Viewpoint -- Are the Accountants Killing Lean?

Sept. 13, 2010
Lean must be viewed by everyone in the company as a tool for business growth, not just cost control.

When manufacturing managers first embraced lean in the early '90's it was the doubting accountants who had to be dragged along, demanding guarantees for the return on investment that just weren't available at the time. While manufacturing professionals were quick to see Lean as a powerful new philosophy for meeting customer demand, the accountants often saw it as just another buzz word and an opportunity to spend money on consultants. Reorganizing the factory floor for flow wasn't cheap and without a lot of evidence that the costs would be recouped, the accountants were understandably reluctant.

The evidence is now in and Lean has proved itself to be a money maker. Everyone gets it, even the accountants. And there is the danger. Where the manufacturing engineer sees the beauty in efficient flow resulting in ever greater throughput, the accountant sees the same transformation of the factory as a direct path to the reduction of production costs. They are both right, but when the concept of Lean Thinking is reduced to a euphemism for cost reduction then the opportunity for sustained continuous improvement is threatened. The manufacturing leader needs to keep the entire team focused on Lean as the path to long term growth if he is to reap sustained benefits.

Any Lean-trained manufacturing expert can walk through a pre-lean factory and point out lean-like recommendations; shorter component travel here, smoother flow there, Kanbans, or whatever. Once implemented, these suggestions reduce labor hours and, in fact, do produce quick payback. The consultant gets paid, the accountants' doubts are suspended and all but the laid off employees seem happy. So management calls for more of the same.

Sure enough, the consultant is brought back in. Kaizans are held, the factory is reorganized again, cost reductions are tallied and the management team celebrates the savings. But this time the savings are only half again as large as the first round. And then the accountants notice that costs are not continuing to go down. In fact, despite yet another round of Kaizens, costs are slowly beginning to rise. Their doubts come back and they question the Manufacturing team as to why they should continue to fund Lean initiatives. The management team begins to lose interest in Lean.

As in the example above, Lean is often equated with cost cutting and one hears talk such as, "Our costs are way too high, we need to get lean." Management teams are aware of success stories from other companies, and maybe remember the progress made during their own prior forays into Lean, and believe that if they were only to redouble their efforts they could really make an impact on cost.

Next thing you know, the boss announces a new "lean program" that will "...really cut costs to benchmark levels..." The accountants come up with cost reduction targets for manufacturing. The management team rallies behind the boss and they roll out the Lean program to the rank and file. And the rank and file yawns and dusts off their resumes. They have seen Lean work before, and to them it is just another word for lay-off.

For Lean to become an effective and sustaining way of doing business, the following attributes are required:

  • Seen by all as a tool for business growth, not just cost control -- Management must structure the Lean program around long term growth objectives, more rewarding jobs and as the best path to job security
  • Workers trust the management team -- Begin with a commitment to not lay off workers who find ways to eliminate their jobs. If trust is already low, start small. Early successes in waste reduction are celebrated and rewarded. Expand the program as trust improves.
  • The management team trusts the workers -- Muda reduction ideas are funded without undo justification. Don't demand ROI charts from work teams.
  • Program is bottom-up energized, not top down driven -- Workers will self-sustain programs that benefit them personally. Once they see the waste, they will choose to eliminate it themselves if the result leads to more rewarding work.
  • Use consultants to train others to see, not to identify waste themselves -- Nobody can see waste as well as those doing the task.
  • Lean techniques are applied across the enterprise, not just in manufacturing -- Why do only blue collar workers harbor Muda? They don't, so don't send that message. The opportunities are equally great in engineering, and yes, even accounting.

But what about the company that is barely surviving in a downward turning market? With little hope of gaining new business, the management team feels they need to cut costs just to survive. In this case, bring in the experts, cut where they recommend and do your lay-offs as you see fit. But just don't call it Lean. Because if and when the business does turn around, and you want to implement Lean to free up workers so you can apply them elsewhere, it will be too late. Lean Thinking will be forever tainted by the cost cutting brush. I f you must lay off workers, then lay them off first and introduce Lean sometime thereafter. Or implement Lean cautiously and claim savings at the rate the freed up labor can be absorbed elsewhere in the enterprise. Then use Lean to find ways to get the same work done with the fewer people you now have.

So how do you know when your Lean program is healthy? Here are a few signs:

  • Workers volunteer to be on Kaizen teams, both blue collar and white -- White collar buy-in to Muda reduction will be a harder sell than blue collar. Bigger egos don't want to accept the idea that they are producing waste. Begin with white collar Lean.
  • Savings from Kaizen round two are even greater than round one -- Now that the Kaizen teams trust the leadership they will be even more adept at identifying and extracting Muda
  • Workers request Lean training -- they see it as job enrichment and the opportunity to participate in a process that has management interest and favor
  • Lean terms like "Muda," "Kaizen" and "Flow" are part of the company's vocabulary -- it becomes an intrinsic tool of business as usual
  • Employees are leading Kaizen events, not consultants -- Lean is a basic job skill, not a specialist task.
  • Learning curves are beating expectations -- Lean results tend to expand across an organization and reap unexpected savings. Cheaper, better, faster ideas spread quickly to operations not yet "leaned out."
  • Quality is improving -- Fewer operations, less travel and reduced labor input all result in fewer opportunities for error. Errors themselves are Muda and will be attacked directly.
  • Costs are continuously declining -- there is no end to cost reduction and the opportunities do not dry up. Every time a process is opened up for scrutiny, new opportunities to extract Muda are seen.
  • Business is growing -- Lower costs and better quality from a more engaged and satisfied workforce almost always leads to higher customer satisfaction and a more successful business.

Greg Smith is the owner of Seacoast Aerospace and Marine, LLC, a consulting company specializing in advising manufacturing and program management executives. Formerly he was a VP/GM at BAE Systems in Nashua, NH. He can be reached at [email protected]

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