Measurement and Return on Investment

Lean Nation,

It has been a while since my last blog. Too long in fact, but I am committed to blogging more frequently in 2016.  Today's blog is on measurement and Return on Investment.  Great organizations can measure their results.  They can measure them at the local level, at the site level and the enterprise level.  And they can measure things in real time.  No waiting for month end reporting or quarterly reporting to know which way things are trending. 

Aside from real time measurement,  great organizations simply have the ability to measure things.  I firmly believe capability follows motivation. Great organizations do not accept the "computer system" can't give us that information.  they go get it.  Automated if possible, manually if not automated, and with a stop watch if necessary. "Go and See" is the best way to see if something is working.

Before I go on, let me state that measurement is critical because it is the only way we can show improvement.  If you can't measure it, you can't improve it.

Now before we get into ROI, let's review what to measure.  Measurement in an improving environment comes from one of five dimensions. Quality, Delivery, Cost, Staff Morale, and Growth.  Collectively these measures make up we call a balanced scorecard and also make up what we call the "true north" dimensions.  When waste is removed from a process, typically all five of these dimensions move simultaneously.  Done well, you can expect double digit growth in each of these measures year over year.  The following table explains the five dimensions in more detail.

True North Category	True North Measure Definition
People	Staff morale or staff engagement
Quality	Defects per unit of service or process outcomes related to meeting the customer’s requirements
Delivery	Lead time for goods and services from customer need identified to customer need met expressed in time (minutes/hours/days)
Cost	Hours or $ consumed per unit of service. Typically a measure of productivity
Growth	Increases in revenues or volumes

Now during the course of improvement, we want to ensure we have a good return on investment.  A well done lean management system will deliver an ROI of 3 or 4 to one on an annual basis.

Be cautious, however, as every A3 and every project will not return hard dollars. Nor should it.  But the collective of your improvement efforts should return 3 or 4 to one annually.  One of the biggest mistakes organizations make is expecting every single project to return hard dollars. This neglects the dozens of important pieces of work that return soft dollars, improve the customer experience, improve staff morale, make the workplace safer, and change the culture of the organization. 

One of the techniques I like to employ is running a multiple team kaizen event.  In this circumstance, one of the teams should have a hard dollar savings. This in effect funds the other teams.  The balance of the teams can attack a variety of different wastes, but may or may not have a hard dollar savings. 

Lean Blessings,

Ron

President and Sensei

Breakthrough Horizons LTD

www.breakthroughhorizons.com 

Measuring and Taking Action

Lean Nation,

Deep sigh.....There is much work to be done. This blog begins with a story. A true story at that. One of my peers has a client that has been struggling with creating oversight for their improvements. Their current set-up is a scattering of open and closed A-3's around an accountability matrix on a wall. I am working from the assumption that everyone knows what an A3 is.

Technically, A3 is a paper size; 11" by 17". It is the largest sheet of paper that can be faxed. More specifically, Wikipedia defines the A3 as follows. "A structured problem solving and continuous improvement approach, first employed at Toyota, and typically used by lean practitioners."

So consistent with a theme that I have blogged on repeatedly, all improvements should link to the organizational strategy. This organization was trying to show their strategic intent of their lean work (through A3's posted on the wall) aligned to their key measures. This organization had sound strategic pillars, People, Quality, Access              ( Delivery), and Value ( Cost). Their outcome measures were solid as well. 

The problem was the action taken to drive the outcomes measures was lacking. In an attempt to create a sense of urgency, this consultant created some trend charts of the key measures to show lack of both action and results.  

The response from the Senior Leader was “nothing new here, We look at this every month”. I explained they we could go beyond looking at it every month and start using the data to identify priority improvements, accountability……….His response was that their organization is getting away from using metrics "like this" because people just game the numbers.

In simplest terms, if you can't measure it, you can't improvement it.  When the senior leader of the organization (by the way this is an $800,000 enterprise with 6 sites) doesn't want to measure key outcomes,  lean improvement is going to be tough sledding.

We have much work to do in educating leadership.  

Lean Blessings,

Ron

Ron Bercaw

President and Sensei
Breakthrough Horizons Ltd.
www.breakthroughhorizons.com
2 time Shingo award winning author

The secret sauce of lean leadership

Lean Nation,

I have been very blessed in my life.  I have worked for and with many companies.  Some were large and some were small.  Some were publicly traded and some were private.  Some were union and some were non-union.  Some were high tech with new products coming to market and lots of automation and some companies were low tech with lots of labor.  But most importantly, some had great leadership and some had atrocious leadership.  I am now convinced that every job was a stepping stone to something better, even though I couldn't see it at the time.

This is a lean blog, though, and I am pretty sure no one cares about my work history.  But I took two important learning's away from this experience. The signs had always been there, but they were never clear. The signs were solidified about a month ago in a conversation with a 40 year lean veteran.  I asked him what are the keys to creating a culture of improvement .  He said unequivocally the key is leadership.

I asked him to be more specific.  He said leadership needs two skills to be successful at improvement. The first is not a surprise.  He said that leaders need to hold everyone accountable to follow standard work.  This means staff and management.  This means "special" employees like physicians and engineers, and lawyers. And this means leadership like directors, chiefs and vice presidents.

I see in many organizations that the staff is held accountable. But the further you get from the staff,  the less accountability there is.  This creates many problems, but most notably, lack of leadership standard work drives the majority of the waste in the system.

The second leadership skill is the ability to create a tangible vision.  While lean at its most fundamental, is about seeing and eliminating waste, sometimes the entire system is so wasteful, it needs to be totally re-designed.  While many leaders agree with this statement, many fail to act in any meaningful way.  The risk of failing is too great.  The culture change too large. We will upset people.  This has worked in the past. Look how we benchmark....The list goes on.

One way this plays out is the creation  a fuzzy strategy, with unattainable or un-measurable goals. The lower levels of management, in an attempt to meet the strategy, embark on multiple and frequently competing initiatives. This results in limited improvement, poor results, and lots of frustration.

Great lean organizations have a clear vision and strategy.  There is no guessing on the approach, measures or expectations.  And they don't dodge the unpopular issues, sacred cows, or silo-ed organizational structures. There are no untouchable employees.  Everyone participates and every is accountable.  Transformation is the goal.

So looking back on my career and my consulting practice, I can attest that every transformation that failed was because of a gap in one of the two leadership skills. Either the accountability framework was not in place, or leadership did not have the courage to create the correct and clear vision leading to sub-optimal results and no culture change.

How's your transformation going?

Lean Blessings,

Ron

Ron Bercaw
President and Sensei
Breakthrough Horizons Ltd.
www.breakthroughhorizons.com
2 time Shingo award winning author

Standard work for lean experts

Hypocrites?  I can't think of a better word.  Let me explain.  Many organizations are not getting everything out of their improvement efforts.  So using lean thinking, we have to diagnose the root cause of the lack of results.

The common culprits;  lack of leadership, no real-time problem solving, and no visual management to discern normal from abnormal are not going to be discussed.  I have committed substantial commentary to the subjects in previous blogs.  I want to discuss lack of standard work.

We should know by now that standard work is the underpinning of lean success and improved performance. Lean tools exist to help to make waste visible and then eliminate those wastes.  The concepts of continuous flow, pull, and zero defects have been well documented and eliminate many of the seven forms of operational waste.   But the waste will return if the remaining work is not standardized.

Standard work represents the safest, easiest, best know way to do something.  It is recipe that when followed leads to the highest quality, shortest lead-time, and lowest cost way to complete a process.  It brings life to flow, and pull, and defect free.

Any credible lean expert will be competent with standard work, and can teach the concepts, document the process and teach team members how train and certify team members in standard work.  

So here is my question, when it comes to managing an improvement cycle using the scientific method, where is your standard work?

To get the most out of your improvement process,  four things need to be considered.
1. Standard work should exist and be utilized when preparing for improvement.
2. Standard work should exist and be used when running and improvement.
3. Standard work should exist and be used when sustaining improvement.
4. Standard work should be followed.

Do you have written standard work?  Do you follow it?  If not.......you are a hypocrite. And it might be costing you some improved performance.  Poor preparation, poor event execution, and poor sustainability all lead to sub optimal results.

So if you have a standard work gap, you can now take a countermeasure.

Lean blessings,

Ron

Ron Bercaw
President and Sensei
Breakthrough Horizons Ltd
www.breakthroughhorizons.com











1.  

Are your internal lean experts excelling?

Lean nation,

Today's blog will review an important lesson.  If you have read any of my blogs in the past, your will quickly recognize this theme.  About 1/3 or more of my blogs focus on this topic.  Have you guessed it yet?

Leadership

I was teaching a Master's class at the University of Toronto, and an adjunct this week on healthcare quality improvement.  I had a class of some the best and brightest minds in healthcare including a blend of physicians, clinicians, and administrator's.  It is inspiring that our next generation of healthcare leadership is getting a grounding in lean quality improvement.

This class was an intense course.  4 days of  consecutive lessons.  I prefer teaching in that format since the concepts are progressive in their application and the back to back consistency enables better retention and application of the material.  The questions I received from the class were very interesting and an excellent gauge for what is happening within the healthcare industry.  As least as it relates to the students in the class. And this class was international in their make-up.

Would you be able to guess where the majority of questions came from?   Yes there were thee usual list of questions related to tools and their application.  The concepts students struggled the most with included the following:

• the application of takt time
• properly completing a time observation
• properly completing a loading diagram
• applying the scientific method through the A3, and 
• process control

Ironically, the broader issues with the class were not tool related at all.  There were leadership related.   As we talked through linking lean improvement to corporate strategy, removing the barriers to large scale organizational change,  dealing with accountability issues,  one theme became apparent.  Leadership in these students organizations were unclear of their roles,  or not engaged in the improvement process at the level required to be successful.  

All of the major issues that need to be resolved to transform an organization must be dealt with directly by senior leadership.  This topic dominated the class from the first through the fourth day.  I had to spend a lot of time addressing the leadership aspects of each of the change concepts. More time was spent talking about the tricks to get leadership's attention.

Let's go back to the title of this blog.  Are your lean improvement experts excelling in your organization?  If not,  the problem may not lie with the improvement team, it may lie with leadership.

Lean Blessings:

Ron

Ron Bercaw

President and Sensei

Breakthrough Horizons Ltd

www.breakthroughhorizons.com

Shingo award winning author

How long does is take to transform to a lean enterprise?

Lean nation,

I hope everyone is doing well with the un-seasonally cold weather over the past 10 weeks. While we all like to complain about the cold and snow/ice,  the change in climate does two important things for us; 1) it kills bad bugs , and 2) the melt off fills the lakes and streams.  So let's count our blessings and look forward to a nice spring and summer season.

One of the questions I frequently get from my clients is how long does it take to transform?  This is a great question, but one very difficult to answer.  Third parties that offer improvement and transformation services will answer 3-5 years.  No corporation that ever actually "transformed" has completed the journey in 3-5 years. 

The true test of transformation has few acid tests:

1) Can the organization weather the change of their change agent?  I have seen many companies do great things for 3 years.  When the CEO, or the GM leaves, the improvement leaves with them.  This is the most common cause of lack of sustainability.  Is your improvement effort focusing on developing all of the members of the senior team to weather a change in leadership?  Or is one person driving the bus.  I have seen an organization do 10 years of great improvement work only to have a new CEO wipe out the entire improvement department within 3 months of their arrival.

2) Another red flag as that lean is an "operations" thing.  improvement never moves beyond the operational area in to admin, finance, HR, new product development, maintenance , supply chain, etc.  If this is the case, you are are risk of not transforming.  The organization is too shallow at the leadership levels to recognize the benefits of transformation for the entire enterprise and even the extended enterprise. 

3) Another common failure is lack of a long term view.  Organizations set goals of transforming every thing and everyone  in 3 years.  100% of all people trained! World calls status in 3 years.   While this might impress wall street or the board, this is not a path of transformation.  True transformational success requires a focused approach to improvement aligned to corporate strategy. The pace should be calculated and based on sustaining improvement and changing culture, not number of people trained, or number of projects completed.  Truly transformational efforts  want lasting outcomes ( results ) and culture change, not effort. This is what publicly traded companies have a difficult time transforming.  the measuring stick is making the next quarter's guidance , not really sustaining improvement in performance and culture. 

4) An additional factor is is self reflection and engagement.  A Toyota executive once commented PDCA sound simpler right?  10 years for Plan, 10 years for Do, 10 years for check, and 10 years for Adjust.  40 years to learn PDCA?  If we do some self reflection, we all have some work to do. 

So now that  have covered why organizations don't transform, what is the number of years required to transform an organization?   I'm not sure there is a magic number, but if I have to be pinned down to a single number I would estimate 2 decades.  20 years! Most organizations jump from shiny object to shiny object. Quality circles, TQM, empowerment, etc.  This behavior fails to transform an organization.  Learning can't occur when the methodology and language changes every 5 years. 

You do not, however, need have to wait 20 years for results.  Improvement, done properly, should immediately deliver results to your customer, your organization and to the staff.   

Lean Blessings:

Ron

Ron Bercaw

President and Sensei

Breakthrough Horizons LTD

www.breakthroughhorizons.com

Shingo Award winning author 

   

How to survive change fatigue

Lean Nation,

Today's blog will focus on the inevitable change fatigue. If you have followed the advice in either of my two publications, "Taking Improvement from the Assembly Line to Healthcare", or "Lean Leadership for Healthcare".  Or followed my advice on earlier blog posts.  You will now understand that creating a lean culture has some clear and distinct steps.

First, link the strategy to improvement by defining your strategic outcomes aligned to true north.  Select and map the key value streams to deliver the required improvement to your customers. Complete A-3 thinking using a combination of projects and rapid cycle improvements.  Then sustain the gains with standard work and visual management.

But what happens after a year of rapid cycle events?  The entire value stream has been "changed". The management energy now required to maintain standard work seems overwhelming.  Aren't we finished? Haven't all the changes been completed?  Don't we need a break?

In short, No!  The break organizations take after the end of the first pass of improvements through the value stream is what kills many lean initiatives.  Are you perfect? Hardly.  So more improvement is necessary.  But what about this fatigue.  There is no energy left to make the next level of improvement. Change fatigue comes from many sources but the common ones include the following:

• No change in management day to day practice.   The same culture of going to meeting after meeting exists.
• No leader standard work. Management does not know how to do their jobs.
• Lack of staff engagement.  Management is forced to hold everyone accountable because the staff has failed to won the new processes.
• The rest of the organizational management practices have not yet changed.  Despite working in an improving environment,  the rest of the organization ( HR, finance, scheduling and staffing, materials management, etc.) operate in the same inefficient manner taking management away from gemba.
• Lack of senior management focus.  The daily priorities change day by day causing lack of focus.

Change fatigue is an excuse.  Rather than understanding the root cause of the problem,  management "quits" and calls for a break on new change.  This disrupts the momentum of improvement and make future improvements extra hard to obtain.

You might argue that root causing the reasons for change fatigue is taking a break.  This is incorrect, fixing any problem is improvement.  My advice is to push through this initial resistance.  Once you come out the other side this "change fatigue" phenomena will not return.

Lean blessings,

Ron Bercaw

President and Sensei

Breakthrough Horizons Ltd

www.breakthroughhorizons.com 

Shingo Award winning author