Industry Market Trends

Q&A: Lean Enterprise Institute's Mark Graban

Nov 10, 2009

In this edition of Expert's Corner, Mark Graban, a senior fellow at the Lean Enterprise Institute, weighs in on lean's place in a down economy, its role in health care and how to manage cultural change at the start of the lean journey.

Lean, the set of management practices based on the Toyota Production System (TPS), is meant to eliminate muda (a.k.a. waste, a.k.a. non-value-added activity) in all processes to improve efficiency, reduce cycle times, improve quality and increase bottom-line profitability.

Although lean initiatives can help manufacturers achieve on-time delivery and operational excellence, as well as shorter order cycles, reduced costs and increased revenue, it is neither an easy solution nor a quick fix, but is an ongoing process of continuous improvement.

In our continuing series that highlights the views of industry experts, IMT recently picked the brain of Mark Graban, a Senior Fellow with the Lean Enterprise Institute, author of the book Lean Hospitals and founder of the Lean Blog.

IMT: In any economic environment, halfhearted attempts to institute "a quick fix" lean system almost always fail. Recessionary times tend to expose an organization's true commitment to operational improvement. From your observations over the past year, are more companies abandoning the pursuit of process excellence or are they doubling down?

MG: From what I've seen, companies are doing both. A recession can be a great time for organizations to invest in their people and processes in anticipation of a rebound and future growth.

The most famous example has been Toyota Motor Co. in North America. Although they laid off temporary workers, Toyota kept 2,000 workers on the payroll at their San Antonio, TX, factory, even though there were no trucks to be built. During this downtime, employees were trained on TPS principles, performed maintenance, worked on quality improvement projects and relearned basic job skills. That factory set itself up for greater success by investing in its people; but then again, Toyota had the luxury of sitting on a mountain of cash that had been generated over time. My guess is that Toyota was not being philanthropic -- this wasn't a charity program for its employees. Toyota's expectation was that quality and productivity would be dramatically better when production resumed, as it eventually did.

Not everybody is taking "the Toyota approach" with their front-line workers or their professional staff. Anecdotally, I know of many cases where companies (and even hospitals) that were supposedly committed to lean laid off experienced lean facilitators and engineers during the downturn. A company that views its process-improvement people as just a direct cost that needs to be scaled proportionally to sales probably doesn't have a very deep commitment to lean or its long-term success. The No. 1 principle of "The Toyota Way" is probably the most important and the most difficult for other companies to emulate: "Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals."

IMT: In the past, some people interpreted becoming "lean" as terminating employees to reduce costs. Yet, as you point out at your Web site, one of the key pillars of lean practices is empowering and respecting people. Why has the (mis)interpretation that "lean" equals "job losses" persisted so long, and have we finally gotten past it?

MG: A big part of the problem is the everyday use of the term "lean," especially in the business media. Especially during a recession, when sales are falling and companies are shrinking, you see the word "lean" in headlines and articles that have nothing to do with the TPS. Magazines say we are "living in lean times" and they don't mean "lean manufacturing." This is problematic to the lean manufacturing and lean health care communities. I saw a quote from one hospital executive who said, "We think we staff pretty lean now," and that had nothing to do with the TPS.

Lean is about meeting customer needs and providing value with the lowest possible cost. Focusing only on cost (or labor levels) might mean that you don't have enough people to meet customer needs, given your processes and systems. Lean is about having the "right" staffing levels, not the lowest, based on benchmarks.

When you are newly introducing the lean methodology to an organization, you spend a lot of time talking about what lean is not, it's not about cutting corners, speeding up the work, and getting rid of people. Have we gotten past the interpretation that lean means layoffs? Of course not. It's a never-ending discussion and a challenging education effort. I arrived at one hospital and was told by a nurse, "I was really scared of this training, because my husband's manufacturing company did a lean project and a bunch of layoffs followed." Part of my training and education was to explain what the lean methodologies and management philosophies are. We can't control what companies do in the name of what they call "lean."

The good news is that many hospitals have explicitly stated "no layoffs due to lean" policies, where the executives make commitments that process improvements will not lead to employees losing their jobs. We need to promote those examples more broadly, both from manufacturing and from health care.

IMT: In recent years, the lean philosophy has branched outside of manufacturing, making inroads in fields such as health care. In your opinion, what are some of the most important or successful lean health care initiatives, and could any of them be applied to other industries as well?

MG: There are many exciting lean developments in health care, both in terms of the growing numbers of hospitals that are now using lean methods and the number of hospitals that have truly embraced the lean philosophy through five to 10 years of their lean journey.

Most important are the improvements in patient safety and quality of care, including the use of standardized work and visual management methods to reduce hospital-acquired infections and preventable errors. To manufacturers, as providers of employee health insurance, cost is a primary concern, as recent news reports suggest that insurance premiums will increase another 10 percent for 2010. Health systems like ThedaCare and Gundersen Lutheran have demonstrated the ability to use lean to reduce costs by 25 percent to 30 percent while improving quality and shortening the length of hospital stays. With lean, we really can have it all in health care: better safety, better quality, less waiting, lower cost and better morale. That's a great message to reinforce in manufacturing, as their goals should be the same.

One area where health care, generally speaking, does a better job is the focus on the "respect for people" pillar of lean. Organizations typically focus only on eliminating waste, but the other pillar is equally important. The most successful health care organizations are embracing the idea of engaging with their employees and medical staff to redesign their own work processes. Before lean, hospitals can be just as bad as a stereotypical manufacturer in terms of asking employees (including nurses and other skilled professionals) to just "check their brain at the door." Since health care is inherently such a people-focused business, many health care organizations are waking up to the need to exhibit respect for each employee every day. That's the key to success, through lean, in any type of organization. I encourage manufacturers to go visit a leading lean hospital, as there's much that can be learned about staff engagement and kaizen.

IMT: Lean typically begins with culture and leadership, but it is often difficult to get buy-in and commitment from throughout the organization. For someone whose company is just getting started with lean, what are some ways you would suggest managing cultural change and engaging employee participation?

MG: One way to start engaging employees is to ask them to get involved! There's usually a pent-up desire to give suggestions and make improvements, but the bottleneck is often the front-line supervisors and managers. You have to coach them on how to accept ideas from staff members and, in many cases, to give up control of all of the details of the process. Lean thinkers know that the people doing the work know the most about the process, but managers can feel a loss of power or importance in the organization as a result of employee engagement. If supervisors and managers react badly to employee ideas, that will kill your engagement efforts. So coaching and training for managers is key.

I often recommend people to the works of Norman Bodek on "Quick and Easy Kaizen" for more on this topic. I also like the methods and lessons on kaizen from David Mann's book, Creating a Lean Culture, as it has some very practical methods and ideas for employee engagement.

You also have to alleviate the fear that suggestions and improvements might lead to people being laid off, so again, that's an important point to keep in mind. Leaders also need to help set direction, reminding the organization of their purpose and key pillars. Continuous improvement efforts are more beneficial to all when the ideas aren't just random changes, they should be focused on pillars like patient and employee safety, reducing patient waiting time, and staff productivity. While leadership delegates many aspects of the actual improvements, that doesn't mean leaders completely disengage. They have to lead, setting direction and then taking feedback from the different layers of the organization.

Mark Graban is a Senior Fellow with the Lean Enterprise Institute, where he works on lean health care initiatives such as the Healthcare Value Leaders Network. An experienced lean consultant who has helped many hospitals start their lean journeys, Mark authored the book Lean Hospitals: Improving Quality, Patient Safety and Employee Satisfaction. Mark is the founder of the Lean Blog and creator of Move To Healthcare, a networking site for experienced lean professionals who are considering a move into health care.