HOW DO YOU CREATE A LEAN CULTURE?




by Art Byrne


Well, let’s start with a simple definition of company culture. Leading management thinkers like Edgar Schein define a company’s culture as a shared set of values, goals, attitudes, and practices that characterize an organization. A successful company culture is one that can be bought into from the newest part-time employee to the CEO.


I’ve always thought of company culture as “the way we do things here,” which may be a bit simplistic for some. But my point is that, over time, most companies develop some form of culture that points the way to how things get done. A company’s culture might contain elements of strategy in the area of company goals, but it is more about the attitudes and practices that answer the question of “what is it like to work here?”


Asking “how do you build a lean culture?” assumes you are changing from a traditionally run “batch” company. This transformation is no small matter: A lean company thinks in almost the exact opposite of a traditionally managed enterprise when it comes to operational approaches and underlying attitudes and practices. Traditional companies are built around functional departments that force them to produce in batch mode. In contrast, lean companies are built around value streams that allow value to flow at the beat of customer demand.


“A lean company thinks in almost the exact opposite of a traditionally managed enterprise when it comes to operational approaches and underlying attitudes and practices.”

Now, if you lined up a sample of 100 traditionally run companies, no two might have the same culture. Even so, due to their functional organizations and batch production approach, you would find similar cultural elements in all of them. For example, consider their attitude toward problems: is the first response to ask “who?” as in who did it? How do they value their employees? Do they give them the means to do their jobs? Is there a major internal focus on “make-the-month?” The list could go on forever and underscores the point that to become lean, everything the traditional company does must change. The challenge is enormous. You can’t create a lean culture without first creating a lean enterprise.


So, you can’t make this massive shift overnight. Nor can this new culture occur from the bottom-up: it must be led by the owner or CEO. And converting to lean is all about people. I don’t mean replacing your current employees with new ones but helping your current workforce adopt a dramatically new way of thinking and acting. You have to help them see the waste and opportunities that have been there all along so that change can start to take root.


So, where to begin?


Lead From the Top

This work starts with the leader, who doesn’t have to start as a lean expert but must commit to becoming one. They must have enough familiarity with lean principles to understand why everyone should make this conversion and what can be expected as a result. The leader must be dedicated to this approach, as its success or failure will be determined by their actions and involvement going forward over a

long time.


You can’t manage the shift to lean or delegate it. The leader needs to be hands-on, leading the way. You can’t just talk the talk. People might comply with orders from a top-down manager, yet mere obedience won’t change the culture. People who choose to follow their leader’s behavior will take ownership in changing the company and its culture.


Communicate

Next, communicate. Pull your entire team together and explain WHY you want to make the shift to lean, WHAT kind of results you expect, WHEN this will start, and HOW you plan to go about it. (Hint: kaizen, kaizen, kaizen.) This message needs to come straight from the leader — no delegation allowed. Make sure that you also tell your team what they can personally expect — what’s in it for them. A change this big will make everyone nervous, so from the very start, tell your team that there will be no layoffs due to kaizen activity. This thinking will be a big leap for the traditional manager who associates cost reduction with head-count reduction.


Set the Operational Excellence Goals

Set and communicate the operational excellence goals that, when achieved, will distinguish your company from your competitors. Explain your answer to the question, “What are we trying to do here?” These goals will serve as guidelines for everyone in the company going forward. And they need to be aspirational goals, i.e., stretch, and focus on changing your processes, not your results. If you change your processes, the results will improve as you approach these goals.


At Wiremold, these were our operational excellence goals:

· 100% on-time customer service

· 50% reduction in defects annually

· 20% productivity gain annually

· 20x inventory turns

· Visual control and 5S everywhere


These were all stretch targets. For example, when we began, we were at 3x inventory turns — but that was the whole point. If you want to change the culture, you must change the conversation and how the entire company thinks about what it is trying to do. The easiest way to change the way people think is first to change the way they act, and the operational excellence goals serve as the guidelines for the whole company’s actions in the future.


At first, these stretch goals were a big shock to everyone. But they quickly started to define our new culture of striving to become a lean company. People got on board, and what might have been seen as ridiculous targets in traditionally run companies were soon taken for granted as part of “this is the way we do things here.”


Change the Structure to Give Lean a Chance

But just setting goals and the way forward is not enough. If you want to change the culture, you have to make the organizational changes needed to give yourself a chance to meet these goals. Don’t forget that, to become lean, you are changing from a batch-and-push approach to a flow-and-pull operation. And this transition means that you need to change your physical organizational structure early on, shifting from functional departments based on the same type of equipment to value stream teams. In our case, we based our value stream teams on product families and gave each value stream leader all the equipment necessary to build that family, complete from raw material to in the box.


To make this change, we had to move most of our equipment close to the product family team leaders, who were stationed on the shop floor next to their equipment and people. While this was disruptive, it sent a clear message that things were changing and that we were serious about achieving the operational excellence goals. In addition, the reorganization eliminated the previous culture associated with the functional departments. While this change alone didn’t establish a new lean culture, it did break down the barriers needed to get there. Above all, it gave all our employees the means to do their jobs successfully and the organizational support to solve problems and eliminate waste.


Establish A Strong Kaizen Promotion Office

As part of the switch to a value stream organization, we created a strong in-house kaizen promotion office whose full-time job was organizing, running, and following up on kaizen activity. These people were all existing employees learning from our outside Japanese consultants (all ex-Toyota experts) as they went along. Establishing this entirely new structure was a radical change and was dedicated to helping our workforce do their jobs better, easier, and safer. All by itself, it signaled a big cultural shift. We moved some of our highest potential employees into the kaizen office, which you rarely see a traditional company do.


“You can’t manage the shift to lean or delegate it. The leader needs to be hands-on, leading the way.”

We were constantly running kaizen team events, averaging nearly two per week per facility, which really led to a kaizen, or lean, culture. Everyone was involved in kaizen, regardless of whether they worked in the office or the factory or were hourly or salaried employees. A typical kaizen team was comprised of eight to10 people we took from their job to concentrate on improvement activity in a specific area for a week. The teams were made up equally of hourly and salaried employees, so everyone was involved. Lean is all about “learn by doing,” and the kaizen teams were where the learning took place. The goals for each team were all stretch, but so were the results.


Typical Results of a One-Week Kaizen:

· Cut lead times by 90%

· Reduce staffing from 10 to 5

· Reduce inventory by 70%

· Reduce floor space by 50%

· Reduce defects by 60%

· Reduce travel distance by 90%

· Cut setup time by 90%

· Connect the customer to the shop floor


Talk about a culture change. Results like these, week after week, kaizen team after kaizen team, opened everyone’s eyes to the opportunity before us. It is hard to be part of a team like this and not be excited by the work. The best ideas for eliminating the waste came from the people who were doing the work, so we got a lot of buy-in that helped the changes stick. People wanted to be on the next kaizen team. As you might expect, this was a huge cultural shift from the prior attitude of “come in, do your assigned job, and go home.” The reason for this is they were all learning something new every day, using the kaizen tools to understand how to see and eliminate the waste. Step by step, we created the lean culture.


A couple of examples might help you appreciate the change in employee attitudes from what they were doing before lean to how they acted afterward. The first involved a 150-ton punch press that was coil-fed with a large progressive die. Historically it took 3 hours and 10 minutes to change this over, and the operators were pretty much on their own with little management support. As a result, they did it the same way every time, and there was no pressure to reduce the time it took as the plant made everything in huge batches.


We organized the first kaizen on this press, and after the first week, the team had cut the setup time to 19 minutes. Our prior culture would have said, “Gee, this is great!” and stopped there. Instead, we kept going back with additional kaizens, and before long, the hourly operators of the press took over with their improvement ideas. They eventually reduced the setup time to one minute. When you give an operator support and allow them to reduce the work done on a single setup by three hours and nine minutes, the way they think will change.


A bigger challenge, and perhaps a better example, involved the tool room. We had a 60-person tool room that allowed us to build our own punch press dies and that we saw as a competitive advantage. At that time, most companies like ours eliminated their tool rooms and outsourced the work to lower their overhead. As a result, we had a talented group of toolmakers who were a little hard to deal with, as they saw themselves as being above the rest of our workforce and were pretty set in their ways. They made great tools, but it took almost three months to make a five-station progressive die. They participated in nearly every one of our kaizen teams but were reluctant to do kaizen in the tool room.


Eventually, we persuaded them with the challenge to make a progressive die in less than a month. Lots of bitching and complaining took place initially, but ultimately, they did one in 28 days. Man, were they excited! Many of their friends outside the company were also toolmakers at other local companies, so, of course, they bragged about it. When their friends said, “No way can you do that,” they just said, “You’re wrong. That’s the way we do things at Wiremold.” After that, there was no stopping them; they just wanted to keep reducing the time.


Understand What is Important

When starting, we tried to look at things as simply as possible. For example, we knew that all companies are nothing more than (1) a group of people and (2) a bunch of processes (3) trying to deliver value to a set of customers. Logic told us that, to be successful, we needed to concentrate on improving our processes, not on our results.


“… to be successful, we needed to concentrate on improving our processes, not our results.”

So early on, we established a set of core values that we could use to guide everyone forward. We never thought that just writing down our core values would magically change peoples’ behavior or result in a change in our culture.

We had to live the values to show all our associates that we were serious.


Wiremold Core Values

· People

· Customers

· Kaizen


We publicized these values throughout the company, printed them on our stationary, and made sure that everyone understood these simple commitments.


We focused first on our people. Moving to lean requires teamwork, and we wanted everyone to feel that they were an equal part of the team. Everyone got training in the lean principles. We put everyone on a kaizen team as soon as possible and asked many of them to lead or co-lead these teams. We encouraged everyone to speak up about problems or issues. We started recognizing people for their contributions, not their job titles. The best ideas for removing the waste invariably come from those doing the work, so management supported and encouraged this behavior. We agreed that one of management’s biggest responsibilities was developing and broadening our people’s skill sets.


Kaizen and kaizen teams were another major focus because learning-by-doing was a key link between our people and our ability to deliver value to our customers. We knew, for example, that we couldn’t be the company we wanted to be with our usual four- to six-week lead times. But after many kaizens and the contributions of all our people, we reduced lead times to one to two days while taking inventory turns from 3x to 18x. These improvements alone created enormous value for our customers.


Of course, everything we did was focused on our customers. How could we deliver more value to them? We did the traditional things like shortening our lead times, lowering our costs, improving our quality, and being more responsive. But we also implemented other initiatives when we saw opportunities to help our customers. For example, we initiated weekly delivery routes at set times for our distributors. We changed our sales terms to smooth out their ordering patterns and asked them to carry 75% less of our inventory to free up cash and space for them. We also got our customers involved up front on all our new product designs. We would say, “We designed it with our ears” by listening to what the customer wants.


Clarify the Behavior You Expect

Setting clear, stretch, operational excellence goals indicated to everyone what we were trying to do. Our statement of core values showed how we would achieve the goals and how management would behave. But what did we expect from our associates when they came to work every day? To address this, we again tried to keep things simple and easy to understand. Our code of conduct did both.


Wiremold Code of Conduct

· Respect others

· Tell the truth

· Be fair

· Try new ideas

· Ask why

· Keep your promises


Do your share

Once again, we went overboard, sharing this set of values with everyone. We posted this everywhere, communicated it constantly, and even gave everyone a small, laminated card that they could carry in their wallet. Like everything else we did, we didn’t expect that just writing this down would change our culture. It was simply another important piece in the “how do we do things here” transition. The list incorporated traditional values of most companies but blended in some of our newer lean values like respecting others, trying new ideas, and asking why.


Like anything else, saying something is one thing: how management behaves to back it up determines how people act. In this case, one of management’s obligations was to remove the bad actors who couldn’t conform. They all got second or third chances as we didn’t want to lose anyone. Of course, the fact that we had a union made it take a little longer but, in every case, the reaction from our associates closest to someone we had to let go was, “Gee, what took you so long?”


Tie It All Together

To become a company with a lean culture, we needed everyone looking forward to achieving our operational excellence goals. The traditional batch company with a “make the month” culture is always looking backward at something that already has happened. What’s the point of that? You can’t do anything about something that already has happened.


So we changed the way we ran the company. We deployed forward-looking operational excellence goals down to the team leaders, and they reported on the progress they were making to my senior staff and me once per week. They each had ten minutes to tell us their progress on the five goals and what improvements (kaizen) they were planning for the next week. Management was there not to criticize but to support the teams. Because we had all our senior leaders there, we could make very quick decisions. We still closed the books every month, and we got it to where it took only three days, looking only at the numbers.


As most of our associates were on one of these value-stream teams, the bulk of our employees always focused on reaching the operational excellence goals. We had everyone looking forward, focused on our processes, not our results, which changed how people thought about their daily work. They no longer just came to work to do the same old job day after day. They were all part of the “what kaizen do you plan to run next week” section of the weekly management review. They knew their ideas would be listened to and implemented. With everyone focused on the next improvement idea, “the way we do things here” really changed for the better. Not only were we converting to lean, but we were building a lean culture changing the way we did business.


We did other things like initiating a suggestion program and an annual employee survey. Still, the primary drivers in creating a lean culture resulted from the structural change from functional to value stream, the operational excellence targets, the core values statement, the simple code of conduct, the weekly reviews on progress on our operational excellence targets, and the constant learning through our kaizen efforts.


We learned through this entire process that kaizen cultures are hard to beat. For Wiremold, over just under 10 years, we more than quadrupled sales, gained 13 points of gross margin, took inventory turns from 3x to 18x, improved EBITDA from 6% to 21%, and increased enterprise value just under 2,500%.


 

Art Byrne is the retired CEO of The Wiremold Company where his lean strategy increased enterprise value 2,467%. He is also the best selling author of The Lean Turnaround and The Lean Turnaround Action Guide.