There is a typical lean fairies and unicorns article in The Economist, titled “Decluttering the company”. It extolls the value of simplification, eliminating meetings, reducing emails – you know – all the usual stuff. Everyone agrees with it; you won’t find a single person out there who thinks that lots of meetings and email is a good thing.
The problem comes when you get to the part that says, “Bain says a manufacturer it studied made savings equivalent to cutting 200 jobs by halving the default length of meetings to 30 minutes and limiting to seven the number of people who could attend.”
What exactly did they “save” and how did they “save” it?
There are only two ways saving people’s time can translate into a financial saving: get rid of the people who used to be in meetings and writing emails, or having those people create more value for customers and having that value translate into either more sales or higher prices.
GE, of course, is run by folks who clearly understand this and measure success by headcount and labor cost. “Jeffrey Immelt, General Electric’s boss, is seeking to introduce a ‘culture of simplification’, as part of a plan to cut the giant conglomerate’s overheads from a peak of 18.5% of revenues in 2011 to 12% in 2016.” He learned the art of management from “Neutron Jack” Welch who earned the nickname among the GE ranks because he was like the neutron bomb which was designed to kill people while leaving structures intact. Jack set out to get rid of all the people at GE but leave the offices standing. So it is no surprise that the mechanics of the “culture of simplification” are to cancel the meeting and layoff everyone invited to it.
Most companies don’t have such a crystal focus. They would like to lay a bunch of people off but don’t really know how to convert simplification into pink slips. They are the ones that present their amazing kaizen and Six Sigma results at conferences crowing about the millions of dollars they have ‘saved’ but never really explaining how the company isn’t any more profitable now than it was before they ‘saved’ the millions. Their ‘savings’ are like the savings in the Bain quote – “equivalent to cutting 200 jobs” … but actually equal to zero.
The lean tools are great in their ability to free up time and capacity. That is the easy part of lean. Much trickier (and rarer) is the conversion of that capacity into sales growth. The problem is that converting newly freed up capacity – whether it is value adding capacity or managerial and staff capacity to support higher levels of value adding – requires accounting and sales to be part of the plan and they have by and large missed the lean message entirely. You can’t find capacity under-utilization in standard costs, and with prices based on standard costs and sales folks only understanding lower prices as the means for higher sales it just doesn’t happen.
This gets right at the heart of the fundamental notion that lean is only powerful as a holistic, enterprise wide strategy. As an operational cost cutting mechanism it is a pretty weak approach. It gets at the basic principle that lean is a growth strategy and not a cost reduction strategy.
Decluttering and simplifying for its own sake is probably better than not decluttering and not simplifying, but unless it is part of a sound, integrated plan to do something worthwhile with the time that used to be wasted on the clutter it won’t mean much to the bottom line.