David Harkin writes that in the current economic climate, manufacturing businesses have to be leaner in order to be cost competitive, but some Irish companies can still struggle with lean concepts and cultural change
Mech

 

Author: David Harkin, mechanical engineer and managing partner, Tecknic Performance Leaders Ltd

Lean transformation programmes are very much in vogue these days with Irish businesses and, in particular, with the many clients of Enterprise Ireland’s carefully crafted, three-step Lean Business Offer.

With funding available and specialist support from the Enterprise Ireland team, together with the preferred supplier list of specialist lean practitioners, the aim is to encourage companies to participate at varying levels of lean complexity in order to “build company competitiveness through the best practice programme”.

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A key aim of the third step on the lean transformational programme is to deliver a “company-wide transformation in culture”. This is an ambitious plan, by any standards, but especially given that many of Enterprise Ireland’s clients are SME, indigenous, family-owned companies at different stages of their generation life cycle. Is it possibly a step too far?

The definition of culture is often explained as ‘that which is taken for granted’. Therefore, an agenda that aims to unravel and re-build an organisation’s paradigm, even when supported by consultants who are chosen for their skilful use of lean and other operations-excellence tools, is an enormous challenge for any programme.

Figure 1: An organisation’s cultural web (click to enlarge)

At its most basic level, culture could be about the reasons for business success historically or assumptions around its purpose. Culture also can be described as ‘the way we do things around here’ – the routines, systems and structures, whether formal or informal. The cultural web (Figure 1) is a useful device for mapping organisational culture, with the aim of generating management’s own perceptions of the cultural aspects of their company.

Culture is extremely important, in that it tends to act as an unwritten guide for employees and helps them to make sense of their environment and understand the behaviours required to ‘fit in’ and perform work effectively. When this is challenged with new systems or structures required to deliver a company-wide transformational programme – and the realisation hits home that the existing culture is no longer fit for purpose – keeping the ship on course requires a lot more than a lean toolkit.

If it veers off, a variety of reasons are commonly cited, such as lack of senior management involvement, middle-management abilities and employee resistance. But are these just symptoms of the underlying cultural working environment that may be poles apart from what is expected from a lean system.

CULTURE IS ABOUT VALUES AND BEHAVIOUR

The benefits an organisation gets from marketing its products, mission statement, vision and values are of course extremely important, but an organisation’s culture is not based on finely worded presentations or elaborate websites. Culture is more about behaviour and what drives it. It matters as much as hard numbers; hence the challenge is how culture is crafted to improve competitiveness and business performance.

The renowned Jack Welch, former General Electric (GE) CEO and subsequent prolific writer on leadership, introduced the ‘20/70/10 split’ system of performance appraisal to constantly upgrade his team and help change GE’s culture. Welch’s vitality model states that the top 20 per cent of the workplace is most productive, and 70 per cent (the ‘vital 70’) work adequately. The other 10 per cent (‘bottom 10’) are non-producers.

A strong proponent of the Six-Sigma methodology, Welch recognised through his ‘GE Way’ that culture change did not happen overnight. During his 20-year tenure, he revaluated GE’s core purpose and values. This, in turn, defined the behavioural expectations and norms that he wanted from his team and split-system performance reviews were conducted accordingly against these standards. In a nutshell, the breakdown of the split meant the under-performing bottom 10 per cent were simply let go.

Measurements were based on both soft and hard numbers, with an emphasis on behaviour to improve performance. ‘Forced ranking’, as it was called, does have its critics due to its harsh, autocratic style and absence of a coaching strategy, but according to Welch (NYT 2012), this was the kindest form of management. Employees were generally told where they stood after performance reviews – therefore, layoffs and dismissals came as no surprise. Low performers were given a chance to improve, he said. And, if they did not improve within a year or so, “You moved them out.”

Comparing Welch’s approach with that of the examples in Womack & Jones’s Lean Thinking (2003) bible for practitioners, the contrasts could not be starker. Indeed, although he also agreed on the need to remove the 10 per cent of ‘anchor-draggers’ (a term used in the book to describe management more suited for a hierarchical structure), the similarities end there.

Lean Thinking details how, after reducing employee numbers and letting go those deemed unsuitable for the lean culture, Art Byrne, CEO of electrical/electronic manufacturing company Wiremold, set about building a culture of inclusiveness. Following a complete re-structure from a hierarchical organisation to a team-based structure, he set about formulating HR policies that included ‘ironclad’ job guarantees to support the continuous improvement process, going as far as introducing more casual dress codes.

In Byrne’s view, job guarantees were essential to get the best from the employees during kaizens. Kaizen is the Japanese for ‘change for the better’ and it refers to philosophy or practices that focus upon continuous improvement of processes in manufacturing and engineering. With changes to planning, office workers in Wiremold were moved to the production areas along the value stream; hence the ‘white collars’ were no longer appropriate.

CULTURAL CHANGE – EVOLUTION VS REVOLUTION

The successes of these paradigm shifts were quite remarkable. The two examples illustrated demonstrate sweeping changes driven by two strong leaders who, from different viewpoints, had clear visions and distinct values that they fostered and shared.

Although the approaches used were quite different, from the outset their key role was to consider the strategic long-term duty to customers, shareholders and the wider stakeholders they impact. Employees needed to be flexible, whilst understanding and relating to the new purpose and values at every level.

This, in turn, was reinforced by how the leaders and the managers consistently behaved on a daily basis – how they recruited, managed, developed, promoted and rewarded in a way that incentivised the desired behaviour. Corporate values were defined in practical and meaningful ways, so that the organisational cultures were values-driven. These values were lived, breathed and consistently buttressed through actions and behaviours day-in and day out, from top to bottom.

This is quite an accomplishment, by any standard. So, with Enterprise Ireland actively promoting a ‘company-wide transformation in culture’ over a relatively short time period, and with many Irish companies managed around deeply seated hierarchical structures, is it reasonable to consider that a potential chasm exists between what the clients expect and what Enterprise Ireland envisages from its three-step Lean Business Offer?

With lean systems benchmarked against the widely renowned Toyota Production System (TPS), why then do organisations find it so difficult to decode? This question was posed by Steven Spear and H. Kent Bowen (HBR 1999). They realised, after an extensive four-year study of TPS, that to understand Toyota’s success, you had to “unravel a paradox”.

They discovered that rigid specification on the one hand was the very thing that made flexibility and creativity possible on the other. Their findings showed that TPS and the scientific method that underpinned it were not imposed on Toyota; the system actually grew naturally out of the workings of the company over five decades. However, that is not to say that the use of lean and other improvement tools are not effective for improving other businesses in a much shorter time periods, even against the oppositions engrained within their cultures.

All the same, the critical success factor of a lean project comes from the management of change, not the lean tools – mainly because the presence of ‘anchor-draggers’ are in every organisation.

CONTINUOUS IMPROVEMENT PROGRAMME

Culture helps employees understand the behaviours required work effectively

Few Irish business managers are adroitly equipped as Welsh or Byrne, so considerable outside support from seasoned practitioners on business improvement methodologies is essential. Of course, best practice project management alongside the improvement tools will bring deliverables anyway without the necessity of turning the business upside down or inside out.

Even still, there are some businesses just not ready and can struggle with basic lean concepts. An alternative programme that may culturally suit Irish businesses is the adeptly structured continuous improvement process (CIP). Its success relies on a specific hard/soft balanced approach and its key aim is to pursue operations excellence with a range of improvement tools and techniques, coupled with synchronised staff development programmes and change management methodologies.

Internal project teams are coached in people and process best practices. Like Toyota’s cultural change, it comes from experimental learning combined with the CIP programme’s many incremental improvements. Furthermore, because change comes about as an ‘evolutionary’ process, this makes it easy to understand, get broad acceptance and ensure alignment with hierarchical management’s aspirations.

Delivering a leaner, cost-competitive organisation this way will add to a sustainable improvement culture. Once embedded, system and structural changes through the CIP could even be taken for granted. TPS grew naturally over many decades, so perhaps the first lessons on lean culture change starts here.

David Harkin is a mechanical engineer and managing partner with the Dublin-based consultancy firm Tecknic Performance Leaders Ltd. He holds a higher national diploma in mechanical engineering and a diploma in fuel technology from the University of Ulster, Jordanstown and North West Institute of Further and Higher Education, Derry respectively. He is an MBA-qualified senior manager and managing consultant with 25 years’ experience at executive level in international companies. He primarily advises MDs, factory managers and business leaders on performance improvement.    

Harkin is a Chartered Institute of Personnel and Development lecturer in business management with HR specialisms, as well as an operations change management specialist with an accomplished track record in performance improvement and project delivery. His international research into productivity benchmarking coupled with extensive hands-on experience, led to the development of a unique operations excellence improvement model entitled iP3 ®.

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  Author: David Harkin, mechanical engineer and managing partner, Tecknic Performance Leaders Ltd Lean transformation programmes are very much in vogue these days with Irish businesses and, in particular, with the many clients of Enterprise Ireland’s carefully crafted, three-step Lean Business Offer. With funding available and specialist support from the Enterprise Ireland...