As a working sensei with over two decades of experience in implementing lean transformations, I've become increasingly frustrated with the lack of a good "back-to-basics" book to give people their introduction to the way of lean thinking.
Over and over again as my clients came to me for resources that taught the basics of lean management, I realized in other literature there were not only some key lean principles missing or buried under a lot of talk and theorizing, but also some vital aspects weren't covered at all.
Therefore, my first aim for The Little Book of Lean was to provide an easy-to-read introductory book that distilled the required principles into something that anyone, in any sector of work, could read and quickly understand the basics. In addition, I wanted to challenge each reader by presenting a set of thought-provoking discussion questions so they could immediately start to work through how Lean would apply to them and thus eliminate the need for "never-quite-close-enough" comparative case studies.
Cost Reduction with Job Security
One of the lean principles not explained in other literature is the idea of cost reduction in conjunction with job security. What does this really mean? Any organization trying to improve results by implementing a lean strategy will inevitably have the opportunity to reduce costs but not all do. Why? While quality is the professed focus of many, as is timeliness and morale of associates, what else happens by default when you remove all that waste? For many organizations, when they remove waste from processes it just seems to reappear somewhere else. Why?
I have seen companies afraid of, or avoiding, the cost reduction issue and as a result, in too many lean improvements, organizations don't do the necessary follow-up work to drive the costs down and reap all the benefits of their efforts. The reason is most cannot see how to reduce costs without simply eliminating the people. Let's look at an example of a company that needs two employees to run the payroll in a finance department. Through study and waste elimination the process now flows better, and with higher quality, using a new standard work that only requires one person. What do we do with the newly surplus individual? First, you have to have defined at the very outset of your transformation how you are going to address this. You have to have a clear policy and commit to it. Fundamentally you cannot hope to continue to improve if the final result produceds only job loss. Therefore lean transformation cannot be pursued without a clear strategy for growth. While many experienced sensei make this clear from day one, most leaders still tend to underestimate the speed and size of the capacity that gets freed up from day one.
To overcome this, organizations must create a set of clear criteria agreed upfront about what they are going to do to fuel further improvements. All manager must understand that in order to sustain a transformation for any length of time, the management team itself has to commit to growth -- growth that can likely be at the expense of anyone else in their market or field, but not their own associates. The idea is that management understands ahead of time that it has to grow the organization and enhance the value they provide to customers in order to be successful, instead of eliminating employees.
Next, the golden rule is that when an improvement has been made managers must decide exactly who will not be working in the newly improved process the next day. Without immediate action to remove excess staff, improvements always tend to backslide to an earlier position. So what to do with the spare resource?
If we're going to improve the bottom line and get some quick wins, then we need to eliminate -- wherever possible -- the need and reliance on temporary employees and agency staff. Typically this type of staff is expensive. Additionally, because they the staff is aware they are not there for the long haul, many tend to "stand-off" when it comes to contributing to improvement due to the nature of their contracts.
Also there is a natural attrition due to retirement or other causes. Therefore as soon as the lean tranformation is started don't hire a new employee for a vacant job; instead, use people that have been freed up by improvements in the workplace. When re-deploying people after improvements have been made, always redeploy the top performer. It's a counterintuitive decision for most managers to make, but this simple act sends a very powerful message about your motives.
Next, look at overtime spending and shift systems all of these can be addressed before the growth starts to come due to increased performance.
Another excellent place for freed-up people is to 'insource' activities that have been previously outsourced. For example, one of my clients, a toolmaker in Portugal, made early improvements that raised the productivity of the plant to the point where it had six people surplus to requirements. The management team asked how it should handle this. Looking at the purchase ledger we noticed the company was buying a lot of plastic injection molded components and packing materials. We asked what the cost of those items would look like if they were made in a lean way by the surplus labor they now had. Factored into this was allowing the team some time to learn the technology to be competent to insource the work.
Within weeks, the team not only decided how they could do it, but they bought a small machine at a yard sale to prove they could master the technology. Ultimately, the organization insourced a lot of the activities it had previously outsourced, and it did it all with its own labor force. The cultural message sent through the organization was that Lean was not only making improvements, but it was also providing employees new jobs and different tasks. This of course brings up issues of skills and flexibility and that some things cannot always be addressed so quickly. In this case use the policies above whilst re-training and temporarily holding surplus people in the internal improvement team itself.