This article is an edited transcript of roundtable conversation about Continuous Improvement from the perspective of four of Enterprise Minnesota’s most knowledgeable consultants. They are David Ahlquist, Greg Hunsaker, John Connelly and Sam Gould.
Let’s say I’m a manufacturer who has heard about continuous improvement and lean for years, but I’ve never really taken the time to see how it could benefit my plant. What do you say?
John: Manufacturers, like most other organizations, are process oriented. And those processes are the critical components that help them move through what they want to deliver to their clients. There is always a customer at the other end of that process, and the customer defines its value: what they are willing to compensate for versus not. Meaning, every step inside that process is either valuable to the customer or not valuable. And once we identify those basics, we can act to either promote the value or eliminate the waste.
David: In my mind, lean has two sides. Part of it is about being efficient, but as important is the velocity—how you are flowing value to your customers. That’s what’s going to help you stay ahead of the competition.
How do you define value?
David: The customer defines value. It is the fundamental level that they are willing to pay. To service our customers well, we need to understand what they value.
Sam: Lean has the transformative power to get the full engagement of the people moving in a single direction, improving the company. Companies that have fully engaged employees are far more profitable than those without fully engaged employees.
John: Lean drives competitive advantage. All of our manufacturers need to keep continually getting better, being stronger than the competition. Many of them are successful where they are at. Their competitors are also successful but keep trying to improve. This is the basis for our manufacturers to follow—continually improve to maintain that competitive advantage.
Sam: Lean is a simple philosophy that anyone at any level in the organization can understand. It is continually doing your best, which is deceptively simple. Everyone knows their job; they know how they struggled yesterday, and they know how to do things better tomorrow. It’s easy for workers on the floor to explain to you the key elements in having a good day. We want them to transform their thinking into asking, “What does it require to have a better day?” And that’s looking forward to improvement. There is a house of lean that includes value-stream mapping, sometimes plant layout, looking at cell layouts, the 5S strategy—sort, set in order, shine, standardize, and sustain—so that’s where most people go. But the thing to look at is how you express out the waste of the non-value added activities going on in your business, the ones that don’t contribute to delivering your product, or delivering value to the customer as they perceive value.
David: Maximizing value starts with an operating strategy—how we optimize and manage the value streams, the way we do business. Just as important, we must engage the people who are involved in the process to continually improve the utilization of our existing resources to minimize non-value added activities.
Talk about how that contributes to competitive value.
John: Continuous improvement is the crux of that. Every organization gets better little by little every day. Sometimes, they do it unconsciously. We want our clients to be as conscious and aggressive and successful as they can be because we know all their competitors are also working on getting better. We do processes, we know who customers are, we want to be more efficient, do better and add value, and we want to do it faster than any of the other alternatives our customers have.
Greg: One element, too, is that the company knows what’s essential to being profitable and communicates it to the people on the floor—who are doing the value add—so they know what to improve. So, communicating as a strategy is vital for continual improvement. And a lot of times it gets missed.
THE SKILLS GAP
How is continuous improvement an essential strategy in the battle for employees?
Sam: Strategy sets the stage of where the company wants to go, and the tactics from 5S are what we use to express out non-value added activities, and to create higher value, whether it’s through people or the process. It’s usually the standard way in which we deliver a predicted outcome. And the company that can predict its outcome regarding on-time deliveries, and the value of what’s delivered to the customer, they win in the marketplace, especially if they can get there at a lower cost.
The great strength of the Toyota production system is it makes everyone a problem solver. Best practices set a standard for creating work instructions on the floor. Job instructions express out the rework and the scrap and those things that come from that. Transforming workplace relationships is another way to get employees to create higher value for the company.
And we do the same thing with all of our processes: best methods pick apart your processes into their smallest components and put them back together in ways that create higher value for the company. Each one of these tactics can build a better competitive advantage.
David: Everyone is having to do more with fewer employees. It’s harder to attract employees, and a poorly-organized workplace, with a lot of waste in it, turns off workers.
The frustrating part of a worker’s day is the time he or she spends fixing things and putting out fires, the waste. The subtle advantage of an effective lean program is employees can enjoy a quieter, more stable workplace. I’ve had companies describe how after candidates take a plant tour, they’ve come back and said, “No, thank you. This just doesn’t look like a place I want to work. It’s not organized, and it doesn’t look professional.” It can make a big difference when trying to hire new staff.
Does the urgency of workforce challenges make your clients think more about continuous improvement as a strategy rather than a series of one-off tactics?
John: That’s a connection we want to help them make. One is through efficiency: we have to achieve better results from the same resources. Next, we have to establish a culture that helps retain employees because they’re actively engaged in what we do. And third, we take the chaos out of processes. We stabilize them to the point where we can consider automation to replace some of those basic functions.
Greg: Engagement is important. Up-and-comers want a sense of belonging. They don’t want to just walk in the door, punch a clock, and then stand in front of a machine. They want to feel like they are part of something. Giving them that can be a strategy to retain people and maybe even acquire new employees who will stay with your company for extended periods of time. Ultimately, lean is a valuable way to show respect for your people. They live on that floor for 8 to 10 or 12 hours a day. We should use our power to show their ideas mean something. We don’t want them to check their brains at the door. We want them to be productive, lean advocates for the company.
Sam: Respect is a crucial element. Let’s say you have a new worker who is struggling. You can say, “You’re not meeting the consistency we’re looking for, you’re not doing this right, so out you go. We’re going to find you a dust mop somewhere.” Or, you can look to find the full potential of that employee. And when you use that tactic, you’re looking to see what value that person can bring to the organization. That’s a conversation that will help you make a low performer a 90/100 percent person. That same tactic can help your high performers increase their value.
Lean can engage employees by treating them with respect. When you’re elevating a person’s ability to perform, instead of poking him or her in the eye with a sharp stick, he or she will become more engaged. And that is contagious for the rest of the workforce.
This is a nicely done segue from Lean 1.0 to 2.0. Describe the process of that evolution.
John: We all talk about Lean 1.0 being method and tool focused. So, there’s a lot of content, there’s a lot of knowledge about those methods and about those processes. And what I hear in my colleagues’ comments right now is that it’s more important how people apply those concepts, apply that knowledge. The significant difference is moving from knowledge and methods and tools to people who are engaged. They are developed. They can see waste. They understand problem-solving. They are committed to making change and empowered to put those changes in place.
Does the strategic emphasis on people make it more or less relevant to CEOs and managers?
David: Many companies have been frustrated by lean not taking hold and expanding within a company. It sounds simple, but getting everyone pushing in the same direction can be challenging. Lean 2.0 provides a framework to engage more of the staff and manage improvement on an ongoing basis.
We’ve got to get them an environment that supports and drives improvement with daily feedback, and the recognition and support of management—which can take a little bit of time. We just don’t want to say, “You’re underperforming;” we want to give them a toolset, understanding, and a little time so they can move forward and slowly chip away at those non-value added tasks.
Sam, you’ve talked about the institutional “C.A.V.E. man” attitudes at companies that can subvert continuous improvement. Is it still a problem?
Sam: The C.A.V.E. man is the “Citizen Against Virtually Everything.” If they are not converted to the value of the rising generation, they will be run off. It’s even a greater divide today than before. When managers see the churn of the rising workforce, they find that the older generation is reluctant to invest time and transfer knowledge to the new employees due to the high attrition rate.
I heard one crusty old fellow ask a new person: “Is there anything you know how to do?” The new person didn’t come back from lunch. When I talked to him about it, he said, “Okay, so we hire a top person who just graduated from a technical training program in welding. He gets to the floor here, and he doesn’t know how to use a tape measure. It’s just impossible.”
I said, “Are you telling me, that this top graduate is no good because he doesn’t know how to use a tape measure? Couldn’t you teach him how to use one? How hard is that?”
It’s a matter of looking at their potential, not their inadequacies. It’s the same thing in processes. Most people think that 90 percent of their problems are their people. That’s not right; 95 percent of their problems are the processes, not the people.
Lean 2.0, instead of looking at tools and methods to express out waste, looks at how we can create higher value by counting on the people in the process. We focus mostly on people because they are the ones who will create that value, and we have to build that culture. It is crucial, for example, to make a culture around job safety. If the rising generation feels unsafe, they won’t stay. So, the important thing is to set the hook where we have near misses—our factories are pregnant with near misses. We have to help them see and prevent a near miss. That way, they feel like they can make their workplace safe, not only for themselves but for everybody. Yes, they get paid the same as everybody else, but the day’s a lot more fun. The rising generation has to understand the value that they can bring, or they’re not going to be there very long.
That’s a key component: lean allows them to see their value, how they fit into the organization and how they can sustain the growth of the organization.
David: Worse than a C.A.V.E. person is someone who is disengaged and no longer cares. They’ve given up. I find the reason a lot of C.A.V.E. people push back is because they actually care about the process. They’ve seen things that work, and they’re worried that change is going to create more significant headaches and more waste for them. Change is always hard, and we’ve always had this problem. People don’t naturally embrace change. Change isn’t always managed well; there isn’t follow on, there isn’t accountability. An effective lean program understands that. Like in a good Kaizen event, you get people involved, you address the roadblocks, you address all the problems that C.A.V.E. people bring up. If you can engage the C.A.V.E. people—Sam loves to say this—you can turn your biggest detractors into your biggest supporters. It’s not easy to do, but we need to set up an environment where we make it easy for changes to happen.
Sam: When I was taught lean, I was told that you want to jettison the C.A.V.E. man as quickly as you can. I thought that was disrespectful because I’m a C.A.V.E. man. This isn’t going to work if I have to get rid of myself first, okay. But it allowed me to think about C.A.V.E. men more deeply. They’re the ones asking the questions that you’re not ready to answer, and that can be frustrating. But what they’re really getting to is, what value are you trying to deliver through this activity? They’ve been through a lot of activities that didn’t perform. They know that just saying it doesn’t mean anything. They won’t see value until they feel it, smell it, hold it, and see it in action. I’ve learned that you don’t jettison the C.A.V.E. man. In fact, you don’t leave on your journey without one, because they’re the ones who will bring the ballast to the lean journey conveyance.
These people tend to be natural leaders. They interface with a lot of people; they have connections that are both political and social. A converted C.A.V.E. man will deliver ten times the value of an early adopter. Not only that, they will do something you might not be able to: they will convert the other C.A.V.E. men. So, that crusty group at the top? Don’t ignore them and hope they retire, because when they do retire, they’re going take along a lot of value you will have a hard time recovering.
John: It’s interesting because the passion behind that resistance probably came from a commitment to the success of the current state. So, without seeing the reason and the value for the future state, they hold onto the current state. That’s different than people who just oppose things.
What about measurability? I suspect many manufacturers want to know how to measure the value of lean. Is that sometimes difficult? For example, in safety, how do you measure an accident that didn’t happen?
John: That specific example may be a challenge, but more broadly, lean is one of the more measurable aspects of our four puzzle pieces. I think actual measurement in continuous improvement is one of the simpler things to get to, compared to other improvement opportunities.
It’s because we’re taking a look at what resources go into a process and those resources have value attached to the dollars of materials or the dollars of time. When we come to the output of the process we can take a look and say, “What did we save here?” More importantly, what value did we add back to the customer at the end of the process?
Sam: It’s very measurable. You do your charter that actually talks about the business case and what the return on investment is going to be. I then use that charter as a contract. So, at the end of the three days, they sign up for it through their signatures. Just an example: there was a company where one element was that this event would improve their profit margin by a half percent. That’s huge. They had the hardest time putting their name to that. That’s what I’m going to guarantee, right? But we heard them express themselves recently, that right now it’s at one and a half percent. It’s three times what they previously could hardly swallow. Well executed.
Greg: Another person stood up and said, “I would die for that.” She was from another company that was there, and she was impressed they got that much out of that improvement. She said, “I would kill for that.”
How do you respond to manufacturers who say they don’t have time for lean, they are spending all their time trying to keep up with capacity?
David: It’s a challenge, but we want them to understand whether they’re using their employees and equipment to the best extent possible. When I go to a company that has a machining center that’s constrained, we ask, “How well are you using it?”
“Oh, we’re using it, we’re scheduling, we’re paying attention.”
I then ask, “How well are you really using it?”
We’ll do a simple analysis: What’s the green light time? When is the machine spindle turning? When are they making parts? It’s very common to discover the machine is only producing value less than 50 percent of the day. So, we ask, are we using our resources, or are we waiting for setups, for information from the office, or for materials? The first thing we want to do is make sure we’re using our current resources the best we can before we talk about a new plant, adding new equipment, or trying to hire new employees who are really hard to find these days.
Sam: Productivity is the creation of value at a lower cost. We’re looking at increasing productivity. Any increase in productivity yields capacity, so you’re regaining your capacity. Efficiency is a result. What we’re looking at is productivity that delivers to that result.
John: There’s an important tangent here. The measurements within continuous improvement and the efforts to make the process as productive as possible can also evaluate the mix of work. Which components are the most profitable? If we can identify some segments that aren’t as profitable as we want, that’s a way to free up capacity. We can switch to the more valuable components of what we offer.
Greg: I’ve gone on tours when clients have said, “I wish I had two more of these machines.” I said, “So you have a machine constraint?” When I asked how many hours the client ran the machine each day, he said, “We only have one shift.” That identified some of the confusion. If you’re not running 24/5 or 24/7, you don’t have a machine constraint, you have a labor constraint. Sometimes they focus on the machines when it turns out to be labor. How do they measure that? They may not even use that for scheduling purposes because they genuinely don’t know what the capacity is.
Explain the concept of the standard work mode concerning continuous improvement.
David: If we don’t have standard work, we can’t improve the process. The classic lean quote from Taiichi Ohno is: “Where there is no standard there can be no kaizen (improvement).” To get people up to speed on best practices, we need to understand what these key elements are and share them. Too much documentation is worse than no documentation because people don’t pay attention to it. We want to break it down to the key points and then train to those key points. Then we can have training go a little more smoothly, and now we can have continuous improvement because we can see how it’s working.
John, you talk about a concept of “seeking the abnormal.” What do you mean by that?
John: First of all, I enjoy the reaction that I get from clients when I suggest they seek the abnormal as a strategy. I’ll either get a smile or a wrinkled-up face. One client related it to Abby Normal in Young Frankenstein, the brain in the jar—I love being remembered no matter how it happens.
The concept here is we want lean leaders to go where the process is performed. Don’t wait for reports; go where the process is completed and look for the abnormal. And the only way you can see abnormal is to know what normal is. And the only way to know normal is to be familiar with the measurements of the process. When you know normal, you can stand in front of a process and reach only two conclusions about abnormal. One is performance below normal, and then we jump right into how fast we can problem solve to return the process to normal. The other abnormal condition is we might actually see performance above normal. And the fantastic part about that is we can capture what made this above normal and make that the new standard, the new normal. Which is why I love the idea of seeking the abnormal because both of the two reactions put us in a better position.
On top of that, describe what you mean by your clients should think about continuous improvement regarding how customers feel.
John: Here’s an example. I was with a client who was telling me about how they would 5S their truck garage. I asked, “Why would you bother 5Sing the truck garage?” expecting an indignant response. What I got was excitement. “If we deal with that, we’ll get truck repairs and truck inspections in and out faster, and that will wholly support our commitment to turn around the delivery time to our clients.” That’s exactly what we’re after. When you can see a process—and more important than an initiative is when the customer for that initiative says, “Wow! This is better!”—I think that’s an excellent indicator of the prioritization you did for your initiatives.
Sam: Taiichi Ohno once said, “The worst waste is the waste that you don’t see.” Someone else said, “Progress stops when you’re satisfied.” If you can’t see abnormal, you’re satisfied, and progress is not happening. So, we try to develop lean eyes, the ability to see. That’s what we’re trying to do with lean really—it is the skill and ability to look at the things you think are normal and ferret out those things that are not normal.
How difficult is it to empower employees to see waste?
Greg: They may see it, but they may not know that it’s a waste because they don’t want to come to work and have a stressful day. So, they may create hidden factories within the factory that make their day easier but tell no one. That allows variation in the process. First shift does it one way; the second shift does it another way. And the third shift comes in, and says, “What the heck did first and second shift do? They’re doing it all wrong.” So, they make hidden factories to make their days easier and better, but they don’t communicate. There’s no engagement throughout the entire company. They already do it, but they don’t understand what they’re actually doing.
Sam: I was working with quite a large company, and it’s not a clean place by any means, so at the end of their shift, the employees were blowing themselves off. But from a safety standpoint, you’ll blow something in your eye or in somebody else’s eye. That’s dangerous, but I couldn’t get anybody’s attention. When they were looking at buying another compressed air system because the one they had could not keep up, we taught them how to find out when it runs out of capacity. Well, when do you think it runs out of capacity? At shift change, because they’re using that resource. And then they’re at a teachable moment. You teach them it takes seven electrical horsepower to create every pneumatic or compressed air horsepower. You’re squandering something that people think is free. It’s not free. They’ll turn the lights off, but they’ll leave a hose hissing in the corner—and they’re just hissing away money. It’s costing $3,000 to $5,000 a year.
John: You’re asking how to know what to look for. You can’t be where it always happens, and yet there’s a mindset about this. We talked about measurements. I can’t see an error if I don’t know what to compare it to. I have to know what it’s supposed to be. And then, we add visual management on top of it because we can’t always be there to check the measures, but if we’re continually reporting the critical components where everybody can see them, then it’s much easier to go where the process is performed and observe whether it’s operating normally or not.
David: There can be challenges with employees appreciating what’s value added because most employees get paid the same whether they’re doing value added or non-value added work. They just see it as part of the day. When we have bad quality, everyone understands that’s non-value added, but there are a lot of subtle things like setups, filling out paperwork, and staff meetings, which are currently necessary, but non-value added. So, we need to train staff on the different types of waste and provide timely feedback on area performance. With visual feedback, we want anyone to be able to walk up to a work area and in six seconds or less understand how we are doing today on cost, quality, and service. Now we can have a discussion about addressing what is getting in the way of staff doing the real work—the eight deadly wastes. If we’re all going to make tomorrow better than today, our staff needs feedback to tell us how we’re doing today.
Looking more inwardly, how does continuous improvement help leverage the other puzzle pieces?
Sam: One is talent development. With business systems, your quality system integrates directly into it. And we should be doing this at a strategic level, seeking a competitive advantage. It’s key to the other puzzle pieces.
David: Business management systems require setting objectives at relevant functions. Good business management is to have aligning, cascading measures that go all the way down to the shop floor supporting our strategic objectives, as well as continuous improvement.
Sam: That strategic plan and the tactical tools we use to get there align all the way to the production floor. Instead of having your corporate dashboard in the leadership team room, you want to have that same model down on the production floor. You have what I call the quick wins: safety, quality, productivity, talent development, and continuous improvement before every shift.
Greg: So, that’s taking the strategic intent and tying it down to the bottom floor where all the rubber meets the road, where the real value is generated. I mean, the people on the production floor, they pay everybody’s salary. So, you’d like for them to support a bigger salary, and you’d want to pay them a more substantial salary because they’re bringing higher value to the company.
Featured story in the Winter 2018 issue of Enterprise Minnesota magazine.