Lean management has been with us for so many years and organizations that have successfully embraced it have achieved superior business performance and competitive edge over their rivals.
Predominantly used in manufacturing, today, Lean is being adopted across all industries such as healthcare, financial services, construction, tourism, government, customer service, software and insurance. Performance focused leaders have realized that all work is process, and because all value is delivered as a result of a process, Lean should be applied to all industries.
Lean is all about reducing or eliminating waste whilst simultaneously maximizing value. In order to realise maximum value from Lean methods and tools, a Lean culture needs to be fostered. Thus the message of Lean and its benefits must be communicated to each and every employee at each level of the organization. This will also ensure total buy-in from the top to the bottom of the organization.
You might be asking yourself, “Why should we become Lean?” Lean helps employees move away from a singular focus of doing their work to a dual focus of doing their work and also become motivated to perform their work even better on a daily basis. Also, Lean helps to streamline your organization, engage your employees and achieve competitive advantage over competitors. Cost savings realized from the streamlining of the organization reflect directly in the bottom line.
It is important to note that Lean is so much more than cost reduction, it is a business strategy decided upon by senior management. Lean is not just another round of traditional cost cutting with headcount reduction as the primary focus. Instead, Lean thinking is about having a balanced assessment of the organization’s processes and the people involved in the processes and simultaneously achieving both improved bottom line results and employee growth.
Lean aims to improve the ratio of good cost to bad. Every organization, whether private or public, incurs two types of costs. Value adding costs (good costs) and non-value adding costs (bad costs). Value adding costs are to be encouraged if they bring competitive advantage and enhanced service.
On the contrary, costs that are incurred but don’t end up providing value to customers are waste. You therefore need to establish what is it that your customers perceive as value and ensure that your products or services are of value before striving to perform better. Quoting the words of Peter Drucker, the famous management guru, “There is nothing so useless as doing efficiently that which should not be done at all.”
To successfully realise value from Lean, it is important to note the following:
- The whole purpose of all Lean activity is to improve the overall performance of the organization. It is important to clearly define what your organization is trying to achieve. Think about the purpose of your product or service range. You also need to deeply understand and appreciate your customers’ spoken and unspoken needs.
- Your organization is a system of integrated and dependent elements working together to accomplish your defined purpose. Lean focuses on total system improvement as opposed to making changes in isolation. Making changes without an appreciation of the organization as a system often leads to unintended consequences.
- Most of the processes within the organization are not value-adding from the customer’s perspective. There is a lot of waste, variation and overburden involved. Lean analyses existing processes, reorganizes them and builds a smooth workflow.
- Lean is a journey without an absolute destination point. Because there are always opportunities for improvement, Lean is never fully implemented. In reality all waste cannot be removed, it is a goal to aspire to. Employees should persistently strive to improve the performance of their work on a daily basis.
- People are the true engines of Lean. To continuously improve your organization, you need to grow people, empower them and engage their collective intelligence. When engagement levels are high, turnover is low, and this leads to higher productivity as there is less time spent training people to become competent in their job roles. People must know what is expected of them, have the resources to perform their jobs well, be appreciated, have input into improving their own work area and get the opportunity to work on what they are qualified to do.
Lean systems are designed to make normally invisible small problems and non-conformances visible. The core purpose of Lean is to surface problems and opportunities for improvement. Together, Lean and other enterprise performance management methodologies such as strategy maps, scorecards, KPIs, activity based cost management, driver-based forecasting and enterprise risk management can be used to reduce waste, drive business performance and create a competitive advantage.
