Fat Results from Lean Implementation

FAT Results from Lean Implementation: A Rational Process Approach to Lean Success

Lean manufacturing is an accepted vehicle for organizational transformation. It brings a bias for disciplined action, clarifies the intuitive knowledge gained from experience, and puts an organization on the path to accelerated business results. Yet industry reports and research indicate that while most organizations have a reasonable understanding of the technical pieces of the lean puzzle, they struggle to realize its promise.

In the quest to attain “flow” with “zero” waste, organizations are falling short on the people management aspect of lean implementation. As lean gurus swamp the shop-floors, the people who are actually responsible for sustaining lean programs are relegated to the background and are not well managed. Their importance in the lean journey to success is ignored and misunderstood. This often leads to variable and unpredictable process improvements and business results that can’t be maintained.

Getting FAT results from lean implementation – it sounds Atkins-approved. The truth is, like any successful diet, results can be improved by focusing on the person involved in the program. At Kepner- Tregoe, we frequently help clients integrate the people side of the equation and improve results. In lean initiatives, focusing on the people pieces helps organizations solve the lean puzzle. The results can be FAT—Financially triangulated results that come at an Accelerated pace, and are Translatable consistently across other parts of the organization.

To achieve FAT results, we must first understand the lean landscape, lean management practices, and the performance system that drives project team behavior.

Understanding the Lean Landscape

Observe the lean landscape, not as a lean theory expert, but through the eyes of the people who experience lean first hand as it gets implemented across their organization.

The view can be frustrating and confusing.

It is not uncommon to find that the strategic business objectives of an organization are at odds with when and where lean is implemented. For example, a consumer products plant of a large pharmaceutical company decided to transform itself into a “Lean Enterprise” with 37 distinct projects that focused on improving manufacturing flows and fill rates and reducing cycle times. While the projects were implemented, the company was being strategically benchmarked against labor costs in offshore countries. In this case, a lean job well done was at cross purposes with the strategic objective to lower labor costs. Results from lean projects coincided with the closure of the production facility. For people affected by the plant closure, going lean did not help. It only created disbelief in lean principles.

Call it Kaizen events, 5Ss, Poka Yoke, or something else; organizations have a tendency to apply multiple tools simultaneously. This leads to more projects, often beyond the capacity of the people who must execute them. A manufacturing client had 213 improvement projects identified across its portfolio of three plants in North America. They quickly learned that this would be unmanageable and would produce undesirable outcomes. In this situation, the lean program was blamed for the unrealistic overload of initiatives and was cited as a diversion from core business activity.

The point is frequently made that while individual lean projects are delivered successfully, their performance metrics never add-up. The great strides that have been made in productivity aren’t reflected on a 1:1 basis on the bottom line. This inability to triangulate results in a multiple-projects environment undermines the credibility of lean at an enterprise level.

For the people working in lean projects, their worst fear, on a personal basis, is that jobs are no more secure than prior to the lean journey. What’s in it for them if they embrace lean? How and why should they ever get on the lean bandwagon? More importantly, why should they remain on the lean train?

The Lean Journey

The lean journey chart shows how lean implementation progresses in an organization. The timeline of a lean implementation is plotted across the horizontal axis. The vertical axis is a measure of process or business performance. The population curve of projects follows an S curve with cumulative stages of lean success. Operations improvement projects in a variety of industries in different geographies support this pattern.

At the bottom left of the spectrum is the “negative zone”, when Lean teams witness a downturn in business performance as a result of a lean implementation project. It sounds odd, but it is often true; business performance takes a step backwards as the processes around the targeted area within the organization adapt to change. This negative trend is transient in nature. Within a short period—at maximum, within a quarter—the performance should take an up turn towards the desired goal. If not, the program needs serious review.

The majority of projects are populated around the first zone of performance improvement. These projects are in the “low hanging fruit” category. Processes in this zone tend to be managed in a reactive mode. However, as process execution matures to proactive management, process/business performance improves dramatically.
The next quantum leap is made as organizations rise above process management and acknowledge the importance of people in the project.¹ Ultimately, “lean nirvana” is found when the human performance system is proactively managed at an individual and an organizational level. The gains here are asymptotic.

Assessing an organization’s maturity on the lean curve and mapping operations improvement initiatives on this chart can provide valuable insights. Continuing progress along the lean maturity curve requires understanding of the dynamics of people vs. processes, reactive vs. proactive process management, and their interrelationships in lean projects.

Lean Management of Process Performance—The People and Process Connection

Lean projects typically address one or more concerns in these categories: customer service, flexibility, cost, cycle time, and quality. These all can be nicely tied back to the customer-product profitability equation. While the ultimate concern may be to improve business profitability, we actually accomplish this by improving the performance of the processes that constitute an organization’s activity. Since people work within an organization’s processes, we need to improve the performance of both processes and people to gain any substantial and sustainable advantage.

Lean management is an adaptive system of continuous improvement of multiple, interconnected processes. Each employee should understand the interrelationships between the key elements of lean management.

The lean process begins with setting goals that are directed by the company strategy. Gap analysis identifies the most critical business processes for meeting these goals. The organization then conducts business process improvement and integrates people and process performance. Finally, a post-project review is performed and the cycle is repeated. We believe that FAT results are generated in a lean program when the “conducting business process improvement” and “integrating people and process performance” elements of lean management cycle are administered in proactive mode.

Consider this simple diagram of expected process performance. For any process there is an acceptable range of variance. Clearly the objective of implementing lean is that the lower end is not acceptable anymore and the future should evolve between the baseline and the goal line.

Understanding Reactive Management of Process Performance

Organizations demonstrate reactive behavior when process improvement is a reaction to historical performance data.

On the reactive management chart, actual performance can be charted to show if it falls above or below the baseline or “should.” Any departure from the baseline, whether it is above or below, can be designated as a “deviation.” If performance is above the baseline, further opportunities are explored by identifying the root cause for the superior performance so that it can be replicated to sustain the improvement. If performance is below the baseline or there is a trend for downward performance, the gap or deviation in the process metric is analyzed for root cause so that it can be removed to improve performance. Root cause analysis is pursued through a three-question lens:

• Is there a deviation?
• Is the cause unknown?
• Do we want to know the cause?

If the answers to all three questions are affirmative, the organization should conduct a root cause analysis. This analysis leads to identification of causes and development of multiple alternatives. Action is taken on the best-balanced choice with risks assessed.

Why do we term this as reactive? It is reactive because the process improvement analysis is based on historical data. Some precipitating changes in the past have led to a performance deviation, and attempts to remove it or replicate it are being made as a reaction to this altered state.  This is the low-hanging fruit of performance improvement. An organization following this route can quickly ramp up its performance by making the “should” or upper level the “best demonstrated practice.”

The critical success factors for reactive process management include:

• Understanding process performance goals
• Monitoring the baseline
• Being specific! Managing from overly broad or inaccurate data will create costly cost/time overruns

Typical gains of 15-20% productivity, reductions in work-in-process inventories, and reduction in floor space and travel times are examples of the low-hanging fruit that well-executed lean events can reach in the early phases of an organization’s lean journey.

Understanding Proactive Management of Process Performance

Proactive management of processes generally begins in phase II of a lean program. This can be found in organizations where lean is not an ad hoc, one-off initiative—lean principles have been embraced and structured programs are in place.

At this point, the improvements from the phase I or “reactive phase” have helped create a new, improved baseline. A new “should” is identified for continuous improvement in the next phase of the lean journey. In this stage, improvement teams work beyond the previous “best demonstrated practice” and move into uncharted territory.

In the reactive state, the team looked at cause and effect. In proactive mode, attention shifts to the “likely cause” and “likely effect”. Lean teams in this phase spend time shaping the future. Kepner-Tregoe defines the rational processes for these activities as Potential Problem Analysis and Potential Opportunity Analysis.²

In Potential Problem Analysis, the team addresses the likely cause of a process performance decline by taking preventive actions. If the likely cause does occur, despite preventive efforts, the team is prepared for damage control with planned contingency actions. The team sets “triggers” for these actions that act as warning lights or the signal to launch contingency measures that reduce the impact of the likely effect.

Potential Opportunity Analysis helps teams explore the future for better-than-planned process performance. In such cases, the teams need to decide about promoting the likely cause—they want more of it so process performance exceeds expectations. They take actions and set triggers to capitalize on the potential effect. When things do go better, they are prepared to take full advantage of the opportunity. Unfortunately very few teams are proactive enough to exploit things that go better than planned.

A lack of data and precedence can be a barrier to proactive management. But data and precedence exist if you seek information on the cause or effects of the same or similar processes.

The chart of managing flow time opportunity provides an example of the proactive management of a process. A lean team charged with improving flow time may focus on multiple likely approaches that reduce the work content on the critical path or remove elements from it. Each approach can be analyzed for potential opportunity by identifying likely causes, taking promoting actions, and planning actions that will capitalize on process flow time improvements.

People Management in Lean Projects

Lean brings change in the way people relate to processes within the organization. Change can hurt people both with its magnitude and speed, and it can be stressful. This is especially true if the improved productivity resulting from lean implementation creates a perception that fewer hands will be required at the workplace.

Expanded responsibilities, team ownership of a process, and the emphasis on disciplined flexibility that characterize lean programs often lead to resistance. Monetary rewards can only go so far to overcome this resistance.

The lean journey can be seamless and less painful when the management of people’s performance systems are an integral part of the lean program. To fully grasp the reactive and proactive people management aspect of lean projects, it helps to know the elements that can affect people performance and the drivers that can help manage behavior.

In its most simplistic fashion, human performance fits nicely into the process track of low end, high end, and a “should” or baseline level of performance. If there is a performance gap, the true cause should be as identifiable as the gap in any other type of performance.

Unfortunately this is easier said than done. The challenge in people performance management is that, while the “actual” can be obvious, the “should” is often not clear, not commonly understood, or not communicated.  At Kepner-Tregoe we recommend using a rational approach to increase the likelihood of getting the “should” behavior—also known as performance—in lean projects. We call this approach the “Performance System”.

How the Performance System Drives Project Behavior

The Performance System model provides a practical, useful framework that clarifies human performance. Using this model, managers can construct and analyze each component as it relates to an employee, team, or work group, and then improve and align it to support performance expectations. Tracing its roots back to the early years of behavioral science research by B.F. Skinner, we’ve validated this model in numerous project and work environments. The five components of the performance system model are:

• Performer: the individual or group expected to behave/perform
• Situation: the immediate setting or environment in which a Performer works, such as the project environment
• Response: the behavior (also known as performance) of the Performer
• Consequences: events that follow the response and increase or decrease the probability the Response (behavior/performance) will occur again, given the same Situation
• Feedback: the information that Performers receive about progress toward their goals; it helps guide their Response (behavior/performance)

The five elements of the performance system are interlinked and should not be considered or administered on a stand-alone basis. Lean projects that impact an entire organization require a performance system hierarchy that is mapped to the organizational hierarchy. This clarifies the organizational dynamics and integrates both people goals and organization goals.

The Performer is usually an individual but can have a broader definition as a team or larger organizational unit. This broader definition is most useful in lean implementation.

The Situation refers to the immediate environment or setting in which the Performer works—the lean project team, the department, or business unit of which the Performer is a member. Three key elements describe the Situation—performance expectations, signals to perform, and the work environment. Each element of the Situation impacts an individual’s or lean project team’s behavior.

Consequences are events or conditions that follow a Performer’s Response and increase or decrease the probability that the Response will occur again, given the same Situation. Consequences can be encouraging or discouraging to increase or decrease the probability of future Responses.

Feedback is a critical component of the lean project performance system. It provides Performers with performance-based information about progress toward the organizational goal of lean enterprise. Comparison of actual performance to the plan guides the Performer in maintaining or modifying Responses/behavior.

Comparison of actual performance to the plan guides the Performer in maintaining or modifying Responses/behavior.

Understanding Reactive Management of People Performance

Reactive management of each element of the performance system focuses on past performance of lean project team members. The objective is to keep people performance above the unacceptable low end and move it upward from the baseline or “should” performance to the high end or goal.

To manage the Performer, the following questions are asked:

• Did the Performer have the necessary skills and knowledge to perform?
• Did the Performer know why the desired performance was important?
• Was the Performer physically and mentally able to perform?

In many lean projects, “the lean guru” assumes that the people can be provided with the necessary technical skills through training workshops. This not only goes against the lean philosophy of lean as a way of life and learning as part of the journey, it compounds the damage because Performers fail to understand why their desired performance is important and how their Response can have an impact across the value stream.

Managing the Situation element begins by establishing if the Performer had the appropriate operating environment. This is accomplished by asking:

• Did the Performer know the desired output?
• Did process performance standards exist?
• Did Performer consider the standards attainable?

Lean projects that fail to move beyond phase I have their roots in Performers, both individuals and project teams, not understanding their unique Situation, that is, the combination of products, customers, supply chain partners, and processes that support those transactions.

The Response from the Performer is validated by asking:

• Which process performance was observed?
• Did the performance met expectations?
• What were the desired, the undesired, and the alternative Responses?

In our observations many lean projects demonstrate a high degree of ambiguity around performance measures and lack of common understanding on desired, undesired and alternative responses.

The Consequences for the both the Performer and the organization can be confirmed by considering:

• How well do the Consequences support the desired performance?
• Were the Consequences meaningful to the Performer? To the organization?
• Were the Consequences immediate enough to encourage the desired performance?

Developing effective Feedback mechanisms should be one of the first steps in influencing performance, since improvement will only be sustained if the Performer is able to detect progress. Feedback mechanisms are established in the ground-rules activity of project management and are a reflection of how the project manager goes about communicating progress to project contributors and sponsors. Managing the Feedback loop completes the full circle of people performance management. The questions asked about Feedback must include:

Did Performers receive information about their performance?

• Was it relevant and accurate?
• Was it timely and specific?
• Was it easy to understand?

It is expected that not all questions will have affirmative answers, but ensuring that concerns are discussed with the Performers and corrective measures designed in place gives lean projects a much higher probability of improving future results and sustaining the gains.

Understanding Proactive Management of People Performance

Proactive process management coupled with proactive people management can produce benchmark project results. All five elements, the Performer, Situation, Response, Consequences and Feedback are in the play in a proactively managed human performance system aimed at influencing the behavioral changes in the Performer. The distinction between proactive and reactive people management lies between observing past behaviors and changing future behavior.

This is achieved by designing the performance system from the onset, during the planning phase of a lean project.

This is accomplished by:

• Determining Responses to be changed or improved by grouping reported deficiencies
• Identifying Performers whose Responses must be changed or improved
• Modifying the performance system variables (Situation, Consequences, and Feedback)
• Communicating and implementing changes

The questions in proactive management of people performance are forethoughts, not afterthoughts.

To empower the Performer to deliver the desired Response, the following questions help design the performance system:

• What necessary skills and knowledge will be required by the Performer to deliver the desired Response?
• How would the importance of desired performance be made visible to the Performer?
• What physical and mental attitude is needed by the Performer?

Proactively managing the Situation element requires asking:

• What is the desired output?
• What performance standards need to be designed?
• How can the standards be made attainable to the Performer?

To ensure that the Response can be measured correctly, the following questions need to be answered in the design phase:

• Which process performance will be observed?
• What are the desired performance levels?
• How will the desired, undesired and alternative Responses be made visible?

The Consequences for the both the Performer and the organization are designed by considering:

• How will the Consequences support the desired performance?
• Were the Consequences meaningful to the Performer? To the organization?
• Will the Consequences be immediate enough to encourage the desired performance?

Designing the Feedback loop completes the proactive performance system design. This requires considering:

• How will the system ensure that Performers  receive information about their performance?
• What will make the Feedback relevant and accurate?
• How can Feedback become an element of the project work breakdown structure to ensure its timeliness and specificity?
• What will confirm that the Performer understood the intended Feedback?

Designing a performance system is not akin to cultural change, but it is a practical approach to influencing performance in a focused way to get desirable results for projects.

Cumulative successes help build a lean culture without directly confronting the existing one.

Conclusion

Most lean programs don’t capitalize on the benefits of managing processes proactively and forego the steep gains that can be achieved by managing human performance.

Like all journeys, the lean journey requires a roadmap. A good lean roadmap must integrate the human performance system and management of business processes for sustainable business performance. Both people and processes should be managed with a structured, rational approach that includes both reactive and proactive management.

Engaging people in a way that builds positive reaction to lean implementation within an organization is critical.  By creating a performance system that encourages people to succeed, the lean journey moves into a new territory of significant, sustainable results.

Endnotes

¹ Keith Pelkey, “Business Process Improvement and People Performance”, (2002)
² Charles H. Kepner and Benjamin B. Tregoe, The New Rational Manager, (Princeton, Princeton Research Press, 1997).