When price and cost pressures result in insufficient profits and survival strategies, companies must find ways to immediately and effectively eliminate waste. Very often, the best solution is to become a lean enterprise. A truly lean enterprise requires performance at “Olympic” levels. Many companies start the journey to becoming truly lean, not all succeed. Here is how to take a company to the level where it can earn the gold.
Pricing and cost pressures have become an integral component of the automotive industry and will most likely never go away. W. Edwards Deming’s book Quality, Productivity, and Competitive Position states “Failure of management to plan for the future and to foresee problems has nurtured waste of manpower, of materials, and of machine-time, all of which raise the manufacturer’s cost and the price that the purchaser must pay. The consumer is not always willing to subsidize this waste.” Every automotive supplier of goods and services knows all too well this statement is even truer today than it was when it was written in 1982.
Continuous identification and elimination of waste has become an essential element in the strategy of many of the most successful companies. In fact, as many as 10 years ago, a survey conducted by an automotive OEM identified that the vast majority of their most successful suppliers had fully integrated lean manufacturing as a part of their culture, philosophy and operating principles. The successful lean companies were compared to the others that were unsuccessful at implementing lean initiatives. The findings were enlightening.
Analysis and assessment of lean failures revealed a common, but usually unexpressed root cause for lack of success, “We thought lean manufacturing was a shop floor program and delegated it to the production department. We failed to recognize that lean involves our entire enterprise, every person and every system in the company.”
Further analysis of lean enterprise successes lead to an understanding that there are four key elements that the company leadership must have in place before implementing lean initiatives. These are the keys to the gold:
- Develop and share a consistent vision for the company.
- Implement a balanced compensation system.
- Develop a company culture with honest and open communication.
- Find an experienced lean leader for the company.
Top-level leadership is the key to successfully implementing lean initiatives in any company. Lean is “Olympic level” manufacturing. Competing at the Olympic level requires leadership, vision, commitment, strength, determination and hard work. More often than not, it also requires a great coach. Becoming lean enterprise is a team event, and just like in sports, every team needs a leader and a coach that truly understand the total game.
Consistent Vision
A consistent vision is the first element required for success as a lean enterprise.
The company leadership owns the development, implementation and continued improvement of the team vision, goals, strategy and culture. Without a clear statement of vision, no team — and no company — can truly be successful as a lean enterprise. Without this vision, team members will not understand how the total team intends to function and how they, as individual team members, are to fit in and function.
The company vision must also serve as the roadmap to success through a business plan. The business plan must cascade the top-level strategies into division, department, and finally to individual responsibilities, action plans, measurable goals and timelines. These form the basis of the Business/Quality Operating System. It is essential to consistently track the results of the action plans and to provide clear communication so that every team member understands the direction and necessary timing, as well as the methods this team uses for keeping score and evaluating wins and losses.
Compensation Systems that Reinforce the Vision
The second element for successful implementation of lean methodologies is a compensation system that links directly to the annual business plan. A balanced compensation plan, based upon valid measures of continuous improvement, true operational efficiency, teamwork and short-term results will promote the culture where lean initiatives can survive, thrive and produce tremendous results.
Compensation systems are the team members’ ultimate motivation and measure of success. All managers know that people will do what you pay them to do. All employees know that what is most important to the manager is what will get you money if you succeed.
When the primary basis for compensation is individual performance and quarterly earnings, reactivity and short-term plans are the usual accomplishment. Examples include sporadic cost cutting and headcount massacres. Not only can these situations completely demoralize the team, these short-term successes often lead to longer-term disappointment. Problems can usually be covered up for a time, only to reappear larger than they had been at the time of their disappearance. Short term focused compensation systems can also be a major contributor to frequent and seemingly uncoordinated programs. “Zero Defects” is a great example of this “program du jour” mentality. We have all seen similar programs that are little more than a slogan. They arrive with a band, banners and speeches and then, very silently, with no results, just go away.
Management Participation and Reviews
The third key element for success at lean methods is a company culture where the leadership and the management are participating members of the total team and where there is open and honest communication.
The leadership team has the total responsibility for creating this culture. True progress can only be accomplished and sustained in an environment where information and assistance flow freely throughout the entire organization.
All too often, management participation and reviews only occur when there is a less than optimal result. Some managers refer to this as “management by exception,” while most employees refer to this as “management by intimidation.” In this culture the team members fear the boss. Problems are concealed from management and necessary resources and assistance are not provided to the teams. Teamwork is nonexistent in this environment — lean methodologies cannot exist without teamwork.
The Leader Hires the Coach
An experienced lean enterprise coach is critical to the success of the team and the fourth key element required for lean initiatives to succeed. The coach develops the team and the teamwork. Individual team member knowledge, skill and experience are not enough to compete and prosper at the Olympic level in manufacturing and service industries today. To quote Dr. Deming again, Best efforts are not sufficient.” Everyone is already doing their best. The coach is responsible for the proper functioning, involvement and commitment of the entire team. Every job on the team is important and contributes to the success or failure of the team. Total coordination and flawless execution from every team member, every day and every cycle are required to effectively compete in today’s market. To win the gold, the lean coach must be capable of motivating and leading the team to continuously achieve Olympic levels of performance.
All too frequently, a company’s lean coach is someone that has been less than fully successful in another position and has been assigned to this task as one last chance, or to move them out of the way. Other times the lean coach is a person who has been successful and now has a week or two of lean training, but no real experience. For those companies operating with an inexperienced coach, lean initiatives offer very limited successes and are often doomed to become just another program du jour.
The more successful strategy is to hire a very experienced lean enterprise coach on a permanent, temporary or contract basis. The experienced coach is then required to participate in the development of the lean initiatives as well as lead the implementation on the shop floor and in the offices. Training the other members of the staff, including the top management group, is another area where experience pays dividends. Developing several experienced coaches not only gives the company bench strength, it leads to friendly competition within the teams. Once the healthy competition begins, true quantum leaps of progress, not just baby steps, can be achieved. Productivity, launch efficiency, quality, employee morale, profitability and customer delight all improve dramatically and simultaneously. This is where best in class performance is established and where companies earn the medals in Olympic level manufacturing!
Let the Games Begin
Winning the gold in today’s business environment requires total team performance at Olympic levels. To unlock the potential of your company to achieve lean gold, four key elements must be solidly in place before the first speech is given and before the first banner goes up:
- Select an experienced coach.
- Develop and encourage honest and open communication.
- Balance long and short term results in reward and recognition systems.
- Develop and share a consistent company vision.
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