The CEO needs to be good with Lean

Give Lean implementation the status of your company’s number one strategic intent, lead it from the top and see it succeed! A CEO with deep commitment to lean thinking and lean practice stands the best chance of leading his organisation to becoming ‘truly lean’ and explore even greater possibilities. CEO’s who have developed traditional management styles and interact with such others with traditional management ideas will succumb to trying them and struggle with successful lean implementation. Lean is a complete strategy and not merely a cost reduction or quality improvement program. Managements that treat this as a mere shop floor improvement program tend to delegate this work to their next level and kill the intent. If a CEO is not able to lead lean transformation for any reason, then he should delegate it to the next best leader who should be so empowered that the buck should stop with him in respect of every decision; irrespective of whether it pertains to marketing, purchase, quality, people or production.

Every leader leading lean transformation starts off as a novice, learning along the way through mistakes and experiments. He needs to have a strong vision of what the future can be with successful lean implementation, and that vision will help stay focused. Most people fail with the first principle itself which is the principle of Philosophy – “Base your management decisions on long term thinking (for gains and advantages), even at the expense of short term gains.” This is where almost everybody trips. Dual focus is not possible as at the time of decision making, you have to choose one of the two, and what you decide will be your ticket to success or otherwise.

As a random example; imagine you receive a large order and are bound to deliver good quality on time. You have got a set of lean processes going and seen its benefits, and need to keep implementing further steps in the process to advance on the lean journey. But what you do instead is panic and go back to old traditional thinking and style of managing the execution. Such actions not only kill the effort but sets you back by a long time, and if you are not attentive this becomes a precedent for your next and every subsequent order. Lean thinking and lean behavior is opposite to convention. So wanting to implement lean with traditional thinking will never work. Lean requires engaging people with trust right down to the last workman, traditional hierarchy of command and control does not work here.

Thinking and behavior in an organisation is influenced by its leaders; they build the culture. The leaders and their succession must place great emphasis on productivity, workmanship, quality, value etc. The leadership concept of the organisation must be to build an organisation that will serve customers for a long time, rather than build a product to make money, or to be merged, sold or liquidated at the whims and fancies or incapability of the management. Take the example of Toyota; its leaders believe that profits are the result of ‘making people who make good things that satisfy customers.’ Traditional corporate executives see things in a different way. They see that profits come from selling things, whether they are made good or not, by whoever, and whether or not they satisfy customers. While profits can be increased through productivity improvement, in traditional management productivity as a pursuit is secondary to the pursuit of profits. Production is incidental to money making, and thus it (Lean) garners little interest among corporate executives.

The traditional understanding is that lean is only for shop floor. This is a wrong understanding. Lean implementation starts with the customer demands and does ‘not’ end with delivery, that means start with the marketing function and its backend, then work upstream all the way. In companies where marketing function is discrete and disconnected to the value adding chain, it is likely to induce more wastes. It’s like a train whose engine goes jerky in a start stop motion, then there can be no smooth ride, meaning there will be problems in on-time deliveries, quality, inventory issues, shortages etc. To enable the value delivering value stream deliver efficiently it is necessary to set right the philosophy and practices in the company-customer interface called the marketing department. Traditional marketing uses forecasting as a method for projection, but the advanced operations research techniques still produce errors when compared with market behavior. These errors induce demand changes in product mix and quantities, causing failures and errors in delivery, inventory and quality. Lean companies use the actual market consumption in developing the sale rates for seeing into the future, and this is more reliable and accurate. CEO’s must know that starting their lean journey with Kaizen, TPM or VSM does not get the lean results because they miss this vital aspect.

How then should a CEO lead the lean journey if he does not know how? Today information is available in books and seminars. Best way is to study from a Sensei (teacher or lean consultant). Lean is best learnt and understood through practice (by doing it) and not through power points or simulated games, as these are templated. This means being more on the Gemba or with customer or supplier than being in the ivory tower. Lean leaders are where work is, developing ideas, experimenting and solving problems. Every organisation has enormous amounts of waste and even more unwanted is the information that’s flowing. Developing the ability to see waste which was never seen before is how one begins improvements. We do the craziest things in lean that are traditionally unimaginable – like reducing a fourteen-hour tool change to nine minutes! Ninety days’ commodity raw material inventory to cyclical four days! Bringing forty-five-day throughput time down to less than two days! Inventory levels down to single day consumption! Etc. So improvements will have to be worked on with vision, faith and persistence. The incremental results will build belief and propel your journey. The potentials are so great that organisations which never made profits have changed from the colour red to black in two-three quarters! So, developing knowledge of lean is important for the CEO as it enables him to clearly see the wastes that exist, and organise the organisation structure or its value stream and the problem solving activities. This will help to remove waste, become productive and grow. If the CEO does not have the lean knowledge, he will not understand the opportunities that exist and find it difficult to lead the transformational changes to become lean. That’s when the resistance to change will be high. So the CEO must learn the knowledge of lean to be able to lead change successfully.