Chapter 3

Lean Culture

Its Meaning and Creation

Anyone who has never made a mistake has never tried anything new.

—Albert Einstein

Imagination is more important than knowledge.

—Albert Einstein

Any intelligent fool can make things bigger and more complex. . . . It takes a touch of genius—and a lot of courage to move in the opposite direction.

—Albert Einstein

Some of the best lessons we ever learn are learned from our past ­mistakes. The error of the past is the wisdom and success of the future.

—Dale E. Turner

The underlying principle of lean is a customer-driven philosophy for organizationwide continuous or ongoing improvement and waste elimination. Improvement, or kaizen, which roughly translates as good (zen) change (kai), necessitates doing things differently. Kaizen is a learning approach based largely on evaluating past experiences through observation, questioning, experimentation, and making changes based upon data-driven results. The quotes noted in the preceding text convey a significant concept for the creation of a lean culture. Continuous improvement requires intellectual curiosity to innovate as well as courage because mistakes will occur. An important prerequisite for achieving change is a supportive organizational culture because the culture of an organization can act either as a facilitator or as an obstacle to change. Kaizen requires a supportive organizational 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 the previous chapter, 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 upsets the balance of stability.¹ The culture of an organization, which is created by organizational founders and leaders and 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 and sustaining it.

Organizational culture is a critical element when attempting to achieve continuous improvement. In an online survey of practitioners, respondents ranked lean culture as a critical element of lean organizations.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. Results of two surveys conducted in 2012 and 2014 found the company Clockwork Active Media as one of the best places for employees to work, in large part due to the organizational culture.³ 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 be a resounding “yes.” But remember, the four elements of lean systems, leadership, teams, practices and tools, and culture, are interdependent. Namely, the ability to answer “yes” to this question is why leadership is the keystone to lean management as founders and leaders create the culture.

This chapter begins with an examination of culture. It follows by exploring a stepwise process for implementing change. The chapter concludes with a discussion of nine system elements that can promote a more entrepreneurial culture.

Organizational Culture Defined

Culture itself refers to a set of assumptions that are learned over a long-term time horizon. The assumptions serve to guide overt attitudes and practices of a group such as a team.⁴ Culture manifests itself in the form of shared elements including company documents, norms of behavior, beliefs, values, metrics, and rewards. These shared elements are causal determinants of attitudes and practices. Organizational culture refers to these shared elements in a workplace environment. It is the principled atmosphere of the system. Simply put, it is the way things are done in an organization.⁵

The culture of an organization is created by founders and current leaders. However, it is developed from reinforced behaviors.⁶ The most important source of reinforcement is leadership. This is one reason 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.⁷

Organizational culture is composed of day-to-day practices and behaviors.⁸ 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, workplace health and safety, and the recognition that lean is a lifelong path of ­continuous improvement, which if pursued honestly and diligently promotes a ­culture with energy, focus, and longevity.

The creation of a lean culture is an inherently iterative, ongoing process. It is not a onetime event. It is infused with both an entrepreneurial spirit and discipline. The long-term maintenance of continuous improvement activities requires that an organizational culture be produced by individuals who embrace change.⁹ Namely, an important aspect of continuous improvement avoids bureaucracy and hierarchy, yet expects discipline. It 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. Systems attempt to reduce dissonance and maintain the status quo.¹⁰ Cultures also provide stability and comfort, which may make change more difficult.¹¹ Furthermore, as organizations grow over time, depending upon leader choices, they will at times become more bureaucratic with vertical functional structures and horizontal management layers, which serve to impede change. A lean culture must promote creativity, involvement, experimentation, and new thinking. An entrepreneurial spirit can promote improved ­productivity, quality, lowered cost, shortened delivery time, enhanced safety and ­environment, and improved morale.

Lean culture is disciplined thought complete with the brutal facts of reality so 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 facilitate achieving this environment by adopting the following four suggestions.¹²

1. Possess the humility to acknowledge that one often does not yet understand enough to have the solutions to problems.
2. Investigate with questions (e.g., asking the “5 Whys”) that will lead to the best possible insights.
3. Engage in dialogue and debate, not coercion, as a means to search for the best answers.
4. Conduct investigations without blame, which encourages openness and participation.

Lean culture will grow from the consistent effort of a constant, disciplined approach.¹³ Disciplined actions lead to an opportunity for an enhanced focus on a process. This includes a daily routine, which 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 doing it correctly should be the person doing the job.

There must be checks at various managerial levels creating a “network of support.”¹⁴ This network consists of levels: worker, shift supervisor, plant manager, and so on. 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 also 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, which 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, which upsets the balance of stability.¹⁵ 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 managing lean.

Change itself is not easy. Machiavelli is acknowledged for noting that there is nothing more difficult to plan, more doubtful of success, and 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 defense by those who would gain by the new system.¹⁶

The process of implementing change typically proceeds in a stepwise manner.¹⁷ 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 Plan-Do-Check-Act (PDCA; see section on PDCA and Hansei in this chapter). Or, this can be the outcome of a kaizen event. This typically involves a small group of 1 to 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, which is easier for a small group.

Resistance to change diminishes when subordinates identify the need for change in response to problems or opportunities, see investigations and associated responses, or experience improvements that change brings. Success allows further improvement. Success 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, which involves a greater number of individuals.

The third phase of change broadens improvement further, allowing even greater participation. Embedding these improvement capabilities within the routines and knowledge of the entire firm, making them multifunctional, organizational-based capabilities follow 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.

Finally, 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.

Creating and Maintaining a Lean Culture

The process of improvement for most is slow but is typically contagious. It is important to manage expectations because change can be slow. It is usually better to reduce the possibility of discouragement, which encourages withdrawal from improvement efforts. Expectations can be managed with a posted timetable that identifies when one can expect results. Eventually improvement must engage everyone, both internally and externally.

Successful organizational adaption and the creation of a lean culture is increasingly reliant on generating employee support and enthusiasm for change.¹⁸ A lean culture must be hostile to complacency, continuously seeking improvement by learning through evaluating past experiences with observation, questioning, experimentation, and making changes based upon data-driven results, all without demoralizing people. The inherent nature of a lean culture is depicted in Figure 3.1.

It is the organization’s leadership that must reduce ambivalence to change and create the environment that possesses the enthusiasm and support, which encourages change from subordinates through participation and agreement. In order for change to be permanent, it must be agreed upon and supported by those who will enact it.

Figure 3.1 The inherent nature of a lean culture

Organizational founders and key leaders play a central role in establishing organizational culture through a variety of mechanisms that establish and promote the assumptions that guide team member attitudes and practical choices.¹⁹ A lean culture is created and maintained by engaging, encouraging, empowering, investing in, and rewarding one’s team. Nine mechanisms that play a vital role in today’s organizations for the creation of a kaizen culture are shown in Table 3.1. These mechanisms are intended to promote subordinate understanding of the assumptions, which eventually shape attitudes and practices. It should be noted that these mechanisms are not independent but rather interdependent. There are common means for establishing several of these mechanisms in a simultaneous fashion. Each of these lean culture creation mechanisms is explored in the text that follows.

Table 3.1 Nine mechanisms for creating a lean culture

Agreement of a Shared Long-Term Vision, Goals, and Strategies

Leadership is best defined as effecting change.²⁰ In order to effect change, leaders must align the efforts of resources toward a shared vision and goals, which may be challenging in organizationally and politically complex cultures, as processes often cross functional boundaries, utilize shared functional resources, rely upon comingled functional budgets, and ­utilize varying metrics. However, improvement necessitates change, which implies there is a perceived or observed gap between the current system state and the desired future system state. Attaining agreement among various stakeholders in order to address performance gaps is essential for establishing a lean culture. Ambivalence to change makes attaining agreement and resultant improvement initiatives difficult as those who perceive benefits by maintaining the status quo may resist change.

Achieving agreement of a shared long-term vision, goals, and strategies places a premium upon the leader’s ability to communicate the need and attain the shared vision that is necessary for a commitment to change. Example mechanisms that play a vital role in attaining this agreement are one’s leadership style, communication skills, as well as various company documents.

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 there usually exist 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.

A lean culture depends upon continuous improvement. A lean culture must encourage experimentation and innovation in order to achieve improvement. It must be observed that lean culture comprises day-to-day practices and behaviors.²¹ However, the desire to experiment and innovate sometimes contradicts a lean culture’s stated rules and practices, which can be detrimental to lean initiatives.²² This can occur because the day-to-day practices and behaviors of a lean culture need to include standardization of methods. Namely, on any given day there needs to be recognition of the value for doing work following prescribed company policies and procedures in order to achieve consistent results. This statement may be best explained by a second example. Assume a company produces a single product possessing multiple specifications. A three-step process is utilized to produce it. Further, assume three shifts are utilized, given the volume of demand. This example may be explained pictorially using Figure 3.2.

For any single product, it is desirable to have an identical outcome for each copy. The company has identified a prescribed method for performing each operation, A, B, and C, in order to achieve this single outcome. However, assume each of the three workers on each of the three shifts is convinced that an alternative method will yield a better outcome. Should one perform this task using the prescribed company method or one’s own method? Using the prescribed company procedure at each operation for each shift should yield a single outcome. Using three alternative procedures (one for each worker on each shift) at each of the three successive workstations will yield 27 different outcomes (3 procedures × 3 workers × 3 workstations) or variations.

Figure 3.2 Variation example

The example above points out the importance of recognizing the value of performing work according to company standards. However, it also recognizes the importance of employees requesting permission to conduct an experiment following a scientific management approach. This approach begins with the development of a hypothesized improvement process as the first step. The second step develops an experiment, complete with decision variables and performance metrics, that is 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 so that performance differences may be attributed back to this decision variable. The fourth step follows with the results evaluation. Once the hypothesized method demonstrates an ability to enhance process results, it becomes the standardized company procedure. Achieving standardization in processes is vital for achieving process outcome stability. Process outcome stability promotes the ability to understand both the current state and potential benefits of improvement efforts. Namely, it must be recognized that standardization does allow for change. Change, either small, incremental improvements or significant (radical) breakthrough improvements, comes about through experimentation. In order to correctly assess experimental outcomes, process stability must have been achieved.

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.

PDCA and Hansei

A valuable approach for discovering continuous improvement is 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.

1. 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.
2. Do: Execute or implement the new processes.
3. Check: Measure or assess the new processes and compare execution versus the plan in order to ascertain any variances.
4. 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 in the preceding text. PDCA goes one step further, however. It looks for improvement, which 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 as shown in Figure 3.1.

Similar to PDCA is the Japanese practice of hansei, an important practice of lean cultures. The term means self-reflection. It acknowledges there is often an opportunity for improvement when team members can reflect honestly upon outcomes with modesty and humility. Similar to PDCA, hansei emphasizes identifying how the results of activity differed from expectations, acknowledging one’s mistake, and pledging future improvement. The desired outcome of the practice is identifying plans for ensuring the mistake will not occur again.

Hoshin Kanri and Nemawashi: Group Planning and Ladder Ball

As noted in an earlier chapter, participative management is a leadership style that engages subordinates. It is a strategic, group planning approach of engaging stakeholders. Allowing stakeholders to participate in the managerial decision-making process has been credited with an ability to raise motivation, increase readiness to accept change, improve decision quality, develop teamwork, improve morale, and further individuals’ managerial development. People have an inherent need to control, to some extent, processes in which they will be engaged.

Hoshin kanri is an example of a participative group planning process. It is a Japanese term where hoshin means compass or pointing the direction and kanri means management or control. The participative 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 catch ball 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, which has the potential for 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, which 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.

Participative management approaches can be time-consuming, and delegation is not a way of passing responsibility. Leaders should decide on their role prior to engaging the subordinate group. Additionally, leaders should articulate the extent of their involvement in any group decision-making process as well as indicating explicitly or implicitly the extent of the authority they are asking subordinates to assume in the decision-making process.

Experience and research indicates that high-performance teams are more likely to develop using participative approaches. Although there are exceptions, team performance also tends to improve when members volunteer, work full-time (vs. part-time), and in small teams (e.g., 10 or fewer members) for projects that have compelling objectives. 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 the next chapter.

Creation of a Learning Organization

Kaizen requires leaders to create a learning organization capable of quick adaptation. As noted earlier, kaizen is a learning approach based largely on evaluating past experiences through observation, questioning, and making subsequent changes. The best way to achieve this is to recognize four important characteristics of change. First, everyone has the ability to learn. Learning simply means modifying behaviors. Learning is often best accomplished by conducting performance investigations with open dialogue and debate, even confrontation, but not coercion, as a means to search for solutions. Investigating with questions often promotes a shared and more complete current state understanding, leading to better insight. Altering future behavior without assigning blame for first-time subpar performance will promote openness and participation and may ultimately lead to greater agreement. And, sharing accolades for superior past performance will promote a receptive culture.

Second, leaders must accept the stewardship and responsibility for transformation and must personally demonstrate a desire to learn through their own participation. All team members must possess the humility to acknowledge that a single person does not often understand enough to have all the solutions. And, after learning a lesson, students must become teachers and share the lesson with others. Leaders must create the environment that stimulates change by example.

Third, team members must see their workplace as a laboratory for experimentation, reflection, learning, and change. Leaders must demonstrate their support for experimentation, which entails the risk of failures and mistakes, as it enables discoveries. Although potentially costly, failures and mistakes promote valuable organizational learning where everyone can share in the knowledge. A lean culture has not been established if failures or mistakes are hidden because of perceived threats.

Fourth, change should be encouraged with a clear understanding of an organization’s current state, its ideal state, and the disparity between them. The importance of making change is critical to the long-term success of an organization. However, achieving change based upon a perceived gap between the current and ideal states overly simplifies the likelihood of success. Social and organizational processes operating within an enterprise typically bring about slow, time-consuming change and challenge success. Infrequently does change come about through abrupt innovation; rather, it most commonly occurs through small, incremental alterations, making long-term sustainable momentum challenging.

Promoting collaboration and information exchange facilitate innovation. Collaboration, information sharing, and resultant organization adaption is reliant upon choices such as decentralized decision making, flatter organizational structures, reduced bureaucracy, and lessened status differences among colleagues.²³ These choices should enhance the organizational knowledge base as well as promote a kaizen culture possessing an entrepreneurial spirit with greater creativity, involvement, and a willingness to experiment.

Recognizing One’s Team as an Asset

For decades, Toyota’s Production System (TPS) has referred to its team-based approach as respect for people. Championship teams combine good teamwork with individual skills.²⁴ A team-based approach promotes system goals more effectively than any group of individuals acting independently can. The logic for utilizing teams can be summed up by Aristotle’s idea that the whole is greater than the sum of the parts.²⁵

Kaizen activities, which typically require contributions from many individuals and functional disciplines, may be disruptive, often changing processes and threatening (or appearing to threaten) both corporate culture and customary ways of conducting work. Therefore, the creation, composition, and development of one’s team is critical to maintain momentum. Leaders should invest in individuals and teams, just like any other asset. When leaders recognize the team as an asset, it facilitates creating a learning organization. Investing in one’s team is another means for promoting a kaizen culture.

Effective working groups require a high level of respect and trust, which enhances the potential for superior team performance. The benefits of effective teams include greater initiative and team member commitment, higher job satisfaction and morale through a sense of belonging, fewer conflicts, and more successful initiatives. The consequences of dysfunctional teams include lower motivation, frequent conflict and disagreement, greater lack of respect, poor communication, and an increased likelihood of initiative failure.

Leaders must assess and understand team member capabilities before investing in one’s team. This enables leaders to better align people with their current capabilities as well as affording a more directed investment in team members’ training, education, and skills, including cross-training. Cross-training promotes benefits to the organization including enhanced flexibility and greater idea generation.

Lean leaders may develop and position subordinates for future success by delegating and sharing decision-making authority. Lean leaders will actively share information as well as solicit and listen to subordinate opinions. Demonstrating sensitivity and empathy and acting selflessly rather than selfishly engenders support as well as an ability to motivate, engage, and inspire. Sharing information fosters communication and teamwork. As noted earlier, a participative management style raises motivation, increases readiness to accept change, improves decision quality, develops teamwork, improves morale, and further promotes an individual’s development. Praising individual and team efforts as well as supporting and rewarding efforts and success also raises motivation, increases readiness to accept change, develops teamwork, and improves morale. Leaders who are effective for long-term horizons typically do not crave the limelight. Rather, they channel their ego and ambitions into the success of their subordinates and the organization. This approach pays long-term dividends.

Three salient points for the establishment of a team follow.²⁶ First, leaders should examine a potential team member’s inherent traits and characteristics, which are difficult to change or to learn, in addition to educational background, practical skills, specialized knowledge, and work experience. Although important, these latter items can be learned. Second, people with desirable inherent traits and characteristics may require less managerial and motivational effort, may more easily and more quickly adapt to a changing world, may more likely support needed changes in direction, and may unify behind decisions, regardless of parochial interests. Desirable personal traits and characteristics are especially valuable as firms alter course from the current state to pursue objectives associated with an ideal state. Third, establishing an agenda with the team creates team building, motivation, more solution options, develops leaders for the future, and increases the likelihood for agreement.

Beyond training, education, and skill enhancement, investing in one’s team can be done in additional ways. Once an appropriate team is formed, leaders must subsequently demonstrate respect by trusting workers. Problem solving requires team-based solutions, which should be provided by the personnel closest to the problem, those who implement the solution, and by those who provide needed resources and understand the larger competitive picture. Once employees understand their participation is essential, greater team member involvement in team-based ­methods such as cross-training programs, hoshin kanri, quality circles, kaizen and kaikaku events, and suggestion programs may be possible.

Wellness Programs

The maintenance of a kaizen culture can be enhanced with various employee-focused investments. 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 demonstration of wellness program value is limited because of their more recent development. One example of a wellness program, occurring in Oakland County, Michigan, began in 2007. After four years, the program is providing measureable results. The year 2009 saw a 12 percent decline relative to 2008 in health insurance costs for the county.²⁷

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 percent 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, another employee-focused investment, 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 percent 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.²⁸

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 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 fifth ­century BC used ergonomic principles in the design of their tools, jobs, and workplaces.²⁹ Similarly, 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 a lean 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 have 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 follow when designing a metric system for assessing performance and rewarding superior behavior or performance. In the following text are some useful guidelines for establishing metrics and reward systems.

People do possess the ability to learn. Learning simply means altering behavior. Metrics and rewards can alter behavior, so both are important. In order 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, which 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.

In order 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.³⁰ Since metrics and rewards alter behavior, understanding the wants, needs, and desires of customers is an essential input for designing a 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.³¹ 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 an 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 the behavior of another individual(s) 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. In order 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 metric and rewards systems, 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, downtimes, 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. Data may be flow interruptions due to late materials, poor machine reliability, missing tools, or unavailable operators. Data 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 a set of workplace assumptions that are learned over a long-term time horizon, which serve to guide overt attitudes and practices of a group. The culture of an organization 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 a lean culture by reinforcing appropriate behaviors, which 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

1. Agreement of a shared long-term vision, goals, and strategies. Attaining agreement among various stakeholders in order to address performance gaps is essential for establishing a lean culture. Ambivalence to change makes attaining agreement and resultant improvement initiatives difficult as those who perceive benefits by maintaining the status quo may resist change.
2. 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.
3. The PDCA 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.
4. Hoshin kanri and nemawashi. All levels of planning, 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.
5. Creation of a learning organization. Kaizen is a learning approach based largely on evaluating past experiences through observation, questioning, and making subsequent changes.
6. Recognizing one’s team as an asset. Recognizing one’s team as an asset and investing in one’s team facilitates creating a learning organization.
7. Wellness programs. These programs recognize the value of people, the single most important asset of an organization.
8. Ergonomics. This promotes the safety, comfort, and productivity of employees.
9. 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 the creation of a lean 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 services. Therefore, when discussing culture, one must be cognizant not only of organizational culture but also of geographic cultures.

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.