Top Down or Bottom Up?

Answer incorrectly and you'll find out why only 5% of organizations build sustainable, successful continuous improvement processes.

What is the proper organizational model for a company's continuous improvement effort? I tell folks that there is no one model that works for all; it varies from organization to organization. Anyone who has been working in CI or lean transformation for any length of time will tell you that the effort will not work without the visible support and involvement of the senior executive at the particular site and the same holds true of the participation of the company's CEO. That does not mean that the effort is top-down driven, however.

Most folks would agree that the most advanced company in CI and lean transformation is Toyota Motor Corp. Their senior executives throughout the organization are involved with, and supportive of, the process, but it's not a top-down-driven effort at Toyota.

It's the way they do business. The Toyota Production System is the way the company operates, but the CI efforts are all bottom-up driven, with all the individual work teams throughout all functions of the company conducting their own CI projects. That's really the holy grail of CI where you have individual work teams identifying the waste in the processes in their own work area and conducting their own process improvement activities without specific direction from management. However, there are very few organizations that have reached that level of CI activity.

What I see in most CI programs is that they are treated like the latest management fad and the people in the organization look at it like just another "religion of the week" program being pushed on the organization by top management. Someone is appointed the "champion" and given the responsibility (usually without the organizational authority and senior executive involvement and support needed) to go implement the "new" program. It is not the process the company uses to conduct its business. In fact it is often at odds with the existing, established processes and metrics the company uses to run the business so it is destined to limp along and fail. The "champion" is tasked with getting people trained (usually just on the production floor) and to conduct some kaizen events to get the organization "lean." The associates are not really involved in the CI effort and are just doing what the command-and-control management structure is telling them to do. They have no voice in the projects being undertaken and are only taught what they need to know about problem-solving and CI that is necessary for the project they are assigned to. This is a recipe for failure and the primary reason that less than 5% (in most practitioners' opinions) of CI efforts produce sustainable, positive results for the organization. This is how most of the top-down-driven initiatives are conducted, in my experience, and it's a total waste of the organization's time and resources.

What is needed as an implementation model is the active, visible involvement and support of the CEO and the senior executive leadership of the organization. Associates must see that it's not just another "religion of the week" but an active commitment by the company to change the processes that are used to run the company. The folks who are doing all the value-adding work for customers must be really involved in the whole CI process and actively engaged in the evaluation and selection of the projects. Where the existing business systems conflict with the needs of the lean transformation effort and the systems and metrics needed for CI efforts, the legacy systems are changed or discarded to accommodate the needs of the transformation effort.

Convincing the senior leadership of most companies to accept and embrace this is very difficult since the positive results often are many quarters in the making and have a negative impact on the conventional financial reporting systems used for external reporting. Enlightened management accounting systems (look at lean accounting, sometimes called accounting for lean) will show the reduction in working capital, substantial improvement in cash flow, improved quality and on-time delivery, improved productivity and the creation of additional capacity with little capital investment. At the same time, the balance sheet and P&L used for external reporting will suffer some short-term negative impact.

Whatever organizational structure you choose, the most important element is to train everyone in the organization in the tools of CI, with an emphasis on non-value-adding waste identification and problem-solving, so all the associates can contribute to the CI effort. They also need to have input into the projects being worked on and then senior management has to be visibly and actively involved in supporting the teams in their improvement efforts.

Ralph Keller is president of the AME Institute and former president of the Association for Manufacturing Excellence.

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