How Company Culture & Leadership Impact Lean Transformation: Case Study

In Getting the C-Suite on Board with a Lean Company Transformation, I talked about why it is so common for corporate executives to delegate lean transformation and then mostly sit on the sidelines.  Now, I would like to provide an example of what one company is doing to try to change that.  As a consultant to the company, I cannot reveal its name.  But, it is a several billion dollar manufacturer of bearings and other machined components in Europe that is owned 100% by a mother and her son.  They have a reputation for innovation, meticulous engineering, and high quality. 

About four years ago they began their lean journey and, during this period, they were able to build a track record of success in reducing costs and inventory while also developing a cast of about 30 skillful lean consultants.  The Vice President of this lean group, who has regular access to the CEO, recently noted a problem.  Although there had been several changes in their many factories around the world, for the most part, the changes were led by his group and not improved upon or even sustained by the plant leadership.  He believed that the problem was in the leadership and culture and, to turn it around, the C-Suite needed to fully embrace and lead the cultural transformation.

He received permission to interview all C-Suite members and foundthat each had a different view of what lean was supposed to be.  Most thought the company was more advanced than it really was.  He therefore asked for one day with the top 15 executives who make up the board of directors, but the CEO actually gave him five days.

The internal lean group carefully crafted the process deciding to spend three days in workshop mode with outside experts, several days of benchmarking in Japan, and then a final presentation by the executives to all managers of the company about the vision and approach the company would take going forward.  They intelligently reflected that too many similar activities were focused on generating action items, and in this case, what was most important was educating the board so they had one common view of what lean should be in their company, particularly the desired culture.  The 15 executives were assigned to three groups:

1. A basic value stream mapping group, which involved walking the process on a product line in a plant while comparing it to a value stream map of what should be happening, and then returning the next day for a cultural assessment.
2. A lean accounting simulation group that made products going from large batch to one-piece flow and included a financial report after each round using company metrics.
3. A group including the CEO that took a tour of one of their plants but was led by a Japanese CEO who let them see the plant through his eyes.

All convened with me for a “fireside chat” at the end of day 2 and discussed what they had learned.  There was common agreement about the weaknesses in the culture, the misguided attempts to cascade financial metrics that made sense to the board at the operating level (such as direct labor variances), and a vision of what a culture of continuous improvement should look like.  On the third day, which I did not attend, something amazing happened.  Despite three groups having very different experiences, it quickly became clear they had a common vision for their culture.  It focused on the gemba and leaders at all levels actively engaged in leading and coaching continuous improvement.  Rather than run off in 100 directions, they decided to focus intensely on two model plants to create the desired culture and branch out from there.

There is still more work to be done in the program—the Japanese tour and large presentation—but that is still only the first step.  What has happened is that the eyes of these executives have been opened.  Unfortunately, eyes can close as fast as they open.  What matters next is a lot of follow-up with the executives regularly going to the shop floor with the lean coaches and observing, analyzing, discussing the gaps with what should be happening, and further conversing with the plant managers about future steps.  These observations and discussions should be a regular part of board meetings.  In other words, the top executives must keep in touch with the lean transformation, actively lead it at the gemba, and discuss policy and strategy implications at the board level.  Nothing in these first steps will ensure that will happen.  But by actively engaging them at the gemba, with coaches, and letting them discuss with each other what they saw and what it means, the company has made a giant step forward.

Dr. Jeffrey Liker is professor of industrial and operations engineering at the University of Michigan and author of The Toyota Way.  He leads Liker Lean Advisors, LLC and his latest book (with Gary Convis) is The Toyota Way to Lean Leadership.