CHAPTER 5
Organizational Flow as the Pathway to Lean
AS A FRESHMAN IN COLLEGE, I was amazed as I gazed across the network of paved walkways across campus. What was remarkable was how astute the campus planners appeared to have been—they seemed to recognize precisely where people would walk between the university’s many buildings, laying out the paths in a way that anticipated students’ routes across its vast lawns. Their planning was near perfect, a feat that seemed utterly amazing.
Then a friend explained to me that this was not at all how it was done. The needed analysis would be impossible to perform, he explained; even a detailed study of class locations and student schedules would only begin to address the many considerations that would dictate the pattern where students might tread. Instead, the architects simply waited for a year and then paved over the ruts worn by the students.
The lean movement began with much the same approach—leaving wide open all possibilities and then defining specific steps after years of experimentation proved the need for a series of structured pathways. A number of tools and practices were ultimately formalized, particularly the more visible elements that the Toyota system used for finding waste and solving specific challenges. Today these have become widely recognized as the core techniques that make up a lean solution. While helpful for guiding travelers whose destinations are nearby and more straightforward, these paths fall seriously short of pointing the way for those who have farther to go.
Many companies have used these methods for successful shifts to a leaner approach, speeding production and reducing wastes. Still, it is not uncommon to see organizations plateau after reaching a steady-state level of maturity. For others, their sticking point appears to come even earlier. As described in Chapter 4, the greater the complexities of their products and operations, the more difficult it can be to gain a foothold beyond basic tools and tactics.
This is not to say that progress is not being made. On the contrary, it is truly inspiring to speak with individuals at organizations who “get it.” For whatever reason, they came to see the greater art-of-the-possible that this approach represents and set themselves on course to achieve it. They recognized that targeting cost savings alone does little to keep up with changes in customer demand; that preventing backsliding takes going beyond tactical or steady-state lean, although these can contribute important capabilities along the way. They understand that increasing their ability to anticipate what customers want and then exceeding their expectations creates what turns into lasting lean success.
These are the real leaders in the lean movement. At some point in their journey the lightbulb went on; they saw their transformation as a way to not only become more efficient but to reach further toward what is really important: creating dynamic value for the customer and sustainable wealth for the corporation.
The challenge is to find a way for others to reach this realization. They must come to see that going lean means more than its first steps represent—and then set forth on a pathway to advancing beyond the intermediate plateaus toward the highest level of excellence. Doing so will take more than a grasp of the mechanics; it will take building a new mindset—the art of the possible—and then breaking down the organizational complexity that so often obscures the best pathway for advancement. This is particularly the case within industries marked by great complexity and business uncertainty.
It has once again come time to pave the pathway to reveal a systematic methodology for seeing through this complexity. And doing so supports one of the basic tenets of lean: Adopt an organizational construct that expands individuals’ insights and promotes transparency and simplicity.
Simplifying Through Decentralization
In some ways, Alfred Sloan’s concept of decentralized management has created an even broader impact on business than Henry Ford’s moving assembly line. Sloan’s approach to delegating decision making created the means for keeping GM’s vast network of operations and suppliers in lockstep while GM turned out the much greater variety so critical to his strategy’s success. It was his split from Ford’s system of centralized control that made possible the much greater complexity that characterizes his multiproduct line approach, which launched the automaker into market leadership for decades to come.
This basic concept seems central to breaking through the vast complexity that represents perhaps the greatest challenge in advancing in lean maturity—although implemented in a much different way. It makes sense, therefore, to understand why lean decentralization differs so fundamentally, and why it serves as an important foundation to lean dynamic’s tools and practices.
Value Versus Volume or Velocity
As described in Chapter 1, Sloan’s application of decentralization was founded on a distinctly different mindset from that of lean dynamics. Rather than tracking the details, Sloan delegated authority to managers, who reported their results based on average production levels (or standard volume), optimizing for the enormous, predictable customer demand that represented the norm. This solved the challenge of managing GM’s vast complexity—but it also brought significant limitations.
Factories came to operate well at or near the production volumes for which they were built, but these efficiencies quickly dropped when volumes shifted from anticipated conditions. Moreover, they came to require “absolutely level production—or the nearest to it that could be attained,” a limitation that caused loss to skyrocket during economic downturns or demand surges.1
Today’s supply chain solutions, intent on speeding operational velocity, run the risk of contributing to this effect. Going Lean describes the hazard of creating long-term arrangements aimed at speeding flow and reducing inventories by delegating production of major components to suppliers. Without first addressing lag that amplifies variation and disruption when conditions fluctuate, sudden surges could undermine suppliers’ ability to perform, and economic downturns can compromise their viability—a reality increasingly faced by many businesses today.2
Lean dynamics’ very different concept of decentralization addresses business complexity by applying an organizational framework that mitigates the challenge of managing its many critical details. It does not depend on simplifying assumptions to make decentralization work, as did Sloan’s approach. Instead, it applies decentralization as a means for embracing the details, creating a structure that delegates responsibility to individuals at different levels across the organization as a way for tackling complexity head-on. It restructures so that specific activities can be optimized by eliminating lag and creating dynamic dampening capabilities that prevent disruption and promote consistency across continually changing conditions.
The result is a much flatter value curve—a bottom-line measure of stable value across a range of volumes, reflecting not only velocity but greater agility in responding to change. Still, making this work requires making a substantial shift to create the necessary conditions so the workforce can take the lead.
Inclusion Versus Control
Perhaps what most distinguishes a lean dynamics solution is its clear split from the tradition of dealing with business’s myriad, diverse activities by imposing rigid systems of top-down controls and simplifying assumptions (which inherently create disconnects and lag, as discussed earlier). It is a very different approach to decentralization, driven by workforce inclusion, where individuals across the corporation or institution become integral to guiding and tracking critical aspects of the business.
The key is breaking work into more manageable increments of value—clear elements that tangibly contribute to the final product (for an aircraft or automobile, this might be basic materials, parts, components, or other recognizable elements, as described in Chapter 4). Rather than performing discrete, disconnected processing steps, individuals with common skills and equipment can be given responsibility for producing the range of items within a given product family from beginning to end. This makes it possible to manage the details that go into everything from scheduling work to ordering materials, tightly synchronizing activities across a range of conditions, minimizing disconnects that are often the root cause of waste.
This restructuring naturally expands workers’ and managers’ span of insight, making it possible for them to manage the details of value creation at each step along the way—a fundamental key to its success.
Insight Versus Information
At Southwest Airlines, there is no clean split between those who measure and those who perform work. Employees remain constantly aware of the company’s goals—from profit and revenue to how their work impacts the customer’s needs. Each understands the larger objective of his or her work, such as the importance of ensuring on-time flight departures.
The importance of expanding worker insight in this way is critical to the company’s results, as noted by Brandeis University professor Jody Hoffer Gittell in her book The Southwest Airlines Way.
Interviews with Southwest frontline employees revealed they understood the overall work process—and the links between their own jobs and the jobs performed by their counterparts in other functions. When asked to explain what they were doing and why, the answers were typically couched in reference to the overall process. “The pilot has to do A, B, and C before we take off, so I need to get this to him right away.”3
Workers’ broader span of insight—a natural result of managing work from end to end for complete increments of value—helps facilitate the challenge of eliminating lag across the business by creating a much more intuitive flow of information. Moreover, it dramatically simplifies what information must be broadly shared and minimizes information disconnects that are often the root cause of lag and waste.
Perhaps the greatest benefit is creating a depth of insight that goes far beyond what could be captured in an information system. Individuals performing or managing work to produce items from beginning to end across a product family are able to see not only the individual process steps but the challenges and opportunities for improvement that exist between these activities. They find themselves in a position to identify improvements to supplied materials, design details, or even manufacturing equipment that can streamline their activities or produce a more consistent or superior product. The result is greater consistency, precision, and innovation—even when conditions do not remain stable and predictable.
Case Example: The Benefits of
Breaking Through Traditional Barriers
Consider the approach taken by the Pittsburgh Regional Health Initiative (PRHI), a nonprofit consortium of healthcare providers in southwestern Pennsylvania. More than a decade ago PRHI embarked on an ambitious program to apply lean principles as a means of overcoming serious problems with the healthcare system. It wasn’t hard to see that a problem existed, with outright failures like hospital infections and medication errors affecting millions of patients across the nation, costing billions of dollars per year. The startling fact that preventable medical mistakes have become a leading cause of death itself makes clear the critical need for change.4
Through education, research fellowships, and awareness-building efforts, PRHI is clearly intent on tackling this challenge head-on. Rather than simply addressing whatever problem comes up first (as some lean consultants had apparently advised) or emphasizing peripheral administrative areas, its network of medical providers pursue projects directly targeting “a clinical objective,” from hospital infections to medication errors—addressing some of the most serious challenges affecting patients’ well-being. So far the results have been promising—from slashing hospital infection rates, preventing mistakes from patient “handoffs” between units or across work shifts, and reducing medication errors or delays.5
Its focus is not so much on creating technology-based solutions; its participants’ efforts have repeatedly demonstrated that even simple, low-tech practices can have profound impact.6 Much of their attention instead goes to challenges like breaking through organizational barriers across this vast, complex, and continually changing system. “So much is done in isolation,” says PRHI’s president and CEO, Dr. Karen Wolk Feinstein. Solutions must come from correcting this, creating transparency across the entire system, leading to real value in the form of quality services, providing care that is always effective, safe, and efficient.
One of the more recent examples of success in advancing this vision is Pharmacy Agents for Change, a program that targets the enormous problem of delivering proper doses of the right medications to patients when they are needed. By breaking through traditional organizational barriers, making changes like including pharmacists in hospital treatment teams, participants improved everything from preventing drug interactions to increasing patients’ reliability in taking their prescribed medications, in one case reducing discrepancies (such as illegible, duplicate, or out-of-date prescriptions) from as much as 90 percent to less than 10 percent (a statistic that continues to improve).7
Creating and implementing transformational solutions requires applying these changes not just across departments but between institutions. As Dr. Feinstein explains, a chronically ill patient may receive care from a wide range of facilities that provide everything from skilled nursing to cardiology or other specialties, mental health services, and primary care. This vast range of paths that can be different for every patient creates tremendous opportunities for disconnects—each of which can lead to inefficiency and errors, affecting the system and ultimately the patient.
PRHI’s efforts point to important lessons that seem to be gaining acceptance. Broadly extending them will involve applying its structured approach along with the right incentives to promote necessary collaboration and deliberate action across broad networks of providers.
Establishing Organizational Flow
When businesses and institutions learn about lean, they tend to immediately take aim at tangible work steps to improve their flow of material and information. The reason seems clear: This physical progression of steps is easiest to visualize, making needed actions clear and direct. Beginning this way, however, neglects a critical focus proven by lean dynamics benchmarks like Toyota and Southwest Airlines: smoothing organizational flow.
What is organizational flow? Better known as the flow of people and process, it represents the means for optimally engaging the work-force—breaking through traditional barriers and extending workers’ spans of insight so they can become instrumental in guiding these efforts.8 Innovative industrial engineer Shigeo Shingo, who helped create the famed Toyota Production System, explained this “flow of people” as essentially how individuals coordinate and understand a broader range of steps to optimize the way in which work is done.9
Recognizing the Disconnects
It is common for lean efforts to begin by conducting kaizen events, multiday, facilitated events in which workers are taken away from their normal activities to brainstorm ways in which work can be streamlined. Yet this approach can backfire, as seems to have been the case during some of GE’s “workouts” (a variant of this concept), as described by Robert Slater in Jack Welch and the GE Way.
It became fashionable to launch assaults against bureaucracy. But the bureaucracy had been erected in many cases to help impose discipline that assured the quality of products and processes. All too often, the assault on bureaucracy had the effect of getting rid of some of that discipline.10
What caused such a disconnect? Although it might seem that removing bureaucracy will correct problems like sluggish decision making, doing so can undermine traditionally managed organizations that depend on this type of structure. Participants’ ability to understand this, however, is often limited by their span of insight. Although individuals can quickly hone in on what the problems are, they do not have sufficient understanding and visibility to see how to correct them.
Peter Senge referred to this as the learning dilemma: “We learn best from experience but we never directly experience the consequences of many of our most important decisions,” he explained.11 Why is this? As corporations grew to enormous proportions over the last century, they lost the organizational simplicity, transparency, and adaptability that marked their decision making. The division of responsibilities that became so central to the way they managed their increasing scale also became a critical weakness, making it impossible for workers and managers to see the results of everything from work activities to improvement initiatives.
The more complex the organization, the more pronounced this disconnect can become, since so many decisions cross departmental lines. Workers and managers find themselves responding largely to output-based requirements and lagging metrics dictated by other divisions, often with little insight into why these are needed or what the impact of deviations that will inevitably occur might be.
Correcting this requires expanding the workforce’s span of insight sufficiently to eliminate these disconnects before broadly involving them. This includes changing how people at different workstations and even management departments relate to one another—shifting from a fragmented structure marked by internally focused metrics, inefficient coordination, and suboptimal decision making to creating the means to gain meaningful insight into how their work relates to the final product.
Expanding the Span of Insight
Those organizations that succeed in leaping beyond existing plateaus to new levels of performance seem to create a methodology that progressively advances this span of insight. Rather than seeking to shift their organizational structure all at once, it seems important to progressively focus attention on shifting key areas with the potential to broadly affect lag (described in Chapter 4), concentrating on one part of the problem at a time. Breaking down the problem in this way—restructuring around these focal points to expand project teams’ end-to-end understanding of the challenge—stands to promote the broader span of insight needed to wade through the details across complex functions and fundamentally rethink how business is done.
Chapter 7 suggests an iterative approach that identifies key focal points, extends individuals’ span of insight, and implements solutions. In this way, project by project, businesses and institutions can expand their workforce’s visibility by concentrating on those areas where transformation is needed and the likelihood of acceptance is greatest.
Identifying these focal points is an excellent starting point because it reveals major areas where disconnects exist and relates them to major challenges to advancement that might not have been evident to the company (or at least not documented as a priority for action). Creating specific actions for correcting these serves as a powerful opportunity to shatter traditional functional barriers—engaging people from across different functional elements to define specific actions and sequencing their implementation to increasingly expand their ability to turn out desired results.
Unlike so many kaizen events, this is not a once-and-out exercise where changes are quickly made and then attention is shifted elsewhere. Instead, it takes continuous improvement beyond generic philosophy, concentrating iterative, incremental advancement at key focus areas with clear objectives for attaining tangible, bottom-line outcomes. The specific manner in which organizations accomplish this will vary; the key, however, seems to be assembling cross-functional action teams responsible for progressively fostering an expanding shift within selected focus areas (described in Chapter 7).
Bit by bit, individuals’ span of insight will expand, enabling them to see across disconnects to identify high-potential solutions. When given the necessary insight and tools to succeed, individuals seem willing and able to take the lead in restructuring the flow of work, information, decision making, and innovation—to succeed in stimulating lean transformation like never before.
Key Point: Shifting Focus from
Processes to Products
Many people familiar with lean methods recognize their emphasis on creating manufacturing cells: a way of structuring work so that individuals in a work unit perform the entire set of actions needed to turn out complete products or components from beginning to end (increments of value, as described in Chapter 4; typically product families share common characteristics). This is a powerful way of shifting to a product-oriented focus, emphasizing the deliberate creation of value, rather than shifting processing steps for local gains without specifically understanding how this impacts the final product or the customer. Aligning workers can be a powerful force to:
Create a sense of ownership. Making workers responsible for the end-to-end production of tangible products leads to greater insight into, understanding of, and enthusiasm for the work they perform. This tends to create a much stronger sense of pride and ownership.
Relate work to a specific customer. Creating ownership for tangible units makes it possible for more meaningful coordination with suppliers and customers (individuals representing upstream or downstream operational steps). This relationship has proven effective in developing the ability to better anticipate and respond to dynamic challenges, such as sudden changes or surges in demand.
Serve as a focal point for meaningful measurement of improvement. Workers’ increased awareness of the disconnects between value-creating steps makes it possible to create meaningful, actionable metrics they can monitor and act on to keep flow progressing smoothly and efficiently, mitigating lag and accumulation of waste and keeping them out over time.
Promote innovation. Some organizations allow these cells to operate as “semiautonomous units,” permitting them to make significant adjustments and exercise creativity in improving product flow, stocking supplies, and reducing inventories. Workers develop suggestions and build business cases (with the help of their own financial analysts); when approved, management acts quickly to approve requested funds, making sometimes significant changes in how they do business.12
In this chapter we have seen the importance of decentralizing management to break through the organizational complexity that would otherwise stand in the way of attaining broad-based transformation. Lean dynamics seeks to accomplish this by realigning the business to promote real ownership at each point along the way.
The result can be a series of product families managed in a largely decentralized manner (rigorously integrated into the overall system, as described in Chapter 7), in which workers optimize their performance based on a specific understanding of what their customers need. This promotes a greater span of insight into what it takes to create their elements of value, as well as how they fit into the broader value-creating structure, making it possible for workers to take a lead role in mitigating lag, holding down waste, and optimizing results even under continually changing demands.
The chapters in this section have explored key elements that form the pathway for advancing to higher levels of lean maturity: recognizing the elements of value that can focus implementation efforts and creating the organizational structuring that will drive the needed change. We are now ready to explore where to begin such an effort: identifying the transformational focal points that can point the way to where businesses and institutions might begin their journey or refocusing efforts that have already begun to gain the greatest advantage from these methods, in a way that promotes ongoing advancement in lean maturity.