RESEARCH – The author explores the effectiveness of five common managerial practices in driving a corporate lean initiative forward, analyzing the data gathered while visiting 36 factories of a large corporation.
Words: Torbjørn Netland, NTNU, Trondheim, Norway
This article is a summary of the research paper “Implementing corporate lean programs: The effect of management control practices,” which Torbjørn published in the Journal of Operations Management in 2015 together with Professors Jason Schloetzer and Kasra Ferdows from Georgetown University.
Companies spend billions of dollars to develop, deploy, manage, and maintain their corporate lean programs. There is research evidence that such programs can be very effective, if managed correctly. We have all heard that to properly support a lean transformation managers must stay committed over time, but surely they must also do something.
Indeed, as part of their lean journeys, they encounter a number of tactical questions that they need to answer if they want to make the right decisions and take appropriate action. Such questions include, for example, “Should we have a lean team?” “Should we track the progress of our implementation using bottom-up metrics or top-down audit schemes?” And finally, “Should we offer financial and non-financial rewards to employees for their contribution to the lean transformation?”
To our surprise, we saw a gap of scientific research into the answers to these (and other) common questions. We therefore set out to scientifically investigate which managerial tactics assist leaders 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 five common tactics:
- Local lean teams and coordinators
- Top-down audits
- Bottom-up performance reporting
- Financial rewards
- Non-financial rewards
Local lean teams and coordinators
Our research 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 lean teams “disconnect the rest of the employees from engaging in the lean program.” Instead, we found that they have a coordinating role, helping employees learn about lean principles and supporting them in improvement activities. They serve as a go-to source for information and pointers on lean methods, such as value stream mapping, problem-solving tools, and workplace organization (5S).
There is admittedly a risk that lean teams could turn into bureaucracy-ridden, non-value-adding departments that mainly report lean implementation upwards for compliance reasons. To avoid this risk, managers should 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 their competence, skills set and drive.
Top-down implementation audits
To check progress at local level, 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, shine, standardize, and sustain. In our research, we found that such audits do not motivate people to keep supporting the implementation of lean. They may be useful to know where you are (undoubtedly, a prerequisite for improvement) and they can help you keep a focus on the program, but managers should not expect them to miraculously motivate people to drive the lean implementation further.
There was an important exception among the plants we surveyed and studied: those that had just started with lean. For them, the audits have two major advantages: first, a manager who is visible on the shop floor during the audit is showing commitment; second, running an audit helps employees to learn the elements of the lean program. Perhaps the apparent need for top-down audits signals that a plant is far from establishing 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
We found that bottom-up daily operations meetings have a strong and statistically significant positive effect on lean implementations. These short meetings are held on the shop floor, performed standing up, and don’t last more than a few minutes. They are crucial to ensure everyone in the unit is up to speed on the latest progress and problems, each day. Their effect is the creation of a “pull” force for the lean program.
Of course, to call for short meetings in front of visual boards every morning is not enough in itself. We observed a large variance in how meetings were held and in how effective they turned out to be. We learned that best practice is when every employee comes prepared and contributes to solving the problems that are flagged up. At the opposite end of the spectrum are those meetings where the manager stands by the board and dictates the work plan of the day. The best way to create effective bottom-up performance reviews is to start holding the meetings, and then to continually improve them using the PDSA cycle (plan, do, study, and act).
Offering monetary incentives in exchange for participation in the lean implementation is a very common practice in corporate environments. 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 them financial rewards in the form of money or expensive goods and services. It so happens that these managers rarely succeed with their programs.
The problem with using financial rewards is not that they do not work; they do. The problem is that they only have a temporary effect. After a while, people start to take the “extra money” for granted, and the incentive loses its power to motivate. Any reduction in the rewards can have a destructive effect on the lean program.
Financial reward programs have other negative side effects, like people arguing fiercely about the way the rewards are calculated and distributed and more bureaucracy being created. Management should share the financial gains from the lean program with all employees, but not by connecting financial rewards to the lean program directly. Rather, they should share the gains by investing the money back into the site (e.g., in the cantina, wardrobes, and equipment), end-of-the-year bonuses, or a general increase in salaries.
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 assists the establishment of lean. 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.
The original paper can be purchased here
Dr Torbjørn Netland is an Associate Professor at the Norwegian University of Science and Technology (NTNU), Trondheim, Norway. He has been a Visiting Researcher at the University of Cambridge in the UK, and a Fulbright Research Fellow at Georgetown University, McDonough School of Business, in Washington DC. Starting in September 2016, he will be the new Chair of Production and Operations Management at ETH Zurich, Switzerland. His research on “Managing Corporate Improvement Programs” is performed in close cooperation with global companies and appears in leading peer-reviewed journals. Torbjørn is an Editorial Board member of the Lean Management Journal and a Board Member of the European Operations Management Association (EurOMA). He blogs at www.better-operations.com and tweets as @tnetland.