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Organising for Lean
George Koenigsaecker

The key issue in organising for a lean conversion is always leadership. As noted in the prior articles in this series, a lean conversion involves a very large amount of organisational change and the lean tools themselves are often counterintuitive. A successful lean conversion has two key characteristics - a "hands-on" leader who drives the change, and an outside "sensei" to help teach the new tools and help determine the path the conversion will follow.

Successful lean conversions almost always have strong top-down leadership at the beginning of the process. Part of the leadership role is to establish the need for change. Another part is to support the learning of the lean tools, such as setup reduction, cell design, standard work, etc. Yet another role is establishing improvement metrics and, finally, modifying the organisational structure to support conversion effort.

A Continuous Improvement Organisation
In the early phase of a conversion, most organisations do a poor job of follow-up on improvement efforts. This undermines the lean initiative. The best success practice for avoiding this pitfall is to select a continuous improvement (CI) manager dedicated to supporting the conversion effort. This key individual should be someone who has the drive to "sell" the organisation on the lean effort, and who you expect to be promoted within the company.

If you include all the costs (including some of the early inefficiencies of the change effort when your associates are still learning) that are connected with getting someone up the lean learning curve, you could conclude that you will invest several hundred thousand dollars on your CI manager's education before the dust settles.

Part of the cost is the expense of sending him or her to training sessions. But much of it comes from lost opportunity costs that accompany the startup phase of virtually every lean conversion. During this initial phase, as we noted in the first story, progress is slow as your CI manager and associates struggle to understand and implement principles they are not used to using.

You want to be sure your investment is in someone whose personal capabilities will leverage this investment. The CI manager's position is not the position for someone counting the days to retirement, nor should it be used as corporate Siberia.
The CI Manager's primary role is to:

1. Lead training efforts in the lean tools.
2. Plan for improvement events.
3. Follow-up on the to-do projects left hanging at the end of improvement activities to make certain they are done and that the expected results are achieved.

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Self-Funding Improvement
It is normal for people to "backslide" towards the old way of doing things. In order to get the results that you need, it is essential to follow-up regularly in the areas where improvement activity was focused to assure that the "new way" stays in place.

Keeping in mind that a lean conversion can achieve as much as a 400 percent organisation-wide productivity gain, you need to think about how much "process reengineering" will be needed to achieve this kind of result. From personal experience, I have found that typically you can "restudy" an area, say, every six months for at least three years, before the magnitude of improvement starts to slow significantly.

One of the unusual characteristics of this process is that each step makes more of the waste visible. After you have improved an area, it becomes easier to identify more waste; waste becomes more visible, and, thus, the focus of another improvement activity.

To maintain the momentum of activities, the most successful lean conversion efforts eventually have 2-to-5 percent of total employment dedicated, full time, to the improvement effort. This sounds pretty incredible, but it is not as hard as it sounds. A good way to get there is to allow the full-time CI Team to add one new full-time member for each, say, five associates freed up from improvement activities. This makes the process, after the initial investment in a CI Manager, self-funding.

And don't assume that the team should be all salaried associates. Much of the work in shop-floor CI events requires moving machines, repositioning electric and hydraulic lines, and modifying fixtures. Maintenance associates, toolmakers, and other associates who have a positive attitude about change can be great CI Team members.

In fact, when you start improving shop operations, you will normally find that you are short in the technical skills required to implement improvements. You'll never have enough industrial engineers, mechanical engineers, toolmakers, and maintenance associates.

It is normal for the lean conversion to begin in the plant operations where the processes are more visible. However, about two-thirds of the average manufacturing company's associate costs are in the various support areas. As you CI Team grows in skill, they will begin to lead CI events in the administrative departments. So, as you build your CI Team, remember that they will eventually want some associates who are able to lead "administrative kaizens".

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Getting Department Support
As you start building a dedicated improvement organisation, there is a tendency for the traditional functional departments to feel uninvolved in the conversion process. Often these departments will view the conversion as a threat and actually try to slow its progress. Fortunately, there is a way to obtain general involvement from more functional areas.

When you start a lean conversion, there are many new "tools" for the organisation to learn, and it takes a long time to apply all these tools organisation-wide. It is hard to progress if you only use one of the lean tools because they tend to support each other. You will find yourself working with most of the tools simultaneously. Having functional departments take leadership roles in deploying the tools gets the departments involved in the conversion. Here are some examples:

Single Minute Exchange of Die (SMED). Reducing setup times is an ideal lean tool for the tool room to take on. Cutting setup times is a crucial step to creating flow and the key to setup reduction is to make lots of small modifications in tooling. It is a manageable piece of the overall lean learning curve, and the tool room will be involved in making the most of the tooling modifications anyway. So get them involved.
Pick the first value stream you are going to focus on and identify the setups that are in this value stream. Then give the tool room a goal, say, of studying one setup per week to determine what needs to be done and delivering one completed fixture or tool per week.

Mistake Proofing (Poka-Yoke). Make the quality department responsible for leading the implementation of mistake-proofing efforts. It is a powerful aid to continuous improvement in quality and to reducing the cost of quality.
Again, focus along the first value stream targeted for improvement. Have the department analyze the top causes of defects and develop countermeasures. Set a pace - one mistake proofing study per week or month. The pace should be just barely achievable and fast enough to stress their resources. This pace keeps people too busy to spend energy undermining the improvement effort.

Total Productive Maintenance (TPM). TPM is an important building block of a successful lean conversion, but it is often neglected because it sometimes takes a while to see results. Its natural home is with the maintenance department. It should be tasked with TPM training, determining the regular preventive maintenance (PM) work to be done on each machine by operators, and with establishing - under supervision - the plan for what maintenance activities operators will perform, often called autonomous maintenance.
The TPM effort will increase machine up-time, improve quality, and after a year or so, free skilled maintenance folks to focus on machine problem solving as the breakdowns become less frequent.

Kanban. Implement kanban with caution. Use it where it is impossible to directly link machines in a one-piece flow. For instance, most plants have a couple of big "monuments", large machines such as ovens, that will take some time to be replaces with cell-sized equipment. In the meantime, schedule them with a kanban system. This is a good task to assign to the materials/production control department.

Point-of-Use Purchasing. Most lean operations move to blanket purchase orders with a reduced number of lean-oriented vendors. Operators and lean persons do their own point-of-use purchasing for their cell. The purchasing department is in a good position to take on this task.
Apply the same approach used with other departments. Start with the first value stream targeted for improvement, identify the purchased material used, then set goals for how many parts will be ordered at the cell level within, say, the next month.
It is a good idea to get most of the buyers on to shop-floor improvement teams on a monthly basis early on. At some point, you will become confident enough to start helping you strategic vendors adopt lean. If you buyers have been learning in your own shop, they can eventually become lean "sensei" to your vendors.

Change Management. Task your human resources staff with monitoring the change management issues and working to keep them to acceptable levels, given the more rapid pace of improvement that is being undertaken. The hum resources associates should develop specific plans to monitor the impact of change on the organisation. They also should plan and act to minimize the time period of the personal "sense of loss" that each associate will go through as their work processes are changed.
Meeting regularly with associates is an effective way to overcome these challenges. For instance, HR representatives should sit down with associates in an area scheduled to undergo its first kaizen event to answer questions and offer reassurances that the change will be for the better. They can take regular surveys of employee morale. However, they must understand that the responses will invariably show a decline at the beginning of the conversion effort. After a few months, morale should trend upward.

Administrative Continuous Improvement. Two thirds of the total associative cost in the typical manufacturing company is in non-production areas. So, to get the big gains you will have to study and reengineer all the administrative processes. You will discover that, like the shop, you can restudy and administrative process up to six times before extracting most of the waste.
Early on, give your accounting associates the task of participating on shop-floor improvement teams once a month for about six months. Then let them start leading a monthly administrative improvement team. There is often a lot of resistance to applying the concepts of improved quality, delivery, and productivity to the administrative areas. (And, or course, that means that there is more accumulated waste there to remove!)
The accounting associates, based on their accounting training, tend to feel "honor bound" to report the amount of waste identified and will work to achieve the gains by mapping an administrative process. It is also good to task the accounting folks with 30-day and 90-day follow-ups to all improvement projects to assure that the gains were real and that they have "stuck".

To get functional departments familiar with their respective lean tool, buy them some books to read on the subject and have them form book study groups, which meet regularly to discuss the material and how to apply it.

Part of the job of the "hero" you selected for the CI Manager position is to keep all these activities in all the functional areas working together. Of course, the top manager at the location is responsible for assuring that all the functional areas are working the conversion plan AND working together.

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The Hard Part
The organisational tasks described above take a lot of effort. But they are tame compared to what must ultimately happen to achieve the full benefits of lean.

The process of a lean conversion keeps pulling you back to building flow, which pulls you toward cellularizing product flow by family and also cellularizing information flows in the staff areas. To get where you need to go, you must change your organisational structure from a functional one to a product/information flow-based organisation.

As the plant moves to focused factories based on product families, the important jobs of the future will be the focused factory managers. These factories-within-the-factory will encompass several flow cells and the necessary support personnel. As a consequence, the scopes of functional positions will shrink. For example:

Quality. The quality department will hand off the inspection task to shop-floor operations or poka-yoke devices. This will substantially reduce the size of the quality department and refocus the remaining group on quality problem solving and quality planning for new products.
Purchasing. The purchasing department in a traditional manufacturing firm spends 80 to 90 percent of its effort placing purchase orders and expediting product delivery. As the operation moves to point-of-use purchasing, and as you trim 80 to 90 percent of the vendor base to work with firms willing to follow you lead on continuous improvement, the size of the purchasing group will come down significantly. You can redeploy some of the purchasing associates to lead the conversion effort of the vendor base, but you will still be over-staffed for the task remaining.
Product Development. Eighty percent of your product development resources will move to a cross-functional, full-time, project-focused structure that is managed by reviews at "toll gates" or checkpoints along the development process. This is a salaried, new product development "cell" that is co-located with associates from engineering and production.

Transitioning these organisations is the hard part. People with careers built on functional expertise will no longer be "kings of the hill". But kings don't like being deposed. With luck, some of the functional personnel involved in the lean conversion projects described above, will be redeployable to the conversion process.

Meanwhile you will be creating new "kings of the hill" in value stream-focused positions such as focused factory managers, cross-functional product development team leaders, CI managers, etc.

This is big-time politics with lots of careers at stake. It will test all your management skills to handle this transition, and end up with a strong team organised to drive continuous improvement.
As you start the conversion process, you should continue to look at your functional leaders and redeploy the "best and brightest", as soon as possible, into the long-term lean structure, such as the focused factories and the CI promotion office. Get you key leaders on board, rather than worried.

Use your best to fill key roles, such as the CI manager, product development team leaders, and focused factory managers. (At some point, you may have a CI team for each focused factory). Then try to combine functions in the departments they came from and continuously reduce the size of the functional staffs. Eventually true lean processes will make most of them obsolete as the organisation reorganizes along product value streams.

At first, the functional personnel will not believe that the lean effort will reduce the need for the work they have been doing. You will need to "push" the adjustments. But as the lean processes take hold, the folks in the functional departments will be glad that you took the opportunities to redeploy them from the "old" to the "new".

As you can see, a true lean conversion, that gets the four-fold increase in output per associate and the other gains in quality and delivery, will also require a total reconstruction of your organisation. It will probably take a decade to get all of this in place. But the good news is that you will be improving cost, quality, and delivery - as well as new product development - every month of every year of the process.

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