Corporate Culture Archives - Management Meditations

On-line Training Partnership with Liker Leadership Institute

Posted on May 19, 2013 by Larry Miller

Jeff Liker, the author of The Toyota Way, Lean Culture and Lean Leadership has developed an online training program in Lean Leadership. I have agreed to serve as a coach to those taking the Lean Leadership course. The course is self-paced and online. There are two levels of the course, one leading to a Yellow Belt Certificate and the other leading to a Green Belt Certificate in lean leadership. This is a good way to engage a large number of managers who may not have the time to attend on-site training and who can progress through the course on their own time. This can be supplemented with on-line Webex discussions about application among the managers in your organization.

Who Should Attend

Executive Leadership Team
Managers
Lean Project Sponsors
Team Leaders

Why

This course is designed to give participants a deeper understanding of what it means to be a true ‘Lean Leader.’ Through this interactive series of videos delivered by 11-time Shingo Prize winning author Dr. Jeffrey K. Liker, you will learn directly from Dr. Liker all aspects of Lean Leadership. You will be taking frequent quizzes and getting feedback to gauge your progress throughout the course. Training like this is not available anywhere else.

Liker Leadership Institute (LLI) offers an innovative way to learn the secret to lean leadership

“When I wrote “the Toyota Way to Lean Leadership” with Gary Convis we knew that “lean leaders” would finally have a way to live the company values, become excellent at process improvement following the disciplined approach of Plan-Do-Check-Act, learn to coach others in process improvement, and lead both horizontally across the company and vertically within their area of responsibility. This allows them to achieve the challenging targets the organization needs for success.

“My online course provides an overview of each step in the lean leadership development process: Self-development, Developing and Coaching Others, Supporting Daily Kaizen, and Creating a Vision and Aligned Goals. Throughout the course you will learn more deeply through exercises, case examples, quizzes. and actual projects in your workplace under the guidance of talented lean coaches (LLI Coaches).”

Administered in 15-minute sessions.
Online and on-demand, the course can be taken from anywhere in the world, at any time of day, and on any computer or smartphone with internet access.
Distinguished through accessibility.
Students select a code and are paired with a coach that suits their interests, their preferred language, or their geographical location.
More opportunity.
Students are also given the opportunity to access the LLI WebOffice, making available to them all the resources that Jeff Liker and the LLI Coaches use.

Sign up here at Liker Leadership Institute

Decide whether you want to take the Yellow Belt or the Green Belt course.

Be sure to put in the following code for Yellow Belt course: Either DC or MD
For the Green Belt course: Either GDC or GMD (this will assure that I will serve as your coach)

If you have any questions, please contact me at LMMiller@lmmiller.com.

Transformational Change vs. Continuous Improvement

Posted on May 15, 2013 by Larry Miller

(The following was published yesterday in Industry Weeks Continuous Improvement Newsletter.)

It may sound like sacrilege to hear someone say that continuous improvement may not always be the right answer. Of course, it is the core process of lean management. But, there are times when more significant and more rapid change is required – sometimes revolution rather than evolution is called for.

When Revolutions are Needed

Thomas Jefferson said that “Revolutions in human affairs, like storms in the natural environment, are from time to time, a necessary and desirable thing.”

A couple examples: First, some years ago I was speaking at a Toyota suppliers’ conference and had lunch with a group of Japanese Toyota consultants who worked with their suppliers. The young president of one supplier had these consultants come in and completely re-organize his factory. They sent all the workers home, insisted that the CEO stand aside and not interrupt their work. They ripped all the equipment out of the floor, reorganized the placement of every piece of equipment, changed the flow of work, redefined every job, and when the workers returned they were all oriented to their new work assignments.

This was not continuous improvement by those at the gemba. It was a radical, revolution in the whole-system of the organization.

Second example: Toyota itself, in the 1990s, had a turnover rate of 25% among newly hired workers, and they were running out of workers. They realized that there was something dramatically wrong with their system. Along with their union, they redesigned their own system to the degree that one writer claimed that Toyota had abandoned lean manufacturing altogether. They had not abandoned it, but their previous focus on the technical system alone had created misalignment with the needs of people, and they had to redesign to align the social and technical systems.

Third example: A Canadian health care organization that provides home care had centralized the planning and scheduling of nurses and home support workers. They created a call center in one location to which calls from all over Canada came, and this center scheduled nurses throughout the provinces. It was supposedly going to create savings due to the economies of scale, all scheduling in one location.

The customers hated it! They never knew who they were talking to. The employees at the call center didn’t have personal relationships with the nurses or the funding agencies, and customer intimacy was impossible. They were engaged in continuous improvement within the call center. However, they could have done that for years and never corrected the fundamental problem. It had to be closed down, the scheduling function decentralized to the local districts where the schedulers could have close contact with the nurses and the funding agencies. The whole system was blown up! Now the funders are happy, productivity is improved, and costs have been reduced.

In all three of these cases, continuous improvement could not get you there! The first thing to understand about transformational change is that the external environment — technology, regulation, competition, the economy — is forcing change upon your organization. Your organization is a sub-system of a larger system, and it must align its systems to the external world. Sometimes that external environment demands rapid change that may be uncomfortable for everyone.

Significant Change Requires Alignment of the “Whole-System”

Second thing to know is that every organization is a “whole-system.” Lean management is a whole-system. It is not 5S, teams, or process maps. It is everything from the organizational structure, the information system, the decision-making processes, the human resource systems, etc.

Most companies that have tried to adopt lean management have disaggregated that whole-system and implemented some pieces of it. They have implemented 5S, just-in-time, work teams or problem-solving groups and have often experienced failure. The human body is a whole-system comprised of separate organs or sub-systems, and they fit together as unified architecture. The heart relies on the lungs for oxygen, and they both rely on the digestive system for nourishment. If you remove any of those sub-systems from the whole, that organ will quickly die.

In the same way, pieces of lean management most often die like organs removed from the body because they depend on the other organs for their survival. You cannot implement a lean management structure, with strong teams at every level, without changing the decision process, the information flow, and the reward systems. You cannot implement just-in-time work flow without changing the information flow, the decision-making process and without redefining jobs at the first level. And, you cannot implement lean culture without changing the functions and structure of management. These are all organs of the same body.

Third thing to know: Sub-systems of the whole must be aligned. My firm had been hired to help implement a team-based organization in a manufacturing plant. We were to design the team system and provide training. But when walking through the plant, the plant manager told me that we didn’t need to worry about the compensation system. He had another consultant working on that. I asked how the employees were paid. They were paid on a piece rate system that the other consultant revised each year. So… we were to get them working as great teams while they were paid on individual piece rate! I told him it would fail. The whole-system must be aligned.

Misalignment Undermines the Best Intentions

If you want great teamwork at any level, the incentives have to be based on teamwork. There are a hundred ways in which misalignment of sub-systems can undermine the best intentions of any change process.

When many companies begin their lean journey, they may not realize that both Honda and Toyota started their operations in the United States and other countries outside of Japan with a greenfield site where they designed the plant layout, organized the equipment, aligned their suppliers, hired all of the managers and associates, and trained them in their way. They created a unified whole-system whose parts were all aligned to the same philosophy. They were not changing a culture, overcoming resistance, or redesigning existing facilities. However, this is entirely different than the challenge facing most companies. Toyota and Honda succeeded because they had a unified, whole-system that they built over time and for which they have common understanding and commitment at every level of the organization. In that sense, they had it easy.

The Problem with Problem-Solving

We have been introduced to many problem-solving models as the solution to all ills. Whether it is Six Sigma’s DMAIC, or the Shewart Cycle of PDCA or PDSA, or the A3 problem-solving model, they are all predicated on the idea that there is a specific problem to be solved. Why do you think there are so many problems? Could it be that there is something more fundamentally wrong?

Problems are within the current state system. They are by definition history. Transformational change is not problem-solving. It is designing the whole-system to meet the needs to customers and the future environment. It is an act of creating something, not fixing something.

Paths to Lean Organization

Transformational change is about proactively creating the future organization and system. It asks, “Given the future environment, the technology, the market and social changes, what do we need to be like in the future, and how do we create that future?” It is designing a fundamentally different house than the one we are living in. Yes, there is a “problem,” but you won’t find the problem by fixing every rash and headache. The problem is that the design of the organization is not suited to its current or future needs.

Transformational change is a process designed to create significant change in the culture and work processes of an organization and produce significant improvement in performance. If your organization has a relatively traditional culture, you need transformation to engage your people, gain understanding and commitment to change. If you only need to make small improvements, to engage people in continuous improvement, you do not need whole system architecture. The American auto companies desperately needed to make significant change in their culture, but instead of a serious approach to analyzing and changing the culture, they opted for a less threatening and less dramatic approach of small groups working on small improvements. It was too late for that.

If you need to align your organization and culture to your strategy, you need whole-system design. If the organization creates walls and barriers to the flow of work, you need whole-system design. If the market place is changing significantly and your organization needs to respond to changing technologies, customer demands, or regulation, you need whole-system design. And, if you have had difficulty implementing change, gaining commitment from your own managers and employees, you need whole-system design.

“Respect for People” and “The Design of the System”

Posted on May 10, 2013 by Larry Miller

Michel Baudin, a fellow blogger and author, posted a video link of a panel discussion that included Jeffrey Liker (The Toyota Way, Toyota Leadership) in which British consultant John Seddon makes the comment that “This respect for people stuff is horse shit.” Seddon argues that what leads to improvement is the system and not an intervention to respect or deal better with the people. On Michel’s blog, there followed what I think was an interesting exchange on the subject between Michel, Mark Graban and myself.

You can find the entire 45 minute panel discussion here: http://vimeo.com/42297077. It is a worthwhile discussion about lean, standard work and the nature of the system. You could easily use this video as a basis for a training session to discuss how these concepts apply to your organization.

Beware False Dichotomies

But, I want to discuss in a bit more depth this idea of “respect for people” and the nature of the system. To argue that respect for people is horse shit and the right answer is in the system is a false dichotomy. False dichotomies are popular in our culture because they have become the basis for political discussion and an intellectually lazy way of arguing a point. For example – socialized medicine is bad, free markets are the solution. Or, we have Second Amendment rights, therefore any restrictions on guns is unconstitutional. These are false dichotomies. The government has a role in healthcare and so do free markets. You can have a right to a gun and have background checks or registration. You have a right to free speech, but yelling fire in a crowded movie theater is out of bounds. There is freedom of religion, but if you claim that your religion is cannibalism…. well, there is a limit!

Taiichi Ohno, Father of Toyota Production System

Respect for people is the result, not only of personal patterns of communication, but also the result of the nature of the system. In democratic societies, in which you elect the government and there is freedom of speech, religion and press, that system is inherently more respectful of people than a system that is autocratic and guarantees no freedoms. The problem with autocracy is not simply the personal behavior of leaders, but the system that produces disrespectful behavior on the part of leaders. Taiichi Ohno, considered the father of the Toyota Production System was a genius for his development of that system, but his personal behavior toward others was often demeaning and disrespectful. Of course, he was the product of a post WWII world in which a leader could berate an employee in ways that would now get you fired today… rightly, in my view. There are many examples of leaders doing great things, yet demonstrating behavior we would not want to imitate.

How Do You Design In Respect for People?

As a manager or leader you are a “systems engineer.” You are responsible for the design of the technical and social systems of your organization. Here are just a few ways you can design respect for people into your organization’s system.

On-Boarding Respect: How you bring people into your organization, particularly managers, can set the pattern for the rest of their career with your company. Is a new manager brought into the company, given a corner office, a conference room in which to hold meetings, and provided an organization chart that defines his role in the world? I hope not. At Honda a new manager or professional, on their first day at work is handed their uniform, the Honda baseball cap, and assigned to work on the line for six weeks. Why? To learn “respect” for the “world’s greatest experts who are on-the-spot.” This practice is designed into the system and it does a great deal to instill an attitude of respect for those who do the value adding work.

Leader Standard Work at the Gemba: Leaders at every level should spend some time at the front-line, where the work is done. Why? Not to “oversee” or to “supervise” but to learn, to help the front-line employees to solve problems. If the leader’s walks around the floor is scanning the environment for something to correct, to “catch someone doing something wrong”, he is demonstrating disrespect. If, on the other hand, he is scanning the environment for “how can I help them and what can I learn from them?” he is demonstrating respect. Leader standard work should be reviewed at the next level, and the next. At each review the question should be “How did you help them?” Or, “What did you learn from them?”

Design Decision Making for Respect: An important part of the design of your system is the design of the decision making process. If you have not designed the decision process than your design is incomplete. What decisions are made by the individual front-line employee? What decisions are made by the work team? These are important questions because they will determine how much “stuff” floats up the organization, how much time managers spend “tampering” with work that is not theirs, and how engaged the work force will be.

Encourage Experimentation and Improvement: As you are doing your gemba walk it is a good idea to discuss problems and then ask the employees or teams what experiments they have conducted. We learn through experimentation. Toddlers learn by touching everything in sight and putting most things in their mouth. We learn by exploring and experimenting. Most continuous improvement, and it is the intention of the PDCA cycle, is simply to cause people to think and to try some possible improvement. There should be no fear in experimenting and failing. That is inherent in the learning process. If you encourage and reward experimentation, you are demonstrating respect for people.

All of these practices should not be the result simply of individual leader’s behavior. Rather, they should be designed into the system. As the system engineer, the manager of the system, it is your responsibility to design respect for people into that system. This is essential to the improvement process.

Transformational Change Management

Posted on May 8, 2013 by Larry Miller

Getting to Lean – Transformational Change Management is now available on Amazon.

There is continuous improvement, and then there is transformational change. Transformational change involves rethinking the whole-system of the organization, creating alignment to the external environment and among the internal subsystems of the organization.

What many don’t realize is that even Toyota has had to redesign their system of production based on the needs of the larger social system when they had 25% turnover among new employees in the 1990′s. Sometimes you have to think about the fundamental nature of your system and transform that system based on new principles.

Beyond Problem Solving to Co-Creating the Future

Getting to Lean is a guide to transformational change. It is about creating the future. It provides a process for significant and large scale change in culture and capabilities to build a sustainable lean enterprise. Getting to Lean presents whole-system architecture which engages stakeholders in aligning the systems and structures of the organization toward a common purpose.

Many change efforts dis-aggregate lean management into its component parts, and like organs removed from the body, they are not sustainable. Systems that are whole and aligned are sustainable. This book is a guide to creating sustainable change.

Getting to Lean presents the practical lessons the author has learned from more than one hundred whole-system change efforts. It addresses the technical system (work process), the social system, and the economic system which must all be aligned to principles and to the strategy of the enterprise. It is not just about problem solving, it is a systematic plan for creating the architecture of the lean organization.

“In the early 1980?s I was most fortunate to publish the books of Taiichi Ohno and Dr. Shigeo Shingo that gave us the Toyota Production System (Lean). At around the same time I had the privilege to know and work with Dr. Lou Davis who taught and consulted on Socio-Technical Systems. I thought that if American industry was only smart enough to realize how to put together Lean and Socio-Tech we could really rule the world and be the most competitive. Larry Miller was one of the few consultants to understand the power of the combination. I never give up and hopefully the leaders of American industry can begin to listen to Larry’s wisdom.” Norman Bodek (author of The Harada Method, Quick and Easy Kaizen.)

“I’ve read hundreds of management books in my decades as a professor (currently Columbia University) and a management consultant. Over the last 30 years the trend has been to write a breezy, short book, maybe a fable with a big font and few pages. Larry Miller’s book, GETTING TO LEAN brings us back to solid content with vivid and fascinating examples from his many years as a management consultant. Miller goes through the entire process of how to create a high-functioning organization. This is no mean feat, as thorough as Miller is, because it requires great skills as a writer and thinker, as well as heavy doses of wisdom.” Dorothy Marcic, Ph.D, Columbia University, author of Understanding Management, Managing with the Wisdom of Love and playwright.

361 Pages; List Price: $36.95; e-book Price (Kindle, Nook & iPad) $19.95

Introduction
Chapter 1: Principles
Chapter 2: The Method: Who Participates?
Chapter 3: The Method: Overview of the Process
Chapter 4: Are We Ready for Change?
Chapter 5: Writing the Design Charter
Chapter 6: Discovering Your Internal Assets and Liabilities
Chapter 7: Discovering Your External Environment
Chapter 8: Discovering Your Customer’s Priorities
Chapter 9: Discovering the Current Value Stream
Chapter 10: Dreaming the Ideal Future
Chapter 11: Designing the Work – Variance Analysis
Chapter 12: Designing the Work – Eliminating Waste
Chapter 13: Designing Knowledge Work
Chapter 14: Designing the Ideal System of Work
Chapter 15: Designing the Ideal Social System
Chapter 16: Designing the Future Economic System
Chapter 17: Deploy and Develop the Design

Appendix:

The Conference Method of Redesign
The Honda Way – A Visit to Marysville
Rebirth of American Manufacturing at GE
Economic Efficiency and Social Intimacy
Joy at Work
How You Change Is the Change
Company Wide Lean Implementation

Creative Destruction and Transformational Change

Posted on April 25, 2013 by Larry Miller

This is about lean management and organizational change. It is about adapting to disruptive technology and markets. The ability to adapt your organization’s capabilities to changing technology and markets is, in itself, a core competence required of every organization today. And, continuous improvement will not get you there. Disruptive technologies and markets require transformational change, revolutionary rather than evolutionary, not simple problem solving or continuous improvement.

The lean management process or Toyota Production System is founded on continuous improvement. But that continuous improvement is built on top of a stable platform that is aligned to a relatively stable market. Cars still have four wheels, for the most part still have an internal combustion engine; but, they don’t fly and they don’t travel over the Internet. But, what if technology completely disrupted the business model. And, how do you transform to adapt to disruptions?

The Creative Destruction of the Book World

As an individual consultant and author, I am my own business unit, seemingly uncomplicated, but definitely multi-functional if not multi-skilled. I have just finished another book. In the good old days of publishing you sent your book off to your agent or your editor and you trusted the publisher to handle everything from that point forward, including editing, cover design, marketing, etc. Hopefully, you received a fat advance making the torture of writing minimally rewarding. For many authors, those days are history. Even highly successful authors are now turning to self-publishing and disrupting the traditional system.

The changes to which authors, and many companies must respond, are driven by the changing demands of the customer or market place. And, those changing demands are the result of technology shifts.

Here is what has changed. Yesterday I visited my local Barnes & Noble in Annapolis, carrying my Nook and visiting their Starbucks where I could sit and enjoy browsing books on my Nook tablet while sipping my favorite beverage. I have watched this store over the past twelve years as it has been transformed. Ten years ago there were six large book cases of management books (not counting finance, investing, etc.). Today there are two. Most of those two are taken up by legacy best sellers. Wandering around the store I saw shelves labeled “Manga.” I never heard of Manga! I went over to investigate and there was a teenage girl flipping through one of the books and I asked her what Manga was. “Japanese cartoons”, she replied, looking at me like I was stupid! There are three large shelves filled with books of Japanese cartoons. Japanese cartoons are outselling the Toyota Production System by a mile! And, I thought I was smart!

At least half of the floor space at this Barnes & Noble is now consumed by children’s toys and electronics associated with the Nook. Add the space for magazines, blank diaries, reading lights, and Starbucks, and less than half the floor space is left for books. And, that is disappearing fast!

I don’t blame Barnes & Noble, which is losing money in its stores. They are fighting to stay alive and trying their best to adapt. They are the only remaining bookstore chain and there are precious few independent bookstores. When I want to buy a book, or browse for what’s new in a field like lean management or change management, I would be wasting my time to go to any bookstore. The books aren’t there. Like you, no doubt, I go to Amazon or B&N online. There I will search key words, read descriptions, reviews and the author’s information and purchase the book or the e-book. That is the market for business books today.

NOOK Media, LLC Given this disrupted reality, what does a publisher do for an author, that the author cannot do himself? The primary reason for publishing with a major publisher was distribution… their sales force that would sell your book to the book stores. But, with shelf space rapidly disappearing… they aren’t buying. Need an editor? You can hire one in any town or from the Internet. Google “book editor.” No problem. Need a cover designed, do the same. Need a publicist. Hire one. You can manage the entire process yourself and keep the majority of the margin on the retail sales.

Lean is the elimination of waste, non-value adding activity. If the reader can get exactly what he or she wants, directly from the writer, everything between the writer and the reader is waste. Trips to a bookstore are waste. Standing in line is waste. Staring at a bookshelf where you can’t find what you want, is waste (unless you are looking for Manga!). It is entirely possible that the Internet will soon make both publishers and bookstores a thing of antiquity. Where is that blacksmith’s shop, anyway. Of course, I am fond of bookstores. I remember when my American Spirit and Barbarians to Bureaucrats were on the front table at Walden Books, Brentano’s, and Border’s. There is no greater satisfaction for a writer than to see your book on that display table at the entrance. But, unless you are a celebrity, a politician or a famous sports star, it probably won’t happen but for a very few.

Publishing is becoming a lean business. Author to printer to Amazon to reader, directly. It is a pull system. You order a book from Amazon, and although they say they have x number in stock, in most cases they don’t have any in their warehouse. The electronic order goes from your desk, to Amazon, to the on-demand printer, in seconds. The printer prints the book you ordered, a single copy, that night, and ships it the next day. It arrives at your door in a box that says Amazon the following day, but it is coming directly from the POD (print on demand) printer. Of course, it is faster than that if you order the Kindle, Nook or iPad version. That is lean publishing, all enabled by the technology of the Internet and new printing technology.

So, what does that have to do with your business? The shorter answer is everything. The exact same principles and process are being applied to almost every business.

The Strategy of Adaptation

If you believe that creative destruction can’t happen in your business it is possible that you are like the frog in the gradually heating water who only tries to jump out when it is boiling. Almost every business is being disrupted to some degree. Here are some things you can do to survive creative destruction.

1. Who Gathers and Analyzes Intelligence?

Sensing is the beginning of strategy. Strategy is about sensing changes in the external environment and defining how to adapt, how to position your organization for competitive advantage given the changing landscape.

When I was a young man I served in the U.S. Army Intelligence Corps in Europe and Vietnam. Most people don’t realize that more than 90% of intelligence gathered, processed and analyzed by the CIA and the DIA is overt, rather than covert, intelligence. In other words, it is available from public sources. I am not advocating spying by any company. But, I am advocating having a deliberate process of gathering and processing intelligence on the external landscape. The external landscape include technology, economics, political changes, social changes, competitor behavior and even climate change. With all the information about disruptive changes you cannot evaluate all the data casually. It requires a system, responsibility and accountability.

It has amazed me that large organizations will have hundreds of sales people out speaking with customers and learning about their changing preferences and competition every day, yet do almost nothing to process the intelligence they are gathering. It is like having eyes but not seeing. And, that is only one source of readily available intelligence.

The real problem is that most companies are like a government would be if they had not CIA or DIA to process and analyze information. Who is responsible for objectively analyzing all of the available sources of information on your markets, relevant technologies and competitive behavior? And, is that information presented to senior managers in a way that leads to effective responses? From my observation, in most companies this process is entirely haphazard.

2. Who Builds Adaptive Scenarios?

Potential disruptions to your business model must be prioritized.The military is very good at this. They constantly build scenarios around irrational behavior from North Korea, another revolution in the Middle East, or other potential threats. Chances are they have a planned response for almost any contingency you can think of.

What are the greatest potential threats to your business? And, how can you capitalize on any new technology or social trend to create a threat to your competitors? Better to be the disruptor, rather than the disruptee.

Which management group has oversight for strategic adaptation? It should be the senior management team with clearly delegated responsibility for both sensing and responding. How often does the senior management discuss the intelligence and potential scenario? The president of the United States receives an intelligence briefing daily. That’s a clue. In today’s rapidly changing environment, an annual strategic planning process, with annual plans, is entirely too slow.

3. Who Designs the Future?

In truth, many organizations today are poorly designed for their current reality. The structures and systems were created in an age of stability and slow change. In The Machine that Changed the World there is a case study of a two teams designing a new car model. One was the new Chevy Barreta and the other a new Honda Accord. Both companies designed the cars utilizing cross functional teams comprised of engineers from engine, chassis, transmission, manufacturing, etc. But, in the case of the Barreta the members of the team each reported up to their siloed structure for the engine division, chassis division, etc. Every decision had to be approved up through the line management of those silos. In the case of the Honda Accord team, the team leader reported to the CEO and everyone understood that the two most important teams in the company were the team designing the next Accord and the team designing the next Civic. Everyone else worked for those teams. In the Barreta case the team leader quit three times in frustration. Needless to say the Barreta doesn’t even exist anymore. It took twice as long to design and it had little appeal in the market place.

Structure matters. When technology and markets shift, as they are in healthcare and many other fields, the structures and the systems of the organization need to be transformed to align with the new reality. Continuous improvement will not break down major organizational walls or redefine major systems and processes. Continuous improvement is ideal for improving micro-processes within existing structures. But, if those structures are not aligned to the external environment, and not aligned to each other. Continuous improvement will not get you there. Transformational change management is required.

4. Transformational Change is a Core Competence

In stability you don’t need to transform your systems and structure often. But when the landscape is changing and at rapid speed, this competence of managing change is likely to determine winners and losers.

Strategic planning should sense the external landscape and define the future markets and market positioning of your company. That should be a core competence. But, transformational change goes beyond that. Transformation change creates the internal capabilities required to compete in the future environment. Your strategy might say that in five years fifty percent of your sales will be direct to end-use customer sales over the Internet. That is a market strategy. But, it does not define the internal capabilities that will enable that result. What skills are needed? What culture will enable you to manage that type of business? What processes are required to perform in that marketplace? What structure will enable those processes?

Transformational change management is a process, not of problem solving, but of creating the future – the organizational capabilities required to adapt to the changing environment.

Quality of Work Life and the Toyota System

Posted on March 19, 2013 by Larry Miller

Books on lean management and the Toyota Production System are too often presented as if this system has been a virtual heaven of production efficiency and worker satisfaction. In the author’s enthusiasm, questions about stress and work life are rarely raised or they are glossed over. In Japan there have been serious issues raised about the quality of work life at Toyota plants and Toyota has openly addressed this issue itself, along with its union, and conducted its own whole-system redesign to improve the attractiveness and reduce the stresses of working within their system.

For the past month I have been sitting here, very focused, on completing another book (yes, one more!) on transformational change management, or whole-system architecture. Lean is a description of a desired state. Within lean is an incremental change process – continuous improvement. But, it is not a process of significant or transformational change. It is the “Where are we going?’ but not, the “How do we get there?” Many companies fail in their adoption of lean because they do not address the “whole-system” and misaligned structure, information systems, HR policies and other cultural drivers inhibit the transformation to lean. Whole-system architecture is a way of addressing the needed transformational change.

The good thing about book writing (you should try it!) is that it forces you to think, to research, and to organize your thoughts. While doing my research I came across what I think is a very interesting article on how Toyota addressed significant quality of work life issues. For those of you who are serious students of lean you may wish to go to the source and read the entire article.

Quality of Work Life and the Toyota System

In the 1990′s Toyota faced its own labor crisis with a 25% rate of turnover among new recruits to the workforce, an aging labor force, and a general aversion among young Japanese to working in factories. This raised serious questions within Toyota about their own system and how it impacted the quality of work life. The following paragraphs are quotes from an important study of what Toyota did in response to this crisis, a study that has been overlooked by most proponents of lean manufacturing.

“Facing up to the labour shortage and to the exhaustion of the whole work force, the management and the union at Toyota began to question the production system and the method of managing work. They concluded that a radical resolution of the crisis of work could only be found in a reorganization of the production system to make work more attractive, for they were in agreement that the cause of the labour shortage was the nature of assembly line work and the Toyotaist method of managing work.”

“The management of efficiency lay in the reduction of the number of workers, which was accomplished by Kaizen activities on production tasks and procedures. This in turn was based upon the ideas of ‘just-in-time’ and ‘autonomization’ (labour saving) which had been sustained and developed by T. Ohno. But the underlying cause of the crisis of work that Toyota was experiencing was precisely this system for managing productive efficiency. Therefore the idea of ‘just-in-time’ was questioned. ‘Just-in-time should not be applied to people’, according to a section leader at the Motomachi factory. ‘If the number of production workers is increased, productive efficiency will be lowered. But we should not think solely about productive efficiency’, according to the personnel management department. The implication is that the reduction in the number of production workers should not be pushed too far. In other words, ‘lean production’ should not be applied to production workers. Otherwise, work will continue to be detested by the younger generation and will continue to tire production workers and supervisors. Hence the committee proposed to modify the management of costs.”

“This questioning of the production system has finished by modifying the idea of ‘just-in-time’ and the management of productive efficiency: ‘just-in-time should not be applied to people’, and ‘we should not think solely about productive efficiency’. Hence a humanization of the production system and of work was launched. By investing massively to improve working conditions, by developing a new conception of the production line, by allowing segments of the line to keep buffer stocks, by making social relations of work more equitable and rational, Toyota has changed the rules of the game. For Toyota, ‘lean production’ appears to be the model of the past, because it placed too much pressure on people. The new strategy at Toyota is to give a more humane dimension to its production system but without hindering productivity; even if progress remains slow, and is held back by the old Toyotaism.”

“In terms of team work, four production workers form a work team which is responsible for a segment composed of a series of connected tasks (three or four tasks). The work team takes responsibility for the quality of its tasks, whereas on traditional lines, each person is responsible individually.” [1]

The Imperative to Redesign… Periodically

Thomas Jefferson is reported to have said that “Revolutions in human affairs, like storms in the natural environment are, from time to time, a necessary and desirable thing.” He is also reported to have suggested every twenty years. The point is that every now and then we need to rethink our system of organization – the social, technical and economic system – or the “whole-system architecture” in order to assure that we are adapting to change in the internal and external environment. This is exactly what Toyota has done.

The lesson of Toyota’s experience at its own plants is that the lean system of production is not simply a technical, mechanical, system in which the only goal is to improve production efficiency by eliminating waste; although, that will always be one of the goals. It is also necessary to design a system that takes into account the human factor, the social system that enriches the work and the quality of work life.

The other lesson from the above study is that the Toyota Production System, or lean, is an “open-system” able, no required, to adapt to the environment in which it lives. Like every organic system, it either adapts or dies.

[1] “Humanization of the production system and work at Toyota Motor Co and Toyota Motor Kyushu.” By Koichi Shimizu, In Enriching Production: Perspectives on Volvo’s Uddevalla Plant as an Alternative to lean production. Sandberg, Ake, Editor, Digital Edition, Stockholm. 2007. P. 398.

Dr. Deming’s Joy at Work, Happiness, & the High Performance Organization

Posted on February 18, 2013 by Larry Miller

Dr. Deming was fond of promoting the idea that every employee should be able to achieve joy at work and that joy would lead to improved quality and a high performance organization. The research on happiness or positive psychology supports the value of his intuition. Seeking happiness is consistent with seeking a high performance organization.

“Management’s overall aim should be to create a system in which everybody may take joy in his work.” Dr. W. Edwards Deming

The cynic may picture workers sitting around with a drink in hand, party hats, and dancing around the workplace in a silly display of “joy.” But, obviously that is not what Deming was promoting. He was promoting the need and possibility of intrinsic reinforcement, joy from the job itself, the achievement, the self-satisfaction derived from the ability to improve and control one’s own work.

We have all experienced joy in our work. Whenever I have asked clients to identify the time they felt most joy in their work they are likely to describe a time when they were engaged in meeting a challenge and succeeding. That challenge might be learning a new job or developing and instituting a new process or product. Or, they may point to a time when they were working with a great team of colleagues who shared the same goal and determination. In other words, they were not partying, they were performing. Great parties are quickly forgotten, great performance is long remembered.

Happiness and the High Performance Organization

Dr. Deming’s instruction was based more on his own excellent intuition than on any research. However, in the past twenty years, the most popular area of psychological research has been in what is known as positive psychology, very simply the study of psychological wellness, rather than illness. The first book I read on this subject was Authentic Happiness by Martin Seligman and I recommend it highly. Since its publication there have been a flood of happiness books. I would encourage you to explore Dr. Seligman’s Authentic Happiness website where you can take a survey to find out how happy you are while at the same time contributing to his research data base.

So, what is the big finding of positive psychology?

“The belief that we can rely on shortcuts to happiness, joy, rapture, comfort, and ecstasy, rather than be entitled to these feelings by the exercise of personal strengths and virtues, leads to legions of people who in the middle of great wealth are starving spiritually. Positive emotions alienated from the exercise of character leads to emptiness, to in-authenticity, to depression, and, as we age, to the gnawing realization that we are fidgeting until we die.” (Authentic Happiness, p. 8)

In other words, if eating chocolate sundaes, sex and money resulted in authentic happiness you would find the happiest people to be those who have the most money, sex and ice cream. But, that simply isn’t so. They are more likely to be the most depressed and anxious. What does lead to happiness is knowing what your strengths are, developing and exercising those strengths; and exercising the virtues of character and strong social relationships. People who have a strong community of relatives and friends are happier than those who have few friends and only distant relatives. Those who are optimistic and have hope in achieving a positive goal are happier than those who are pessimistic or feeling helpless.

Happiness Findings and What You Should Do at Work

If you read many of the books that are based on research (below I provide a recommended reading list) you will find that there is a consensus view regarding the key factors that lead to a happy life and each of them has direct implications for creating a happy and productive workplace. Here they are:

1. Strong Social Relationships Lead to Joy

Forty percent of those who are married say they are “very happy” while only 24 percent of those who are not married report being very happy. That advantage holds for men and women, young and old. Very happy people spend the most time in socializing and the least time alone. People who are very sociable, good conversationalists, good listeners, tend to be happier and more likely to be married. It is hard to separate cause from effect because each of these factors reinforces the others. In other words if you are more sociable you are more likely to be married, and the reverse is true.

Religious belief and participation in a religious community strongly correlates with happiness. Religious Americans are less likely to abuse drugs, get divorced, commit crimes, or kill themselves. They are also physically healthier and live longer. There are several possible causes. One is simply that a strong moral code or value system provides guidance that directs one to behavior that is more satisfying and less the cause of unhappiness. Another possible explanation is that religion is often the basis of community life, a strong social network.

What does this tell us about creating “joy at work?” Joy is rarely derived alone. It is most likely to come from a strong social network, teams and teamwork, in the workplace. The family farm and early craft shop was a strong social relationship and provided security and happiness. The factories of mass production in which each worker was told “do your own work” led to isolation and alienation. The formation of unions, in which they called each other “brothers” was a natural act of psychological survival. Now we know that creating natural brotherhoods and sisterhoods, social bonds, in the workplace creates both happiness and leads to productive behavior. Almost all innovation is the result of trusting relationships and teamwork.

It is the duty of the manager to assure that no one is alone in their work and that everyone is a member of a supportive group, a social network or team.

2. We Derive Joy from our Strengths

Playing tennis does not make me happy. Dancing does not make me happy. Why? Because I suck at those things. Playing the guitar, and more particularly, learning a new tune on the guitar, makes me very happy. As you might guess, I am a decent guitar player (at least in my own mind and I ask you not to interrupt that thought) and a student of folk blues guitar. We all have strengths and a healthy workplace is composed of people with diverse strengths. Recognizing the value of that diversity, the contribution of each strength, provides the opportunity for joy. A great workplace is an orchestra comprised of individual competencies playing in harmony.

There is a close relationship between Toyota’s principle of “respect for people” and Honda’s principle that “the world’s greatest experts are on-the-spot” and the joy that comes from building and using your strengths. In every workplace, every member of the organization should be respected for his or her expertise. They should know that they are expert and have the dignity and the joy that comes from that self-awareness and from building that strength. Or, in my guitar example, from learning a new tune. Learning, building on strengths, brings joy.

Does this mean that weakness should be ignored? No. If an employee is weak at showing up on time or completing assigned work, those weaknesses must be addressed. But, we should identify individual strengths, employ, celebrate and strengthen those. This is what makes for a joyful workplace.

Recently I was in a manufacturing plant in which many line production workers had been trained to do only one repetitive job and had been at it for many years. What do you think happens to the mind when someone does only one job and does it day after day, year after year? It is deadly. These same workers can be trained to do every job on the line. This increases the flexibility of the manufacturing process and increases every workers ability to solve problems and improve the process. Multi-skilled workers are more valuable than single-skilled workers. And, where does the joy come from? It comes from being on an effective team and having developed multiple skills that allow the worker to help others in their work. The greater the ability to contribute to the team, the greater the self-worth of the individual.

3. Money Does Make You Happy… To A Point

One of the great myths of motivation is that money doesn’t motivate. For some reason I always hear this from the person in the organization who makes the most money. It’s rubbish! It is fair to assume that everyone is motivated to be happy. The question then is, “Does money make you happy?” Let me quote from Christopher Peterson’s excellent book Pursuing the Good Life:

“Research shows that income has a positive relationship with happiness (life satisfaction), although it is not a straight line. As income increases, its added contribution to life satisfaction becomes smaller. The impact of additional income is greatest among those who have little money, but it does not stop mattering, even after someone is able to meet basic needs.”

When the life satisfaction of people who live in poor countries is compared to those who live in wealthier nations there is a strong correlation of wealth to happiness. The least happy nations are the poorest. However, once a certain level of wealth is achieved, it matters little. As Seligman writes, “So, the Swiss are happier than the Bulgarians, but it hardly matters if one is Irish, Italian or American.” Once a basic level of wealth is achieved, there is little gain in happiness above that.

In other words, if a manufacturing level work can raise his or her income enough to be able to save for retirement and for a child’s education, that increase does bring greater joy. The additional money has real utility. If the CEO of the company gets a raise from ten million dollars a year to eleven million dollars a year, after a day or two of self-congratulations, he will experience no greater happiness. In other words, that investment was a lousy one in terms of happiness gained.

We also know that money, or any reward, effects behavior when there is a contingency, an if-then relationship between performance and money. You all have used “if you eat your vegetables, then you can have dessert.” Or, if you study hard, you will get a good grade. Those are contingent relationships. Therefore, if you learn these additional skills and can perform these additional job functions, you will earn X more per hour in compensation, does in fact motivate performance.

4. Altruism, Performing Work in the Spirit of Service, Makes You Happy

Ayn Rand (Atlas Shrugged, The Fountainhead) was wrong! In her promotion of the pseudo religion of objectivism she decried altruism and promoted self-interest as the highest ethic and displayed great misunderstanding of altruism.

“What is the moral code of altruism? The basic principle of altruism is that man has no right to exist for his own sake, that service to others is the only justification of his existence, and that self-sacrifice is his highest moral duty, virtue and value… Time and again, I have found that the basic evil behind today’s ugliest phenomena is altruism. Well, I told you so. I have been telling you so since We The Living, which was published in 1936.” Ayn Rand

Unfortunately, Rand’s cynicism has permeated our political and social lives. You may choose between Ayn Rand’s view of ethics as the pursuit of self-interest or you can choose the virtue of the great religions: “So whatever you wish that others would do to you, do also to them, for this is the Law and the Prophets.” (Mathew 7:12). Or, “One should seek for others the happiness one desires for himself” – Buddha. In Taoism - “Regard your neighbor’s gain as your gain, and your neighbor’s loss as your own loss.” Let me suggest an even more practical argument. From a Darwinian, survival of the fittest point of view, this teaching of altruism has survived through the ages in every great religion. Its universality and survival is a testimony to its truth and utility. The study of ant hills and beehives has similarly demonstrated that service and sacrifice for the common good is an essential survival trait engrained in the genetic codes of bees and ants. It likely is engrained in our own as well.

Of course, Ayn Rand was an atheist who enjoyed the adoration (and book royalties!) of those seeking to justify their own pursuit of self-interest. But what every great religion taught as the Golden Rule is exactly what leads to a deeper and more authentic happiness. It turns out that doing for others, serving others, is ultimately in one’s own self-interest, an investment returned in happiness.

Much has been written about the pursuit of a worthy purpose in life, a legacy to look back upon. A worthy or noble purpose is never about oneself, but rather the good one may do for others. The knowledge that one is in pursuit of a noble purpose has the effect of ennobling oneself. One can argue that engaging in charity and service to others, sacrificing for others, is paradoxically, an act of self-interest because it leads to greater personal happiness.

All organizations have a responsibility to create a sense of meaning in the lives of those who dwell within its walls. Every great leader has understood his or her responsibility to ennoble their followers by holding up that which is worthy in their work and calling upon followers to sacrifice for that which is worthy, the good of the whole, the worthy purpose. In doing so the leader is giving them the gift of self-worth and meaning.

5. Optimism and Creative Dissatisfaction Generate Performance

Norman Vincent Peal was right. The Power of Positive Thinking is one of the most popular management and self help books of all time. He had no scientific data to support his philosophy, but like Dr. Deming, he had good intuition and powers of observation. You can summarize its guidance in this quote:

“Formulate and stamp indelibly on your mind a mental picture of yourself succeeding. Hold this picture tenaciously. Never permit it to fade. Your mind will seek to develop the picture…Do not build up obstacles in your imagination.”

Today we might view this as somewhat sophomoric advice from a bygone age. But, it turns out, that today’s science proves that he was right on the money. Martin Seligman wrote a great book title Learned Optimism which followed his less happy book, Learned Helplessness. In it he sites a great deal of research that demonstrated that well functioning, high performing, individuals are essentially optimistic and not pessimistic.

“The optimists and the pessimists: I have been studying them for the past twenty-five years. The defining characteristic of pessimists is that they tend to believe bad events will last a long time, will undermine everything they do, and are their own fault. The optimists, who are confronted with the same hard knocks of this world, think about misfortune in the opposite way. They tend to believe defeat is just a temporary setback, that its causes are confined to this one case. The optimists believe defeat is not their fault: Circumstances, bad luck, or other people brought it about. Such people are unfazed by defeat. Confronted by a bad situation, they perceive it as a challenge and try harder.” Martin Seligman in Learned Optimism.

In other words – hire optimists and not pessimists! Create a culture of optimism, of hope, of belief in a positive future for your organization. Winning cultures and winning teams are optimistic. No football coach before the game gave a speech to his team in which he said, “Well boys, we have no chance of beating this team, so let’s go out there and take what’s coming to us!” And, subsequently won the game. Losers tend to believe in their own defeat.

The positive psychology research has demonstrated that “On average, optimistic individuals are healthier because they take care of themselves; optimistic students earn better grades because they go to class; optimistic insurance agents sell more policies because they make cold calls; and so on.” (Peterson, p. 89.)

Why a photo of Penelope Cruz? Because it is much more rewarding than the photo of Dr. Deming and you deserve a reward for reading this far. And, it may give my male readers some optimism. Or, depression. It’s up to you!

However, optimists also need what I have termed creative dissatisfaction in order to motivate high performance. In order for positive reinforcement to have its effect there must be deprivation and not satiation. Creative dissatisfaction is the awareness of the gap between where I am or who I am and where I could be or who I could be. I could have a best selling book. I could get that promotion. I could get that better job or learn that new skill. On the other hand, I will never play in the NBA or make love to Penelope Cruz. I am pretty sure of both of those things, although if Penelope wants to contact me that would be nice.

It is a core function of leadership in every organization to generate both optimism or hope and creative dissatisfaction. Where are we going and why will it be great when we get there? How will we get there? What must I do to help us get there? Effective leaders provide the answer to these questions and generate both optimism and creative dissatisfaction.

So, to summarize how you can instill joy and high performance in your organization:

Build great teams! Be sure that every employee serves on a well functioning team with knowledge of its purpose and its performance. Encourage celebration of winning team goals and setting records.
Build internal social networks. Build social networks around common interests and competencies. These become learning networks that provide both the joy of social relationships but also the joy of learning.
Be sure to practice respect for people and recognize that the world’s greatest experts are those who are on-the-spot, with their hands on the work. This builds their self-esteem and encourages learning.
Institute a process of gaining flexibility through multi-skilled, cross trained employees who can optimize the effectiveness of their teams.
Stop wasting money where it doesn’t pay off and spend it where it does. Pay employees for gaining skills and achieving performance. Value high performance by paying for it.
Know and promote the worthy purpose of your organization. Ennoble your employees by connecting them to a spirit of service. This is the essence of leadership.
Hire optimists and not pessimists. Generate hope and optimism by clearly stating where we are going and why it will be great when we get there. Generate creative dissatisfaction in yourself and your employees.

If you do these things you will be applying much of the current research in positive psychology and it will fulfill Dr. Deming’s guidance to provide joy at work.

Recommended Reading: (You can quickly order through the Amazon links at the bottom of this page.)

Authentic Happiness by Martin Seligman
Pursuing the Good Life by Christopher Peterson
Happiness and the Good Life by Mike W. Martin
Stumbling on Happiness by Daniel Gilbert

Fast Cycle Lean and the Rebirth of American Manufacturing at GE’s Appliance Park

Posted on January 23, 2013 by Larry Miller

The only thing certain about a trend is that at some point it will reverse or achieve stability and be a trend no longer. For the past thirty years the United States has witnessed the decline of manufacturing as China, in particular, became a willing provider of low cost labor with few health, safety or environmental regulations. The outsourcing trend may have run its course.

Outsourcing was based on an understanding of the different functions in the product innovation-to-market process as distinct and separate functions. It was not a lean, interruption free process. Product design and engineering could be done in the U.S. or Europe, the product specifications could be shipped to China where the process/manufacturing engineering and the manufacturing was done. It was then transported, sold and serviced in the country where the cycle began. The logic of this process assumes that each function is separate and distinct. But, might there be a competitive advantage in the overlap of these functions? In other words, might the ideal process be a bit more non-linear, with overlap between design/engineering and manufacturing and sales? What if each was a team, and members of each team spent time with the other teams engaged in dialogue about how to improve the product and respond to market intelligence? How would that change the outcome? And, then might there be an advantage to co-location, rather than having the process separated by a very large ocean, language and culture?

GE is proving that this is not a theoretical question, but one that is demonstrating results and drastically altering the manufacturing strategy of one of the world’s largest manufacturers. The return of jobs by GE to its Louisville Appliance Park is the best evidence yet of a new trend and it is important that every company engaged in manufacturing consider the key elements that make this a sound business decision.

The Landscape Shift

The exporting of manufacturing jobs to China was based on a few simple premises:

First, wage rates were low enough to offset the cost of transporting finished goods back to the U.S.
The outsourcing trend assumed a relatively stable social and political environment that would not disrupt the flow of goods back to the U.S. Low costs plus low risks made for high returns on investment.
The assumption that technology development, design and engineering could be done in one place, the U.S. or Europe, while the dirty work of making the product could be done in China.

What may be the best news yet for the U.S. economy (and spell serious trouble for China) is that all three of these conditions have changed and will continue to change. The landscape is shifting, as it always does. Now, the risk/reward equation is not the same as it was.

Wage rates in China have gone up four to five times what they were in 2000 and are expected to rise 18% a year. At the same time oil prices, which move goods back to the U.S., have gone up three hundred percent in the same period and are not likely to decline.
Despite efforts to control the media in China, the Internet is working its magic there as it has done throughout the world. Impossibly dangerous environmental conditions, corruption by public officials, and the growing gap between the few rich and the mass of poor has resulted in growing social unrest and worker strikes. Labor unrest is growing in numbers, is better organized, and will represent a genuine threat to supply chain stability in the coming years.
And, there is a growing realization that disconnecting the functions of design, engineering, and manufacturing slows down the improvement cycle. The world of competition will increasingly be one of rapid response to consumer preferences, rapid adoption of technology innovation, and this is best achieved in an environment of dialogue and teamwork across those functions.

The case of GE’s Appliance Park illustrates this well. The Atlantic magazine last month published an excellent article by Charles Fishman on the turnaround at Appliance Park.

Employment at Appliance Park kept rising through the ’60s, but it peaked at 23,000 in 1973, 20 years after the facility first opened. By 1984, Appliance Park had fewer employees than it did in 1955. In the midst of labor battles in the early ’90s, GE’s iconic CEO, Jack Welch, suggested that it would be shuttered by 2003. GE’s current CEO, Jeffrey Immelt, tried to sell the entire appliance business, including Appliance Park, in 2008, but as the economy nosed over, no one would take it. In 2011, the number of time-card employees—the people who make the appliances—bottomed out at 1,863. By then, Appliance Park had been in decline for twice as long as it had been rising.

Macro-Lean Rapid Innovation Cycle

However, this past year, Appliance Park opened an all-new assembly line to make cutting-edge, low-energy water heaters. It was the first new assembly line at Appliance Park in 55 years—and the water heaters it began making had previously been made for GE in a Chinese contract factory. On March 20, just 39 days later, Appliance Park opened a second new assembly line, this one in Building 5, to make new high-tech French-door refrigerators.

CEO Jeffrey Immelt, writing in Harvard Business Review in March, declared that outsourcing is “quickly becoming mostly outdated as a business model for GE Appliances.” Just four years after he tried to sell Appliance Park, believing it to be a relic of an era GE had transcended, he’s spending some $800 million to bring the place back to life. “I don’t do that because I run a charity,” he said at a public event in September. “I do that because I think we can do it here and make more money” (from The Atlantic, December, 2012).

While every manufacturing company has somewhat different requirements, it is essential to consider the logic of GE’s strategy and how that might apply to your own. Listen to the effect of creating a unified, interruption free, fast-cycle design to manufacture system as GE began manufacturing the GeoSpring water heater at Appliance Park:

“The GeoSpring project had a more collegial tone. The “big room” had design engineers assigned to it, but also manufacturing engineers, line workers, staff from marketing and sales—no management-labor friction, just a group of people with different perspectives, tackling a crucial problem.

“We got the water heater into the room, and the first thing [the group] said to us was ‘This is just a mess,’?” Nolan recalls. Not the product, but the design. “In terms of manufacturability, it was terrible.”

“The GeoSpring suffered from an advanced-technology version of “IKEA Syndrome.” It was so hard to assemble that no one in the big room wanted to make it. Instead they redesigned it. The team eliminated 1 out of every 5 parts. It cut the cost of the materials by 25 percent. It eliminated the tangle of tubing that couldn’t be easily welded. By considering the workers who would have to put the water heater together—in fact, by having those workers right at the table, looking at the design as it was drawn—the team cut the work hours necessary to assemble the water heater from 10 hours in China to two hours in Louisville.”

The traditional assumptions of the traditional innovation to manufacturing process was that the smart guys were in marketing, design and engineering. The almost smart guys were in process engineering. And, the not smart at all guys were in manufacturing. Obviously, the manufacturing workers could not design or engineer the product. Only the smart guys could do that. There wasn’t any need for the smart guys to talk, or listen to, the not so smart guys.

There is one big fallacy to that thinking: In the manufacture of technology based products, and products that require frequent innovation, the manufacturing guys or gals, better be smart, and their brains can contribute more to the development and improvement of the product than was previously assumed. It is management’s job to create, as Honda says, “the world’s greatest experts” on-the-spot, where the work of manufacturing gets done. There are no “not smart” folks in lean manufacturing and to achieve macro-lean, the entire system, from market research to delivering the product to customers, must be transparent and the product of teamwork across all functions.

The Lean Enabling Social System

The most common cause of failure in lean implementations is the focus on the work process, the technical system, and ignoring the social system that will enable that work process. This is no where more true than creating the fast-cycle integrated lean process demonstrated at GE’s Appliance Park.

There are some critical characteristics to that social system that are essential to its success:

Dialogue is the skill that results in an emerged collective wisdom from the group. It is a skill that is not common in most of our organizations.
Teamwork: The GE GeoSpring team was a true team in the sense of working as one unit, without respect to rank, degree, or where they came from.
Respect: Genuine respect for people who are different rather than the same, different experience, training, or titles must be viewed as an asset to be appreciated, rather than an invisible wall erected to separate people.
Shared Learning: Every member of the team must be genuinely engaged in continuous improvement which means constant examination of the data and shared brainstorming of possible improvements.
Shared Data: All great teams have a common scoreboard that reflects the results of the entire team effort. The team must also share data and experience from each function because it has implications for the next or previous function.
Common Purpose: It is the job of leadership to instill a sense of common purpose, common vision, and common values in the group.
Shared Space: You have to be there! Internet conversations are better than no conversation, but the ability to look at the part, the product, observe the process together is a critical enabler of fast cycle innovation.
Celebration: All great teams celebrate together because the victory or loss is a shared victory or loss. This motivates future collaboration.

This integrated, synergistic process demonstrated by GE is based on the ability to create collective wisdom, the wisdom that comes from a group, and that requires a well designed social system as well as the technical work process. This is unity and diversity in action. It may well be the future of American manufacturing and a key to revitalizing our economy.

The Lean Culture Challenge: Can You Graduate from the 5S’s to The 7S’s that Really Matter?

Posted on January 8, 2013 by Larry Miller

There are big things and there are little things. There are things that make a huge difference and things that make a small difference. There are things we do because they are easy and there are things we avoid because they are hard.

Books and articles on lean manufacturing, lean culture or management, very often devote a good bit of time to the 5S model. These 5S’s (Sort, Set in Order, Shine, Standardize and Sustain) are all important and worthy when you have a micro-focus on the shop floor. Orderliness is important in any manufacturing setting. However, I believe much of the focus on this 5S process is because these are easy things to attack. No executive in the world is going to object to creating orderliness and eliminating wasted motions on the shop floor.

Doing 5S is easy because it requires nothing of executives and very little if any change in the behavior of managers. It does not disrupt their world. And, that is exactly why it does not address the big issues that drive the culture and competitiveness of any organization.

What is Culture and Why Does it Matter?

Let’s step back and examine what determines the culture of your organization and what you can do to influence it.

First, what is organization culture? It is the system of beliefs and habitual patterns of behavior that are the norms in the organization. We all have habitual ways of thinking, feeling and behaving and those define our own culture. And those beliefs and behavior are most significantly expressed and modeled by executives and managers. If their behavior undergoes no change, if their beliefs are not challenged, you haven’t changed the culture no matter how many 5S implementations or kaizen events you have led. It’s easy to do a shop floor kaizen event but it is frightening to challenge the behavior of senior managers and this is exactly why so many lean implementation efforts fail or fail to sustain.

Continuous Improvement (kaizen) is not an “event.” The idea of an “event” is an inherent contradiction to the idea of continuous improvement. Lean or continuous improvement is a culture that permeates every level of the organization every day. It must be understood as internal competitive strategy, the capabilities of the organization. External strategy is a response to external stakeholders – the business marketplace and financial market. Internal strategy creates the capabilities that enable successful external competition. In other words, if you want to compete on the showroom floor (external), you must have great engineers, stylists, manufacturers, and they have to be able to communicate, must be motivated, etc. (internal capabilities). But, this must be framed as a strategy that is owned by the executives, not merely a tactic on the shop floor.

A Framework for Organization Culture:

Every organization’s culture, even the culture of countries, operates in some similar ways. First, there is an external landscape upon which the culture must operate. This is the playing field of competition. Then there is the nature of the organization itself – its flexibility or rigidity, its complexity or simplicity, its ability to facilitate the work or inhibit the work. Then there are the people, the human capital of the organization, with all their competencies, motivation, fears and hopes. And, at the heart of the organization there is a system of beliefs, values and vision that tend to condition behavior and create boundaries for behavior. You can apply this model to a country or to a corporation.

The 7S’s that Determine Culture:

Let’s take a closer look and fill in the details of this framework. There are 7S’s that are the key levers, the things that determine your culture. These are the things that you can change and these are the things for which leaders must take responsibility.

The Landscape:

If you are developing strategy you develop that strategy to adapt to a changing environment… and it is always changing! If you are in the business of retail sales you must be adapting to the external changes in technology and social habits. Are you developing a strong web and social media presence or are you stuck in brick and mortar stores? These are obvious elements of strategy that are driven by the realities of the landscape. Economic and political changes will also affect strategy. If you are in the energy business you know that threats of war in the Middle East, or the politics of hydraulic fracking in Pennsylvania may determine where you invest your capital. And changes in the climate may have something to do with where you build that next plant and what your insurance costs may be in the future. All competitive strategy involves gathering intelligence and developing a response to the challenges of the external environment. The corporate graveyard is littered with the names of companies that failed to recognize and adapt to the changing landscape.

1. Structures:

The builders of the great Cathedrals of Europe understood a lot about the architecture of structure. And what they understood was not just the engineering of space, but they understood the power of structure to influence the mind and spirit. When you walk into a great cathedral your head goes back and you breath in, and you can feel your soul elevating toward heaven. This is the power of structure.

Do the designers of your corporate structure understand architecture, the influence of structure on thoughts, feeling, and behavior? What do people care about and how does the organization structure determine those thoughts, feelings and behavior? What team am I on? With whom do I win, celebrate, or lose? What are the boundaries and how high are the walls between the structure of which I am a part and other structures in the organization? And, does the structure enable or hinder the flow of the important work process in the organization?

All of these questions are important and they are important right up to the most senior management team. Does the structure of that team reflect the reality of both the core and enabling work processes in the organization? And, does the structure follow the flow of the work in a way that reduces barriers, interruptions, rework and other forms of waste? And, what are you doing to analyze and redesign that structure?

2. Social Systems:

Social systems matter a great deal in any organization. These systems include the following:

The system of hiring (who does it, what are the criteria, etc.)
The system of promotion (who wins and why.)
The system of reward and recognition (what makes performance matter? Are both tangible and social reinforcement contingent on important performance?)
The decision-making system (who decides what and in what style – command, consultative or consensus).
Communication Systems (who knows about what, when and in what style)
Score-keeping or Feedback Systems: (nothing drives behavior more certainly than effective score-keeping)

When implementing lean management many lean implementers draw boundaries around their work that exclude all of these social systems and in doing so, they cripple their ability to influence the culture. It is simply impossible to create a culture of teamwork and continuous improvement if every manager is rewarded only for his or her individual performance. It is impossible to create lean culture in an organization in which the important score-keeping is invisible to most of the players on the field. All of these elements must be designed to optimize teamwork and continuous improvement.

3. Technical Systems:

The technical system of the organization is the core work process that includes each task, each piece of equipment, each second of time consumed as the work flows from input to output, and every opportunity to add value or create waste. The redesign of the whole-system of the organization often begins with mapping the technical system and identifying all of the variances, cycle time, and every opportunity to improve how the customers’ needs are met as value is added through the process.

Lean implementers generally do a better job on the technical system and do less on the social system. For some reason, perhaps it is because of their own backgrounds, they feel more empowered to address the work process, the technical system, then they do to address the social systems.

What lean implementers need to realize is that the social system enables the technical system. In other words, when Shigeo Shingo worked with the die change operators to improve the cycle time of die change, he worked with them as a team. He empowered them. He enabled the to make decisions, experiment and to track their own data. He changed the dynamic of the work team. Similarly, if one studies Toyota one learns that the senior management team makes decision in very different ways than in a traditional Western corporation. The social system is different at the top and and the bottom of the organization.

4. Symbols:

It is ridiculous that symbols should influence behavior and be a concern for lean implementers wishing to create lean culture. It is almost childish.

How do you feel about your country’s flag? Or, your religion’s cross or star, or other iconic symbol? Or, how about your school colors? Or, your bulldog, or eagle or raven, or cowboy hats, or those wearing the Redskin’s hog noses to games, or cheese-heads? Its all ridiculous., isn’t it?

Yes! And that is just part of being human. It has been since history was first recorded and it is no less today. Whether it is wearing a good suit and a tie at the corporate office or wearing uniforms on the factory floor, symbols make a difference. They serve the purpose of saying “This is who I am! This is what I care about and who is my team.” Symbols create social bonds that unite people in common effort. What symbols bond people together in common purpose in your organization?

5. Stories:

I am surely not going to say something as silly as “you need to tell stories.” You are a serious manager, an executive, you have serious work to do looking at spreadsheets and graphs. You don’t have time for story telling. Really?

Every culture… I repeat, EVERY culture, is built on stories of heroes and heroins who demonstrated the values that are important in that culture. We learn far more through stories than through theories and mathematical logic. The Bible, front to back, is a series of stories about real people who the reader can relate to – their tests and difficulties, victories and failures – and each story is a lesson. They were remembered and retold, from generation to generation. Why is there no chapter on the theory, the analysis of the data, the facts, and a step-by-step action plan? And the reason is that it would have been forgotten, but we remember Samson and Delilah, David and Goliath, and Cain and Able. The lessons that are remembered are in the stories. It is why the Iliad and the Odyssey, Greek Tragedies and the plays of Shakespeare are important. They all tell the stories of the culture and reinforce the value systems that are important in that culture.

What are your company’s stories? Who are the heroes? And, are there heroes of the present, or are they all of the past? Cultures in decline only have heroes who are dead. Cultures that are growing and conquering have heroes of the present. It is your job to find and make the heroes. Tell their stories!

This is an important job!

6. Skills:

By Skills I include all the things that people are able to do – their knowledge and their competence. Every strong organization culture is one that values and builds the skills that are critical to the core work.

For many years Honda considered their core competence to be engine technology. That did not mean that chassis design, suspension engineering, styling and manufacturing were not important. But, they believed that the core competence was engineering engines. When you arrived at the Marysville, Ohio plant and you walk into the lobby there is artwork on pedestals, like busts of great men of history. But, this artwork is different: The Formula One engine that won the world championship; the 500cc motorcycle engine that won the world championship… this is the artwork on pedestals.

At the time I was involved in Marysville, Iri Irimajiri was the President of Honda America Manufacturing and Mr. Iri had been a Formula One engine designer. He knew engines! The culture promoted those who knew engines. They valued engine design and this is reinforced by the artwork in the lobby of the plant.

Every great company knows what its core competencies are. Marketing and brand management at Coca-Cola; pharmaceutical discovery at Merck and Pfizer; technology innovation and sensual packaging and customer interface at Apple. What are your company’s core competencies that create competitive advantage? How are these promoted and developed in the organization?

7. Style:

Early on we learn that how we shake hands, how we look at people, the tone of voice we use, and how we make decisions are important determinants of our success in life. This is true for the individual and it is true in the collective experience of an organization. One of the things I have learned after thirty-five years of consulting with a hundred different companies is that they do each have a style that reflects their culture.

Many years ago I worked with the Continental Can Company and they would not have disagreed that their culture was adversarial in the extreme. They had a long history of union-management conflict and extreme distrust. The Vice President of Human Resources told me that their managers were “gunslingers.” I wasn’t sure what he meant. Then I went to lunch with five or six of their senior managers. They kept their hands under the table, leered around from person to person, and then suddenly, they would draw! “That’s not right!” as their quickly drawn finger pointed at someone who had just misspoken (according to them). They were gunslingers! It was a style of interaction that they had learned and developed over the years and it spoke volumes about the culture.

I could describe dozens of styles of behavior in different companies, and most reflect a far better history. These styles enable effective decision making or destroy effective decision making. They cause the workplace to create joy in work and teamwork among colleagues, or a place that creates ulcers.

So, these are the 7S’s of organization culture. Now, which do you think will have a greater impact on the long term competitiveness of the company – sorting and shining tools, or creating systems and structure that eliminates walls through the process and creates teamwork? I am not against the 5S process so commonly associated with lean manufacturing. However, they will not determine the competitive success of the organization. That will be determined by the big seven!

Teamwork at the Cleveland Clinic

Posted on December 25, 2012 by Larry Miller

Today’s New York Times editorial focuses on the advances made at the Cleveland Clinic through the development of teamwork across functions. Having long promoted teamwork, through both formal structures and changes in behavior, it is nice to see its importance recognized in the press.

As I have found working with other organizations, the Cleveland Clinic has succeeded by creating a system and structure that both requires and supports teamwork. It has become the new normal.

The N.Y. Times points out, “In its most fundamental reform, the clinic in the past five years has created 18 “institutes” that use multidisciplinary teams to treat diseases or problems involving a particular organ system, say the heart or the brain, instead of having patients bounce from one specialist to another on their own.”

As many of us know, bouncing from one doctor to the next, continually trying to find your way through the system, is a source of error and rework that requires deliberately designing the system, creating the architecture and process of “flow,” which is little different than apply lean management principles in the manufacturing setting where the goal is to create uninterrupted, continuous flow, of materials. Overcoming individual interests and egos is often the difficulty.

“This team approach can improve the quality of care because all the experts are involved in deciding the best treatment option, which can save time and money. The neurological team, by consensus, has been better able to determine which acute stroke patients need a risky and expensive treatment that involves threading a catheter through an artery in the leg up into the brain to destroy a clot. It cut the use of that treatment in half, reducing costs and deaths and improving outcomes.”

What is clear is that the Cleveland Clinic has created not only the architecture of teamwork but has engaged teams in the process of continuous improvement. Many small experiments by teams on-the-spot result in huge gains in both bottom line performance and customer satisfaction.

“One analysis found that suturing could be done as well with a $5 silk stitch as with a $400 staple, leading to a big drop in the use of the staples. At the same time, the clinic has also carried out simpler reforms, like improving sterile conditions, which has reduced catheter-related bloodstream infections by more than 40 percent and urinary tract infections by 50 percent. All this has happened in a remarkably short time. Patients seem to like the treatment they get. A federal government survey of patient opinion last fall found that 80 percent of the patients gave the Cleveland Clinic a high rating over all and 84 percent would recommend it to others, well above the state and national averages in the 69 percent to 71 percent range.”

I previously noted the culture of teamwork at the Mayo Clinic. The same is true now at the Cleveland Clinic. These are two models that should be followed by all healthcare organizations.

Meta-Lean 2: Empiricism and Humility

Posted on December 12, 2012 by Larry Miller

Developing an Attitude of Science

The primary task of a manager is to think. The future success of the organization is dependent upon his or her ability to think clearly, critically, and creatively.

The greatest enemy of continuous improvement is arrogance, particularly on the part of leaders, and the opposite quality of humility is a requirement of learning and improvement.

In my previous post I introduced the idea that there are “big thoughts,” or over-arching cultural principles that are essential to creating a genuinely lean culture. I suggested that the principle of Unity was the first. The second is what I will call the principles of Empiricism and Humility.

It might seem that empiricism and humility are two different things, but let me suggest that they are necessary corollaries.

Last night I watched the Charlie Rose interview of Jeff Immelt, the CEO of General Electric. I recommend the entire interview to you. It is insightful and intelligent. But, toward the end Charlie Rose asks Jeff Immelt what is the one piece of advice he would give to MBA students today if he was speaking to them at the Harvard Business School. His answer was “Humility and the curiosity that goes with it. The big mistakes you make are when you stop asking questions. But, if you are always hungry and digging for that extra piece of knowledge, that is how the world works.”

I think you would be hard pressed to find a better piece of advice for any executive or manager.

Correlation, Causation, or None of the Above?

Continuous improvement, or lean management, is built on the ability to discern fact from fiction; causal relationships from correlative relationships; anecdotes from data trends and statistical analysis. Unfortunately, our culture is doing a very poor job of helping students, and the population at large, develop these abilities. China, and many developing countries are outscoring the U.S. in math and science education with the U.S. ranked as low as 31st in math scores. This is a frightening trend with dramatic economic consequences.

Here is just one small example of this disability. Well.. actually, it isn’t that small!

It is constantly argued that lower taxes produce economic growth and higher taxes reduce economic growth. This is repeated so many times in the public press and political discourse that it is assumed to be true. The fact is that there is no demonstrable causal relationship between economic growth and tax rates. According to a study by the Congressional Research Service, a non-partisan body, there’s no evidence that tax cuts spur economic growth.

If anything, the chart below demonstrates a slight correlation (not a causation) between higher growth and higher tax rates. Don’t misunderstand, I like low taxes as much as anyone! But, what I like, is completely irrelevant to the facts. And your ideology or political leanings don’t change the facts! The facts are easy to demonstrate, but the facts are rarely looked at and given very little regard in the public discourse. Why is this? It is because we have become more ideological in our thinking and that frees us from the burden of analyzing the facts.

Dr. Deming’s 14 Points and an Attitude of Science

Dr. Deming was constantly preaching that we must manage by the “facts”, by the data, not by slogans, objectives, or other efforts to create fear or intimidation. He was, of course, a statistician and he believed in the power that comes from understanding your data.

I began my career in behavioral psychology which is heavily research and data oriented. B.F. Skinner used to say “the pigeon is never wrong.” In other words, when you conducted an experiment and the subject (a pigeon, for example) behaves in a way contrary to your expectations, the actual behavior trumps any theory you might have. It is the equivalent of saying, the employees are never wrong, in regard to their level of behavior or motivation. They are responding to the nature of contingencies, the consequences to behavior in the real environment. As the manager of those contingencies you are, therefore, responsible for their behavior. This is an attitude of science or empiricism.

My earliest work in textile mills in the South involved getting plant supervisors to post graphs that demonstrated rates of quality, waste, etc. and then have the supervisor lead a team meeting when they would discuss the data, ask why it was going up or down, reinforce improvement, and discuss what they could do to improve in the coming week. It was simple, but effective. Seeing the data on a graph, even by hourly workers, who in some cases were illiterate, had a powerful effect on their behavior. They responded to feedback, the visual display of the facts of performance. And, they could analyze data in its simplest form.

Every front-line work team and, of course, every management team must become “scientists.” By that I mean simply applying the essential scientific method of a) gathering baseline data, or data of a control group; b) implementing a change in methods or conditions; then c) studying the data as it changes; and then d) standardizing what worked; and e) moving on to another experiment, another intervention to attempt to improve performance. Letting the data speak, learning from the data, is the essential attitude of science and it is what we must cultivate in every organization. Until we achieve this we have not achieved the essential cultural characteristic of empiricism.

Scientists are humble because they know that they are not determining reality, they are merely discovering it, and most often after many, many failures. When Benjamin Franklin conducted his famous kite and key experiment to explain that lightening was electricity, he did so in a world in which the predominant view was that lightening was the anger of God punishing us for our sins. Franklin replaced superstition with science. That is exactly how most of human progress has been made and it is how most advances in production or other business methods are made. Unfortunately, in many of our organizations we are are still burning witches, rather than studying the data and experimenting.

As you go on your Gemba walk through production areas, in meetings with managers, ask for the data. See the data graphed! Ask “Why?” Teach them to become scientists!

Meta-Lean: The Unity Principle

Posted on December 6, 2012 by Larry Miller

When the Western mind encountered lean organizations such as Honda and Toyota, we overlaid our ways of thinking, the mechanics of our mind, onto those systems and reduced them to their component parts. It is the tendency of the Western mind to employ reductionism to explain the workings of systems. But, that is not the way of the Eastern mind.

Lean Metaphysics

Some companies have engaged in what they think are lean implementations by reducing lean to component parts and experimenting with one component over there, another over here, and a third somewhere else. That is guaranteed to fail. The very idea of reducing lean to its component parts fails to “get it.”

There are components to lean: just-in-time, continuous flow, quality detection systems, plant design, teams, information sharing, etc. But, there is also something that holds them together, something that is almost metaphysical, which I will all “Meta-Lean.” It is a Zen, a philosophy, a working of the mind that is distinctly different than the workings of the mind in traditional Western organizations. Meta-lean principles hold the parts together and enable them to work together in a dynamic that leads to self-correction and improvement.

I believe that the first principle of meta-lean is what I called in a previous book, The Unity Principle. Honda took this principle to heart and sought to apply it in their U.S. operations. It is simple, yet profound. Let me give an example:

The human body is a natural system. It is organic, living, changing, adapting, and composed of interdependent parts or sub-systems. It is a “whole-system.” It can be reduced to component parts. There is the digestive system – the mouth, throat, stomach, etc. There is the respiratory system; the cardiovascular system; and, of course there is our natural IT/IS system, our brain and central nervous system. You can describe each of these systems independently. You can remove them from the body and dissect them. But, they will be dead. Their life depends on their interdependence. The whole is greater than its parts.

The reductionist mind would view the human body as merely the sum of each of its subsystems. Yet, each of these subsystems contains no life unless completely integrated with the others. Only when the body is whole can we say that it is a human life. It is more than the sum of its parts. I think any scientist would agree that even after more than a thousand years of dissection and study of the human body, we truly do not understand the magic of its connections, its unity as a whole, which gives it intelligent life.

I will argue that lean culture, lean organizations, contain a similar mystery of life. Separate the parts and it becomes lifeless, unify the parts and a magical thing happens. It gains life as the parts interact and support one another.

The Unity of Social and Technical Systems

When I was last in Marysville, Ohio at the Honda assembly plant I also visited a supplier, Stanley, that produces headlight and taillight assemblies. The Stanley plant has no outgoing warehouse or storage area. Pallets of assembled headlights or taillights go directly onto a truck. That truck moves every two hours to the Marysville plant. The “pile” of headlights and taillights at Marysville is merely a two-hour pile. The truck must move every two hours. That, of course, is the just-in-time work flow. However, that is only subsystem of the whole organic system.

Associates on the line have a phone at their work station. When they find one… I repeat… ONE bad part, they pick up the phone that rings in quality assurance. A quality assurance associated immediately answers the phone. He then comes out and picks up the part. He returns to his desk and picks up a second phone. That phone rings at the supplier. The suppliers is informed of the defective part and the supplier must get back within one hour to explain what he is doing to correct the defect that was created only hours ago. Remember the two hour pile!

Notice that this human feedback loop involved only first level hourly associates. No manager got in the way to slow it down. No meetings were called. No studies made or reports written. The hourly associates were trusted to transfer information through the artificial walls of legal company boundaries that become irrelevant in a lean system.

The immediate feedback loop conducted entirely at the first level is employee empowerment, engagement, trust. Without this, the two hour just-in-time process becomes impossible. One system is entirely dependent on the other… just as in the human body.

Thinking that Unites and Thinking that Divides

In the culture of the Lakota Sioux the hoop, the circle, has sacred significance. Kevin Locke is a friend of mine and he is a well known “hoop dancer”. He told me that the Lakota Sioux, when they first encountered Europeans moving west, referred to them as Oblatongyangpi, which means “people of the square” or just square people. Why? They carried things with four separate sides (books); when they built homes they built squares; they cut out squares to look through; if they had a lot of homes they organized them into squares; they even tried to do square dancing… almost impossible. Obviously, they loved squares with four separate sides. Each side can be measured separately and each side has a beginning and an end.

And, in the world of the Sioux, they built round homes, organized them into circles, danced in circles (much easier!) and the hoop, which has no beginning and no end, symbolizes the unity of all human beings, people and animals, earth and sky, in one organic whole created not by man, but by the Great Spirit. You may have heard the phrase “Indian giver”, someone who gives and then takes back. This misunderstanding comes from the fact that Native Americans had great difficulty understanding the idea that you “owned” a piece of property. How could something that was created millions of years ago and is eternal belong to someone who will last only an instant? The land will soon own you, not the other way around, and you will own nothing but your soul.

Westerners are obsessed with property lines, ownership, divisions between things. We employ armies of lawyers to argue over who owns what and where the lines of squares are drawn. Much of it is cultural insanity that adds no value but consumes energy.

We love to organize people into two separate categories. In the recent election campaigns we had the absurdity of the population being simplistically divided into “makers” and “takers”, “producers” and “mouchers.” It is an insane example of square thinking. Yesterday, I read that John Sununu, former Governor of New Hamphshire, weeks after the election was explaining the Obama victory by the dominance of takers over makers. The irony is that John Sununu has spent his entire career in the employ of government, taking from the people, never having started a private company or managed a productive enterprise in the private world. Yet, it is comfortable and an easy explanation to divide the population of the United States into those who take versus those who make. Nothing is so simple and the nonsense of these false divisions (and there are many) are destructive of the unity of the nation.

Divisive thinking tears apart the unity of the whole. Every genuinely great leader sought to unify people in common purpose. Every general of every victorious army understood that the army had to act in unison, marching together and claiming victory together. A divided army is easily defeated.

The sickness in many of our organizations is a sickness of division. We create compensation systems that separate and divide rather than unite. We create different forms of dress, offices, buildings and symbols that separate people into those who do labor and those who make decisions.

Lean culture and management requires the destruction of divisions. There is no division of thinkers/deciders and doers/order takers. Every associate is a thinker and every one a decision maker. Every member of the organization should be rewarded based on the success of the whole. Symbols such as the different dress codes or uniforms should be abolished because they inherently imply divisions of class.

The lean mind does not see divisions created by lawyers in the form of corporate walls. The flow of the work process must flow through the division of legal walls as if they do not exist. They are irrelevant to the end user of any product. Lean is like the stream flowing from the top of the mountain to the sea in one continuous motion. The flow of the stream is not interrupted by legal property boundaries and does not wait for management decision making.

Until the leaders of the organization have understood the power of unity over division and have meditated on the creation of unity within their organization and the unity of flow through all the walls and silos of departments or companies, you have not adopted lean culture or thinking.

The idea of the Unity Principle is simple. The idea of whole-systems is simple. Yet, putting these ideas into practice is not simple and requires dedicated effort.

Lean Lessons from the Hawthorne Studies

Posted on November 2, 2012 by Larry Miller

Hawthorne’s Lessons for Lean Management

From both my clients and in a number of other publications there have been references to the so called “Hawthorne Effect” in the past few months. The Hawthorne studies have been a frequent source of misinterpretation over the years. It happens that they also have significant implications for the implementation of lean practices in organizations.

Understanding the research can help one develop a system that is sustainable and not merely a short term boost in performance.

Women in the Relay Assembly Test Room at the Hawthorne Western Electric Plant

As you may know, the Hawthorne studies were conducted in 1924 by a team led by Elton Mayo at the Western Electric Cicero, Illinois plant. These studies are credit with beginning the entire field of industrial or organizational psychology. As might be expected, the research methodologies at the beginning of any field of study are not particularly refined and may lead to erroneous interpretations of the data. The most significant modern investigation of the Hawthorne studies was conducted by H.M. Parsons and published in Science Magazine (1974) in which he went back and re-examined all the data from Hawthorne and even interviewed some of the participants.

The “Hawthorne Effect” Myth

The general interpretation, and I will say “myth” of the Hawthorne Effect is that if you make almost any change (in this case it was changing the lighting in the plant) it will produce a positive effect, a so-called novelty effect, which is likely to be temporary. However, the more recent re-study of the data and the conditions of the experiment revealed that in some cases performance improved, in some it stayed the same, and in some it became worse. In those cases in which performance improved, more was happening besides changing the lighting. The workers in the rooms in which performance improved were made aware of feedback on their performance, and in some cases received positive reinforcement for improvements in performance. In other words, if all conditions had been held constant, and if there was no feedback to workers, there is no evidence that merely changing the lighting would have had any effect.

The Feedback Effect

The idea that “being studied” improves performance is true when “being studied” involves workers being given attention that they did not previously receive (feedback and reinforcement) and when they can see the output measures of their performance and observe their performance improving. That is what the Hawthorne studies really demonstrated. There have been hundreds of research experiments since that have demonstrated the exact same thing. In fact, nothing in organizational behavior has been more studied then the effect of feedback on human performance.

Elton Mayo who led the research team at Hawthorne

It is also worth noting that Elton Mayo, who conducted the studies, also attributed some of the effect to the fact that workers felt better about themselves because the researchers were demonstrating “caring”, “interest”, etc., toward them. If you can imagine the conditions on an assembly line in 1924, it is not hard to understand that workers craved any “caring” attention and would respond positively to that demonstration by the researchers. Is this a “novelty” effect? In reality, students in a classroom, children at home, and workers in almost any environment respond positively to interest in their performance demonstrated by their parents, teachers or supervisors. This is a form of positive reinforcement. This again has been demonstrated in hundreds of research projects after Hawthorne.

Pay for Performance Does Matter

All of the workers at the Hawthorne plant were on a pay for performance, piece rate system. However, it was well documented that the workers managed upward, controlled the pace of work because they had learned that if some groups increased their rate management would increase the requirements for piece rate. In fact, the workers were self-organizing and working as a large team.

Because it wasn’t what the researchers were looking for, they didn’t report on the effect of both a change in the piece rate and a change in the team dynamics that allowed a small team to manage their own behavior to maximize their compensation. Here Parsons, who carefully examined the data and interviewed the workers, describes what happened In the Relay Assembly Test Room experiment:

“Two other extraneous variables particularly affected production rates. One was an alteration in the group piecework procedures for paying the workers; its base was changed in period 3 (when performance improved) from the output of an entire large department to that of their little five person group, making their earnings more contingent on individual performance. Though the investigators acknowledged that this change might have induced the women to work faster (and thus confounded the results), they attempted to discount that likelihood. Thereby they incurred later criticism from some of the few analysts who paid attention to this variable.

“The experiment’s major dependent variable was productivity as evidenced in output rates. When the five operators moved to the test room after period 1, they were seated together with a chute beside each person’s work area. When one of them assembled a relay she dropped it down her chute, in which a hinged flap then activated a microswitch that sent a pulse to a counter. Every half hour a sixth employee tabulated cumulatively the totals of the five counters on a table behind the operators, and daily total were posted. The operators could and did examine those individual totals, during and between days, but the investigators never regarded that behavior as significant or even worth pointing out in their accounts… This information (discriminative feedback) was the second major extraneous variable that, coupled with the first, the money reinforcement, turned this study into an Organizational Behavior Management experiment. It also explained the Hawthorne effect, anchoring it to a particular experimental procedure.” (H. M. Parsons, Hawthorne: An Early OBM Experiment; Pay for Performance: History, Controversy, and Evidence; Journal of Organizational Behavior Management, Volume 12, No.1; The Haworth Press, 1992.)

So, an alternative explanation for the improvement in performance in the Relay Assembly Test Room was that the workers were reformed into a small team; those workers could visually see and discuss the results of their work; they were freed from larger group pressure to hold down production; and they felt in control of their results as a small team. This is a powerful combination of motivating forces.

An interesting side note on the Hawthorne Studies is that W. Edwards Deming, when a young man, was employed as an hourly worker in the Hawthorne plant at exactly the same time the studies were being conducted. Many of Deming’s views about workers in manufacturing plants are related to the conditions and treatment of workers in that plant. Needless to say, those conditions were not positive. Deming experienced the “normal” piece rate system at Hawthorne and became an extremely strong advocate of eliminating all financial incentives. However, Deming did not have the data. Deming had not studied the effect of these experiments, nor dozens of experiments that have been conducted since that time that demonstrate that money can motivate. However, as can be seen in the above experiment, it is never simply money. It is how money is employed along with the ability to control performance, empowerment, and the social system of teamwork.

Implications for Sustaining Lean Implementation

What does all this say about sustaining and improving performance at sites that have gone through a lean implementation? The changes in performance are not the result of “novelty” or being studied, as the general view of the Hawthorne Effect might suggest. Rather they are most likely the result of 1) the technical system changes that enable better performance, and 2) the improvement in motivation that results from small group ownership, feedback and reinforcement.

It is the job of management to provide attention, caring and feedback to employees as the experimenters did in these studies. This is the essence of the Gemba walk, or “being on-the-spot.” If managers stop doing this and go back to their own “old ways” it is likely that some of the gains in performance will be lost. If they continue to engage in good management practices, changes in performance are likely to be sustained or improved.

The effect of “ownership” and teamwork cannot be over emphasized. Teams need to be of a size where they can experience the contingent effect of their own performance on results. The results of their effort to improve performance must be positively reinforced in some way. It doesn’t have to be money, but it does have to be real in their world.

What needs to be reinforced? The simple answer is experimentation and improvement. Who needs to be reinforced? The team members who work together as a team so you are reinforcing not individuals in a way that creates disunity, but the small work group so that you are strengthening their bond and confidence in their ability as a team to improve.

If managers follow these practices you will not have to worry about regression to a mean, or the mythical Hawthorne Effect wearing off any more than Honda and Toyota are worried about die change regressing to a 24 hour process. I am not worried about staff performance or motivation. I am worried about management performance – managers reverting or regressing to their baseline habits. That is what will destroy performance.

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When Revolutions are Needed

Significant Change Requires Alignment of the “Whole-System”

Misalignment Undermines the Best Intentions

The Problem with Problem-Solving

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Beware False Dichotomies

How Do You Design In Respect for People?

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Beyond Problem Solving to Co-Creating the Future

Table of Contents

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The Creative Destruction of the Book World

The Strategy of Adaptation

1. Who Gathers and Analyzes Intelligence?

2. Who Builds Adaptive Scenarios?

3. Who Designs the Future?

4. Transformational Change is a Core Competence

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Quality of Work Life and the Toyota System

The Imperative to Redesign… Periodically

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Happiness and the High Performance Organization

Happiness Findings and What You Should Do at Work

1. Strong Social Relationships Lead to Joy

2. We Derive Joy from our Strengths

3. Money Does Make You Happy… To A Point

4. Altruism, Performing Work in the Spirit of Service, Makes You Happy

5. Optimism and Creative Dissatisfaction Generate Performance

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The Landscape Shift

Macro-Lean Rapid Innovation Cycle

The Lean Enabling Social System

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What is Culture and Why Does it Matter?

A Framework for Organization Culture:

The 7S’s that Determine Culture:

The Landscape:

1. Structures:

2. Social Systems:

3. Technical Systems:

4. Symbols:

5. Stories:

6. Skills:

7. Style:

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Developing an Attitude of Science

Correlation, Causation, or None of the Above?

Dr. Deming’s 14 Points and an Attitude of Science

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Lean Metaphysics

The Unity of Social and Technical Systems

Thinking that Unites and Thinking that Divides

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Hawthorne’s Lessons for Lean Management

The “Hawthorne Effect” Myth

The Feedback Effect

Pay for Performance Does Matter

Implications for Sustaining Lean Implementation

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