Daily Kaizen

Yesterday I spent some time talking with my new neighbor that moved in down the street.  We were making small talk and our conversation ended up moving to the economy.  As I listened to his powerful story I thought about how lucky I have been to work for a company that so far has avoided major layoffs in 2009,  but I also left feeling a heightened urgency.  The urgency coming from the knowledge that in the near term our company will face significant economic challenges (like all healthcare organizations) and yet it seems like we are not doing everything we can now to soften this impact.  We could learn a lot from what my neighbor shared with me (I asked permission and he read this before I posted) and I hope we take many of the actions they his company has. 

My neighbor works as a production manager for a family owned manufacturing company.  In a three month period in 2008 they had their revenue drop by more then 40%  and stay there after several years of record growth.  While the company was unable to avoid layoffs after a big initial reduction he told me the owners have done everything possible to save jobs.  He said that in the past cost improvement in the company was the job of management and there were usually a couple of big cost improvement strategies, usually focused on improving productivity in production areas or by outsourcing.  Most workers were kept in the dark about these improvements and would only be involved when they were asked to do something differently.  He said that once the initial layoff was completed management got together and tried to figure out where they could take out additional costs.  He said it became clear very quickly that management did not have any “new ideas.”  The way the company went about cost reductions activities in the past would not work into the future. 

At the same time staff were frustrated and fearful of what was coming in the future and management was not doing a good job communicating.  This weighed heavily on the President who in the past has a very good and trusting relationship with the workforce and he was frustrated that the workers did not understand how bad the situation was and why decisions were being made.  Given these conditions and not knowing what to do the President decided to set up a series of “townhall meetings” to educate the workforce on what was happening in the business.  The purpose of these meetings was basically to prepare the workforce for additional layoffs coming in the near term as the company burned through its cash.  The President and his team (including my neighbor) prepared a presentation and pulled together the first group of workers.  Once the management got done their presentation they asked for questions.  One of the workers raised his hand and asked “what can we do to help?”  This was not something the managers were expecting to be asked and they did not have a good answer.  While the management team was fumbling around for an answer someone else raised their hand and said “I have a couple of ideas”  And so it began…

Over the last year the company has created a “bottom up” cost reduction strategy that is called “No cost is too small.”  The focus of the strategy is to save jobs by engaging the workforce in reducing costs.  So far it has worked and several million dollars in saving have been identified.  Ideas have included:

• Reducing energy costs by more the 10,000k a month by simply turning machines off when they are not being used and by turning lights and computers off at night
• In-sourcing facility maintenance costs including production workers once per week bringing their law mowers to work to take care of the facility grounds
• Better using space in their facilities and reducing inventory that have allowed them to sell two warehouses
• More then a 50% reduction in scrap, because works are focused on making sure that every cost is accounted for
• The sales team has figured out ways to reduce travel costs by more then 50%
• etc.

What was most compelling to me was that the fact that the company had made the cost problem everyone’s problem.  When I think about my company as leaders we often communicate about the cost challenges of the future.  Yet, at the same time we don’t ask people to become involved in helping solve this problem.  We have all grown use to the small luxuries that we probably should be going without.  It is hard to believe that we will be successful with the big cost reduction strategies if with our actions we don’t treat the small cost opportunities with equal importance.  It time for us to make every cost a big deal and get everyone in the company involved in helping find ways to reduce them.

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We are in an interesting place right now as an organization.  Over the last couple of years we have made a great deal of progress with our Lean work in helping the organization improve at a much faster rate then in the past.  The company is growing and we are doing okay financially, but all indications point to significant challenges on the horizon.  There is a lot of uncertainty about what will happen with policy changes in healthcare and there is no doubt that we, like all healthcare organizations have costs that are too high and rising. 

 These challenges have been recognized by our leadership and most of the 2009 strategies are focused on making the organization more affordable.  Many of these strategies are making good progress, but conditions are changing all the time.  It is becoming clearer every day that everything we are doing is necessary, but also insufficient.  We may be improving faster then we ever have, but it still is not fast enough to meet the demands of the changing marketplace. 

 So how should the organization respond?  Should leadership begin the process of identifying a new list of strategies that are focused on affordability?  This is exactly the action that we have taken in the past and I am hoping it is not the direction we go now.  Our current system has asked a small group of critical managers to again and again carry the weight of strategic improvement forward.  These managers are already struggling with the pace and number of improvements that are underway.  Asking these same people to add additional improvements to their inventory does not seem like the answer.  Thus, I don’t think a group of senior leaders in a meeting room defining a new set of strategies is the answer.

 So what do we do differently in order to get a more substantial result?  I believe the answer is not in focusing on adding additional strategies, but instead getting more people in the organization engaged in the improvement process.  We need to focus on improving and making more robust our management and improvement systems.  As an organization we have used the Hoshin process to identify a handful (some may say a couple too many) of strategic improvements that need organizational resources and support to be achieved.  In addition to keeping these improvements going we need to make it the responsibility of every manager and all employees that they also need to contribute to the organizations success and then we need to provide them the methods and process to make this happen.

Taking this approach is what Toyota calls the Daily Management system where each day teams work to improve their routine processes a little bit and over time it adds up to much bigger improvements.  This system is based on platform of standard work and will also allow us to sustain the strategic improvements we make.  There are several places in the organization where we have a good start in putting this system in place, but most of the organization is either just getting started or not started at all. 

In order to get moving there are several things we can do now including:

• Making sure that we set improvement related goals for every manager in the company that relate to affordability (i.e. 1% improvement on run rate per quarter, 3% productivity improvement per quarter, etc.)
• Make sure that clear expectations are set for level of performance that is expected by all management and that there is consequence when it is not reached and there is a reward when it is! 
• Make sure we develop a robust redeployment process and policy and require that the highest performing team members be redeployed to a centralized pool of resources to support further improvement.  This means taking people out of the process once it is improved. 
• Standardize the definition and requirements of what is required to put a Daily Management system in place.  Ensure that we are ready to bring together all of the following elements into a succinct system:
  • Linked measurement
  • Visual Management
  • Manager standard work
  • Process standardization and improvement, etc. 
• Make sure that our Finance, Lean and HR resources are organized and ready to support managers throughout the organization in putting this system in place and that we have a programmatic approach. 
• Finally, reinforce the organizations standard calendar and make sure that all leaders are getting out of the conference room and into the gemba to make sure that the appropriate checking and coaching activities are taking place.

 Anyway, that is my advice.  Anyone have additions or advice?

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This weekend I was doing my best to explain to a friend what my job was as a Lean Sensei.  Not an easy task to explain to people that don’t understand Lean what it is I do, but I gave it a try anyway.  Much of our conversation revolved around what I do to help make leaders throughout the organization more capable.  How I focus on teaching them the Lean principles and techniques in order to make them more capable across the organization and within their function.  While this is not all that I do, it might be the most important work. 

My friend is an external consultant and told me that he felt sorry for internal consultants, because they had to work with the same people over a long period of time and they just couldn’t “walk away” from those that were not engaged.  I told him this is one of the things I like best about my job, because changing thinking is really challenging, but it is also really rewarding.  It takes trust and the ability to develop strong interpersonal relationships.  Yet, being an effective internal consultant also takes good judgment and perception.  You need to be able to see quickly if the leaders you are working with are engaged in the process and advancing or you risk wasting a lot of time.  As I reflected on this conversation I began to formulate a list of things I need to look for to determine if a leader is making progress at the beginning stages of our engagement.  I thought I would share my thinking and would love to hear from you if you have additional items.   

First, I think the easiest thing to measure at the early stages of an engagement to determine progress is how leaders are choosing to spend their time.  I can’t tell you how often I hear leaders talk about how dedicated they are to the process of improvement, but they continue to spend all their time in meetings away from the work.  Basically, they view their role as “a sponsor of Lean” and Lean is something “others need to do.”  Leaders that are engaged in the process will:

Ø      Begin to spend more and more of their time in the gemba seeking to understand what is happening and helping teams become more capable.  They protect their time in the gemba and meetings are a second priority.  They are constantly looking for ways to free up time to spend more time in the gemba

Ø      They don’t become what I call “victims to their calendar.”  When problems arise they swarm them.  They don’t wait until it is convenient for their calendar.  They show how serious they take problems with their feet not just their mouth. 

Ø      Many of the most effective leaders I know have given up their offices completely!

Second, leaders that are engaged in the process take their learning seriously.  They have a learning plan and they are good students.  These leaders are quick to sign up to participate in Lean improvement events, they visit other organization and they are constantly reading the newest Lean literature.  I know I am making progress with a leader when the process transitions from me as the consultant always having the list of questions when we meet to the leader having an equally complete list of questions for me. 

Third, leaders that are making progress should become more humble and transparent.  The more they learn the more they realize not only how much they don’t know, but also how many problems they have created within their areas.  They become more honest about their challenges and they are more willing to seek others help.  Additionally, they begin to see and understand process.  This shows them how their work connects with the work of other parts of the organization.  They know that their processes create problems for others and vice versa.  Thus they begin to reach across the lines to partner more cross-functionally with others to solve bigger system issues. 

Finally, I like to watch how effective the leaders are becoming with how they manage those that report to them.  There are three things I look for:

Ø      Are they always prepared for every interaction?  Have they gone to the workplace to see problems for themselves?  When the call a meeting to the have a purpose and a desired outcome?  Are they clear about what they expect and when they expect it?  These leaders no longer tolerate spending an hour in a meeting without and clear outcome.  They take everyone time serious and make sure it is used effectively. 

Ø      Have they begun to coach their teams?  Do they ask questions as opposed to give answers?  This is a challenge for anyone to learn, but are they trying. 

Ø      Do they have a system to follow-up in place?  If they ask a team member to get something done by a specific time are they consistent in following up.  Are they showing that they take their own expectations seriously?

Anyway, this list is by no means complete, but it is a set of things I look for.  For consultant out there reading this posting what would you add? 

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As our organization has moved forward on our Lean journey we have begun to integrate PDCA into much of our improvement related work.  In many parts of the organization we have moved out of the Plan, Do mindset and people have learned how to define the problem, identify root causes and then to check often to make sure they are on the right track.  It is exciting to see the progress we have made.  Yet, this progress has been mostly limited to improvement related work that is most often managed through a project mindset and mostly driven by our Hoshin process.   As we move forward it is important to begin to transition this learning into our routine processes so that every task we complete is an experiment that we are looking to learn from. 

At Toyota and other advanced Lean organizations you often hear them talk about PDCA being part of everything they do.  In other words, every product they make and every process along the way is managed through a PDCA mindset.  Thus the learning process is built into everything they do.  This is the foundation of what people call continuous improvement and in Lean terms is the Daily management system. 

Below I have given some thoughts on how to integrate PDCA into routine processes.  I hope this is helpful to those of you getting started on your Daily Management systems. 

Plan:  The plan for routine related processes is the standard we have established for the process based on customer requirements.  Basically, it is what we are expecting to happen if the process is completed to the appropriate level of expectation.  For a pharmacy it might be the amount of time it takes to fill a prescription.  For an office visit it might be that all of the opportunistic care is provided.  

Do: The Do is what happened as we completed the process.  How long did it take to fill the prescription?  Did all the appropriate care get provided?  In Lean this is where we focus on developing standard work in order to reduce variation and make capable our processes.  By putting in place standard work we are then able to compare the Plan with the Do to see if what we thought would happen did happen.  Was our hypothesis correct?

Checking: Checking is the process by which on a regular cadence (often every hour or several times an hour for routine processes) we check our Plan (standard) vs. the Do (what we accomplished) in order to determine if we have a gap.  Checking is where the learning and improvement opportunity is identified.  Checking is also the part of PDCA that is most often not completed on a consistent basis, because managers don’t have standard work.  Without checking your teams will not engage in the improvement process.  For pharmacy the checking process might take place every hour to determine if the team is meeting the wait time targets so that there is a chance to respond before it is too late. 

Adjust: The adjust come in effect when during our checking activity we determine that we either are not meeting or we are not going to meet our Plan (standard) and we now must adjust to get back on plan.  For pharmacy this might mean taking quick action to move people in or out of the process to respond to changes in demand for prescriptions.  As we gain more experience with adjusting teams will begin to develop standard adjustment depending on why the plan is off track.  As teams become more engaged they will move away from waiting for mangers to check and they will check themselves and adjust without being prompted. 

Overall, as we begin to integrate the PDCA into our daily processes we will greatly increase the number of people that are scientist within the organization.  Each team member is really testing a hypothesis with each task they complete and they will constantly be asking “why” something did or did not happen.   This is really the foundation for how you create a culture of continuous improvement. 

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