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Lean Manufacturing is the only product I know of that fails to perform most of the time, and the sellers of that product routinely place all of the blame for the failure on the customer. There is little dispute within the Lean consulting community that anywhere from 75%-95% of Lean transformation strategies fail to deliver the promised financial results. Amazing as it seems, the near universal consensus among the consultants and academics promoting Lean (or the Toyota Production System) is that this failure is the fault of ‘Leadership’ – the executives who buy their books, training programs and consulting services. It is more than a bit ironic that, while Lean is defined as a very customer value focused strategy, the Lean ‘experts’ fill LinkedIn and other forums with customer (leadership) bashing articles and comments.
To listen to them, the typical CEO is driven by greed ,not particularly intelligent, indifferent to the employees and focused entirely on the short term. If only the people running companies could have the intellect, wisdom and morality of the Lean and Toyota experts what a wonderful world we would live in! That sort of arrogance in the face of a 75%+ failure rate is not going to endear the consultants to anyone.
After a long and reasonably successful Lean consulting career, and several years more recently as an executive leading global manufacturing companies I have been on both sides of this street, and I am here to tell the Lean experts that, while the leadership bashing may get you a lot of ‘likes’ and connections on social media, it isn’t going to get you more business and it certainly won’t lead to improving manufacturing performance anywhere.
I’m also here to give the Lean ‘experts’ a bit of advice that will serve you much better than writing another social media post on poor leadership. Jim Womack once described a mutual acquaintance of ours as a “Philosophical genius but a practical idiot’. While both “genius” and “idiot” are a bit harsh, that is an apt description of Jim, himself, and most Lean experts. (Womack, to his credit, never claimed to be anything other than a Lean philosopher.) From an executive perspective, the Lean proponents fail almost across the board to address some very fundamental, practical issues:
What impact will committing to a Lean transformation have on the financials of the business – not in the end, but over the next two or three years while the transformation is taking place? This is not an insignificant question. The CEO has obligations to banks and investors who have expectations every month and quarter. Lean drives down inventory, creating under-absorption, which trashes the income statement and has a major impact on the balance sheet. The interest rate and availability of bank loans are often tied directly to monthly or quarterly financials. Sloughing this question off, telling the people whose money is at risk to take a leap of faith, or simply pointing to Toyota and saying it worked well for them, doesn’t cut it. Without an accurate plan and projection and a clear explanation of the short and long term impact on the basic financial performance of the business, no responsible CEO is going to transform the business based solely on philosophy. For too few Lean ‘experts’ understand the financials, let alone address these questions. The Lean Accounting initiative launched 18 years ago has largely fallen on uninterested ears.
How will the core operating processes continue to deliver while they are being transformed? Whether the existing processes are optimal or not, they work, and there are customer orders to be produced and filled, materials to be purchased and engineering requirements to be met. How will this be done and who will do it while virtually every manager, technical and support specialist and production employee is being retrained and the processes are being ‘kaizened’? How is the massively complex ERP system reconfigured while still supporting the ongoing business?
Where, exactly, will the savings come from if not from payroll or direct materials? According to the Lean experts, cutting people is not allowed, and materials should be procured in smaller, more frequent quantities which drive up both material and transportation costs. Payroll and material costs comprise more than 80% of the costs in most manufacturers, so where will the promised bottom line impact come from? If the answer is that bottom line improvement comes from growth, then exactly how is that done? If through pricing and better capacity utilization, then how are Accounting and Sales involved to make this happen?
I could go on, but the bottom line is this: Most Lean experts have no experience in actual leadership and very narrow knowledge of the overall business, especially the financials. If you cannot address these very reasonable and very fundamental issues, then you are not going to get a CEO to back you. The fact that most companies undergo numerous attempts at driving Lean into the business is a clear indication that leadership believes in the philosophy of Lean; but have lost faith in the consultants who have been unable to provide practical advice and support through the transformation. Those leaders you bash don’t abandon Lean – they abandon you.
To listen to them, the typical CEO is driven by greed ,not particularly intelligent, indifferent to the employees and focused entirely on the short term. If only the people running companies could have the intellect, wisdom and morality of the Lean and Toyota experts what a wonderful world we would live in! That sort of arrogance in the face of a 75%+ failure rate is not going to endear the consultants to anyone.
After a long and reasonably successful Lean consulting career, and several years more recently as an executive leading global manufacturing companies I have been on both sides of this street, and I am here to tell the Lean experts that, while the leadership bashing may get you a lot of ‘likes’ and connections on social media, it isn’t going to get you more business and it certainly won’t lead to improving manufacturing performance anywhere.
I’m also here to give the Lean ‘experts’ a bit of advice that will serve you much better than writing another social media post on poor leadership. Jim Womack once described a mutual acquaintance of ours as a “Philosophical genius but a practical idiot’. While both “genius” and “idiot” are a bit harsh, that is an apt description of Jim, himself, and most Lean experts. (Womack, to his credit, never claimed to be anything other than a Lean philosopher.) From an executive perspective, the Lean proponents fail almost across the board to address some very fundamental, practical issues:
What impact will committing to a Lean transformation have on the financials of the business – not in the end, but over the next two or three years while the transformation is taking place? This is not an insignificant question. The CEO has obligations to banks and investors who have expectations every month and quarter. Lean drives down inventory, creating under-absorption, which trashes the income statement and has a major impact on the balance sheet. The interest rate and availability of bank loans are often tied directly to monthly or quarterly financials. Sloughing this question off, telling the people whose money is at risk to take a leap of faith, or simply pointing to Toyota and saying it worked well for them, doesn’t cut it. Without an accurate plan and projection and a clear explanation of the short and long term impact on the basic financial performance of the business, no responsible CEO is going to transform the business based solely on philosophy. For too few Lean ‘experts’ understand the financials, let alone address these questions. The Lean Accounting initiative launched 18 years ago has largely fallen on uninterested ears.
How will the core operating processes continue to deliver while they are being transformed? Whether the existing processes are optimal or not, they work, and there are customer orders to be produced and filled, materials to be purchased and engineering requirements to be met. How will this be done and who will do it while virtually every manager, technical and support specialist and production employee is being retrained and the processes are being ‘kaizened’? How is the massively complex ERP system reconfigured while still supporting the ongoing business?
Where, exactly, will the savings come from if not from payroll or direct materials? According to the Lean experts, cutting people is not allowed, and materials should be procured in smaller, more frequent quantities which drive up both material and transportation costs. Payroll and material costs comprise more than 80% of the costs in most manufacturers, so where will the promised bottom line impact come from? If the answer is that bottom line improvement comes from growth, then exactly how is that done? If through pricing and better capacity utilization, then how are Accounting and Sales involved to make this happen?
I could go on, but the bottom line is this: Most Lean experts have no experience in actual leadership and very narrow knowledge of the overall business, especially the financials. If you cannot address these very reasonable and very fundamental issues, then you are not going to get a CEO to back you. The fact that most companies undergo numerous attempts at driving Lean into the business is a clear indication that leadership believes in the philosophy of Lean; but have lost faith in the consultants who have been unable to provide practical advice and support through the transformation. Those leaders you bash don’t abandon Lean – they abandon you.