from ‘natural laws’ of business. For example, ‘Structure Your Thinking’ comes from the natural law that organized problem solving efforts tend to generate less waste and produce better results than snap judgements. Unlike values that are company dependent, these principles hold true across companies and industries.

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Far too often, people rely upon gut feel and opinion to make decisions. Whether this is done by leaders directing their teams, or by groups of problem solvers working on their projects, the outcome tends to be the same: poor results.

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One of the problems that we face in business is impatience. We want quick results when we start a new initiative. We want new processes to pay off immediately. As a result, leaders often choose less effective options that provide some return on investment quickly rather than more effective ones that take a while to develop into greater fruition. In large part, this is a function of the pressures of the stock market.  Quarterly earnings reports force leaders to think in three month chunks of time.

There is also a trend for people to expect immediate results with very little work or commitment of time. There are a glut of reasons. Reality shows have convinced people that you can turn around a business in just a few days. Social media highlights all the big wins people have, while failing to address the work or risk or investment it took to get those wins. To top it off, there is a strong niche of self-help books that has focused on tricks, gimmicks, and quick changes that they promise can deliver monumental returns.  

This is a serious challenge to continuous improvement initiatives. It is true that some of the tools can have a quick payoff in specific situations. Applying the 5 Whys, for example, can eliminate a nagging problem in short order.

But many of the more powerful cultural changes—the ones that really impact a company—can take years to put in place. This principle, Think Long Term, keeps the leadership team focused on the potential greatness of the company rather than harvesting small, quick returns on improvement resources.

Prerequisites

Do a quick self-assessment of your company’s goal-setting history. Look for indications that short term decisions trump long term planning. You can see this when R&D is cut to hit quarterly earnings targets, or if you have had a series of initiatives that were abandoned within a year of starting. Also look at the turnover rate of key leaders. The key is to determine how ingrained short term thinking is in your company.

Section Details

Estimated Time for Section: Ongoing

Difficulty: High. This is difficult mindset to change, especially if the company is large and has stockholder pressures. Any perception of failure can undercut senior management and jeopardize continuity of leadership.

Risk: High. Short term thinking is a large contributor to the high percentage of failures in Lean initiatives. It takes significant time to lay the foundation for continuous improvement. There can be a large outlay of effort and resources (particularly time) before there will be a sustained impact on the bottom line.

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Spend any time around Lean, or any other continuous improvement methodology, for that matter, and you will undoubtedly hear the term “Respect for People.” It is a simple concept that should act as a moral compass in how people do business.

The fact is that a company does not have to be respectful of its employees and customers in order to be successful. Some can treat their workers and clients with disdain and a lack of respect and still remain profitable…for a while, at least. In the end, it turns out that being respectful is not only the right thing to do, but is also good for business.

Search the internet, and you will find a plethora of studies that show that last statement to be true. Companies that are on Fortune Magazine’s “Best Places to Work” list outperform other companies. A 2008 by study Alex Edmans of Wharton showed the BPTW companies averaged a 13.9% return vs. 6.1% for the broader market from 1998 to 2006. Sears conducted a study which went even further and linked employee satisfaction to customer satisfaction, and ultimately a tangible increase in profitability.

The short of it is that if you treat people right, the bottom line rewards you. Plus, most people will sleep better at night knowing that they improved the lives of the people they work with rather than simply harvest production from them.

Unfortunately, though, the actual application of the term “respect for people” can be less than perfect. Leaders can feel pressure that makes them act in ways that put short term gains first. Or, they might simply not know a better way to do business.

But fortunately, a continuous improvement system has proven time and time again to be a great way to build a culture that values the contributions of the members of its team and strengthens the organization as a result.

Prerequisites

NOTE: This document draws extensively from our Respect for People term.

Before diving into this principle, make sure you have begun integrating the preceding principles from this volume into your culture.

Section Details

Estimated Time for Section: Ongoing

Incorporating this principle into your culture is going to be an ongoing battle. It is hard to measure and easy to backslide. You should shoot for some immediate progress on the simpler aspects (i.e. communication, setting clear standards with daily management, etc.), but you’ll be adding more ways to show respect throughout the first 3-4 phases of your journey (through ‘Foundation Building’).

Difficulty: High

This principle is particularly hard because respect is such a vague term. It is also one that generates huge emotions. People who feel disrespected get activated quickly, as do those who are accused of being disrespectful. Early progress, though, in less controversial areas will make later advances easier.

Risk: High.

Getting respect wrong derails the teamwork that is critical for many of the later pillars of a business management system. Be careful about underestimating this principle.

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Scalability is the ability to easily ramp up or down to changing requirements. The term is in common use in information technology, specifically in reference to the ability of a system to grow to accommodate increasing traffic.

In a continuous improvement sense, it is the ability of a process to adjust to a growing demand.

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The program leader faces a particularly challenging task in promoting this principle. In a nutshell, he or she will be dictating to the senior staff not only who they hire, but how they spend their time.

Many senior leaders spend far too few hours of the week developing their subordinates…and their own replacements. For some, it is just not a priority. They have a lot on their plate, and they just don’t emphasize mentoring. For others, though, it is actually a conscious decision.

Some leaders are insecure, and don’t want to create competition for themselves. They don’t want to give their boss a viable alternative. The reality is that leaders who fall into this category are…

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A competitive advantage is a condition through which one organization has to spend fewer resources to get the same benefit as a competitor (or, of course, gets more benefit for spending the same amount of resources.)

This advantage can be because of a perception of higher quality products, because of location, because of the ability to recruit the best workforce, or for any of a multitude of reasons.

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Making changes can be a rather large challenge. This is especially true when you are committed to making improvements to the value stream as a whole rather than local ones for an individual process. It is common for disputes to rise, especially when a project team recognizes that there can be substantial time savings if a task is moved to a different team. For example, a task may take people at process ‘C’ 15 minutes to complete, but if it was done as a part of process ‘A’ it might only take five minutes. Clearly, the company benefits from making this change. If the manager of process ‘A’, however, is already facing significant challenges, she may resist adding this work.

Another common problem is prioritization. When a kaizen team is assembled, they have extremely limited time in which to accomplish their goals. Because of this, there is frequently a need to circumvent standard support processes. They may need IT support immediately, or they may need facilities to build some benches on overtime. These needs compete with those of other groups that are also waiting on support

That’s were a champion comes in. A Lean champion tends to be project oriented. They are senior executives with clout in the company. They provide backing to the project team and help remove obstacles, provide resources, move things along more quickly, and resolve disputes. Lean champions must be fully committed to creating a continuous improvement culture to be effective.

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C-Level executives are the top individuals in an organization’s hierarchical structure. They most common are the CEO (Chief Executive Officer), CFO (Chief Financial Officer), and COO (Chief Operating Officer). There are also frequently c-level executives in charge of marketing or information technology.

Some organizations will even go further and assign a chief to things such as diversity or risk.

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Attribution theory is the study of the psychology behind how people attribute causes to the way they behave and the resulting outcomes.

There are two types of attribution.

  • Internal: With internal attribution, the cause of the behavior is believed to be a function of the characteristics and personality traits of a person.
  • External: External attribution, also known as situational attribution, assigns the cause to environmental factors related to a situation that the person is put in rather than personal characteristics.

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Think about what trust is. It is, in effect, a shortcut. It means that you have faith in something, or someone, and have stopped double-checking on all expectations.

If you trust your mechanic, you stop visiting different shops to get a problem looked at. If you trust a salesperson, you stop spending as much time verifying claims. If you trust your neighbors, you might feel comfortable leaving the garage door open while you are in the back yard.

The same holds true at work. If you trust your employees, you don’t need to check up on them as much. If you trust your vendors, you can give them access to do replenishment in your facility. The list goes on. Trust improves efficiency and effectiveness.

Prerequisites

Read the section “Build Relationships” before this one.

Section Details

Estimated Time for Section: N/A. (Ongoing principle)

Difficulty: High. While people are, by nature, social, they are also wary. Developing trust can be a challenge, especially where relationships have been strained.

Risk: High.

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Genchi Genbutsu is a Japanese term that loosely translates to “go and see”. Essentially, it means to go to the actual spot where actual work is happening on the actual product to confirm your conclusions.

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