Lean people are quick to criticize organizations with no Lean. We occasionally call out and criticize someone else’s bad Lean – their Lean. But we almost never criticize our Lean. This is an abnormal condition: Overproduction of positive feedback about “our Lean.”
Look at social media and you will find the Lean cognoscenti congratulating each other for even the most insignificant of Lean accomplishments. The same happens at Lean conferences and similar events. A Lean bubble has been created where support for Lean must always be favorable and ebullient with homage paid to its patriarchs. Good intentions, however, are putting Lean management on the cusp of being seen as flim-flam: a confidence (con) game.
I went on to ask a series of 18 critical questions that challenged people to look at the facts, see reality, and begin to talk forthrightly about what ails Lean and the Lean movement (as distinct from Toyota’s management system). In other words, to recognize they are trapped in an ideological bubble. While we all share the same goal of advancing Lean, adherents to the ideology of Lean compromise that goal when they are unable to see and respond to the truth.
An ideology is a system of beliefs, values, and ideas that help people understand phenomena and guide their actions, and can function as a benefit or handicap, but typically both simultaneously. In Lean’s case, the ideology operated in beneficial forms for about two decades, but it has increasingly turned into a handicap. How so? An ideology functions as a handicap when it:
Ignores the concerns of those who might have interest in the ideology
Is dismissive of real-world impacts (or lack of impact)
Defines approved sources of information and practice
Takes an all-or-nothing position regarding support for the ideology
Leads to internecine disputes
But more than that, ideology generates strong confirmation biases which filter out information (or people) that critically questions the ideology. At its worst, ideologies:
Ignore complexities that exist in the real-world
Make adherents overconfident in their knowledge and solutions to problems
Suppress skepticism and criticism
Shun dialog, compromise, and learning
Institutionalize dogma and lazy thinking and analysis
The result is a stale intellectual environment that cuts off doubt, inquiry, and dialogue — and therefore blocks needed progress. Theories and idealized conceptions overtake and derail empiricism because it becomes more important to sustain the ideology than it is to make adjustments in response to obvious realities and verifiable facts. The open and inquisitive mind, so much required for the effective practice of Lean, is surprisingly missing from the people whom you would expect to have it most.
Anyone who has closely followed my work can clearly see an evolution in my understanding of Lean management and how it interacts with the real world. I have sought to understand, across multiple dimensions and in minute detail, why real-world outcomes are so often misaligned with the prescribed ideology of Lean management. The negative response, particularly from the American Lean movement, reflects the current dysfunction of the ideology as shown in the lists above.
So where do we go from here? The people who cut off doubt, inquiry, and dialogue are unlikely to change. For them, stasis is the better alternative than changing one’s position and engaging the truth. Or, they will quietly move on to something new and leave Lean behind. So be it. But, I continue to press forward to expand my understanding of the minute details that have inhibited the advancement of Lean management. It’s a grand and challenging problem to work on.
Just look at the great progress made so far: My recent book, The Triumph of Classical Management Over Lean Management (February 2018), covers the economic, social, political, and historical factors that cause leaders to reject Lean management in whole or part. The blog posts listed below, written after Triumph of Classical Management was published, cover the business and philosophical factors (denoted by an asterisk), as well as other important related factors.
Small supermarket stocked using kanban cards in a pull system, to closely match supply to demand.
If you boil down Toyota’s production system to its essence, its purpose is to synchronize supply to demand for buyers’ markets. The ability to do so reduces the frequency and severity of stock-out (lost sales) or overproduction of finished goods (resulting in high costs and price discounting). The practical outcome is that production, on average, does not get to far ahead or too far behind actual market demand. Getting it “about right” is good enough.
While buyers’ markets may set the price, closely synchronizing supply to demand helps the producer maintain close control of pricing (i.e. limit the magnitude of price variation, especially downward prices – loss of profit – due to overproduction). It is preferable for supply to slightly lag demand, but no so much as to keep customers waiting for too long. Tight supplies make the customer feel like they are getting something special, while the producer benefits from steady sales, good prices, and consistent profits.
You would think synchronizing supply to demand would be intrinsically appealing to CEOs, whether they produce a product or service. But for most business leaders, it has no intrinsic appeal. Why?
The CEOs attitude can be summed up this way: “It’s not my job to synchronize supply to demand. I am always looking to create sellers’ markets, to set higher prices and increase profit. TPS would interfere with that.” The obvious result is that CEOs have no interest in leading a Lean transformation. Any business instinct that might exist to synchronize supply to demand is quickly overrun by profit-seeking behaviors which, in time, become settled habits of thinking and doing.
To the extent that CEOs have any interest in synchronizing supply to demand, that work is left to low-level technicians and the enterprise software system – also known as “the schedule.” But, if an opportunity to make money arises, then the schedule is no longer valid. Intervention and imbalance is required, which is where value of waste comes in. Waste is useful because it represents capacity to absorb abrupt changes in output, which will be frequent given business leaders’ objective of pecuniary gain. As far as unevenness and unreasonableness, CEOs pay employees to respond when called, whenever they are called. The more practice employees have with unevenness, and unreasonableness, the more skilled they become in managing it. Disruption is a skill to be mastered by employees so that executives can throttle output as-needed.
The de jure nature of business means that leaders have little interest in the truth. Toyota’s production system requires all employees to discover the truth and improve efficiency and performance on behalf of customers. For the vast majority of business CEOs, TPS does not represent the accumulated wisdom of business, dating from centuries ago. TPS is a recent creation and has not yet stood the test of time. Classical management has the advantage because so many generations of business leaders have experienced it, and their accumulated experiences constitute the common stock of practical business knowledge. Therefore, there is no reason to change.
For the last 30 years, our eyes have told us this truth: There is a strong consensus of opinion among CEOs that if any of Lean is to be adopted, it is solely its tools. CEOs have expressed little interest in adopting Lean as a comprehensive system of management to replace Classical Management. This is a problem that we all recognize. However, problem-solving has been remarkably weak given the imagined problem-solving expertise of “Lean thinkers.” It is clear that the various problem statements generated have not accurately described this empirical observation. Much of it has to do with a failure to understand the thinking and interests of CEOs — particularly of large corporations, who have long been the target of interest for Lean transformation.
Example of an intangible asset.
CEOs think of Lean differently than we do. We see it as a necessary way of thinking and working, for the betterment of all. Lean is a needed advancement in leadership and management practice. CEOs see Lean as an intangible asset, whether in the form of Lean tools or as a management system, that may or may not produce an income or other financial gain attached to the future sale of goods and services, or to the future sale of the company itself.
We see Lean as: “How can you not do it?” CEOs see Lean as: “Why should I bother?” These are different questions that expose a huge gap between the thinking of the people who promote Lean management and the thinking of the business leaders who would adopt Lean. The gap has yet to be closed in any significant way despite decades of effort.
Ownership of a company, either directly or by proxy (i.e. the hiring of professional managers compensated via stock options), confers the right to do with the property as one wishes. This includes the right to grow and improve, as well as the right to neglect, abuse, inhibit, or pervert. The rights exercised vary over time and depend primary on the anticipation of financial gain. In other words, if any aspect of Lean is adopted, it is done for the benefit of owners, not for the benefit of employees, customers, suppliers, or the community. Simply put, adopting Lean tools is seen by CEOs as the most efficient way to pursue financial gain, while adopting Lean as a management system is seen as an inefficient way to pursue financial gain — despite evidence that says otherwise. As owners, it is their right to be wrong. It is also their right to neglect, abuse, inhibit, or pervert Lean. And, as owners, they enjoy total immunity when they neglect, abuse, inhibit, or pervert of Lean. They can do what they want to their property.
The end of all business activity is the sale — tangible values — the sale of products and services, or the sale (or purchase) of a business (or parts of a business). The sale, if it is to occur, must be advantageous from a pecuniary perspective. Take the case of selling a business. The owner expects future value in the form of income yielding capacity, which is normally assigned to tangible assets. Intangible assets such as customer loyalty, brands, trademarks, patents, or goodwill, permit computation of future income yielding capacity. However, other intangible assets such as Lean tools or Lean management do not easily lend themselves to computation of income yielding capacity. Intangible assets that owners do understand offer no advantage with respect to generating future income. This is why changes in leaders or changes in owners is so detrimental to Lean. A brilliant example of the reversal of a beautiful Lean transformation was the sale of The Wiremold Company.
Some business leaders say, “Employees are our greatest asset.” What they should say, to be clear, is “Employees are our greatest intangible asset.” Employees are an intangible asset because owners do not know what employees know or the work that they do. Unlike capital equipment purchased to yield a future income, employees are neither capitalizable or depreciable, and so they are not understood by owners as a tangible asset. When someone buys a company, they do not pay for each employee. They pay for employees’ knowledge (an intangible asset) and assume responsibility for the payroll. But because owners do not know what employees know, employees have almost no value to the business beyond their financial compensation (wages and benefits). Under such conditions, employees are fired and hired as determined by financial exigencies, making it impossible for Lean management to thrive in any form other than the use of its tools.
At best, CEOs view the Lean management system as having possible future value. But because this is probabilistic, Lean must compete against other types of investment that are attractive to owners and which have a much greater probability of yielding future income — income streams that are either known or assumed to be higher than what Lean management can generate. What is the value of Lean to business owners if it cannot be capitalized? In the Wiremold example (a 1999 Shingo Prize winner for Excellence in Manufacturing), the value of Lean to the new owner was clearly zero.
Boards of directors place a high premium on CEOs who can skillfully manipulate the vast array of tangible assets, as well as selected intangible assets that can be turned into future income streams such as customer loyalty, brands, trademarks, and patents. Skillful pecuniary manipulation of tangible assets and income yielding intangible assets counts for far more than skillful human interaction through enlightened leadership or managerial abilities. This explains why, despite massive expenditures on training and development, corporate leadership functions at an amateur level in terms of human relations (but at a professional level in terms of money relations).
Despite CEOs indifference to Lean, the antidote the Lean movement always turns to is “do more of the same” — publish more success stories, have more conferences with speakers presenting their successes, publish more how-to-succeed-with-Lean books, post more success videos online, and so on. This post, and other recent writing of mine, are intended to provide Lean advocates with much deeper understanding of the problem and how CEOs think, and to motivate them to consider alternative means and methods for advancing Lean management.
A fundamental feature of Toyota’s management system (and its derivative, Lean management) is the search for the truth. Why? In order to make real improvement – versus merely the appearance of improvement – one must know what is actually happening. And herein lies a problem: people often do not want to know what is actually happening. Instead, they prefer to comprehend a more comforting lower-resolution image of reality, one that omits the details which inform them that things are not as good as they imagine them to be.
When people high up in the hierarchy are satisfied with unrealistic images of reality, a phenomenon called “social learning” takes place, in which people at the bottom of the hierarchy learn that it is acceptable for them to also be satisfied with unrealistic images of reality. The result is that needed improvements go unrecognized and uncorrected, until such time the need for change becomes overwhelming. The long delays between when improvement is needed and when improvement is made leads to handicaps in the execution of business processes. You could think of a process as having a handicap of 32 if the first pass yield is only 68 percent.
Unfortunately, classroom learning is no match for social learning. Even though most classroom learning in primary, secondary, and higher education is of a practical nature, the lessons learned are often not used in the workplace. Social learning is also effective at displacing company-sponsored training. Everyone can cite many examples of company-sponsored training that people up and down the hierarchy failed to put into practice on-the-job.
Root cause analysis is a simple example of an educational or training experience that often fails to get put into practice. Executives do not perform root cause analysis for the types of problems they encounter because it conflicts with their image of reality; their view that, as a result of their effective leadership, everything is as it should be. Business results are good, so the processes must also be good. Even when business results are not good, the processes are still viewed as good, though the people who own the processes are seen as bad and need to be replaced. Lower-level employees learn from this, and they see that there is not much benefit in improving processes if leaders ultimately judge people to be responsible for process failures.
Given these circumstances, it is not surprising that root cause analysis, whose purpose is to get to the truth, is difficult to establish in organizations. Yet, there is often a requirement for lower-level employees to conduct root cause analysis when processes go awry. They will go through the motions and produce a root cause analysis, the quality of which management is unable to judge because they have little practical experience doing root cause analysis. So, root cause analysis becomes an exercise in assuring that the result is not too far from managers’ unrealistic image of reality.
We also know that performing root cause analysis is acceptable or machine processes and for other lower-level value-adding processes, but unacceptable for management or leadership processes. That is because any effort to expose the truth related to management or leadership processes upsets the status quo and their unrealistic images of reality.
A radical is someone who gets to the root of things. As many lower-level employees have surely found out, doing a high-quality root cause analysis exposes the truth and makes managers and top leaders uncomfortable, and may result in being marginalized or even retribution. Facts do not live comfortably in organizations whose leaders prefer to believe in fictions. Nor do fact-based employees.
This one problem-solving tool, root cause analysis, illustrates the major obstacle in transforming an organization from Classical management to Toyota-style (Lean) management. If leaders cannot acknowledge the simple truth about internal process failures, then you can be sure they are unwilling to acknowledge the truth about large or more significant problems. Lean management is not, and has never been, for the leaders who prefer fictions to facts. Had this been the litmus test decades ago, it is unlikely Lean would have achieved a large corporate following. Knowing this, efforts to promote Lean could have been more focused and better directed to those leaders who favor facts over fictions.
For many years, a large army of dedicated people have toiled to sell Lean management to the top leaders of businesses. Many different approaches have been tried, yet all have yielded virtually the same results. In most cases, we have been unsuccessful in selling top leaders the entire management system. Success has been limited to leaders buying only parts of the Lean management system – various tools and methods that can help improve problem-solving, productivity, quality, lead-times, and reduce costs.
Our collective failure to obtain large number of buyers for Lean management tells us two related things about senior leaders:
They are not interested interest in progressive systems of management
They prefer the status quo
After more than three decades, the reasons for this have finally been illuminated in great detail (see 1, 2), along with some potential countermeasures.
Our collective failure also tells us that accepting the duty or responsibility to convince top leaders of the merits of Lean has been a foolish undertaking. In truth, the onus is on leaders to embrace Lean. Because they are responsible for the financial and human fate of the organization, it is clearly the duty and responsibility of leaders to take the initiative to search for and embrace a better management system. If they don’t perform this basic task, then they are leaders in name but not in their actions.
Senior leaders resist Lean because they have much to lose; much of what they lose is real and some is imagined. The various losses run deep and are securely interconnected, which leads to a firm commitment to Classical management — a highly developed form of “inequality maintenance (and “unfairness maintenance”) that is purposefully perpetuated to maintain leaders’ economic, social, political, philosophical, and historical rights and benefits.
Here is a simple example: Most leaders believe that they are effective coaches. But in reality they are merely telling people what to do rather than coaching. Telling people what to do is consistent with efforts – conscious or not – to maintain social inequality in hierarchies. Telling people what to do is a type of vested right of people higher up in the hierarchy, which is not easily given up.
The evidence clearly informs us that interest in Lean is only to the extent that it can be used to preserve their vested rights, power, and control, which is rooted in 17th century Natural Rights. There is a determined, purpose-driven sublimation of Lean management into diluted, weakened, degraded, or contaminated forms that are acceptable to top leaders. Therefore, change management for top leaders is a completely different problem than change management for lower-level leaders and followers.
Strip away all the Japanese stuff, and you will find that de facto is the essence of the Toyota Production System and The Toyota Way. Toyota developed various methods and tools over the years that make people face reality so that the facts cannot be avoided, and so that action is taken based on the facts – in all levels of the hierarchy, from worker to president.
Toyota’s long-term commitment to de facto, and resultant business success, also reveals a much deeper level of caring for the business and its stakeholders that is nearly impossible to find in other big companies. de facto is what makes possible the many innovations in management thinking and practice, as well as leadership, that Toyota has created over the years.
Toyota flirted with de jure under former president Hiroshi Okuda (1995-1999; chairman until 2006), which lead to disastrous results. Despite this aberration, it is remarkable that Toyota management has been able to prevent a complete takeover by de jure given the powerful influence of the Western economic system.
Toyota leaders grow up in a system that values de facto. Top leaders in other companies grow up in a system that values de jure. To get such leaders to accept de facto in place of de jure has proven to be extremely difficult, though not impossible. It is heartening to see the few (mostly small) companies in which senior managers have been able to accept de facto thinking and routines. We wish there were a lot more leaders who took the initiative and volunteered to be different, no matter the size of the company.
Wishing, however, will not do anything to propel change. Likewise, our best hope – training leaders in the Toyota Production System and The Toyota Way (or Lean management) – has done little to gain more buyers and propel wider change. The leaders of the Lean movement seem poised to continue in the direction they established decades ago. That means they remain committed to doing more of the same selling types of routines, which is broadly recognized as having been largely unsuccessful.
Top leaders who volunteer to be different yields periodic small wins for the Lean movement. Is that the best we can do? I don’t think so.
“…the outcome of any serious research can only be to make two questions grow where one question grew before.” – Thorstein Veblen in “The Evolution of the Scientific Point of View,” University of California Chronicle, Vol. X, No. 4, October 1908, pp. 395-416
Click on image to enlarge.
Is Lean management research serious? Well, some is and some is not. The image at right shows an example of a cascade of research questions beginning with the question, “What is Lean management?” Subsequent research questions, shown in blue, seek to characterize Lean transformation success, the roles of leaders and followers, etc. The vast majority of research as focused on the questions in blue.
The research questions in red seek to characterize Lean transformation process failure, the roles of leaders and followers, etc. This line of research questions has been avoided by the leaders of the Lean movement as well as some prominent academics who promote Lean. However, it is within the last several years that the research questions in red have been pursued by greater numbers of academic researchers.
Given that the research questions shown in blue have been the dominant focus for 30-plus years, one can easily conclude that research on Lean management, as reflected in popular writings, is not serious because it has led to the growth of one principal line of questions: “How do you achieve a Lean transformation?” In other words, the focus is on how to succeed with Lean, and thus ignoring the opposite outcome of failing to achieve a Lean transformation — from which there is much, if not more, to learn.
My research and writing are unique because I pursued both major lines of research (blue and red) for more than two decades, and have gone deep into the details to find the ultimate truths. In contrast, the popular research on Lean success and Lean failure tends to be superficial — “first-order” level of analyses. For example, Lean transformation success is often stated to be the result of “committed leaders.” This omits the details of the factors that make leaders committed to Lean. Lean transformation failure is often stated to the result of “leaders who cannot let go of command-and-control.” This omits the details of the factors that make leaders prefer “command-and-control.”
These “first-order,” surface-level, causes may be true, but they do not illuminate the core of executive’s motivations and interests. Instead, they reflect the lived experiences of the authors and their informal analysis of the problem. Serious research must be more than a collection of commonly known “first-order” observations. Such work, while informative, does not identify the core problems from which specific solutions can be identified and tested. The result remains what it has been for decades: Islands of Lean success and a mountain of Lean transformation failures. In other words, little progress is made in problem-solving when the problem is understood on a “first-order” level of analysis.
A key characteristic of serious research is having an understanding of prior research studies, and documentation of previous research so that readers can easily follow the reasoning contained in the logical analysis of the problem. Without such knowledge and visible effort to build upon the work of others, the resulting research is necessarily of lesser quality and utility. Research is a specialized skill which requires many years of training and practice. Absent that ability, research findings are destined to be “first-order” and of limited value.
Unfortunately, research in Lean management has usually ignored inconvenient research questions – the kind of questions that undercut the promotion or advancement of Lean management (red questions). Research that avoids certain questions reveals itself to be of a political nature in that it has a specific agenda to advance and seeks to generate pre-determined outcomes.
Serious Lean research is scientific in its quest to reveal the truth, no matter how favorable or unfavorable the truth may be. That is the natural outcome when research is serious, having no agenda and no pre-determined outcomes. The full picture initiated by the first research question, “What is Lean management?,” is revealed, for the benefit of all who are interested in Lean management. Thus, scientific research serves the interests of the Lean community better than research that is motivated by narrow political or business interests dedicated to advancing Lean management.
“Every organization constantly deteriorates. And this is especially true of a business organization. It loses customers — through death, through change in location, through the lures of competitors. It loses its personnel from the same causes. Its physical equipment is constantly wearing out and becoming obsolete… It is the primary function of management to rebuild at a rate that exceeds these losses. Management can never rest. If it does, the organization deteriorates. It must attract new customers. It must provided for trained replacement in advance of necessity. It must study new inventions, new devices and better methods. It must initiate a flow of experiments.” – Oswald Knauth
A recent article in The Economist said: “Weak growth in productivity has economists asking whether humanity is running out of ideas…” How does one run out of ideas, whether as an individual, a group, an organisation such as business, or even humanity? Ideas generally come from direct and indirect associations that people make in relation to the problem at-hand. The associations are made by interacting with various types of information sources (art, books, news media, academic research papers, etc.), as well as human social interaction.
When business becomes dehumanized, as it has in recent decades (via layoffs, outsourcing, offshoring, and other forms of human replacement), social interaction among employees and between management and employees is reduced. Specifically, information is deliberately withheld; information that could help form associations that would solve the problems at-hand. Withholding information is a tactic designed to preserve one’s employment or position within an organization. The effect of reduced social interaction is to reduce organizational social and technical intelligence. This, in turn, makes problem-solving more difficult, which contributes to the observed low productivity growth. But there is more to it than this.
Economic Component: Business leaders adhere to 18th century economic ideas in the 21st century, and thus discount contemporary knowledge and facts. Economic ideas that made sense in the handicraft era, and informed by animism, lose relevance in the post-modern corporate industrial and digital eras.
Social Component: Organizations are hierarchical, where leaders typically see themselves as superior to workers in all ways beyond mere rank. Superiority, whether implied by rank or made explicit by shows of force, reduces social interaction and the flow of associations necessary for generating ideas to experiment with.
Political Component: Leaders believe they must exhibit power and control over employees. When actualized, this has the effect of choking off ideas and thus cutting off the flow of experimentation needed to “rebuild at a rate that exceeds these losses.”
Historical Component: The past is ever-present. What worked well yesteryear is carried forward, in whole or part, by prior generations of managers and thoughtlessly applied to today and tomorrow. Hierarchies, social, and political pressures in organizations make it very difficult for anyone to safely ask: “Why do we do it that way?” The easier and smoother path is to accept rather than reject.
Philosophical Component: Business philosophy is rooted in old and ancient economic, social, and political constructs. These are transferred from one generation of managers to the next via a personal learning process — exposure early in one’s career to veteran managers.
Ideas run out when people, particularly leaders, remain firmly attachment to the large array of preconceptions associated with each of these five components. Leaders have ideas, but the ideas are almost always within a narrow range of long-established preconceptions and which result in a perpetuation of the status quo. Most followers dutifully do just as their leaders do, and so they assimilate the interconnected web of preconceptions without question. This social inheritance process, always reflective of the past and therefore outdated, is virtually self-perpetuating and results in the constant avoidance of systemic change.
Ideas never run dry when preconceptions are challenged. This is the greatest lesson of Toyota’s kaizen mindset and method. As Mr. Knauth said: “Every organization constantly deteriorates… [management] must initiate a flow of experiments.” You need ideas to run experiments, and ideas are generated by questioning the status quo and related preconceptions.