CHAPTER 3
Lean Culture
I often ask the proverbial question ‘Can you teach an old dog new tricks?’ Typically, half the audience answers ‘no’ and the other half ‘yes.’ In Chapter 2, it was noted that leading entails guiding improvement activities and establishing an organization's purpose, which changes over time. Instilling change is difficult at best as change necessitates learning and adaptation and many people inherently resist change because it is disruptive, intrusive, and it upsets the balance of stability.1 The culture of an organization, which is a product of its workforce, has a significant inertia that resists change. Bringing about cultural change is a time-consuming, often wrenching process. However, you can teach people new tricks as long as there is sufficient incentive. Simply put, people and organizational culture typically resist change. A clear understanding of the importance for change is paramount to achieving it.
Organizational culture is a critical element when attempting to achieve continuous improvement. In an online survey of practitioners, respondents ranked Lean Culture fourth most important out of 10 broadly identified Lean elements.2 Only a ‘systems perspective,’ Lean Leadership, and Lean knowledge and experience ranked higher. Lean implementations often change companies, threatening (or appearing to threaten) both corporate culture and customary ways of conducting work.
A simple, but effective test to better understand if there is a sound foundation upon which to improve the organizational culture is to ask and truly understand if employees look forward to going to work each day. The morale of the workforce, or its esprit de corps, is a simple yardstick leadership may use to assess the level of longer term improvement commitment. The answer to this question must also be a resounding ‘yes.’ But remember, the four elements of Lean Management are interdependent. Namely, the ability to answer ‘yes’ to this question is why leadership is the keystone to Lean Management as leaders create the culture.
This chapter begins with an examination of culture. It is followed by exploring a stepwise process for implementing change. An explanation of standardization, a key element to promoting the stability in processes, and subsequently one's ability to understand a system's current state follows. The chapter concludes with a discussion of five system elements that can promote a more entrepreneurial culture.
Organizational Culture Defined
Organizational culture refers to workplace environment that consists of values, beliefs, attitudes, practices, behaviors, norms, and habits. It is the principled atmosphere of the system. Culture is simply the way things are done in an organization.3 The long-term maintenance of continuous improvement activities requires an organizational culture produced by individuals that embrace change.
Culture develops from reinforced behaviors.4 Mann notes that sometimes culture contradicts stated rules and practices, which is detrimental to Lean initiatives. The most important source of reinforcement is leadership and this is why Lean Leadership is critical to Lean implementation success. The failure of most Lean initiatives can be pinned on the failure to change leadership practices.5
Similarly, Lean culture is comprised of day-to-day practices and behaviors.6 In a Lean system, these day-to-day practices and behaviors need to include standardization of methods, a clear understanding of current system performance, a team-based approach to work, work place health and safety, and the recognition that Lean is a lifelong path of continuous improvement that if pursued honestly and diligently promotes a culture with energy, focus, and longevity.
The creation of culture is an inherently iterative, ongoing process, not a one-time event. It is infused with both an entrepreneurial spirit and discipline.7 Namely, it is an aspect of continuous improvement where Lean Culture avoids bureaucracy and hierarchy, yet requires discipline, and does not focus on what you accomplished; only what you have accomplished relative to exactly what you said you were going to accomplish.
Anyone who has worked in a highly bureaucratic system with too many rules and regulations to follow has probably witnessed that bureaucracy and layers of management eventually stifle peoples' willingness to participate and to take the initiative for change. A Lean Culture must promote creativity, involvement, experimentation, and new thinking. An entrepreneurial spirit leads to improved productivity, quality, lowered cost, shortened delivery time, enhanced safety and environment, and improved morale.
Lean Culture is a disciplined thought complete with the brutal facts of reality such that a simple, yet deeply insightful, frame of reference for all decisions and the path for improvement may be more easily discernable. Lean Culture must be hostile to complacency, confronting brutal performance facts without demoralizing people, and creating an environment that leads to improvement. Leaders can then facilitate achieving this environment, by adopting the following four suggestions:8
Possess the humility to understand one often does not yet understand enough to have the solutions to problems.
Investigate with questions (e.g., asking the ‘5 why's’) that will lead to the best possible insights.
Engage in dialogue and debate, not coercion, as a means to search for the best answers.
Conduct investigations without blame that encourages openness and participation.
Lean Culture will grow from the consistent effort of a constant, disciplined approach.9 Disciplined actions lead to an opportunity for an enhanced focus on a process. This includes a daily routine that is easily audited for understanding process performance. Discipline begins with floor personnel. It must be made clear that these individuals have been given the responsibility, or the obligation to effectively perform assignments. This means following standardized work instructions. If followed correctly, expected outcomes should be achieved with little variation. Discipline must go further than this. Personnel must also be given the authority, or the power to make final decisions to complete their assignments correctly. This is important as it will be these individuals who have the responsibility for making recommended improvements and maintaining them in the future. Without authority, there cannot be accountability, which is the state of being totally answerable for the satisfactory completion of a specific assignment. Namely, accountability is responsibility coupled with authority. This has sometimes been referred to as quality at the source. It should be emphasized that the person who knows best whether or not a job has been done right and for doing it correctly should be the person doing the job.
There must be checks at various managerial levels creating a ‘network of support.’10 This network consists of levels: worker, shift supervisor, plant manager, and so forth. Each level must support its immediate lower level with standardized job responsibilities and authority to take corrective action. Standardized work enables an ability to focus on process. This leads to not only expected output being achieved, but an ability to subsequently strive for improving expected outcomes. Standardization is an important precursor to kaizen. However, it must be remembered that hierarchies or layers of management can stifle participation, so care must be taken to emphasize responsibility of decisions and corrective actions.
The Process of Change
As noted earlier, leading involves establishing direction that requires developing the vision and choosing competing strategies for achieving the results or producing the changes needed. Change itself necessitates adaptation and many people inherently resist change because it is disruptive and intrusive that upsets the balance of stability.11 Company culture often acts as a barrier to change as some people get comfortable with day-to-day routines. This is one significant reason why leadership is critical to the success of Lean Management.
Change itself is not easy. Machiavelli is acknowledged for noting that there is nothing more difficult to plan, more doubtful of success, more dangerous to manage than the creation of a new system. The innovator has the enmity of all who profit by the preservation of the old system and only lukewarm defenders by those who would gain by the new system.12
The process of implementing change typically proceeds in a stepwise manner.13 First, process-based change in capabilities is instilled internally in a localized, single set of related (typically sequential) transformation activities. For example, this can be as simple as the outcome of experimentation or PDCA (Plan, Do, Check, Act; see Section ‘Plan-Do-Check-Act’); or, this can be the outcome of a kaizen event. This typically involves a small group of 1–10 individuals. It is important that individuals working in the area of local change understand and largely agree with the importance and the need for change that is easier for a small group.
When subordinates identify the need for change in response to problems or opportunities, see investigations and associated responses, experience improvements that change brings, resistance to change diminishes. Success allows further improvement; it can serve as a platform that enables greater buy-in and participation. Once mastered, the firm will seek to integrate and coordinate these improved capabilities across a broader set of several activities or systems within the firm. This is the second phase of change that involves a greater number of individuals.
The third phase of change further broadens improvement allowing even greater participation. Embedding these improvement capabilities within the routines and knowledge of the entire firm, and making them multifunctional, organizational-based capabilities follows as the third phase. Specific practices or tools such as Hoshin planning or value stream mapping may be quite useful in these later change phases.
Lastly, in the fourth phase, world-class firms will seek to enlarge these improvements into network-based capabilities that reach outside the limits of the transformation process in order to encompass the value chain network. In this phase, downstream customers and upstream suppliers are typically engaged in the improvement process.
The process of improvement for most is slow, but is typically contagious. It is important to manage expectations because it can be slow. It is usually better to reduce the possibility of discouragement that encourages withdrawal from improvement efforts. Eventually, it must engage everyone, both internally and externally.
Standardization of Methods for Variance Reduction
There is an important saying that is useful to keep in mind during Lean implementations, namely ‘there is more than one way to do it.’ Although this suggests that there usually exists many ways to perform a task, there should be only one standardized company way to perform it. Standardization, or one outcome regardless of who performs the task, reduces variability. Take the case where a company operates a 10-stage, sequential process. If the operator for each successive process stage performs his task in any one of three ways, then there are 59,049 possible outcomes. Furthermore, as a product moves along a process, variation tends to compound.
Achieving standardization in processes is vital for achieving process outcome stability. Process outcome stability promotes the ability to understand both the ability and potential benefits ability of improvement efforts. However, it must be recognized that standardization does allow for change. Change, either small, incremental improvements or significant (radical) breakthrough improvements, comes about through experimentation. To correctly assess experimental outcomes, process stability must have been achieved.
The culture of a Lean environment must recognize the importance of adopting company standards that enhance stability efforts as well as encourage experimentation. The opportunity to experiment must be requested and it must follow a scientific management approach. This approach begins with the development of a hypothesis as the first step. The second step develops an experiment, complete with decision variables and performance metrics, to be carried out to assess the hypothesis. The third step represents conducting the experiment, during which one decision variable is manipulated at a time such that performance differences may be attributed back to this decision variable. The fourth step follows with the results evaluation.
A culture that promotes experimentation ultimately leads to greater improvement discovery. However, it must be recognized that experimentation leads to failures and mistakes. It is important for the culture of an organization to understand that failures and mistakes do offer benefits in the form of valuable learning opportunities. Failures and mistakes, although potentially costly, promote organizational learning as everyone can share in the knowledge. Repeating failures and mistakes can then be avoided by everyone else if the learning is shared. The appropriate organizational culture has not been established if failures or mistakes are hidden because of threats. Hidden failures and mistakes suggest a fearful environment. Furthermore, even when not visible, leaders should seek out problems and subsequently strive to eliminate causes. This will drive even further improvement.
Plan-Do-Check-Act
A valuable approach for discovering continuous improvement is Plan-Do-Check-Act (PDCA). When embedded in one's daily practices, PDCA can provide a clearer understanding of current system performance. It is also known as the Deming circle (cycle or wheel), Shewhart cycle, Plan-Do-Study-Act (PDSA), Six Sigma's acronym of DMAIC (Design, Measure, Analyze, Improve, Control), as well as other acronyms.
PDCA represents an iterative, four-step problem-solving process. The four steps proceed as follows:
Plan: Establish the objectives and processes necessary to deliver results in accordance with output specifications. By making the expected output the focus, it differs from other techniques in that the completeness and accuracy of specifications is also part of the improvement.
Do: Execute or implement the new processes.
Check: Measure or assess the new processes and compare execution versus the plan in order to ascertain any variances.
Act: Analyze the differences to determine their cause. Determine how or where to make changes that will lead to improvement. When a pass through these four steps does not result in the need to improve, alter the hypothesis to which PDCA is applied until there is an outcome that provides improvement.
The concept of PDCA is based on the scientific management approach noted above. PDCA goes one step further however. It looks for improvement that suggests iteration(s). The fundamental principle of PDCA is iteration. Once a hypothesis is confirmed or refuted, executing the cycle again will extend the knowledge or improvement even further bringing the organization closer to its goal(s). PDCA should be repeatedly executed in spirals of increasing knowledge or continuous improvement.
Hoshin Kanri and Nemawashi: Group Planning and Ladder Ball
It is during this stage that a strategic, group planning approach engaging all stakeholders should be pursued. This group planning process is sometimes referred to by its Japanese name Hoshin Kanri. Hoshin means compass, or pointing the direction. Kanri means management or control. The group planning process is a systematic planning methodology for defining key long-range objectives. Because it is a group process, it is designed to use the collective thinking power of all employees. It is intended to ensure that everyone in the organization is working toward the same goal(s).
The process utilizes a catchball or ladder ball approach because it is hierarchical. It cascades down through the organization, engaging and negotiating with process owners for ideas and feedback, while giving every stakeholder a voice. Hoshin Kanri represents a team-based approach for conducting work that has the potential of greatly enhancing the esprit de corps as people have an inherent need to control processes in which they must be engaged. This practice encourages greater stakeholder involvement that in turn can promote an environment more readily accepting of change.
The group planning process is a purposeful attempt to lay the strategic foundation by talking to the people concerned, gathering support and feedback, until a final consensus is reached. The Japanese term nemawashi is sometimes used to refer to this purposeful process as it means digging around the roots of a tree in order to prepare it for a transplant (change). Engaging others is an important step in any major change. Before any formal steps are taken, successful group planning enhances the possibility of change with the consent of all stakeholders. Although it is time consuming, the Hoshin Kanri process can turn skepticism and resistance into support, create cross-functional cooperation, fully engage the workforce in developing executable strategies, link improvement and corrective actions with financial results, and better enable the team to respond to changes and setbacks.
Furthermore, effective use of teams tends to offer a self-regulating feature. Teams commonly promote norms of productivity and behavior. Individual team members are expected to adhere to these norms through informal peer pressure or formal assessment mechanisms. The concept of a team-based approach is explored more fully in Chapter 4.
Wellness Programs
Employee wellness programs have recently recognized that machines are not the only valuable resource that needs regular maintenance. The most valuable resource of any enterprise is its people. Human resources must be available when needed, and therefore this resource requires regular maintenance as well. Wellness programs are employee-centered programs featuring proactive personal fitness programs, including physical examinations, substance abuse and group counseling, and individualized diet and exercise programs.
Wellness programs have been effective in improving employee productivity while reducing absenteeism and health care costs; however, cost/benefit evidence demonstrating wellness program value is limited because of their more recent developments. One example of a wellness program, occurring in Oakland County, MI, began in 2007. After 4 years, the program is providing measureable results. The year 2009 saw a 12% decline relative to 2008 in health insurance costs for the county.14
The Oakland County wellness program consists of health surveys, risk assessments, blood pressure screening, glucose tests, nutrition and exercise classes, and smoking cessation classes. During 2009, 56% of the employees were enrolled in the voluntary program. So, like many Lean initiatives, success has encouraged greater participation. As more evidence of cost effectiveness emerges, more wellness programs will similarly emerge.
Ergonomics
Ergonomics is concerned with safety and the ‘fit’ between people and their work. It takes account of the worker's capabilities and limitations in seeking to ensure that tasks, equipment, information, and the environment suit each worker. Ergonomic injuries comprise more than 50% of all workplace injuries in North America with the most important ergonomic risk factors being posture, force, and repetition, all of which depend on workplace design.15
The International Ergonomics Association divides ergonomics broadly into three domains: (a) physical ergonomics, which is concerned with human anatomy and delves into relevant topics such as working postures, materials handling, repetitive movements, lifting, workplace layout, as well as safety and health; (b) cognitive ergonomics, which is concerned with mental processes, mental workload, and mental workload among other relevant topics; and (c) organizational ergonomics, which is concerned with relevant topics that include work design, design of working times, teamwork, and quality management among other relevant topics.
The foundation of ergonomics appears to have emerged in ancient Greece. Evidence indicates that the Hellenic civilization in the 5th century BC used ergonomic principles in the design of their tools, jobs, and workplaces.16 Similarly, the Toyota Production System (TPS) uses ergonomic principles measuring success in four areas: safety and ergonomics, quality, delivery, and cost. The TPS philosophy suggests ergonomics is a precursor to delivering on objectives of quality, delivery, and low cost. Since ergonomics focuses on employee safety and comfort, it is clearly central to promoting an effective organizational culture.
Metrics and Rewards
Metrics and rewards are an integral element of a firm's culture. Metrics are used in a variety of ways. They are used to assess performance. They are also used to allocate assets and to assist in the selection of strategic alternatives. Metrics Effect decisions and actions as well as influence behavior. Interestingly, we've all witnessed the case where metrics can have subtle, counterproductive consequences. For example, if one evaluates assembly line workers simply based upon a piece rate, disastrous quality is likely to result. Therefore, choosing the correct set of metrics to achieve system goals is critical to success.
Similarly, rewards are used to encourage improvement and to reinforce good behavior. There are some useful practices to both avoid and to follow when designing a metric system for assessing performance and rewarding superior behavior or performance. Some useful guidelines for establishing metrics and reward systems are given in later sections.
People do possess the ability to learn. Learning simply means altering behavior. Metrics and rewards can alter behavior, so both are important. To effectively alter behavior, it must be understood that most people have an inherent need to immediately see their ideas have merit and their actions add value. Metrics and rewards used to assess performance and to reinforce appropriate behavior in moving a firm toward its objectives must be timely. Metrics must measure today's outcomes and rewards must follow soon after. People will tend to perform activities that have a more immediate impact if metrics are used to assess long-term performance (e.g., several years). Similarly, if rewards occur late, they will not offer good value.
To design an effective metric and rewards system, a thorough understanding of customers, employees, work processes, suppliers, and the underlying nature of each metric is essential.17 Since metrics and rewards alter behavior, understanding the wants, needs, and desires of customers is an essential input to designing and behavior altering system. Direct interviews enable customers to articulate this understanding and better enable a firm to prioritize system outcomes. It is imperative to promote this voice of the customer.
In a similar manner, employees are internal customers and have an important voice that should be heard. People have different motivating forces. Therefore, when designing a metrics and rewards system, one should consider the different types of rewards. There are positive and negative methods of reinforcement. Similarly, there are both intrinsic and extrinsic rewards. As noted earlier, intrinsic motivators refer to attributes of the work itself that drive people to engage and perform, provide energy, as well as create enthusiasm. Examples of intrinsic motivators are the leader's capability or expertise, the respect the work will afford, the challenge and interest of the work goal(s) or the ownership of the work, opportunities the work offers for learning and expanding one's skills, an opportunity to provide value, or the opportunity to work with friends or respected colleagues. Again, it has been observed that challenging work goals that are clear and specific are the single best intrinsic motivators.18 It is important to understand that intrinsic rewards can have significant monetary value for subordinates. Many of these intrinsic rewards are low cost to firms but can offer high value to employees.
In contrast, extrinsic motivators refer to attributes or motivation sources outside of the work. Examples of extrinsic motivators are promotion possibilities, economic incentives, and the possibility of penalties. Less mature, younger workers often have greater or more immediate financial needs, and consequently relate better to economic incentives. Many of these extrinsic rewards can represent significant cost to firms and can be easily misunderstood by employees as something owed rather than an earned reward.
Metrics and subsequent rewards should be under the control of the individual. Metrics and outcome rewards that are dependent upon another individual(s) behavior may not effectively drive the desired behavior. People will gravitate toward activities they have full control over. However, it must be recognized that a mixture of both individual and group rewards is important. Individual rewards are important because group rewards offer reinforcement to all team members, some of whom may not have contributed. Group rewards are important because people tend to withdraw if they are not recognized for long-term efforts and individual rewards do not recognize all contributors. Group rewards also recognize and emphasize team performance. To afford control, individuals should be allowed to participate in metric and reward system design.
Metrics and rewards can have subtle, counterproductive consequences. For example, it may be possible to achieve target quality levels, but in doing so a firm can lose sight of a competing objective of low cost per unit. For instance, products can be overly engineered in order to achieve quality targets. Metrics and rewards that alter behavior must recognize all of a firm's intended objectives.
Prior to designing metrics and rewards system, an understanding of work processes should exist. A thorough understanding of the current state of a process or system, an example of which can include current cycle times, down times, inventory levels, material flow paths, and information flow paths, is intended to serve as a baseline to guide implementation efforts toward achieving a desired future state and to evaluate those efforts.
It is also important to have a systems perspective. It must be recognized that system elements, including customers, employees, work processes, suppliers, and even each metric exert interdependent influences on system metrics and resultant rewards. For example, customers may desire superior quality, but the chosen supplier may be experiencing pressures to reduce costs leading to reduced quality of incoming materials.
It is also important for metrics to be parsimonious. If the effort of a metric exceeds its usefulness, it is clearly not worth the collection effort. Data collection efforts can lead employees away from value-added activities. The process location, frequency of collection, and the extent of information collected must be predetermined. Data may be defects due to unmet specifications regarding characteristics such as length, width, height, weight, or volume. It may be flow interruptions due to late materials, poor machine reliability, missing tools, or unavailable operators. It may also reflect simple abnormalities. Regardless of the nature of the data, the information captured must be honest. It is easy for data to be distorted, biased, or skewed. We all know averages can be misleading. The metrics captured must be reliable for adjusting output for continuous improvement. Smaller time increments between data capture may bring issues to light sooner. It is difficult at best to determine an appropriate time interval, but as a rule of thumb, established and stable operations should use a smaller or more frequent increment. Similarly, if performance results are taken at more locations, it may be easier to pinpoint the source of variation.
Summary
Organizational culture refers to workplace environment that consists of values, beliefs, attitudes, practices, behaviors, norms, and habits. Culture is simply the way things are done in an organization. Leadership has the responsibility for establishing the culture by reinforcing appropriate behaviors that promote improvement and waste elimination change efforts. The process of change often proceeds in a stepwise manner. Small, localized efforts typically occur first and if successful, may eventually lead to larger scale, multifunctional, or even value chain network initiatives.
There are many contributing elements to organizational culture. Important elements impacting organizational culture examined in this chapter include:
Standardization of methods for reducing variability. Standardization does not refer to eliminating differences of opinion. Rather, a Lean environment should encourage the generation of different ideas. Standardization is aimed at eliminating variability that is encountered in the performance of a single activity.
Plan, Do, Check, and Act Cycle. This concept recognizes the important benefits to be derived from planning and checking (verifying) activities. Planning facilitates later accomplishment significantly shortening effective execution durations. Checking entails comparing actual execution versus planned execution so that learning and corrective action may be taken in the future.
Hoshin kanri and Nemawashi. All levels of planning, namely, strategic, tactical, and operational should be done following a group process. Although more time consuming, it promotes numerous benefits, including increased idea generation, greater plan support, subordinate development, enhanced morale, and the promotion of team-based norms of productivity.
Wellness programs. These programs recognize the value of people; the single most important asset of an organization.
Ergonomics. This promotes the safety, comfort, and productivity of employees.
Metrics and rewards. The measures and rewards used to assess and recognize the efforts of people eventually lead to directing employee behaviors. It is imperative to align these with initiative goals. Useful guidelines for establishing metric and reward programs have been noted.
Although the theme throughout this chapter has focused on organizational culture, it must also reflect the fact that business is increasingly conducted on a global scale today. This is true even for services as technology is increasingly making it easier to export a variety of services. Therefore, when discussing culture, one must be cognizant not only of organizational culture, but also of geographic culture.
Although the concept of varying global cultures goes beyond the scope of this book, multinational organizations must be cognizant of widely divergent local cultures and business practices to survive and thrive. Varying cultural differences represent change. Improvement practices, regardless of their origin, should always be encouraged and sought.