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

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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:

Culture Model FrameworkEvery 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:

Culture ModelThe 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!

Meta-Lean: The Unity Principle

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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.

 

 

 

 

The Practice of a Lean Management System: Achieving Economic Efficiency and Social Intimacy

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Many years ago one of the first books I read on management was Peter Drucker’s The Practice of Management. In it Drucker defined and extolled the virtues of the management profession and gave credit to Alfred Sloan the longtime CEO of General Motors for developing the model of professional management in much the same way we speak of Toyota today. The system that Alfred Sloan created at GM was built on the theory  of management as a distinct profession, separate from engineering and other specialties.

Womack’s View of Modern vs. Lean Management

Jim Womack’s (founder of LEI Institute) recent book, Gemba Walks, contains a number of interesting and helpful short essays. These are Womack’s more recent meditations on the implementation of lean management. One of the more interesting, in my view, is his essay on Modern Management vs. Lean Management in which he contrasts the system of management build by Sloan at GM and lean management as it was built at Toyota.

What then is the contrast between the “modern management” of Sloan and the lean management of Toyota/Honda? These are the contrasts that Womack describes:

This is a great list and you could literally write a book with a chapter on each of these contrasts. Let me make a few comments on these contrasts by putting them in the context of a matrix I have long used to describe the transformations of organization cultures from the family farm forward.

Modern management at General Motors created a social class system, a disunity or social strata, and that disunity was the ultimate cause of collapse, as it has been in every civilization.

Social Intimacy and Economic Efficiency: The Miracle of Lean

Those of you who have participated in one of my seminars have no doubt heard me discuss the idea of sociobiology, that there are not only physical, but behavioral characteristics that are genetically passed on because of their contribution to our survival. For most of human history, beginning on the Serengeti Plains of Africa where we hunted antelope in small tribal groups, human beings have worked in family units.  The family farm and the small craft shop structure are only the more recent examples of work systems where there was high social intimacy, high interdependence, and high trust.

This so-called modern management that Womack speaks of began at Ford with the specialization and separation of work and management, the separation of doing versus deciding, and the isolation of workers who were instructed to “do your own work.” This instilled fear and created the loss of the social intimacy that had become the “natural” work environment for the human species over the previous millions of years. The work system and organizations of both Ford and Sloan had become contrary to human nature. This led to the natural rebellion, the need for association, the need for “brothers” in the union as inner city youth seek the safety and security of their brothers and sisters in gangs. Seeking security in groups is healthy psychological survival behavior in the presence of isolation and fear.

The industrial revolution and the revolution in management and organization had created great gains in productivity, economic efficiency, but had destroyed the social intimacy necessary to well functioning human beings and well functioning social systems.

Each of Womack’s contrasts between “modern management” and lean can be seen in this light. Decisions being made remotely versus decisions on the spot is another way of describing the class system, the alienation of leader and led, top to bottom, which almost always results in rebellion from below. The same is true for “staffs improving the process versus teams and those close to the work” improving the process. Similarly, standardization by staff groups versus standardization by line managers and those doing the work is another symptom of the this vertically disengaged culture. Experiments by those doing the work, versus imposed plans from above is the same. Each of these contrasts described by Womack illustrate how lean management is solving the social and psychological alienation created by both Ford and Sloan.

Lean Could Follow Modern Management: Pride Precedeth the Fall

While I generally agree with Womack’s analysis he does leave out an important historical context. The system of production created by Henry Ford was a great advance over craft-shop production in economic efficiency. Resources were made more productive – capital, labor and materials. However, as that system conquered the world of manufacturing it led to the excess of specialization or fragmentation of work, the dis-empowerment of workers, inhuman working conditions, bullying supervision and the natural response of unionization as a counter force. Ford’s system, still extolled by Toyota, became barbaric.

Similarly, there was much initial good in the system of management created by Alfred Sloan. Ford’s system did not provide for the management of a large differentiated organization and the integration of diverse and complex functions. The General Motors system added this capability by creating accounting and control systems that enabled the design of a diverse range of cars, sharing many parts, and utilizing shared engineering and production facilities. GM developed a superior system of administration and this is why GM overtook Ford and became the leading manufacturer of automobiles. It wasn’t until Ford hired Robert McNamara and “the Wiz Kids” after World War II that Ford developed its own system of management.

General Motors not only developed a system of integrated organization, but they promoted and developed professional managers. An entire hierarchy and departments of professional managers emerged. Power and decision making shifted from the engineers to the professional managers, accountants and strategic planners. However, just as happened at Ford, excess pride in their system led to the assumption that all things could be solved by professional accounting and strategic planning systems. Unfortunately for GM, none of those systems of “modern management” as Womack calls them, could engineer a superior car or produce one with few defects. Both GM and Ford grew to place excess faith in their accounting and administrative systems and failed to focus on the core skills of engineering and manufacturing.

This historical context is important because each management theory or system has its day and makes its contribution. And then, their methods tend to become mechanical, bureaucratic, a set of standardized and unthinking procedures that blind their followers to new methods. And are there no signs of the same in lean implementation? Is 5S, standard work, and other methods becoming bureaucratized? Are lean practitioners a little too certain about what they think they know?

Pride and arrogance always precede the fall, whether in civilizations, companies or management methods. Lean practitioners beware!

The Miracle of the Lean Management System

The miracle of lean organizations is the achievement of both economic efficiency and social intimacy. This can truly be labeled “the high performing organization” because it not only serves the needs of customers but also the needs of the people within the organization. It achieves not only business performance, but it enables the realization of human potential. It is not only a technical system, but a social system.

The power of well functioning teams, at every level, is that they are the key to creating unity of social intimacy and economic efficiency. Teams are the family unit of modern organization. Having done some work at both Ford and General Motors I can tell you that the psychological isolation was not only symptomatic on the factory floor, but in senior management ranks as well. They were not safe environments. Isolation, whether a worker at one machine in the factory, or within the confining walls of an executive office, leads to fear and distrust. The elimination of walls and silos must be both horizontal, between departments, as well as between levels of management and employees. Disunity must be replaced by social unity.

At this same time I was involved at Honda in Marysville and the social unity between leaders and led was obvious and in stark contrast to the alienation at GM and Ford. The arrogance of “professional management” was gone and replaced by a deep respect for those who did the value adding work on-the-spot.

I am seeing lean implementations that address front line work processes, but fail to recognize the social illnesses that have been created over many years of fragmented organization, the dead carcass of so-called modern management. The principles of lean management that Womack articulates can heal that illness.

Goldman Sachs and the Money vs. Morality Debate

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Yesterday, a young executive at Goldman Sachs, Greg Smith, resigned in a very public way. He wrote an op-ed in the New York Times titled “Why I am Leaving Goldman Sachs.” In essence he accused the leadership of Goldman Sachs of destroying the internal moral fiber of the firm, putting profit before meeting the needs of customers, and he cited the open contempt that Goldman personnel feel toward their clients. It is a sad commentary.

The readers of this blog who are most concerned with “lean” and continuous improvement may ask, “So what does this have to do with continuous improvement?” Trust me, it does!

Step back a moment to frame this issue. The material progress of a company, country or civilization is directly related to its moral character, its culture. But, not in an instantaneous and direct way. Rather, one is the antecedent to the other.

The historian H. G. Wells made the following observation about the decline of Rome: “After the fall of Carthage the Roman imagination went wild with the hitherto unknown possibilities of finance. Money, like most other inventions, had ‘happened’ to mankind, and men had still to develop – today they have still to perfect – the science and morality of money. What happened to Rome? Various answers are made – a decline in religion, a decline from the virtues of their forefathers, and the like. We, who can look at the problem with a larger perspective, can see what had happened to Rome was ‘money.’ Money had floated the Romans off the firm ground.”

Some years ago I was speaking at a conference and this was a time when I was involved at Honda American Manufacturing. I mentioned to the audience that every morning every Honda associate meets with his or her team for fifteen minutes to discuss how they could correct any problems discovered the day before, how they could improve their work.

Immediately after I said this a hand shot up from the audience. I saw his name tag said “General Motors.”  I called on him and he said “Cost justify those meetings. I can tell you that at General Motors we know the costs of stopping that line for even one second. If you can’t cost justify it, it won’t happen at General Motors.” I could only reply by telling him that he had me, I couldn’t cost justify it, I only knew that they did it.

Of course, he was right. General Motors cost justified everything. GM was run by financial managers, with the Chairman drawn from the financial group and with a financial background. He knew money, not how to make cars.

A month later I was at Honda and asked Scott Whitlock then Executive VP of Manufacturing the same question. How do you cost justify those meetings? Of course, at this time Honda America Manufacturing was led by Iri Irimajir, an engineer and Formula One engine designer, who designed an engine being produced at the very time. Scott looked at me and said “Why would anyone ask such a question?” Which of course made me feel stupid! He then said, “We just have faith, that if every day, every associate thinks about how to improve his work, we will make better cars.”

At that same time the work hours required for auto assembly at Honda was about 12 hours per car. At GM it was in the range of 22-24. Yet, at GM it was about money.

Money had “happened” to GM and the dominance of money, versus serving customers with great cars, drove GM to bankruptcy while Honda’s market share continually rose.

In 53 BC Marcus Licinius Crassus, considered the wealthiest man in Rome, and who had gained his wealth through the lending of money, who knew money better than anyone, led the Roman army against the presumed to be inferior Scythians at Carrhae where they were led into hot sand and the immobile Romans repeatedly charged on foot the Scythian cavalry that circled and fired arrows into the legions.  Twenty thousand Romans were killed and ten thousand more carried into slavery, among them the wealthiest of all.

When those who lead the operations of a company are more expert in money than they are in the operations that serve customers, you are likely in decline and will not recover until your leaders care more about customer service, are expert in the operations that serve those customers, than about money. Then, money will follow.

Greg Smith said of Goldman Sachs “To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.”

“It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.”

I have no direct knowledge of the culture of Goldman Sachs. But the fact that an executive is sufficiently motivated, negatively motivated, to publish a piece like this in the New York Times is a red flag that should trigger intense self-reflection by that firm’s leaders. It should also be a cause for all corporate leaders to reflect on their own culture, the values they imprint on their associates, particularly their young recruits.

Social capital, internal trust among members of the firm, and external trust, or what may be called brand equity, are the leading indicators that precede a decline in innovation and service; and that in turn precedes the decline in financial success. You don’t get money by focusing on money. You get money by following the path of dedicating yourself to service, service to your customers and service to your associates, and then money will follow. Those who lead the firm must be expert in what precedes money, not in the counting of fruits after the harvest created by others.