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Lean Principles Must Expand Beyond Shop Floor

Nov. 10, 2014
Lean is most often associated with the factory floor but leaders need to embrace it and spread it through the whole organization if it is to be sustainable.

The 2014 Lean Accounting Summit offered two days of information-packed presentations and workshops that included case studies showing lean principles in action. It was held October 21-22 in Savannah, Ga., produced by Lean Frontiers, headed up by founder and President Jim Huntzinger.

I was honored to be part of such an illustrious group of lean experts to give a presentation on "Returning Manufacturing to America Using Total Cost of Analysis."

The summit began with a keynote presentation on "The Future of Lean Leadership: How Leaders Build Sustainable Cultures of Excellence Based on Principles," by Robert Miller, now president of Arches Leadership and former executive director of the Shingo Prize.

Miller outlined how we got to the present concept of lean starting with the quality circles of the 1960s, leading to the Kepner-Tregoe methodology of work simplification in the 1970s, the Just-in-Time and Statistical Process Control programs of the 1980s, the Total Quality Management philosophy of the 1990s, and now the Lean Six Sigma culture of the 21st century.

As a sales rep for Tier 2 and 3 suppliers to original equipment manufacturers starting in the mid 1980s, I remember trying to comply with the JIT and SPC requirements of my customers. I took an intensive 100-hour class in 1993 to get my certificate in Total Quality Management to be prepared for the future, but saw TQM fizzle out as the decade ended because it wasn't embraced by top management of companies.

Miller affirmed my opinion by saying, "We keep reinventing new versions of known practices, tools, and programs, using a few key principles that are timeless, universal, natural laws that govern consequences in our businesses… Tools and systems are necessary, but are insufficient. Sustainability requires culture. Culture is the sum of all learned and socially demonstrated behavior patterns that exist at many levels: civilizations, regions, countries, communities, organizations, families, etc."

He explained that "individual acts or behaviors are visible, observable, recordable, and measurable. You can't improve unless you measure, but measuring requires a standard or principle… Culture is influenced by a leader, reinforced by rules, embedded by routine, validated by recognition, and guided by beliefs. Beliefs are deeply personal."

He then outlined the six strategies for leaders based on the 10 universally accepted guiding principles of The Shingo Model™:

  1. Leaders understand principles and know what behaviors flow from principles
  2. Leaders have to be honest with themselves and others
  3. Leaders are humble
  4. Leaders value potential of everyone
  5. Leaders ensure systems align with principles
  6. Leaders balance scorecard (results and behaviors) 

He concluded, "Sustainability requires changes in thinking…attempting to implement practices without understanding the reasons behind them leads to failure," This is what we saw happen with the philosophy of Total Quality Management because company leaders didn't learn to understand the principles and didn't practice the strategies necessary to embrace and embed the philosophy into the culture of their companies. Lean Six Sigma will only be sustainable for the next 10 years and beyond if company leaders follow these six recommended strategies so that lean becomes embedded into the culture of their companies and embraced by all employees.

The next keynote speaker, Tom Hood, CEO Maryland Association of CPAs and Business Learning Institute, spoke on "What's the Future of Accounting?" He caught everyone's attention by showing the list of jobs that are most likely to be disrupted by technology ­ accountants were the second most likely at 94%, just after telemarketers at 96%. He said, "We are in a race with machines, and we can't beat them." In my business as a manufacturers' sales rep, I have to do more telemarketing than ever before, so I took this data to heart.

He continued, "We are experiencing the largest shift change in history in: leadership, learning, technology, generation and workplace…For every two Baby Boomers, there is only one Gen Xer, while Millennials (Gen Ys) are equal or greater than Baby Boomers in numbers."

He questioned whether the" leadership of accounting is changing in collaboration, cultural awareness, technology and transparency." He explained that "incumbent practices, resources and institutions are in decline, and new business models, practices and technologies are emerging…The challenge and opportunity is to make the shift from the first curve to the second at the right time and with the right strategy."

He stated that the MACPA CPA Vision for 2025 is: "CPAs are trusted advisors who, combining insight and integrity, deliver value by:

  • Communicating the total picture with clarity and objectivity
  • Translating complex information into critical knowledge
  • Anticipating and creating opportunities
  • Turning insights into action to transform vision into reality”

He briefly highlighted the five ways to thrive in a shift change:

  1. Power of vision, purpose, and alignment
  2. People – strengths and positivity
  3. Collaboration and engagement
  4. Learning and development
  5. Technology (RONI = Risk of Not Investing)

In conclusion, he stated, "In a period of rapid change and increasing complexity, the winners are going to be the people who can learn faster than the rate of change and faster than their competitors."

How to Create Value Streams

Bill Waddell, author of Simple Excellence and Rebirth of American Industry, presented an interesting session on "How to Create and Transition into Value Streams." From my Lean Six Sigma yellow belt class, I learned how manufacturers can organize based on their product value streams, but I still didn't understand how other types of companies could transition into value streams.

Waddell stated, "How we construct value streams should be different for each unique value proposition we have to optimize in order to achieve the objective." He briefly outlined the following steps a company can take to "pursue the things that have the greatest impact on results:" 

  • "Nail down the markets you serve and separate them by the different value propositions/necessary cost structures they require.
  • Identify critical key performance indicators (KPIs) that define how to achieve strategic objectives.
  • Select your value stream managers.
  • Determine initial scope of the value streams by function.
  • Assign the human and physical resources.
  • Restructure core managements systems, ERP systems, accounting, budgeting, and supply chain systems to match value streams"

Waddell featured Wahl Clipper Corp. as an example of a company that has been successful in transitioning to value streams. Wahl has been manufacturing professional styling products, home styling products and animal grooming products since 1919. As an advocate for manufacturing in America, I was delighted to hear that "Wahl has captured 80% of the consumer market in clippers" while manufacturing in the U. S.

In my opinion, becoming a Lean Enterprise is one of the keys to American companies being able to maintain or return manufacturing to America while being competitive and profitable in the global marketplace.

In my next blog article, I will cover day two of the summit.

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