Posted By Jeff Moad, January 21, 2013 at 12:17 PM, in Category: The Adaptive Organization
Here’s one of the inconvenient truths about continuous improvement initiatives such as Lean manufacturing and Six Sigma: Many companies find that, over time, these programs lose momentum and generate diminishing returns.
Although 75% of large company executives recently surveyed by Accenture said that their companies have a continuous improvement program in place, 58% of those said that their programs produced minimal financial impact, and 69% said they believe their programs are in need of a re-evaluation or restart.
This is a problem. In the face of intensifying competition and accelerating global change, manufacturers need improvement programs that can deliver transformative improvement, not marginal and decelerating change.
During a recent discussion among members of the Manufacturing Leadership Council, several executives complained that their companies’ Lean initiatives, having harvested much of the low-hanging fruit, are producing diminishing returns. Facing increasing competitive pressure, one Council member said, “We need to figure out how to achieve revolutionary change over the next three to five years.”
It’s not that Lean and other continuous programs are stagnating because they have already succeeded in uncovering and removing most waste and banishing the bulk of process deviation. I’m convinced that the petering-out effect has more to do with a failure on the part of manufacturers to sustain employee engagement in continuous improvement and to make it a core part of the company culture. Too often, executives push Lean tools onto their people and organizations without first making it clear how such programs are essential to the company’s strategy, and how each individual’s behavior and performance impacts the enterprise, positively or negatively. Without this critical context, is it any wonder that too many workers passively resist continuous improvement, considering it nothing more than the “flavor of the month?”
Recently I came into contact with a mid-size medical device manufacturer whose Lean initiative was going nowhere until it took a fresh look at employee engagement. Although this company tried for six years to implement Lean, it was seeing only incremental and, in some cases, temporary results. Lead times were still over 60 days, and deliveries occurred on time only about 50% of the time. Kaizen events were treated as a joke by manufacturing workers who had convinced themselves that the company’s performance problems were unavoidable given the strict quality requirements under which it operated. (Quality performance, however, was also a problem.)
Four years ago, this company decided to rethink its approach to Lean, starting from scratch by focusing first on employee engagement and accountability. Putting Lean tools temporarily on the shelf, this company went back to basics, establishing mutually-agreed-on goals for each employee that were explicitly linked to departmental, company, and five-year strategic goals as well as the company’s overall mission statement. Systems were put in place to monitor individual performance, and individuals were assigned clear responsibilities and given the resources and authority necessary to accomplish their goals. The company, for example, put into place weekly one-on-one review meetings in which individuals’ performance is reviewed, and now requires that goals be updated each quarter.
Initially, individual goals were linked to very general objectives such as improving quality and delivery and reducing costs. Only after the framework for establishing individual goals and tracking accountability was firmly in place did the company begin to reintroduce Lean principles.
Those principles include the creation of what the company calls Pi teams, composed of three to five members, that each month identify and complete improvement projects using a “plan, implement, check, adjust” methodology and the usual box of Lean tools. Each team has a designated, trained leader, and each department has a coordinator responsible for team leader training. In keeping with the focus on employee engagement and accountability, scorecards detailing team goals and performance are posted for all to see.
The employee engagement-focused approach to Lean is paying off handsomely. In four years, the company’s output has increased by 350%, and the cost of manufacturing has been cut by 40%. Executives estimate a 10x improvement in quality. Overall, the company says the process improvement systems used by employees have saved it $1.7 million over the past four years.
And, perhaps most impressively, it looks like the company can expect similar results going forward. That’s because there is evidence that Lean culture and employee engagement are permeating the company ranks. During the past year, for example, individual production workers have begun to assume the position of Lean team leader, a role that only process engineers had previously performed.
So what’s the lesson here? In my opinion it’s that, while Lean tools and Lean thinking can be effective, manufacturers can’t expect to achieve breakthrough performance improvements without an underlying culture of employee engagement.
Written by Jeff Moad
Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit