Lean Six Sigma

Two steps to Changing Culture

Larry Rubrich of WCM Associates LLC wrote one of the most straight forward books on Hoshin Kanri that I have seen: Policy Deployment & Lean Implementation Planning: 10 Step Roadmap to Successful Policy Deployment Using Lean as a System. I had a past podcast on Lean Construction with him,  An Overview of Lean Construction and could not resist diving into a few Hoshin type questions.

An excerpt from the podcast:

Joe:  You talk again about changing culture. In any organization, it’s really tough. You just don’t wave a wand and change culture or make an edict that we’re changing culture today. Can you tell me how to do it, a short synopsis of it?

Larry: This is really a great question. The difficulty for most organizations, whether you’re talking about manufacturing, health care or construction and service, is nobody’s focused on culture. They let the culture develop on its own, unguided, and then they wonder why they have people in their organization with bad attitudes that don’t care about the organization. So ultimately, where you have to start with culture is you got to start with an understanding that organizational culture is a learned process and it’s developed by the organization in response to the working environment established by the organization’s leadership and management team. So what you have for culture is based on the reaction of everybody to the environment that’s been created by the leadership team.

So if you’re going to change that culture??and most organizations require culture change to support Lean??you have to do this in a couple steps. Ultimately, culture change takes a long time, but you can get it started by doing two things.

First, about the leadership team creating a values and behavioral expectation statement, a little pocket card that says, “This is how we will operate. These are our behavioral expectations, not only for the leadership team but for everybody in the organization.”

So creating these value statements and then, essentially, instituting them and enforcing them within the organization becomes a powerful part of getting that culture change. Obviously and ultimately, the leadership team has to be willing to follow those 100 percent.

So creating the values and behavioral expectations are the start of it. Now, for construction organizations, this can be a difficult flip because many construction organizations already have value statements. But they’re not being followed, and ultimately, they’re meaningless. So we have to re-institute them in some cases and give them some teeth.

When I say, “give them some teeth,” ultimately, for organizations that really change ??a reference: one organization, the leadership team agreed that you get two violations of the value statement, and you’re out of a job; you’re going to be terminated. So that can reinforce what needs to be done.

Once, you’ve created the values and behavioral expectations statements and we’ve got that within the organization, next you have to integrate the values and the Lean activities into associate performance evaluations, promotion opportunities, hiring, merit increases, bonus activity, and new?employee training. All have to be integrated with what you’re looking for from a Lean standpoint and your goals with Lean and also the value statements.

The first time in the organization that somebody gets promoted or rewarded and they’re not a 100?percent supporter of Lean activities, or they’re a violator of the value statement; your culture change is done. So those are very important activities to get started, and then all of that has to be followed up with communication, empowerment, and the teamwork part of creating a Lean culture.

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Does the Original Seven Quality Tools Still Fit?

Prior to his early retirement, Brian Joiner was Chairman and co-owner of Joiner Associates, a nationally recognized management consulting firm. Prior to Joiner Associates, Brian was a UW professor. He is the author of Fourth Generation Management and co-author with Peter Scholtes of The Team Handbook, published by Joiner Associates and one of the best-selling business books of all time, having now sold over one-and-a-half million copies. Brian was a protege of W. Edwards Deming and has received the Deming Medal, the Shewhart Medal, the Hunter Award, the Ott Award, and the Wilcoxon Prize, to name just a few. Brian is at this time is contributing to greater health care solutions through his work at Joiner Associates LLC.

Related Podcast and Transcription: Thoughts on Lean and Dr. Deming from Brian Joiner

An excerpt from the podcast:

Joe:         In today’s the world, does the original seven quality tools still fit?

Brian Joiner:      I think all those things are still very important. Lean, I think, is very important. I’m not so high on Six Sigma. One thing, that I think Six Sigma made a major contribution to, was the process of construction and developing capabilities that, from the beginning. They had this notion that you needed to develop people to high levels of confidence to help others do this stuff. They came up with the notion of the black belts and the greenbelts and so on, and that was a real innovation.

We at Joiner Associates, and the other thing that happened are that companies, we had one of our clients at that time got heavily into Six Sigma, one of the early companies to do that, and we already had a thing that was like the black belt training but wasn’t quite as rigorous, and it included more of the people aspects of consulting and how you get teams to work together and so on, but it had the basics of it, which are para-statisticians training, like paramedics and other things like that.

We had that, but what we never had was the ability to get the company to put the high potentials into the course. That’s what made that hum, I think, was special, was that they had the high potentials, learning and learning by doing it themselves before they go out and try to help other people, getting good at it themselves that creates a whole new culture. That was a big, big impact from the Six Sigma. I think that the content of it is okay. Lean has much better content, and I think they had better content even in the beginning approaches. We didn’t have that access to the high potentials to make that work.

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Difference between DMAIC and PDCA 0

Dr. Liker is a nationally recognized authority on lean manufacturing methods and Professor of Industrial and Operations Engineering at the University of Michigan. He is an expert on U.S. and Japanese differences in manufacturing and supply chain management, and co-founded the Japan Technology Management Program at UM. He had a discussion with me on PDCA in this related podcast and transcription: PDCA The Toyota Way.

Joe:  What makes PDCA, something other than just another problem-solving methodology like DMAIC? Is it a cultural thing? Is that what it’s all about?

Jeff:  Yes, I think it’s a cultural thing. I’ve worked with various trained Black Belts and learned a lot from their Six Sigma Training and the projects they did. But the way I would look at DMAIC is that it’s very scripted, mechanistic approach. The underlying assumption which I think is a strong Western, scientific assumption ?? is that if you can understand the phenomena well enough through a combination of data and analysis of that data, you ought to be able to predict what’s going to happen.

The better you analyze the data, and the more you are precisely trying to identify exactly what the cause is, the better able you are to predict what’s going to happen. If you get it right then you’ve solved the problem, and like I said, the case is closed. You’re like the electrician. You put the tools back in your toolkit, and the case is closed.

In the Toyota way of thinking, again, it comes from humbleness, and it also comes from a background of the company, which started in a rice?growing region of Japan. If you’re a rice farmer, no sane rice farmer would think that they could control everything. They can’t control light; they can’t control the weather; they can’t control soil conditions. So they’re constantly trying to struggle to adapt to things that they can’t control.

That was the environment in which Toyota grew. It kept that humble attitude that the world is just too complex, and we’re never going to be able to predict what’s going to happen. It’s kind of a false sense of security to spend an enormous amount of time collecting data and analyzing the data with ever more sophisticated methods. Because the precision is false precision anyway, and we don’t really know what’s going to happen.

If we can come up with a lot of different ideas and try those ideas quickly, and then, actually learn by doing and actually see what happens. Then we have to go the next step of actually checking what actually happened, and what actually happened isn’t just what happened the week after the Six Sigma project was done. It’s what happens over the next six months, over the year, and over more than that. Do we sustain the process? So you live with the process to understand it.

Then you now have to, somehow, capture that information in a way that it’s reusable, so that people won’t make the same mistakes and don’t have to start the learning process over again in three years, when the manager has moved on, and most of the people have moved on. They have no idea that you made this great intervention three years ago, and you’re aware that these 10 things that work and these five things that don’t work. That’s where you become a learning organization.

My complaint is not necessarily DMAIC itself, but rather, the underlying philosophy and the organizational approach, which is you send in a Black Belt, who’s like the expert electrician. They take the tools out of their toolkit; they fix your problem, and they may work with you to try to teach you a little bit while you’re there. Then they put away their tools, and they go away.

They assume that they if they did enough statistical analysis which often, in these Six Sigma projects that I’ve been involved with, and even when I’ve seen the Lean Six Sigma that comes out of Six Sigma, I sometimes use the analogy that it’s about 80 percent massaging data numbers and about 20 percent actually thinking deeply about the problem, and taking action, and learning from what happens.

It’s the reverse in the Toyota way. It’s about 80 percent thinking deeply, engaging the right people, trying, observing, figuring out what happened, and educating the people who are part of that problem-solving process. Then, there’s about 15?20 percent, which are the tools and techniques and the analysis. That’s generally considered fairly irrelevant. It’s not a big deal, the methods themselves. The measure of success is what a person has taken away from this process: the hourly workers and the supervisors. What did they learn from this?

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Can Lean Be Easily Applied To Sales? 0

I thought I would receive a different answer when I asked Jim Womack, “Well, we’re talking about customer all the time and we talk about feedback and the value for the, but the closest one to the customer in most organizations is the sales and marketing process and that seems to be the one process that’s siloed out there that Lean doesn’t apply to.”

An excerpt from this related podcast and transcription: Lean Stories of Improvement

Dr. Womack:  Well, first off, it absolutely applies. It just hasn’t been applied. By the way, going the other direction, we know a staggering amount about how to do purchasing the right way and it is hardly ever done the right way. So you look downstream, you look upstream, towards sales and toward purchasing, and what you’ll often see is nothing happening that is going to support operating a good process on the production side or on the product development side in the middle, really product development and production.

And customer support. This is quite a step up from sales and marketing, but customer support. Those are really the three easiest to fix core processes of any business. But it’s hard to fix them when you don’t have a companion process stretching upstream and complimentary process going downstream.

And senior management has typically not seen much need to do it. I think partly because it’s just so easy to construct scoreboards that you say to your salespeople, I want you to sell 20% more at an average price of X, and you get an enormous bag of money. And there at senior management, I’ve done my job.

And then you say, well you’re purchasing and you want to save the following amount of my by reducing piece?part?price, and that’s easy to measure. Total cost is really hard to figure out, but piece?part?price, that’s easy. So take piece?part?price down by 10% and I the senior manager, will give you an enormous bag of money.

With no reference to, “Well, how would you do that?” By the way, to actually do that would require changing the supplier’s product development and production process, and probably their purchasing process as well. And to do it with the customer would require changing what we call the provision process which is how you get the product into the hands of the customer and go through the negotiation on price and make delivery and make them happy.

It’s just interesting. Those are treated by most senior managers as things that can be managed with a scoreboard. But what we call management by results rather than management by process. And look, that’s easy. It’s easy.

But to me, it’s like the team owner of some sports team who’s not doing very well so he concludes what’s needed is a bigger scoreboard because perhaps the players can’t see the scoreboard. What the team is saying, “Well, we don’t know how to block and tackle.” Then the owner says, “Gosh, not only do we need a bigger scoreboard. We need more data on the scoreboard. We need lots and lots of metrics on the scoreboard.”

The team is saying, “Well, gee, but we don’t know how to block and tackle.” So then the owner says, “Well, what we need is incentives. I’m going to give you big bags of money if you put points on the board.” The team says, “Gee, we don’t know how to block and tackle.” The owner in exasperation says, “Well, I’m going to give much bigger bags of money to put points on the board.”

So now you have a parody of management by results, except that what you actually see in a lot of organizations. That it’s just sort of magic that if you build a scoreboard with some metrics, and you put money behind the metrics, you will get a good result. That’s an interesting hypothesis, but I believe it has been disproved over and over again. Yet in the organizations it just continues as if there were no evidence that it doesn’t work.

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Thinking of Lean as Your Business Model 0

Art Byrne has been implementing Lean strategy in various U.S.-based manufacturing and service companies, such as Danaher Corporation, for more than 30 years, including The Wiremold Company, which he ran for 11 years. He now serves as Operating Partner at the private equity firm J. W. Childs Associates L.P.

In a podcast (Lean as a Business) , I asked Art

Joe: Point of reference that really struck me in the book, the one big overall thought I had from it, is you view Lean from just about an appreciative inquiry point of view, what you do well, what are the value adding activities? That’s practically like heresy sometimes, what many consider Lean thinking. I think the first thing when someone thinks about Lean, they think about waste reduction. But, you talk about value adding.

Art: That’s correct. There’s a simple definition of, what is a business in the first place, not just a manufacturing business, but any business? It’s really a very simplistic thing. It’s a collection of people, and a bunch of processes all working to try and deliver value to customers. That’s true for any business. It doesn’t have to be just manufacturing. Unfortunately, the traditional approach that we’ve evolved to when we run these businesses, we started out with strategy, and more often than not the strategy is to create shareholder value, which I think starts out by having it all backwards because shareholder value, to me, is a result, not a strategy. It’s a result of what you do, and the value that you deliver to customers over long periods of time is what’s going to improve your shareholder value.

You can’t just say, “I’m going to do shareholder value.” That’s backward. The other thing that occurs in almost all traditional approaches to a business is we take the value adding part of the business as a given. For example, if you’re running a company and you have a six?week lead time, and you’ve always had a six?week lead time, then that’s taken as a given, “OK we’ve got a six?week lead time. How do we do our strategy around that?”

What we try and do instead is we try and get our customers to conform to what we do, to the fact that we have a six-month lead time. Then, of course, we focus very, very heavily on making the month. The traditional management approach is focus on the numbers and make the month, make the quarter, that kind of thing.

Unfortunately, when you’re focused on make the month; you’re focusing on something that already happened. You can’t do anything about that anymore. That already occurred. That happened last month.

In fact, for most companies, by the time they get the results of last month, they’re three weeks into this month. Effectively, we’re always trying to drive the car through the rear-view mirror when you look at it that way. The reality, however, is the opposite of that.

The value is created by a couple of things, one, by improving your own value adding activities. Two, by delivering more value to your customer than your competitors can. Three, by conforming what you do to your customers to satisfy them and make you stand out versus your competition. It’s really this opposite…value is created by the opposite of the traditional approach if you will.

I always like to use the example of a simple thing that productivity equals wealth. Productively, this is true for countries, for companies, for anything. Productivity always equals wealth. If you think of the industrial revolution in England if you think about why the United States has become so powerful, it’s all really because of productivity.

A Lean strategy allows you to get big improvements in your value adding activities, which is basically productivity. It’s a way to get productivity by focusing on your value adding activities. As you get these, this creates the opportunity for you to grow and to gain to gain market share, which is particularly important in times like this when the economy is really flat and slow and people are struggling to get any kind of sales growth.

The Lean approach gives you the opportunity to do that by focusing on your value adding. I look at Lean really as the greatest wealth creator that was ever invented. But most people just look at it as a bunch of tools, as I said before. It’s a whole bunch of tools in a tool kit.

We can roll then out when we want to use them. If we don’t feel like using them…if you look at most manufacturing companies, they say they’re going to do Lean, and most of them will start where they’re trying to do Kanban, just because they can understand Kanban a little bit better than some of the other stuff. They won’t do setup reduction.

They won’t do some of the other fundamental things. They’ll try and do Kanban, without doing all the other things first; you don’t get much cane out of doing Kanban. But, that’s the approach that a lot of people take.

I think you have to understand Lean as strategic to understand what’s possible here. I can give you a simple example of that, which is, if I just gave you an example that said, we got Company A and Company B, they buy the same equipment from the same manufacturer, so they run at the same speed. Everything is equal. They don’t have anything different…as Company B can change the equipment over in one minute, and Company A takes an hour.

If each of them can only afford an hour a day to change that equipment over, then if I asked you who has the lowest cost, and who has the best customer service, A or B, it becomes pretty clear to most people that the guy with the one minute setup is going to have lower cost. He’s going to have tremendously better customer service because of his ability to respond quickly.

He decides to leverage that by offering a two?day lead time, when Company A and the rest of the industry has a six?week lead time. He’s going to start to gain market share. Company A’s first reaction is probably going to be to build more inventory so that he can offer a short lead time. That’s just going to drive his cost up. Or, if that doesn’t work, he’s going to start to cut the price which also hurts his cost structure and his profitability.

Something that most people would look at clearly as a manufacturing thing, setup reduction, turns out that it’s going to give me lower cost and better customer service, two very strategic things. That might give you a little insight into why, Lean at its core, is a very, very strategic thing. That’s part of the point that we’re trying to make in the book, here is applying the Lean tools and doing this…there’re some tremendous results you can get from this.

Joe:  You talk about leadership as being a real focus in Lean. But, you talk about it more in a participatory sense than what I think traditional thought leads us. We think of Lean as empowering the workforce. But, you really do take it that leadership has to participate, and practically, at that ground level. Can you explain that?

Art: Right. Well, if you don’t have the leader of the business…and that doesn’t have to be the CEO, it can be the leader of a plant. It can be the leader of the division, or anybody that’s leading any business, a business owner if you will. My experience with Lean…It’s easy to tell you the facts about Lean and tell you the concepts. But, it’s very difficult to do. As a result, if the leader isn’t leading it, and I don’t mean managing it, but I mean leading it hands?on, out front, showing the way, then you’re not going to really get very far with this. It’s really interesting to me over many, many years…when I’ve given talks at national conferences on this stuff, or whatever, afterwards, people come up to me and say, “Gee, that was great. Can you come and talk to my CEO and see if you can get him to do this stuff?”

Because, the people down in the trenches that are trying to do Lean, they understand that without the CEO backing it, not much is going to change. The reality is, what’s very, very common is that you’ll see companies that say, “Oh, yeah? We’re going to do Lean,” and they think of it as some element of their strategy.

Mostly, they attempt Lean for things like reducing headcount, or improving their inventory turns or something like that. They don’t look at it as a strategic thing. They don’t look at it as, “How do I grow and gain market share by using this stuff…beat the heck out of my competition?” They just want to cut the headcount.

As a result, they delegate it down to their VP of operations. Then, they try and drop Lean on top of an existing batch structure, leave everything else the same. The reality is you can’t do that. You can try it, but you’re not going to be very successful for very long.

If you want to do this and use it as a strategic weapon, you have to change everything over time. It doesn’t do you any good, for example, if you’re in manufacturing, it doesn’t do you any good to try and do Lean at the manufacturing level and let your sales force continue running around doing big batch order taking, or have sales terms that call for you shipping 45 percent of your monthly sales for the last week of the month, and the manufacturing guys are trying to level load production. You’re at odds with yourself.

You have to have the leadership to do this. If you can’t get the leader to participate, it’s something that isn’t going to work very well. One of the main thrusts of this book is really to try and help the leaders understand what it is they have to do, and how they have to behave, and what they have to know in order to be successful at doing this.

I give some examples of; you just start out with as to, “Why do you want to do this in the first place?” Well, the results that you can get are fantastic. If I can digress for a second, I could just give you some of the results that we achieved at Wiremold.

There’s a whole long list here. Basically, we dropped our lead time from four to six weeks down to one to two days. That gave us the ability to increase customer service from 50 percent to 98 percent, and allowed us to quadruple the size of the business over eight years. We improved our gross profit margin from 38 percent to 51 percent.

Improved productivity by 162 percent. Inventory turns went from three times to 18 times. Our operating income improved by 13.4 times over the course of about nine years. The net result was, our value, our enterprise value, if you will, increased by just about 2500 percent over the course of about nine years. We went from a company valued at around $30 million to a company that we sold in 2000 for $770 million. That ought to give people plenty of incentives.

I can’t imagine someone leading a business and I said, “Gee, if I show you how to use these tools, and you can increase the value of your enterprise by 2500 percent over the next 10 years.” If you look at me and say, “Well, that’s interesting, but I don’t really want to do that.” Then, to me, you’re in the wrong job. You shouldn’t be in that position because you should want to do it.

The book really tries to say, “Look, this is what you can get from this. These are the steps you need to take. These are the things that need to be present. These are the things you need to know. This is how you go about implementing this, and the actions that the CEO or the leader has to take to make it happen.” Because, without the CEO driving this, you can really kind of forget about being successful, I think.

Wiremold was an interesting example. After we got written up in a number of books, we were a chapter in the book, “Lean Thinking.” We were a chapter in Gemba Kaizen. We were written up in articles. All the industrial tourists started coming. They wanted to come see what we had done.

That was starting to cause a problem because we had a business to run, and it was taking too much time. I basically put in a simple rule. I said look, we should be able…we should want to help other companies do this, but if they don’t bring their CEO, then we know that they’re not going to do it.

Let’s put in a simple rule that you can still come and visit Wiremold, but only if you bring your CEO. Guess what? All the tours stopped immediately.

Art: No one could get the CEO to come.

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Business901 Podcast of 2014 0

Yesterday’s post, Top 10 Business901 Podcasts of 2014, was somewhat misleading. I only listed Adam Zak, one time, even though his interview was separated into 2 podcasts. The truth is that both podcast rated in the top 4 and one of them was clearly ahead of all others in viewership.

Related Podcast #1: Secrets on Learning about PeopleAdam-Zak

Related Podcast #2: Secrets on Learning about People, Part 2

You can download a PDF transcription or read the content on line at: Learning about People with Adam Zak

Adam Zak is the founder and CEO of Adam Zak Executive Search. He is an accomplished senior executive with more than 25 years of experience spanning the areas of management, consulting, financial and operations management and talent acquisition. He co-authored the book, Simple Excellence: Organizing and Aligning the Management Team in a Lean Transformationclip_image001 detailing the role of senior management in achieving a successful transformation to organizational excellence.

Using The Big Picture Map 0

A few other maps that can be used in Lean was explained by Steven Borris in his book Strategic Lean Mapping. It includes Big Picture Map, Process Mapping, Capacity Mapping, Value-Stream Mapping, and closing with how to use this information for better problem solving and decision making.

Related Podcast and Transcription: Lean Mapping

An excerpt from the podcast:

Joe:   I thought what was interesting about your book when I picked it up is that Value Stream Mapping is a powerful tool but people really think that is the only mapping tool in Lean and they have a tendency to, “Oh, we need to value stream map this…” like out of the blocks or something, but you wait pretty far in the book to introduce it.

Steven Borris:   Yes. I’d have to be honest; I use Value Stream Mapping less than most. What I find is that when you have got the other map itself laid out, you can use that map for anything at all. You can use it for risk analysis, you can use it for manpower, you can use it for looking at capacity problems and bottlenecks, and you can use it for process mapping. Even with what I call the Big Picture Map, once you’ve got the Big Picture Map, and you find all the issues, you can then just add the VSM part in the bottom. Because really the VSM part is just a little castle- wall part where it either adds value or it doesn’t. I usually find that people don’t know how much time they spend doing stuff or how much time they spent waiting, so it tends to be quite hard. You got to go in and get rough ideas to make some measurements. I think the Value Stream Map comes at the end of doing the mapping.

Joe: Can you talk about the flow of your book? You start out with what you call…I think a Big Picture Map.

Steven:   Yes. The Big Picture Map is the one that Agnes Pollock taught us. When I worked for SMAS, it was different when I worked for National Semiconductor. We used to do process maps and analyze what we were actually doing. But the Big Picture Map was trying to see how the whole company operates. I used to have to go into a company, and I’d have a day, originally it was a day, basically we had a day to try and analyze their issues. We were government based, so we had to save the company money. If you do a map, you don’t really save any money. The map tells you what you will save, but it doesn’t actually save anything. I was going into companies, and I was struggling to find all of the issues we had. We had to do more gamble work, more talking to directors and eventually what would happen is that if a company was good enough and it would accept to go for some project, we would try and start with the map.

We could do a Big Picture Map with all the senior managers in a day, possibly two, and that way you can call up all of the issues that we have because it looks at the customers, it looks at the suppliers, it looks at all of the admin, and then all of the production plus goods and shipping. It looks at every part of the company, but what it doesn’t do is look at people.

If you’ve got all of the managers in there, one guy is doing something, it was maybe a company and they all think that if we do this modification, they would be able to wake up the productivity. Usually that can happen but you have no idea that the next place down the line suddenly gets flooded with what they can’t handle. When you’re doing a Big Picture Map, somebody can say, “Well when you did that, we had these problems…” and suddenly it gets things into perspective.

Whenever I try and analyze a company, the best place to start is with a Big Picture Map. That way you can find all the key issues, you find the ones that you know about, but you can usually bring up a few that they don’t know about. Some of the things they’ve discovered have been quite amazing, and these are only the superficial problems. The sort of bigger problems that people have an idea are there, but a lot of them they don’t even think exist as problems.

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