Managers encounter a number of tactical questions in their lean journeys that call for decisions and actions. For example, should we have a “lean team”? Should we track lean implementation using bottom-up structures or top-down audit schemes? Should we offer financial and non-financial rewards for lean implementation to employees? These questions were recently answered in the research paper “Implementing corporate lean programs: The effect of management control practices,” by J. Schloetzer, K. Ferdows and myself, published in the Journal of Operations Management. This post* gives a summary.
We set out to scientifically investigate which managerial tactics assist in the implementation of a corporate lean program. We traveled across five continents to evaluate the tactics used to deploy a corporate lean program in 36 factories of a single large multinational firm. Through surveys, on-site interviews on the factory floor, and performance data from the company, we assessed the effectiveness of the five common tactics referred to in the questions above.
Local lean teams and coordinators
In our research, we found that lean teams and coordinators play an important role in the implementation of a corporate lean program. We did not find support for the usual criticism that they “disconnect the rest of the employees from engaging in the lean program”. Instead, we found that the teams serve a coordinating role. They help employees learn about lean principles, and they support them in improvement activities. Lean teams serve as a source for experts of lean methods such as value stream mapping, problem-solving tools, and workplace organization (“5S”), which is necessary in lean transformations.
There is admittedly a risk that lean teams could turn into bureaucratic, non-value-adding departments that mainly report lean implementation upwards for compliance reasons. To avoid this risk, managers must carefully consider the size and composition of their lean teams. A rule-of-thumb is one member per 150 factory employees. However, more important than the number of members, is the competence, people-skills and drive of those employed.
Top-down lean implementation audits
To check the implementation progress at the local site, many managers employ different forms of top-down audits. The most common example is the 5S audit, which is a checklist of elements that should be implemented in an area for each of the five “Ss”: sort, set-in-order, shine, standardize, and sustain. In our research, we found that such audits do not have a motivating effect on the further implementation of the lean program. Audits may be useful for knowing where you are (which is a prerequisite for improvement), and can help maintain attention to the lean program, but managers should not expect audits to motivate further lean implementation.
An exception was plants that were just beginner with lean, for which the audits had two major advantages: first, managers who were visible on the shop floor during the audits showed commitment, and second, the audits were helpful for employees who needed to learn the elements of the lean program. Perhaps the apparent need for top-down audits signals that a plant is far from a self-sustaining improvement culture. The following quote from a manager captures this idea well: “We need to go from a push-based implementation to a pull-based implementation.”
Bottom-up performance reporting
Different from top-down performance reporting, we found that bottom-up daily operations meetings have a strong and statistically significant positive effect on lean program implementation. The short daily meetings are held on the shop floor, performed standing-up, and do not take longer than a few minutes. These short meetings help everyone in the unit to be up-to-date on the latest progress and problems, every day. As an effect, the meetings created a “pull” for implementation.
It is not enough, however, to call for short meetings in front of visual boards every morning; we observed a large variance in how these meetings were held and in how effective they were. The best practice is when every employee comes prepared and contributes to solve problems. At the other end of the scale are the meetings where a manager stands at the board and dictates the work plan of the day. The best way to create effective bottom-up performance reviews is to start holding meetings, and continually improve them using the Deming PDSA cycle (plan, do, study, and act).
Financial rewards in lean implementations
A usual practice in any change program is to offer incentives for implementation. Financial rewards, or “pay for performance,” are some of the strongest incentive mechanisms that exist in the business world. Many managers strongly believe that they can motivate employees to “implement lean” by offering financial rewards in the form of money or expensive goods and services. These managers, however, rarely succeed with their programs.
The problem with using financial rewards is not that it does not work; it does. The problem is that it only has a temporary effect. After a while, people take the “extra money” for granted, and it loses its motivational power. Any reduction in the rewards can have a destructive effect on the lean program. Financial reward programs also have other negative side effects: people argue fiercely about the way the rewards are calculated and distributed, and the added bureaucracy is not creating value for the customer. Management should share the financial gains from the lean program with all employees, but not by connecting financial rewards to the lean program. Rather, they should share the gains through investments in the site (e.g., in the cantina, wardrobes, and equipment), end-of-the-year bonuses, or a general increase in salaries.
Non-financial rewards in lean implementations
Another type of incentive system is non-financial rewards. Non-financial rewards can be any positive attention that does not involve a substantial monetary element. Some examples are praise and recognition from a senior manager or peers, a diploma, a free lunch, or a simple prize such as flowers. Nearly every employee in the world appreciates recognition for good performance. We observed that one particularly effective form of recognition is when senior managers go to the shop floor to learn from front-line personnel and acknowledge their improvements. Non-financial rewards also foster friendly competition among different areas, which usually assist lean implementation. By linking some form of nonfinancial reward to the lean program, managers communicate the importance of the program and encourage employees to pay attention to it.
Our study examined how common management tactics relate to the implementation of a corporate lean program. Overall, the results suggest that businesses looking to boost their lean programs will have more luck sticking to cash-free incentives, shop floor-level troubleshooting sessions, and appointing a small but dedicated team of lean experts. Note that these tactics focus more on the process of a lean implementation than on its outcome. We did not find evidence that the use of financial rewards and management-initiated internal audits (which are focused more on the outcome) were strongly associated with more successful lean implementation. We hope that these insights can help the reader avoid common mistakes and focus limited resources on the tactics that work.
Netland, T. H., Schloetzer, J.D. & Ferdows, K. (2015) Implementing corporate lean programs: The effect of management control practices. Journal of Operations Management, Vol. 36, In press.
*A version of this post was first published at Planet Lean on May 25, 2016: “A Manager’s Tactics in Corporate Lean Initiatives“