Posted on October 22, 2016 · Posted in Leadership, Lean, Money, Toyota Principles

MoneyMy apologies for the length of  this post, almost twice the 500 words I strive for.

It started out as two separate posts, but the more I thought about it, the more I felt they needed to be joined.  If the motivation for Lean is to save money, then leaders need to understand that they can’t keep savings going unless they re-think how they lead.

As always, I welcome your thoughts.



When asked, “Why go into business?” most people would respond: “To make money.”  That motive is expressed like this:

Fill Need → $$$

In a Lean organization, the reason is a little different. The difference is subtle. In fact, it seems as if it’s the same thing, but it’s not.

In Lean, one goes into business to meet a need and satisfy one’s customers.

The motive, as viewed from a Lean perspective, is expressed this way.

Identify Need → Fill Need → Satisfy Customer → $$$

In Lean, profit is a consequence of satisfying your customer’s needs. It’s the reward for doing your job correctly.

Lean practitioners understand that, if they do their part correctly, money will flow to them.


One of the attractions of Lean to business leaders is the fact that Lean saves money. Let me repeat that.

Lean saves money!



When a company makes money (revenue) through the sale of its goods or services, profit only comes after all expenses have been paid. Depending on the industry, the cost of marketing, distributing, merchandising, selling, warranting, etc. can be anywhere from 60% to 99% of revenue.

That equation looks like this:

Revenue – Expenses = Income (Profit)

By contrast, when an organization saves money, the savings, go directly to the bottom line. In other words,

Savings = Profit

That alone is sufficient reason to embrace Lean. The challenge, however, is that you can’t sustain those savings if you don’t transform the way managers think and behave. That’s why Lean isn’t a project, but an ongoing transformation.  Let me give you an example.


Picture an organization that makes something. They consistently deliver late.  Customers threatens to take their business elsewhere.

In desperation, the senior leaders latch onto Lean to help them. Starting with a Value Stream Map, the senior leaders are trained to identify processes in need of rapid improvement.

As the title “Rapid Improvement” implies, the senior leaders are in a bit of a rush. They identify a process whose cycle time (CT) is too long and call for a Rapid Improvement Event (RIE) to reduce it.

There are 10 people on the RIE team. They are all worker bees, but come up with very innovative ways to streamline the process. After four days, they have created Standard Work and reduced CT by 48%. That lets the product flow to the customer on time.

A Review reflects: the customer will now get their product on time; the product will have 22% fewer defects; and, there is a net savings of $18,000/week between the old and new process.  How great is that?

On-Time Delivery?  CHECK.

Fewer defects?  CHECK.

Savings?  CHECK.

Unfortunately, this organization is run by a typical “command & control” management system. Senior managers decided where the RIE was needed and what the goal should be.

Knowing what was best for the company, senior leaders pressed ahead:  them & the RIE team.

Then came the Monday after the RIE.  That’s when the new process reverts back to the local manager’s control. Heather, the local manager, is sharp, one of the best. She’s been briefed about the new process, but has had no hand in creating it.

Within an hour, Heather has confronted one of her workers. She tells them that the new way they are making the product does not meet the customer’s design criteria.

In fact, meeting those criteria had been an important consideration of the RIE team.  It was closely reviewed to ensure the new process met both the letter and the spirit of the criteria.  As much as that is true, Heather’s subordinates don’t feel it their place to tell her.

Meanwhile, Heather is justifiably upset. She, after all, is the one held accountable for meeting the design criteria. She stops work, retools the line back to the way it had been, and reworks all the day’s product.  That way she KNOWS the product will meet the design criteria.

Since her own boss is none the wiser, no one stops her.

It’s over a week before “On Time Delivery” results are reported and senior leaders find out what Heather has done. Her actions are quickly confronted. In short order, Heather is reprimanded, and Standard Work is restored.

Can you see how her management team let Heather down? They meant well, but didn’t yet understand the human side of Lean. They rushed to a technical solution – very old school – instead of taking a week or two to train their entire chain of command.  In retrospect, they should have followed the advice to

Go slow to go fast.

Can we agree that Heather should have been trained, before the event, by her own excited manager.  Before that, her manager should have been trained by his excitedmanager, and so on.  Are you seeing a theme here?

Lean should create excitement!

If the implementation of Lean doesn’t cause excitement, STOP!  Something’s wrong. Executed properly, the entire leadership team should feel included, excited and “insiders” in this new venture.

Can you see how things could have been done differently?  Can you see why Lean is a TRANSFORMATION and not a series of RIE/Kaizen events?